-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, jyhZ/b7KhYnK387sfzF40yznTvXSh4R8Vn+iwSXb5zWV+j4knxNWMqeqSLonv2re 7gZhNYgBQFCf/HSplFlFpg== 0000950131-95-000616.txt : 19950615 0000950131-95-000616.hdr.sgml : 19950615 ACCESSION NUMBER: 0000950131-95-000616 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950317 SROS: MSE SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST CHICAGO CORP CENTRAL INDEX KEY: 0000036161 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 362669970 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-06052 FILM NUMBER: 95521367 BUSINESS ADDRESS: STREET 1: ONE FIRST NATL PLZ MAIL STE 0287 CITY: CHICAGO STATE: IL ZIP: 60670 BUSINESS PHONE: 3127324000 10-K405 1 FORM 10-K405 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 COMMISSION FILE NUMBER 1-6052 FIRST CHICAGO CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ---------------- DELAWARE 36-2669970 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) ONE FIRST NATIONAL PLAZA CHICAGO, ILLINOIS 60670 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE) Registrant's telephone number, including area code: (312) 732-4000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - ------------------- ----------------------- Common Stock, $5.00 par value New York Stock Exchange Chicago Stock Exchange Pacific Stock Exchange Preferred Stock with Cumulative and Adjustable Dividends ($50 stated value), no par value New York Stock Exchange Preferred Stock with Cumulative and Adjustable Dividends, Series B ($100 stated value), no par value New York Stock Exchange Preferred Stock with Cumulative and Adjustable Dividends, Series C ($100 stated value), no par value New York Stock Exchange Depositary Shares, each representing one-twenty-fifth of a share of 8.45% Cumulative Preferred Stock, Series E ($625 stated value), no par value New York Stock Exchange Depositary Shares, each representing one-hundredth of a share of 5 3/4% Cumulative Convertible Preferred Stock, Series B ($5,000 stated value), no par value New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange Chicago Stock Exchange Pacific Stock Exchange 8 1/2% Notes Due June 1, 1998 New York Stock Exchange 5 1/2% Exchangeable Notes Due February 15, 1997 New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: TITLE OF CLASS - -------------- 8.45% Cumulative Preferred Stock, Series E ($625 stated value) 5 3/4% Cumulative Convertible Preferred Stock, Series B ($5,000 stated value)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of voting stock held by nonaffiliates of the Corporation as of December 31, 1994, was approximately $3,976,000,000. At December 31, 1994, the Corporation had 89,859,798 shares of its Common Stock, $5.00 par value, outstanding. DOCUMENTS INCORPORATED BY REFERENCE PORTIONS OF THE CORPORATION'S 1994 ANNUAL REPORT TO STOCKHOLDERS ARE INCORPORATED BY REFERENCE INTO PARTS I, II AND IV HEREOF, AND PORTIONS OF THE CORPORATION'S DEFINITIVE PROXY STATEMENT DATED MARCH 17, 1995, ARE INCORPORATED BY REFERENCE INTO PART III HEREOF. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FIRST CHICAGO CORPORATION FORM 10-K INDEX
PAGE ---- PART I Item 1. Business................................................... 2 Description of Business.................................... 2 Employees.................................................. 5 Competition................................................ 5 Monetary Policy and Economic Controls...................... 5 Supervision and Regulation................................. 6 Financial Review........................................... 10 Certain Statistical Information............................ 11 Item 2. Properties................................................. 20 Item 3. Legal Proceedings.......................................... 21 Item 4. Submission of Matters to a Vote of Security Holders........ 21 Executive Officers of the Registrant..................................... 21 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters....................................... 21 Item 6. Selected Financial Data.................................... 21 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................. 21 Item 8. Financial Statements and Supplementary Data................ 22 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................. 22 PART III Item 10. Directors and Executive Officers of the Registrant......... 22 Item 11. Executive Compensation..................................... 22 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................ 22 Item 13. Certain Relationships and Related Transactions............. 22 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................................................. 22
1 PART I ITEM 1. BUSINESS DESCRIPTION OF BUSINESS General First Chicago Corporation (the "Corporation") is a multibank holding company incorporated in Delaware in l969. The principal asset of the Corporation is the capital stock of The First National Bank of Chicago ("FNBC"). The Corporation also owns all the outstanding capital stock of American National Corporation ("ANC") and FCC National Bank. ANC is the holding company for American National Bank and Trust Company of Chicago ("ANB") and American National Bank and Trust Company of Wisconsin. FCC National Bank is a Delaware-based bank primarily engaged in the issuance of VISA and MasterCard credit cards. In addition to these banking organizations, the Corporation, directly or indirectly, owns the stock of various nonbank companies engaged in businesses related to banking and finance, including venture capital, leasing and investment management subsidiaries. In addition to its equity investments in subsidiaries, the Corporation, directly or indirectly, raises funds principally to finance the operations of its nonbank subsidiaries. A substantial portion of the Corporation's annual income typically has been derived from dividends from its subsidiaries and from interest on loans to its subsidiaries. The Corporation's business strategy focuses on two customer segments- corporate banking and consumer banking. Corporate banking consists of corporate and institutional banking and middle market banking. Consumer banking consists of the credit card business and community banking. Each of these businesses is supported through the organizational structures of the Corporation's banking and nonbanking subsidiaries, as described below. The Corporation's U.S. offices and international facilities are listed on page 71 of the Corporation's 1994 Annual Report to Stockholders, and such listing is expressly incorporated herein by reference. Corporate Banking Corporate and institutional banking encompasses the broad range of commercial and investment banking products and services that FNBC, along with the subsidiaries referenced below, provides to domestic and foreign customers. The principal focus of corporate and institutional banking activities is the delivery of corporate financial services and noncredit services and the extension of credit to commercial, financial and governmental customers. Serving the larger business marketplace within the United States, Canada, Europe, Mexico, Latin America, the Middle East, Africa and the Asia-Pacific regions, corporate and institutional banking provides products and services to industries including: retailing, commodities, banking, finance, insurance, transportation, securities, real estate, mortgage banking, communications, utilities, and petroleum and mining, as well as health, education and service organizations, and municipalities. Upper middle market customers within the Midwest are also served by corporate and institutional banking. In the global financial marketplace, corporate and institutional banking is responsible for FNBC's investment activities in United States government securities, municipal money markets, fixed income securities, federal agency securities, foreign exchange and the futures markets. Risk insurance products, such as foreign exchange options, interest rate options, and interest rate and currency swaps, are also provided. A separate subsidiary of the Corporation, First Chicago Capital Markets, Inc. ("FCCM"), is a primary government bond dealer and, as such, reports its positions daily to the Federal Reserve Open Market Committee Trading Desk. FCCM also is primarily responsible for activities in the securities of states, 2 municipalities and other governmental entities, and certain corporate entities, including trading, sales, underwriting, research, and maintenance of an active secondary market with national sales distribution. Certain financial products and services such as global merchant banking, private placement of debt securities, merger and acquisition advisory services, subordinated debt investments, highly leveraged transaction financings, asset sales and distributions, loan syndications, and financial advisory services to troubled companies are coordinated with corporate and institutional banking. These products and services are provided through FNBC, through nonbank subsidiaries of the Corporation and through international banking subsidiaries of FNBC. Corporate and institutional banking also develops, markets and delivers cash management, operating, clearing and other noncredit products, both overseas and domestically. These include money transfer, collection, disbursement, documentary, remittance, trade finance, international securities clearing, custody, corporate trust and shareholder services. Corporate and institutional banking includes the operations of three subsidiaries of the Corporation and FNBC: First Chicago National Processing Corporation, which provides noncredit clearing services, including lock box processing, on a nationwide basis; First Chicago International, which provides clearing and documentary services; and First Chicago Trust Company of New York, a New York state-chartered trust company, which provides custody, corporate trust, special agency, stock transfer, and securities issuing, paying and clearance services. In addition, the First Chicago Clearing Center in London is that city's principal depository for certificates of deposit and other short- term securities. Middle market banking is conducted primarily through ANC, which, through ANB and ANC's other subsidiaries, offers a wide range of banking and financial products and services, with primary emphasis on middle market companies in the Chicago metropolitan area. ANB has 17 Chicago and suburban locations, including its main office in downtown Chicago. Suburban branches are located in Arlington Heights, Bensenville, Deerfield, Des Plaines, Elgin, Libertyville, Lisle, Matteson, Melrose Park, Skokie and Willowbrook. ANB maintains one foreign branch in Grand Cayman. ANC also owns American National Bank and Trust Company of Wisconsin, whose activities are coordinated with those of ANB. ANB provides commercial banking products and services to correspondent banks and commercial customers, including commercial loans, demand and time deposit accounts, and cash management services. Separate divisions target small businesses, commercial real estate and asset-based lending opportunities. In addition, ANB offers a wide array of ancillary products and services targeted primarily to its commercial middle market customer base. Corporate finance services and products offered include merger and acquisition advisory services, financial advisory services and interest rate hedging products and, through its affiliate ANB Mezzanine Corporation, mezzanine debt capabilities. International trade banking services and foreign exchange capabilities are offered to commercial customers involved in both import and export activities. Treasury and investment products, which include short-term investment management and employee benefit plans, are offered to commercial customers. Personal banking, personal trust, and investment services, including loan and deposit services, estate planning, fiduciary management and portfolio management, are offered to business owners and executives, and other individuals. Corporate trust services include land trust services offered to companies and individuals, and indenture trustee services offered to companies, municipalities and institutions that issue public or privately placed debt. Consumer Banking The credit card business ("First Card") has primary responsibility for developing and marketing the Corporation's credit card services to individuals nationwide using direct response, telemarketing and other techniques that do not require a local physical presence. While VISA and MasterCard accounts are the primary products sold by First Card, other services include check-accessed lines of credit and certificates of deposit. 3 The majority of the Corporation's credit card accounts are owned and administered by FCC National Bank ("FCCNB"), headquartered in Wilmington, Delaware. First Card operations centers are located in Wilmington, Delaware; Elgin, Illinois; and Uniondale (Long Island), New York. During 1994, First Card continued to expand, primarily through marketing programs offering FCCNB's proprietary First Card line of VISA and MasterCard accounts. FCCNB ranks among the largest issuers of bank credit cards in the United States. Community banking has primary responsibility for developing and marketing diversified financial services to individuals and small businesses located in the Chicago metropolitan area. These services include traditional deposit and loan services, investment advisory and trust services, brokerage services, mutual funds, annuities and mortgage loans. In addition, beginning in 1995, a new "direct banking" department, using various resources such as 24-hour telephone support and nationwide debit card access to automatic teller machines ("ATM"s) and merchants, will focus on sales and service to consumers beyond the Chicago metropolitan area. Community banking services are distributed through more than 80 consumer banking facilities and more than 500 ATMs in the Chicago metropolitan area, and through Bank-by-Mail, Bank-at-Work and telephone and computer home-banking programs. ATM services are provided to consumer banking clients in the Chicago market through a shared network called CASH STATION and through the CIRRUS system nationwide. Other Subsidiaries In addition to the banking subsidiaries described above, the Corporation owns subsidiaries that are engaged in businesses related to banking and finance, including leasing real and personal property; providing specialized financing that supplements FNBC's commercial lending activities; engaging in certain permissible investment banking activities; and engaging in investment management activities. First Chicago Financial Corporation raises funds to finance the operations of its subsidiaries: First Chicago Leasing Corporation, First Chicago Investment Corporation and FCCM. First Chicago Leasing Corporation provides advice on, and invests in, leases for commercial aircraft, facilities and major industrial equipment. First Chicago Investment Corporation provides various forms of equity financing for acquisitions, management buyouts and growing businesses. FCCM engages in certain permissible securities distribution and trading activities as described on pages 2-3 of this Form 10-K. First Capital Corporation of Chicago, a small business investment company licensed under the Small Business Investment Act of 1958, offers equity financing for small business ventures. First Chicago Investment Management Company ("FCIMC"), a newly organized subsidiary of FNBC, provides investment advisory, management and administrative services to a variety of clients, including: retail mutual funds; individuals; defined contribution retirement plans; businesses and institutional investors; and, through its wholly-owned subsidiary ANB Investment Management and Trust Company ("ANB IMC") (formerly a subsidiary of ANB), traditional pension plans. Financial Policy The Finance Committee oversees the implementation of policies established by the Office of the Chairman related to the financial management of the Corporation, specifically: liquidity management, interest rate risk management, capital management, investment accounts, tax planning and accounting risk. The Office of the Chairman comprises the Chairman of the Board, the President and the Vice Chairman of the Board. The Finance Committee is chaired by the Corporation's Chief Financial Officer. Through the Chief 4 Financial Officer's staff, the Finance Committee documents established financial management policies, develops strategies to effect policies, reviews compliance with policies and recommends new policies or modifications to existing policies. The tactical execution of strategies to effect policies is accomplished through various organizational units which, in that capacity, are responsible to the Finance Committee. Credit Strategy The Credit Strategy Committee is responsible for providing strategic direction and senior management oversight for the credit risk management process. This process includes identifying, measuring and managing potential credit risk inherent in loans, leases, letters of credit, and other product offerings such as interest rate and currency risk insurance products, service products, securities placement products and trading products. The Credit Strategy Committee is chaired by the Corporation's Vice Chairman. Market Risk Policy The Market Risk Committee is responsible for providing strategic direction and senior management oversight for the market risk management process. This process includes identifying, measuring and managing potential capital, balance sheet and income effects associated with interest rate, exchange rate and other market risks. The Market Risk Committee is chaired by the Corporation's Vice Chairman. Investment Risk Management The Investment Risk Management Committee oversees all activities with inherent market risk that are not covered by the Market Risk Committee and are not within the asset and liability management oversight of the Finance Committee. The activities over which this committee has oversight responsibilities will generally have a holding period longer than six months, and involve markets with limited liquidity. The Investment Risk Management Committee is chaired by the Corporation's Vice Chairman. Staff Departments Staff support for FNBC, the Corporation and certain of their subsidiaries is supplied by the Administration, Audit, Community Affairs, Corporate Affairs, Corporate Strategy, Credit and Market Risk Policy, Economic Forecasting, Human Resources and Law Departments, and the Finance Group. EMPLOYEES As of December 3l, 1994, the Corporation and its subsidiaries had approximately 17,630 employees on a full-time-equivalent basis. COMPETITION All phases of the Corporation's activities, including banking, are highly competitive. The Corporation's banking subsidiaries (the "Banks") compete actively with money market mutual funds, national and state banks, mutual savings banks, savings and loan associations, finance companies, credit unions and other financial institutions located throughout the United States. For international business, the Banks compete with other United States financial institutions that have foreign installations, and with other major banks and financial institutions throughout the world. In addition, the Corporation's subsidiaries are subject to competition from a variety of financial and other institutions that provide a wide array of products and services. MONETARY POLICY AND ECONOMIC CONTROLS The earnings of the Banks and, therefore, the earnings of the Corporation, are affected by the policies of regulatory authorities, including the Board of Governors of the Federal Reserve System (the "Board"). An important function of the Board is to promote orderly economic growth by influencing interest rates and the 5 supply of money and credit. Among the methods that have been used to achieve this objective are open market operations in United States government securities, changes in the discount rate on member bank borrowings, and changes in reserve requirements against bank deposits. These methods are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, interest rates on loans and securities, and rates paid for deposits. The Board's monetary policies strongly influence the behavior of interest rates and can, therefore, have a significant effect on the operating results of commercial banks. During the past year, economic growth accelerated. If growth continues to be strong, inflationary pressures will develop. Given such circumstances, the Board has been tightening credit conditions, pushing up interest rates. The effects of the various measures used by the Board on the future business and earnings of the Banks and the Corporation cannot be predicted. Other economic controls also have affected the Corporation's operations in the past. The Corporation cannot predict the nature or extent of any effects that possible future governmental controls or legislation may have on its business and earnings. SUPERVISION AND REGULATION Bank Holding Company Regulation The Corporation is a bank holding company as defined under the Bank Holding Company Act of 1956, as amended (the "Act"), and is registered as such with the Board. Under the Act, bank holding companies are prohibited, with certain exceptions, from engaging in, or from acquiring more than 5% of the voting stock of any company engaging in, activities other than banking, managing or controlling banks, or performing services for their subsidiaries. The Act also prohibits bank holding companies from acquiring more than 5% of the voting shares of any bank that is not already majority-owned without the prior approval of the Board. The Act authorizes the Board to permit bank holding companies to engage in, and to acquire or retain shares of companies that engage in, activities that the Board has determined to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. The Board has determined that a number of activities meet this standard. Among the activities so approved are: making and servicing loans; performing certain fiduciary functions; leasing real and personal property; underwriting and dealing in government obligations and certain money market instruments; underwriting and dealing, to a limited extent, in corporate debt obligations and other securities that banks may not deal in; providing foreign exchange advisory and transactional services; acting as a futures commission merchant; and owning, controlling or operating a savings association if the association engages only in deposit-taking activities, lending and other activities that are permissible for bank holding companies. The Board, from time to time, may revise and expand the list of permitted activities. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Riegle-Neal Act") significantly revises prior laws applicable to interstate acquisitions of banks and bank holding companies and the branching powers of national banks. Prior to the Riegle-Neal Act, the Board was not permitted to approve an application to acquire shares of a bank located outside the state in which the operations of the applicant's bank subsidiaries were principally conducted unless the acquisition was specifically authorized by a statute of the acquired bank's state. Commencing September 29, 1995, the Board is authorized to approve an application of an adequately capitalized and adequately managed bank holding company to acquire control of a bank located in another state without regard to whether such transaction is prohibited under the law of such state. The Board may not, however, approve such an application if, following the acquisition, the applicant would control either (1) more than 10% of all insured depository institution deposits in the United States or (2) under certain circumstances, 30% or more of all insured depository institution deposits in any state where either the applicant or the acquired bank is located. The 30% limit on aggregate deposits that may be controlled by an applicant can be adjusted by the states on a non-discriminatory basis. 6 The Riegle-Neal Act also revises the rules applicable to mergers between insured banks located in different states. Before passage of the Riegle-Neal Act, such mergers generally were not authorized. Commencing June 1, 1997, however, adequately capitalized and adequately managed insured banks in different states may merge without regard to whether the merger is authorized under the law of any state. States may elect to prohibit interstate bank mergers or may elect to permit early interstate bank mergers by adopting, prior to June 1, 1997, legislation that expressly so provides, and that applies on equal terms to all out-of-state banks. The Riegle-Neal Act provides that an interstate merger involving the acquisition of a branch (as distinguished from an entire bank) or the de novo establishment of a national bank branch in another state may be approved only if the law of the host state expressly permits such action. An interstate merger may not be approved if, following the merger, the resulting bank would control (1) more than 10% of all insured depository institution deposits in the United States or (2) under certain circumstances, 30% or more of all insured depository institution deposits in any state where the resulting bank will be located. The 30% limit on aggregate deposits that may be controlled by the resulting bank can be adjusted by the states on a non-discriminatory basis. The laws of the host state regarding community reinvestment, consumer protection, fair lending and the establishment of intrastate branches will apply to any out-of-state branch of a national bank unless preempted by federal law or the Office of the Comptroller of the Currency (the "Comptroller") determines that application of such laws would have a discriminatory effect on the national bank. The Riegle-Neal Act contains a number of other provisions related to banks and bank holding companies, including: authorization of interstate branching by foreign banks; additional branch closing notice requirements for interstate banks proposing to close a branch in a low or moderate income area; amendments to the Community Reinvestment Act of 1977 to require separate written evaluations of an insured depository institution for each state in which it maintains branches; a prohibition on interstate banks maintaining out-of-state deposit production offices; and authorization for a bank subsidiary of a bank holding company to receive deposits, renew time deposits, close and service loans and receive payments on loans as agent for a depository institution affiliate of such bank. The extent to, and terms on, which full interstate branching and certain other actions authorized under the Riegle-Neal Act are implemented will depend on the actions of entities other than the Corporation and the Banks, including the legislatures of the various states. Further developments by state and federal authorities, including legislation, with respect to matters covered by the Riegle-Neal Act reasonably can be anticipated to occur in the future. In addition, there may be new, significant banking legislation introduced in the current Congress related to bank holding companies and their powers; the likelihood of passage and effect, if any, of such legislation on the Corporation and the Banks cannot be predicted. The Illinois Bank Holding Company Act (the "Illinois Act") provides that any out-of-state bank holding company whose principal place of business is in a state that grants Illinois bank holding companies reciprocal authority may acquire control of an Illinois bank or bank holding company. The approval of the Illinois Commissioner of Banks and Trust Companies is required to complete such an interstate acquisition in Illinois. The Illinois Act also permits intrastate acquisitions throughout Illinois by Illinois bank holding companies. All interstate and intrastate bank acquisitions by the Corporation are subject to the approval of the Board. The Corporation is required to file with the Board annual reports and such additional information as the Board may require pursuant to the Act. The Board periodically examines the Corporation and its nonbank subsidiaries, and is authorized to impose reserve requirements and interest rate limitations on certain debt obligations issued by bank holding companies. As a bank holding company, the Corporation and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with extensions of credit or providing property or services. The Board has adopted risk-based capital guidelines for bank holding companies that require bank holding companies to maintain a minimum ratio of total capital to risk-weighted assets (including certain off-balance-sheet items, such as standby letters of credit) of 8%. At least half of total capital must be composed 7 of common stockholders' equity, noncumulative perpetual preferred stock and a limited amount of cumulative perpetual preferred stock, less disallowed intangibles and other adjustments (primarily goodwill) ("Tier I capital"). The remainder ("Tier II capital") may consist of subordinated debt, other preferred stock, certain other instruments and a limited amount of loan loss reserves. At December 31, 1994, the Company's consolidated Tier I capital and total capital ratios were 8.8% and 13.4%, respectively. In addition, the Board has established minimum leverage ratio guidelines for bank holding companies. These guidelines provide for a minimum ratio of Tier I capital to total average assets (the "leverage ratio") of 3% for bank holding companies that meet certain specified criteria, including those having the highest regulatory rating. All other bank holding companies generally are required to maintain a leverage ratio of at least 3% plus an additional cushion of 100 to 200 basis points. The Corporation's leverage ratio at December 31, 1994, was 7.5%. The guidelines also provide that bank holding companies experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. Furthermore, the Board has indicated that it will consider a "tangible Tier I capital leverage ratio" (deducting all intangibles) and other indicia of capital strength in evaluating proposals for expansion or new activities. Banking Regulation The Corporation and its nonbank subsidiaries are affiliates of the Banks within the meaning of the Federal Reserve Act and, as such, are subject to certain restrictions on loans made by the Banks to the Corporation or such other subsidiaries, on investments made by the Banks in their stock or securities, on the Banks taking such stock and securities as collateral for loans, and on the terms of transactions between the Banks and other subsidiaries. The Corporation and its subsidiaries, including the Banks, are also subject to certain restrictions with respect to engaging in the issuance, flotation, underwriting, public sale or distribution of securities. There are various additional requirements and restrictions in the laws of the United States and the State of Illinois affecting the Banks and their operations, including the requirement to maintain reserves against deposits, restrictions on the nature and amount of loans that may be made by the Banks, and restrictions related to investments and other activities of the Banks. The Banks are subject to regulation by the Comptroller, the Board and the Federal Deposit Insurance Corporation ("FDIC"); as national banks, they are examined by the Comptroller. FNBC's and ANB's operations in other countries are subject to various restrictions imposed by the laws of such countries. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") significantly expanded the regulatory and enforcement powers of federal banking regulators and has important consequences for the Corporation, the Banks and other depository institutions located in the United States. A major feature of FDICIA is the comprehensive directions it gives to federal banking regulators to promptly direct or require the correction of problems at inadequately capitalized banks in the manner that is least costly to the federal deposit insurance funds. The degree of corrective regulatory involvement in the operations and management of banks and their holding companies is, under FDICIA, largely determined by the actual or anticipated capital position of the subject institution. FDICIA established five tiers of capital measurement for regulatory purposes ranging from "well capitalized" to "critically undercapitalized." FDICIA requires banking regulators to take increasingly strong corrective steps, based on the capital tier of any subject bank, to cause such bank to achieve and maintain capital adequacy. Even if a bank is adequately capitalized, however, the banking regulators are authorized to apply corrective measures if the bank is determined to be in an unsafe or unsound condition or engaging in an unsafe or unsound activity. Depending on the capital level of an insured depository institution, the banking regulatory agencies' corrective powers can include: requiring a capital restoration plan; placing limits on asset growth and restrictions on activities; requiring the institution to reduce total assets; requiring the institution to issue 8 additional stock (including voting stock) or to be acquired; placing restrictions on transactions with affiliates; restricting the interest rate the institution may pay on deposits; ordering a new election for the institution's board of directors; requiring that certain senior executive officers or directors be dismissed; prohibiting the institution from accepting deposits from correspondent banks; requiring the institution to divest certain subsidiaries; prohibiting the payment of principal or interest on subordinated debt; prohibiting the institution's parent bank holding company from making capital distributions without prior regulatory approval; and, ultimately, appointing a receiver or conservator for the institution. If an insured depository institution is undercapitalized, the parent bank holding company is required to guarantee that the institution will comply with any capital restoration plan submitted to, and approved by, the appropriate federal banking agency in an amount equal to the lesser of (1) 5% of the institution's total assets at the time the institution became undercapitalized or (2) the amount that is necessary (or would have been necessary) to bring the institution into compliance with all applicable capital standards as of the time the institution fails to comply with the capital restoration plan. If such parent bank holding company guarantee is not obtained, the capital restoration plan may not be accepted by the banking regulators. As a result, such institution would be subject to the more severe restrictions imposed on significantly undercapitalized institutions. Further, the failure of such a depository institution to submit an acceptable capital plan is grounds for the appointment of a conservator or receiver. FDICIA also contains a number of other provisions affecting depository institutions, including additional reporting and independent auditing requirements, the establishment of safety and soundness standards, the changing of FDIC insurance premiums from flat amounts to the system of risk-based assessments described below, a review of accounting standards, and supplemental disclosures and limits on the ability of depository institutions to acquire brokered deposits. The Riegle-Community Development and Regulatory Improvement Act of 1994, however, among other things, contains a number of specific provisions easing the regulatory burden on banks and bank holding companies, including some imposed by FDICIA, and making the bank regulatory system more efficient. Federal banking regulators have taken actions to implement these provisions. Bank regulators continue to indicate their desire to raise capital requirements applicable to banking organizations beyond current levels. Each of the Banks and the Corporation were in compliance with applicable minimum capital requirements as of December 31, 1994. The management of the Corporation, however, is unable to predict whether higher capital requirements will be imposed and, if so, at what levels and on what schedule. The Banks are subject to FDIC deposit insurance assessments. Under the FDIC's risk-based assessment system effective January 1, 1994, the prior flat assessment rate of 0.23% per annum on the amount of domestic deposits has been changed to a rate based on classification of a depository institution in one of nine risk assessment categories. Such classification is based upon the institution's capital level and upon certain supervisory evaluations of the institution by its primary regulator. The assessment rate schedule currently in effect creates a 0.08% spread in assessment rates, ranging from 0.23% per annum to 0.31% per annum, between banks classified as strongest and weakest by the FDIC. In February 1995, the FDIC proposed reducing the minimum assessment rate applicable to the strongest banks from .23% per annum to .04% per annum. Under this proposal, the premium for the weakest banks would remain at .31% per annum. The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), among other things, provides generally that, upon the default of any bank of a multi-unit holding company, the FDIC may assess an affiliated insured depository institution for the estimated losses incurred by the FDIC. Specifically, FIRREA provides that a depository institution insured by the FDIC can be held liable for any loss incurred by, or reasonably expected to be incurred by, the FDIC in connection with (1) the default of a commonly controlled FDIC-insured depository institution or (2) any assistance provided by the FDIC to a commonly controlled FDIC-insured depository institution in danger of default. "Default" is defined generally 9 as the appointment of a conservator or receiver. "In danger of default" is defined generally as the existence of certain conditions indicating that a default is likely to occur in the absence of regulatory assistance. All of the Banks are FDIC-insured depository institutions. There are certain regulatory limitations on the Banks' payment of dividends to the Corporation. Dividend payments by a national bank are limited to the lesser of (1) the level of "undivided profits then on hand" less the amount of bad debts, as defined, in excess of the allowance for credit losses, and (2) absent regulatory approval, an amount not in excess of its "net profits" for the current year combined with the "retained net profits" for the preceding two years. As of December 3l, 1994, the Banks could have declared additional dividends of approximately $664 million without approval of the Comptroller. The payment of dividends by any Bank may also be affected by other factors, such as the maintenance of adequate capital for such Bank. In addition, the Comptroller has authority to prohibit a national bank from paying dividends if, in the Comptroller's opinion, the payment of dividends would, in light of the financial condition of such bank, constitute an unsafe or unsound practice. FNBC and ANB are registered with the Comptroller as transfer agents and are subject to the rules and regulations of the Securities and Exchange Commission (the "Commission") and the Comptroller with respect to their activities as transfer agents. Certain organizational units within FNBC and ANB are registered with the Commission as municipal securities dealers. These units are subject to the applicable rules and regulations of the Commission and the Municipal Securities Rulemaking Board with respect to transactions in municipal securities performed in a municipal securities dealer capacity. FNBC also is a regulated government securities broker and dealer under the Government Securities Act, and is subject to regulations issued thereunder in connection with the conduct of its United States government securities business. In addition, First Chicago Investment Services, Inc. ("FCIS"), a brokerage subsidiary of FNBC, is registered as a broker-dealer with the Commission and is a member of the National Association of Securities Dealers ("NASD"). The brokerage activities of FCIS are subject to the applicable rules and regulations of the Commission and the NASD. FCCM is also registered as a broker-dealer with the Commission and is a member of the NASD. The securities distribution and trading activities of FCCM are subject to the applicable rules and regulations of the Board, the Commission and the NASD. First Chicago Futures, Inc. ("FCFI"), a subsidiary of FNBC that conducts a commodities brokerage business and is a market maker in foreign currency options, is registered with the Commission as a broker-dealer and with the Commodity Futures Trading Commission ("CFTC") as a futures commission merchant, and is a member of the National Futures Association ("NFA"). FCFI is subject to the applicable rules and regulations of the Commission, the CFTC, the NFA, and certain commodities and securities exchanges of which FCFI is a member with respect to its activities as a foreign currency market maker and a futures commission merchant. FCIMC and ANB IMC are registered with the Commission as investment advisers and, as such, are subject to the Investment Advisers Act of 1940. In addition, as an adviser to regulated investment companies, FCIMC also may be subject to certain provisions of the Investment Company Act of 1940. FINANCIAL REVIEW Additional information responsive to this Item 1 is set forth in the Corporation's 1994 Annual Report to Stockholders on pages 17-39 of the "Financial Review" section and is expressly incorporated herein by reference. 10 CERTAIN STATISTICAL INFORMATION In addition to the statistical information set forth on the following pages of this Form 10-K, the information set forth in "Selected Statistical Information" on pages 66-69 of the Corporation's 1994 Annual Report to Stockholders is expressly incorporated herein by reference. INVESTMENT SECURITIES
1994 1993 1992 DECEMBER 31 (IN MILLIONS) ------ ------ ------ Debt securities U.S. government and federal agency Held for investment..................................... $ -- $ -- $ 330 Held to maturity........................................ 276 245 -- Available for sale...................................... 465 243 195 ------ ------ ------ Total................................................. 741 488 525 States and political subdivisions Held for investment..................................... -- -- 244 Held to maturity........................................ 176 162 -- ------ ------ ------ Total................................................. 176 162 244 Other bonds, notes and debentures Held for investment..................................... -- -- 134 Held to maturity........................................ 4 4 -- Available for sale...................................... 51 15 -- ------ ------ ------ Total................................................. 55 19 134 ------ ------ ------ Total debt securities................................. 972 669 903 Equity securities (1)...................................... 1,620 1,587 1,497 ------ ------ ------ Total................................................. $2,592 $2,256 $2,400 ====== ====== ======
- -------- (1) Includes venture capital portfolio and Federal Reserve stock. As of December 31, 1994, debt investment securities had the following maturity and yield characteristics.
HELD TO AVAILABLE MATURITY FOR SALE TOTAL ----------- ----------- ----------- BOOK BOOK BOOK VALUE YIELD VALUE YIELD VALUE YIELD (DOLLARS IN MILLIONS) ----- ----- ----- ----- ----- ----- U.S. GOVERNMENT AND FEDERAL AGENCY Maturing within one year................... $ 84 5.01% $368 5.48% $452 5.39% Maturing after one but within five years... 191 5.20 92 5.02 283 5.14 Maturing after five but within ten years... -- -- 3 5.87 3 5.87 Maturing after ten years................... 1 8.11 2 8.50 3 8.35 ---- ---- ---- ---- ---- ---- $276 5.15% $465 5.40% $741 5.31% ==== ==== ==== ==== ==== ==== STATES AND POLITICAL SUBDIVISIONS* Maturing within one year................... $ 20 9.84% -- -- $ 20 9.84% Maturing after one but within five years... 74 9.41 -- -- 74 9.41 Maturing after five but within ten years... 51 8.95 -- -- 51 8.95 Maturing after ten years................... 31 9.52 -- -- 31 9.52 ---- ---- ---- ---- ---- ---- $176 9.34% -- -- $176 9.34% ==== ==== ==== ==== ==== ==== OTHER BONDS, NOTES AND DEBENTURES Maturing within one year................... $ 1 5.91% $ 2 8.53% $ 3 7.64% Maturing after one but within five years... 1 7.35 2 5.08 3 6.02 Maturing after five but within ten years... 1 8.17 -- -- 1 8.17 Maturing after ten years................... 1 2.95 47 6.55 48 6.52 ---- ---- ---- ---- ---- ---- $ 4 6.62% $ 51 6.58% $ 55 6.58% ==== ==== ==== ==== ==== ====
- -------- *Yields for obligations of states and political subdivisions are calculated on a tax-equivalent basis using a tax rate of 35%. 11 LOAN COMPOSITION
1994 1993 1992 1991 1990 DECEMBER 31 (IN MILLIONS) ------- ------- ------- ------- ------- Commercial risk Domestic Commercial............................ $ 7,806 $ 6,007 $ 7,020 $ 8,612 $ 9,037 Commercial real estate Construction......................... 256 315 432 867 1,170 Other................................ 2,240 2,094 2,240 3,387 3,596 Financial institutions................ 1,027 1,292 1,307 1,180 1,259 Other................................. 2,869 2,746 2,712 2,425 2,783 ------- ------- ------- ------- ------- Total domestic......................... 14,198 12,454 13,711 16,471 17,845 Foreign office Commercial............................ 1,080 783 937 1,380 1,777 Governments and official institutions. 89 166 222 298 419 Banks and other financial institutions......................... 390 754 766 871 1,004 Real estate........................... 48 65 123 149 161 Other................................. 225 207 61 167 76 ------- ------- ------- ------- ------- Total foreign office................... 1,832 1,975 2,109 2,865 3,437 ------- ------- ------- ------- ------- Total commercial.................... 16,030 14,429 15,820 19,336 21,282 ------- ------- ------- ------- ------- Consumer risk Credit cards........................... 6,337 5,778 4,135 3,843 3,930 Secured by real estate Mortgage.............................. 1,581 1,469 1,319 1,125 1,110 Home equity........................... 832 780 827 782 703 Other.................................. 1,167 647 591 575 681 ------- ------- ------- ------- ------- Total consumer...................... 9,917 8,674 6,872 6,325 6,424 ------- ------- ------- ------- ------- Total loans............................. $25,947 $23,103 $22,692 $25,661 $27,706 ======= ======= ======= ======= =======
12 FOREIGN OUTSTANDINGS The Corporation's cross-border outstandings to countries where such outstandings exceeded 1.0% of the Corporation's total assets ($659 million as of December 31, 1994, $526 million as of December 31, 1993, and $493 million as of December 31, 1992) are shown in the table below. They consist of loans (including accrued interest), acceptances, interest-bearing deposits with other banks, equity investments, other interest-bearing investments and other nonlocal currency monetary assets.
BANKS AND GOVERNMENT OTHER COMMERCIAL (IN MILLIONS) AND OFFICIAL FINANCIAL AND COUNTRY DECEMBER 31 INSTITUTIONS INSTITUTIONS INDUSTRIAL OTHER TOTAL - ------------- ----------- ------------ ------------ ---------- ----- ------ Japan............ 1994 $ -- $4,627 $149 $30 $4,806 1993 -- 3,617 77 21 3,715 1992 -- 3,263 81 33 3,377 Canada........... 1994 $ * $ * $ * $ * $ * 1993 1 289 183 60 533 1992 4 535 113 5 657 Italy............ 1994 $ * $ * $ * $ * $ * 1993 7 600 -- -- 607 1992 4 564 15 -- 583 France........... 1994 $ 6 $ 733 $ 23 $-- $ 762 1993 * * * * * 1992 6 551 2 2 561 United Kingdom... 1994 $210 $ 375 $193 $78 $ 856 1993 * * * * * 1992 * * * * * Korea............ 1994 $ -- $ 456 $435 $ 5 $ 896 1993 * * * * * 1992 * * * * * Germany.......... 1994 $ -- $ 625 $ 32 $-- $ 657 1993 * * * * * 1992 * * * * *
- -------- *Outstandings less than 1%. At year-end 1994, the only country for which cross-border outstandings totaled between 0.75% and 1.0% of the Corporation's total assets was Italy; such outstandings totaled $550 million. At December 31, 1993, the only country for which cross-border outstandings totaled between 0.75% and 1.0% of the Corporation's total assets was Korea; such outstandings totaled $489 million. At December 31, 1992, the countries for which cross-border outstandings totaled between 0.75% and 1.0% of the Corporation's total assets were Korea and the United Kingdom; such outstandings totaled $962 million. HIGHLY LEVERAGED TRANSACTIONS During 1994, exposure to highly leveraged transactions (HLTs) did not reflect a significant concentration in loans outstanding or revenue. At year-end 1994, outstanding HLT loans were $0.5 billion and constituted just 3% of the total commercial loan portfolio of $16.0 billion. At year-end 1994, the HLT committed exposure was $0.6 billion. The 1994 HLT outstandings and committed exposure are essentially unchanged relative to outstandings at the end of 1993. Policies and procedures are maintained for the management and 13 reporting of HLT exposure. The Corporation continues to disclose this exposure using the HLT definition established by federal banking regulatory agencies. The Corporation's venture capital subsidiaries have invested in companies that have substantially higher leverage than would normally exist in their industries. At December 31, 1994, this portfolio consisted of 38 HLT investments with a carrying value of $423 million. At December 31, 1994, gross unrealized gains related to HLT investments totaled $103 million, while gross unrealized losses were $52 million. At December 31, 1993, the carrying value of HLT investments in the venture capital portfolio totaled $397 million. Unfunded commitments related to the HLT segment of the venture capital portfolio totaled $2 million at December 31, 1994. MATURITY DISTRIBUTION AND INTEREST RATE SENSITIVITY OF LOANS The following table shows a distribution of the maturity of loans and, for those loans due after one year, a breakdown between those loans that have floating interest rates and those that have predetermined interest rates. The amounts exclude domestic consumer loans, residential mortgage loans and domestic lease-financing receivables.
ONE YEAR ONE TO OVER DECEMBER 31, 1994 OR LESS FIVE YEARS FIVE YEARS TOTAL (IN MILLIONS) -------- ---------- ---------- ------- Domestic Commercial............................ $2,321 $ 881 $4,604 $ 7,806 Real estate........................... 563 822 1,111 2,496 Financial institutions................ 38 10 979 1,027 Other................................. 989 136 725 1,850 ------ ------ ------ ------- Total domestic...................... 3,911 1,849 7,419 13,179 Foreign................................. 1,058 384 390 1,832 ------ ------ ------ ------- Total............................... $4,969 $2,233 $7,809 $15,011 ====== ====== ====== ======= Loans with floating interest rates...... $1,693 $7,242 $ 8,935 Loans with predetermined interest rates. 540 567 1,107 ------ ------ ------- Total............................... $2,233 $7,809 $10,042 ====== ====== =======
NONPERFORMING LOANS Nonperforming loans include loans on which the Corporation does not accrue interest (nonaccrual loans) and loans that bear a rate of interest that has been reduced below market rates due to the deteriorating financial condition of the borrower (accrual renegotiated loans).
DECEMBER 31 1994 1993 1992 1991 1990 (IN MILLIONS) ---- ---- ---- ---- ---- Nonaccrual loans....................................... $126 $230 $386 $838 $844 Accrual renegotiated loans............................. 4 4 5 5 10 ---- ---- ---- ---- ---- Total nonperforming loans.......................... $130 $234 $391 $843 $854 ==== ==== ==== ==== ==== Nonperforming loans Domestic............................................. $124 $171 $286 $645 $620 Foreign.............................................. 6 63 105 198 234 ---- ---- ---- ---- ---- Total nonperforming loans.......................... $130 $234 $391 $843 $854 ==== ==== ==== ==== ====
ACCELERATED ASSET DISPOSITION PORTFOLIO The accelerated asset disposition portfolio was established in September, 1992. Nonperforming assets in this portfolio totaled $37 million at year-end 1994, $87 million at year-end 1993 and $372 million at year-end 1992. 14 RECONCILIATION OF CHANGE IN NONPERFORMING LOANS
COMMERCIAL REAL ESTATE OTHER TOTAL (IN MILLIONS) ---------- ----- ----- Nonperforming loans--December 31, 1993................. $108 $126 $234 Loans placed on nonperforming status................... 50 83 133 Charge-offs............................................ (22) (30) (52) Transferred to other real estate....................... (20) -- (20) Transferred to accrual status.......................... (24) (25) (49) Other: Mergers and acquisitions............................. 5 21 26 Impact of Brazilian debt restructuring............... -- (49) (49) Principally payments................................. (29) (64) (93) ---- ---- ---- Nonperforming loans--December 31, 1994................. $ 68 $ 62 $130 ==== ==== ====
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING INTEREST
DECEMBER 31 1994 1993 1992 1991 1990 (IN MILLIONS) ---- ---- ---- ---- ---- Domestic............................................... $89 $63 $59 $121 $68 Foreign................................................ -- -- -- 3 -- --- --- --- ---- --- Total.............................................. $89 $63 $59 $124 $68 === === === ==== ===
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.
1994 1993 ---------------------------------- ---------------------------------- ACCELERATED ACCELERATED DISPOSITION DISPOSITION DOMESTIC FOREIGN PORTFOLIO TOTAL DOMESTIC FOREIGN PORTFOLIO TOTAL (IN MILLIONS) -------- ------- ----------- ----- -------- ------- ----------- ----- Interest at original contract rates......... $10 $1 $-- $11 $14 $ 9 $ 3 $26 Interest actually recog- nized.................. 5 -- -- 5 6 3 2 11 --- --- ---- --- --- --- --- --- Interest shortfall, be- fore income tax effect. $ 5 $1 $-- $ 6 $ 8 $ 6 $ 1 $15 === === ==== === === === === ===
At December 31, 1994 and 1993, the Corporation was committed to lend additional funds of approximately $6 million and $12 million, respectively, in connection with nonperforming loans and nonperforming loans in the accelerated asset disposition portfolio. 15 ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES
1994 1993 1992 1991 1990 (IN MILLIONS) ---- ---- ---- ---- ------ Balance, beginning of year Commercial.................................... $488 $488 $627 $770 $1,073 Consumer...................................... 195 136 132 127 159 ---- ---- ---- ---- ------ Total balance, beginning of year........... 683 624 759 897 1,232 Provision for credit losses Commercial.................................... 3 78 261 274 322 Consumer...................................... 221 192 164 166 172 ---- ---- ---- ---- ------ Total provision for credit losses.......... 224 270 425 440 494 Provision for loans held for accelerated disposition................................... -- -- 491 -- -- Charge-offs Commercial Domestic Commercial.................................. 21 31 68 41 29 Real estate................................. 22 53 116 183 83 Other....................................... 4 6 48 149 20 Foreign, other than TCD (1).................. 5 16 48 29 35 Troubled-country debtor...................... -- 17 16 49 489 Consumer Credit card (2).............................. 179 149 157 168 191 Other........................................ 11 7 8 8 6 ---- ---- ---- ---- ------ Total charge-offs.......................... 242 279 461 627 853 Recoveries Commercial Domestic Commercial.................................. 12 21 12 5 3 Real estate................................. 3 2 1 -- 4 Other....................................... 7 6 6 2 2 Foreign, other than TCD...................... 39 10 17 19 11 Troubled-country debtor...................... -- 6 5 8 11 Consumer Credit card.................................. 27 51 46 41 39 Other........................................ 3 1 1 2 2 ---- ---- ---- ---- ------ Total recoveries........................... 91 97 88 77 72 Net charge-offs Commercial.................................... (9) 78 255 417 625 Consumer...................................... 160 104 118 133 156 ---- ---- ---- ---- ------ Total net charge-offs...................... 151 182 373 550 781 Charge-offs of loans upon transfer to accelerated disposition portfolio (commercial)........................ -- -- 636 -- -- Other Commercial (3)................................ 16 -- -- -- -- Consumer (4).................................. (49) (29) (42) (28) (48) ---- ---- ---- ---- ------ Total other................................ (33) (29) (42) (28) (48) Balance, end of year Commercial.................................... 516 488 488 627 770 Consumer...................................... 207 195 136 132 127 ---- ---- ---- ---- ------ Total balance, end of year................. $723 $683 $624 $759 $ 897 ==== ==== ==== ==== ======
- -------- (1) 1992 amounts include $12 million defined as commercial real estate. (2) As of January 1, 1991, the Corporation no longer charges off unpaid interest and fees on credit cards to the allowance for credit losses but instead reverses them against their respective income statement lines. Charge-offs and the provision for credit losses decreased by $21.0 million in 1990. (3) Related to the merger with Lake Shore Bancorp., Inc. in 1994. (4) Primarily reflects the reclassification of reserves related to securitized credit card receivables to other assets for all periods presented. 16 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.
1994 1993 1992 1991 1990 DECEMBER 31 (DOLLARS IN MILLIONS) ---- ---- ---- ---- ---- Commercial Domestic Commercial (1).............................. $436 $368 $365 $417 $439 Real estate................................. 7 24 19 51 46 Other (2)................................... 18 23 29 27 16 Foreign (1)................................... 55 73 75 132 269 Consumer Credit card (3)............................... 201 188 129 124 121 Other......................................... 6 7 7 8 6 ---- ---- ---- ---- ---- Total....................................... $723 $683 $624 $759 $897 ==== ==== ==== ==== ==== Percentage of loans in each category to total loans Commercial Domestic Commercial.................................. 30% 26% 31% 33% 33% Real estate................................. 10 10 12 17 17 Other....................................... 15 17 18 14 15 Foreign....................................... 7 9 9 11 12 Consumer Credit card................................... 25 25 18 15 14 Other......................................... 13 13 12 10 9 --- --- --- --- --- Total....................................... 100% 100% 100% 100% 100% === === === === ===
- -------- (1) Includes allocation for potential losses not specifically identified in the commercial segment of the portfolio. (2) Includes financial institutions, lease-financing and other. (3) Adjusted to exclude reserves for securitized credit card receivables. DEPOSITS The following tables show a maturity distribution of domestic time certificates of deposit of $100,000 and over, other domestic time deposits of $100,000 and over, and deposits in foreign offices, predominantly in amounts in excess of $100,000, at December 31, 1994. DOMESTIC TIME CERTIFICATES OF DEPOSIT OF $100,000 AND OVER
AMOUNT PERCENT (DOLLARS IN MILLIONS) ------ ------- Three months or less....................................... $ 799 39% Over three months to six months............................ 571 28 Over six months to twelve months........................... 361 18 Over twelve months......................................... 304 15 ------ --- Total.................................................. $2,035 100% ====== ===
17 DOMESTIC OTHER TIME DEPOSITS OF $100,000 AND OVER
AMOUNT PERCENT (DOLLARS IN MILLIONS) ------ ------- Three months or less....................................... $457 81% Over three months to six months............................ 17 3 Over six months to twelve months........................... 14 2 Over twelve months......................................... 78 14 ---- --- Total.................................................. $566 100% ==== ===
FOREIGN OFFICES
AMOUNT PERCENT (DOLLARS IN MILLIONS) ------- ------- Three months or less...................................... $10,611 93% Over three months to six months........................... 268 2 Over six months to twelve months.......................... 542 5 Over twelve months........................................ 1 -- ------- --- Total................................................. $11,422 100% ======= ===
The following table shows the breakdown of deposits on an average basis for the past three years. DEPOSITS--AVERAGE BALANCES
1994 1993 1992 (IN MILLIONS) ------- ------- ------- Domestic Demand deposits................................. $ 7,072 $ 6,980 $ 6,136 Savings and time deposits....................... 10,873 11,357 11,915 Time certificates of deposit over $100,000...... 1,837 2,137 3,286 ------- ------- ------- Total domestic................................ 19,782 20,474 21,337 Foreign offices................................... 9,648 9,203 10,357 ------- ------- ------- Total deposits................................ $29,430 $29,677 $31,694 ======= ======= =======
FUNDS BORROWED Federal funds purchased, securities under repurchase agreements and commercial paper are other major nonretail sources of funds. Details on the outstandings and rates of these instruments during the past three years follow.
1994 1993 1992 (DOLLARS IN MILLIONS) ------- ------- ------- Federal funds purchased and securities under repurchase agreements(1) Outstanding at year-end.......................... $13,026 $ 8,255 $ 6,962 Highest outstanding at any month-end............. 16,543 12,588 12,930 Average interest rate at year-end................ 4.36% 2.95% 3.34% Commercial paper Outstanding at year-end.......................... $ 147 $ 164 $ 172 Highest outstanding at any month-end............. 323 239 334 Average interest rate at year-end................ 5.79% 2.90% 3.73% Other funds borrowed Outstanding at year-end.......................... $ 7,518 $ 5,843 $ 3,997 Highest outstanding at any month-end............. 9,573 7,991 4,554 Average interest rate at year-end................ 5.73% 4.19% 5.15% Total funds borrowed Daily average outstanding during the year........ $20,786 $17,155 $14,177 Approximate daily average interest rate during the year........................................ 4.52% 3.52% 4.13%
- -------- (1) Substantially all of the securities under repurchase agreements are short- term in nature and involve no significant counterparty risk. 18 The maturities of other funds borrowed as of December 31, 1994, were (in millions): Other Funds Borrowed 1995............................................................. $5,773 1996............................................................. 930 1997............................................................. 691 1998............................................................. 2 1999 and beyond.................................................. 122 ------ Total.......................................................... $7,518 ======
1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- FINANCIAL RATIOS Net income as a percentage of: Average stockholders' equity.................. 15.5% 20.7% 2.8% 4.0% 9.0% Average common stockholders' equity........... 17.0 24.2 1.8 3.2 9.4 Average total assets.......................... 1.08 1.42 0.17 0.22 0.47 Average earning assets........................ 1.31 1.66 0.20 0.26 0.55 Stockholders' equity at year-end as a percentage of: Total assets at year-end...................... 6.9 8.1 6.9 6.1 5.5 Total loans at year-end....................... 17.5 18.5 15.0 11.6 10.1 Total deposits at year-end.................... 14.3 15.1 11.4 9.3 8.6 Average stockholders' equity as a percentage of: Average assets................................ 6.9 6.8 6.1 5.6 5.2 Average loans................................. 19.1 17.7 13.6 10.8 9.0 Average deposits.............................. 15.1 13.1 10.5 9.0 8.1 Income to fixed charges: Excluding interest on deposits................ 1.9x 2.7x 0.7x* 1.2x 1.3x Including interest on deposits................ 1.6x 1.9x 0.9x* 1.1x 1.1x
*In 1992, earnings (as defined) were insufficient to cover fixed charges. The coverage deficiency was approximately $201 million. 19 ANALYSIS OF CHANGES IN NET INTEREST MARGIN The following table shows the approximate effect on the net interest margin of volume and rate changes for the years 1994 and 1993. For purposes of this table, changes that are not due solely to volume or rate changes are allocated to volume.
1994 OVER 1993 1993 OVER 1992 YEAR ENDED DECEMBER 31 ---------------------- ------------------------- VOLUME RATE TOTAL VOLUME RATE TOTAL (IN MILLIONS) ------ ------ ------ ------- ------- ------- Increase (decrease) in Interest income Due from banks--interest- bearing.................. $ 18.6 $ 45.1 $ 63.7 $ 2.6 $ (62.6) $ (60.0) Federal funds sold and securities under resale agreements............... 111.3 159.1 270.4 100.8 (40.8) 60.0 Trading account assets.... 3.3 52.5 55.8 18.4 (54.9) (36.5) Investment securities U.S. government and federal agency.......... 0.1 2.9 3.0 8.4 (9.1) (0.7) States and political subdivisions............ (4.4) (0.4) (4.8) (4.9) (0.4) (5.3) Other.................... 1.9 (6.0) (4.1) 1.9 0.8 2.7 Loans Domestic offices......... 133.4 112.1 245.5 (139.0) (10.9) (149.9) Foreign offices.......... (22.1) (0.2) (22.3) (38.8) (23.1) (61.9) Assets held for accelerated disposition (1)...................... (34.7) 9.4 (25.3) 8.3 2.0 10.3 ------ ------ ------ ------- ------- ------- Total................... 207.4 374.5 581.9 (42.3) (199.0) (241.3) Increase (decrease) in Interest expense Deposits Savings.................. (1.7) 27.5 25.8 9.2 (48.6) (39.4) Time..................... (25.5) 49.4 23.9 (57.7) (105.4) (163.1) Foreign offices.......... 19.5 66.2 85.7 (42.3) (84.8) (127.1) Federal funds purchased and securities under repurchase agreements.... 93.3 124.8 218.1 6.3 (43.5) (37.2) Commercial paper.......... (0.8) 2.4 1.6 (1.2) (1.5) (2.7) Other funds borrowed...... 71.7 44.1 115.8 118.8 (61.0) 57.8 Long-term debt............ 14.9 4.9 19.8 23.5 (0.1) 23.4 ------ ------ ------ ------- ------- ------- Total................... 171.4 319.3 490.7 56.6 (344.9) (288.3) ------ ------ ------ ------- ------- ------- Increase (decrease) in net interest margin............ $ 36.0 $ 55.2 $ 91.2 $ (98.9) $ 145.9 $ 47.0 ====== ====== ====== ======= ======= =======
- -------- (1)Excludes other real estate held for accelerated disposition. ITEM 2. PROPERTIES The Corporation and FNBC occupy space in a 60-story combined bank and office building at One First National Plaza, Chicago, Illinois. One First National Plaza is master-leased by FNBC from an owner trust that purchased the building from FNBC's wholly owned subsidiary First Chicago Building Corporation in May 1993, pursuant to a leveraged lease-financing transaction. The building has approximately l,850,000 square feet of rentable space, of which the Corporation occupies approximately 59% and the balance is sub-leased to others. It is located on the north half of a block in the heart of the Chicago "Loop," the entire block being owned by FNBC. The south half of the block includes a plaza, parking and restaurant facilities, and a general-purpose auditorium. In addition, the Corporation, or its subsidiaries, own or lease more than 130 bank locations throughout the Chicago metropolitan area and own or lease office space in various other locations as required for the conduct of business. 20 ITEM 3. LEGAL PROCEEDINGS The information required by this Item is set forth in Note 18 on page 63 of the Corporation's 1994 Annual Report to Stockholders and is expressly incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. EXECUTIVE OFFICERS OF THE REGISTRANT
PRESENT POSITION HELD WITH THE CORPORATION AND EFFECTIVE DATE FIRST ELECTED OTHER POSITIONS HELD NAME AND AGE TO OFFICE INDICATED DURING PAST FIVE YEARS ------------ ---------------------------- ---------------------- Richard L. Thomas Director and Chairman of the * (64) Board (1-1-92) Leo F. Mullin (52) Director and President (11-15- * 93) David J. Vitale (48) Director and Vice Chairman of * the Board (11-15-93) W.G. Jurgensen (43) Executive Vice President (1- Various executive posi- 11-91) tions with Norwest Corpo- ration and its subsidiar- ies (banking) Scott P. Marks, Jr. Executive Vice President (1- * (48) 12-90) Marvin James Alef, Executive Vice President (1- * Jr. (50) 10-92) John W. Ballantine Executive Vice President (1- * (48) 10-92) Sherman I. Goldberg Executive Vice President (1- * (52) 12-90), General Counsel and Secretary (4-8-88) Thomas H. Hodges Executive Vice President (12- * (49) 9-94) Donald R. Hollis Executive Vice President (1- * (59) 10-86) Robert A. Rosholt Executive Vice President (1- * (44) 14-94) and Chief Financial Officer (1-1-93)
- -------- *Has served as an officer of the Corporation or a subsidiary for at least the past five years. Officers of the Corporation serve until the annual meeting of the Board of Directors (April 21, 1995). PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this Item is set forth in the first paragraph on page 10 of this Form 10-K, and in the Corporation's 1994 Annual Report to Stockholders in the "Five-Year Summary of Selected Financial Information" on page 18, the "Common Stock and Stockholder Data" table on page 66, the "Quarterly Earnings and Market Price Summary" table on page 67, the "Consolidated Summary of Quarterly Financial Information" table on page 67, and under "Corporate Information" on page 72; such portions of the Annual Report are expressly incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information required by this Item is set forth in the "Financial Ratios" table on page 19 of this Form 10-K, and in the Corporation's 1994 Annual Report to Stockholders in the "Five-Year Summary of Selected Financial Information" on page 18, which is expressly incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is set forth in the Corporation's 1994 Annual Report to Stockholders on pages 17-39 of the "Financial Review" section and is expressly incorporated herein by reference. 21 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is set forth under "Certain Statistical Information" on pages 11-20 of this Form 10-K, and in the Corporation's 1994 Annual Report to Stockholders in the consolidated financial statements and the notes thereto on pages 40-63, the "Report of Independent Public Accountants" on page 65, and in the "Selected Statistical Information" section on pages 66-69; such portions of the Annual Report are expressly incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item pertaining to executive officers of the Corporation is set forth in Part I of this Form 10-K under the heading Executive Officers of the Registrant. The information required by this Item pertaining to directors of the Corporation is set forth on pages 2-6 of the Corporation's definitive proxy statement dated March 17, 1995, and is expressly incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is set forth on pages 12-23 of the Corporation's definitive proxy statement dated March 17, 1995, and is expressly incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is set forth on pages 11-12 of the Corporation's definitive proxy statement dated March 17, 1995, and is expressly incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is set forth on pages 8 and 26 of the Corporation's definitive proxy statement dated March 17, 1995, and is expressly incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a)(1) FINANCIAL STATEMENTS (See Item 8 for a listing of all financial statements). (2) FINANCIAL STATEMENT SCHEDULES. All schedules normally required by Form 10-K are omitted since they either are not applicable or the required information is shown in the financial statements or the notes thereto. (3) EXHIBITS. 3(A). Restated Certificate of Incorporation of the Corporation, as amended. 3(B). By-Laws of the Corporation, as amended [Exhibit 4(B) to the Corporation's Form S-3 Registration Statement (File No. 33-37717) incorporated herein by reference]. 10(A). Stock Incentive Plan [Exhibit 10(A) to the Corporation's 1990 Annual Report on Form 10-K (File No. 1-6052) incor- porated herein by reference].* 10(B). Strategic Stock Incentive Plan, as amended [Exhibit 10(A) to the Corporation's 1988 Annual Report on Form 10-K (File No. 1-6052) incorporated herein by reference].*
22 10(C). 1983 Stock Option Plan, as amended and restated [Exhibit 28 to the Corporation's Post-Effective Amendment No. 1 to Form S-8 Registration Statement (File No. 33-15779) in- corporated herein by reference].* 10(D). First Chicago Corporation Compensation Agreement, as amended [Exhibit 10(D) to the Corporation's 1992 Annual Report on Form 10-K (File No. 1-6052) incorporated herein by reference].* 10(E). The First National Bank of Chicago Compensation Agreement, as amended [Exhibit 10(E) to the Corporation's 1992 An- nual Report on Form 10-K (File No. 1-6052) incorporated herein by reference].* 10(F). Director Retainer Stock Plan [Exhibit 10(G) to the Corpo- ration's 1990 Annual Report on Form 10-K (File No. 1- 6052) incorporated herein by reference].* 10(G). First Chicago Corporation Savings Incentive Plan, as amended and restated.* 10(H). 401(k) Supplemental Savings Incentive Plan [Exhibit 10(I) to the Corporation's 1990 Annual Report on Form 10-K (File No. 1-6052) incorporated herein by reference].* 10(I). Executive Retirement Plan [Exhibit 10(I) to the Corpora- tion's 1992 Annual Report on Form 10-K (File No. 1-6052) incorporated herein by reference].* 10(J). Individual Change of Control Employment Agreement.* 10(K). First Chicago Corporation Trust Agreement (Trust A) [Ex- hibit 10(K) to the Corporation's 1992 Annual Report on Form 10-K (File No. 1-6052) incorporated herein by refer- ence].* 10(L). First Chicago Corporation Trust Agreement (Trust B) [Ex- hibit 10(L) to the Corporation's 1992 Annual Report on Form 10-K (File No. 1-6052) incorporated herein by refer- ence].* 10(M). First Chicago Corporation Director Retirement Income Plan.* 10(N). First Chicago Corporation Senior Management Annual Incen- tive Plan.* 12. Statements re computation of ratios. 13. The Corporation's 1994 Annual Report to Stockholders. 21. Subsidiaries of the Corporation. 23. Consents of experts and counsel. 27. Financial Data Schedule
(b) The Corporation filed the following Current Reports on Form 8-K during the quarter ended December 31, 1994:
DATE ITEM REPORTED ---- ------------- October 18, 1994 The Corporation's earnings for the quarter ended September 30, 1994. November 14, 1994 Announcement that the Corporation increased the common stock quarterly dividend. November 17, 1994 Announcement that the Corporation incurred a loss as a result of the purchase of certain structured notes related to the trust business of FNBC, and that the Commission initiated an informal inquiry regarding certain mutual funds advised by FNBC.
- -------- *MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO BE FILED AS AN EXHIBIT TO THIS FORM 10-K. 23 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE CORPORATION HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, THIS 10TH DAY OF FEBRUARY, 1995. First Chicago Corporation (Registrant) /s/ Richard L. Thomas By___________________________________ Richard L. Thomas Chairman of the Board and Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE CORPORATION AND IN THE CAPACITIES INDICATED, THIS 10TH DAY OF FEBRUARY, 1995. /s/ John H. Bryan /s/ Jerry K. Pearlman - --------------------- ---------------------------------------- John H. Bryan Jerry K. Pearlman Director Director /s/ Dean L. Buntrock /s/ Jack F. Reichert - --------------------- ---------------------------------------- Dean L. Buntrock Jack F. Reichert Director Director /s/ James S. Crown /s/ Patrick G. Ryan - --------------------- ---------------------------------------- James S. Crown Patrick G. Ryan Director Director /s/ Donald V. Fites /s/ Adele Simmons - --------------------- ---------------------------------------- Donald V. Fites Adele Simmons Director Director /s/ Donald P. Jacobs /s/ Roger W. Stone - --------------------- ---------------------------------------- Donald P. Jacobs Roger W. Stone Director Director /s/ Andrew J. McKenna /s/ Richard L. Thomas - --------------------- ---------------------------------------- Andrew J. McKenna Richard L. Thomas Director Director and Principal Executive Officer /s/ Richard M. Morrow /s/ David J. Vitale - --------------------- ---------------------------------------- Richard M. Morrow David J. Vitale Director Director /s/ Leo F. Mullin /s/ Robert A. Rosholt - --------------------- ---------------------------------------- Leo F. Mullin Robert A. Rosholt Director Principal Financial Officer /s/ Earl L. Neal /s/ William J. Roberts - --------------------- ---------------------------------------- Earl L. Neal William J. Roberts Director Principal Accounting Officer /s/ James J. O'Connor - --------------------- James J. O'Connor Director 24 EXHIBIT INDEX
EXHIBIT PAGE NUMBER EXHIBIT DESCRIPTION NUMBER ------- ------------------- ------ 3(A). Restated Certificate of Incorporation of the Corporation, as amended. 3(B). By-Laws of the Corporation, as amended (incorporated herein by reference). N/A 10(A). Stock Incentive Plan (incorporated herein by reference). N/A 10(B). Strategic Stock Incentive Plan, as amended (incorporated herein by reference). N/A 10(C). 1983 Stock Option Plan, as amended and restated (incorpo- rated herein by reference). N/A 10(D). First Chicago Corporation Compensation Agreement, as amended (incorporated herein by reference). N/A 10(E). The First National Bank of Chicago Compensation Agreement, as amended (incorporated herein by reference). N/A 10(F). Director Retainer Stock Plan (incorporated herein by refer- ence). N/A 10(G). First Chicago Corporation Savings Incentive Plan, as amended and restated. 10(H). 401(k) Supplemental Savings Incentive Plan (incorporated herein by reference). N/A 10(I). Executive Retirement Plan (incorporated herein by reference). N/A 10(J). Individual Change of Control Employment Agreement. 10(K). First Chicago Corporation Trust Agreement (Trust A) (incorporated herein by reference). N/A 10(L). First Chicago Corporation Trust Agreement (Trust B) (incorporated herein by reference). N/A 10(M). First Chicago Corporation Director Retirement Income Plan. 10(N). First Chicago Corporation Senior Management Annual Incentive Plan. 12. Statements re computation of ratios. 13. The Corporation's 1994 Annual Report to Stockholders. 21. Subsidiaries of the Corporation. 23. Consents of experts and counsel. 27. Financial Data Schedule.
EX-3.A 2 ARTICLES OF INCORP EXHIBIT 3(A) STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF INCORPORATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE TWENTY-THIRD DAY OF JANUARY, A.D. 1969, AT 10 O'CLOCK A.M. * * * * * * * * * * /s/ William T. Quillen (Seal) -------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *3902038 DATE: 05/18/1993 723138037 CERTIFICATE OF INCORPORATION OF FIRST CHICAGO CORPORATION ------------ FIRST. The name of the corporation is FIRST CHICAGO CORPORATION SECOND. The address of its registered office in the State of Delaware is No. 100 West Tenth Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. THIRD. The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH. The total number of shares of all classes of stock which the corporation shall have authority to issue is 1,010 shares which shall be divided into two classes as follows: 10 shares of Preferred Stock without par value (Preferred Stock) and 1,000 shares of Common Stock of the par value of $20.00 per share (Common Stock). The designations, voting powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions of the above classes of stock and other general provisions relating thereto shall be as follows: PART I PREFERRED STOCK --------------- 1. Shares of Preferred Stock may be issued in one or more series at such time or times and for such consideration or considerations as the Board of Directors may determine. All shares of any one series shall be of equal rank and identical in all respects except the dates from which dividends accrue or accumulate with respect thereto may vary. 2. The Board of Directors is expressly authorized at any time, and from time to time, to provide for the issuance of shares of Preferred Stock in one or more series, with such voting powers, full or limited but not to exceed one vote per share, or without voting powers and with such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions providing for the issue thereof adopted by the Board of Direc- 2 tors, and as are not stated and expressed in this Certificate of Incorporation, or any amendment thereto, including (but without limiting the generality of the foregoing) the following: (a) The distinctive designation and number of shares comprising such series, which number may (except where otherwise provided by the Board of Directors in creating such series) be increased or decreased (but not below the number of shares then outstanding) from time to time by action of the Board of Directors. (b) The dividend rate or rates on the shares of such series and the relation which such dividends shall bear to the dividends payable on any other class or classes or of any other series of capital stock, the terms and conditions upon which and the periods in respect of which dividends shall be payable, whether and upon what conditions such dividends shall be cumulative and, if cumulative, the date or dates from which dividends shall accumulate. (c) Whether the shares of such series shall be redeemable, the limitations and restrictions with respect to such redemption, the time or times when, the price or prices at which and the manner in which such shares shall be redeemable, including the manner of selecting shares of such series for redemption if less than all shares are to be redeemed. 3 (d) The rights to which the holders of shares of such series shall be entitled, and the preferences, if any, over any other series (or of any other series over such series), upon the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the corporation, which rights may vary depending on whether such liquidation, dissolution, distribution or winding up is voluntary or involuntary, and, if voluntary, may vary at different dates. (e) Whether the shares of such series shall be subject to the operation of a purchase, retirement or sinking fund, and, if so, whether and upon what conditions such purchase, retirement or sinking fund shall be cumulative or noncumulative, the extent to which and the manner in which such fund shall be applied to the purchase or redemption of the shares of such series for retirement or to other corporate purposes and the terms and provisions relative to the operation thereof. (f) Whether the shares of such series shall be convertible into or exchangeable for shares of any other class or classes or of any other series of any class or classes of capital stock of the corporation, and, if so convertible or exchangeable, the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same, and any other 4 terms and conditions of such conversion or exchange. (g) The voting powers, full and/or limited, if any, of the shares of such series; and whether and under what conditions the shares or such series (alone or together with the shares of one or more other series having similar provisions) shall be entitled to vote separately as a single class, for the election of one or more additional directors of the corporation in case of dividend arrearages or other specified events, or upon other matters. (h) Whether the issuance of any additional shares of such series, or of any shares of any other series, shall be subject to restrictions as to issuance, or as to the powers, preferences or rights of any such other series. (i) Any other preferences, privileges and powers, and relative, participating, optional or other special rights, and qualifications, limitations or restrictions of such series, as the Board of Directors may deem advisable and as shall not be inconsistent with the provisions of this Certificate of Incorporation. 3. No dividends shall be paid or declared or set apart on any particular series of Preferred Stock in respect of any period 5 unless accumulated dividends shall be or shall have been paid, or declared and set apart for payment, pro rata on all shares of Preferred Stock at the time outstanding of each other series which ranks equally as to dividends with such particular series, so that the amount of dividends declared on such particular series shall bear the same ratio to the amount declared on each such other series as the dividend rate of such particular series shall bear to the dividend rate of such other series. 4. Unless and except to the extent otherwise required by law or provided in the resolution or resolutions of the Board of Directors creating any series of Preferred Stock pursuant to this Part I, the holders of the Preferred Stock shall have no voting power with respect to any matter whatsoever. In no event shall the Preferred Stock be entitled to more than one vote in respect of each share of stock. 5. Shares of Preferred Stock redeemed, converted, exchanged, purchased, retired or surrendered to the corporation, or which have been issued and reacquired in any manner, shall, upon compliance with any applicable provisions of the General Corporation Law of the State of Delaware, have the status of authorized and unissued shares of Preferred Stock and may be reissued by the Board of Directors as part of the series of which they were 6 originally a part or may be reclassified into and reissued as part of a new series or as a part of any other series, all subject to the protective conditions or restrictions of any outstanding series of Preferred Stock. PART II COMMON STOCK ------------ 1. Except as provided by law or this Certificate of Incorporation, each holder of Common Stock shall have one vote in respect of each share of stock held by him of record on the books of the corporation on all matters voted upon by the stockholders. 2. Subject to the preferential dividend rights, if any, applicable to shares of Preferred Stock and subject to applicable requirements, if any, with respect to the setting aside of sums for purchase, retirement or sinking funds for Preferred Stock, the holders of Common Stock shall be entitled to receive, to the extent permitted by law, such dividends as may be declared from time to time by the Board of Directors. 3. In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the corporation, after distribution in full of the preferential 7 amounts, if any, to be distributed to the holders of shares of Preferred Stock, holders of Common Stock shall be entitled to receive all of the remaining assets of the corporation of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively. The Board of Directors may distribute in kind to the holders of Common Stock such remaining assets of the corporation or may sell, transfer or otherwise dispose of all or any part of such remaining assets to any other corporation, trust or other entity and receive payment therefor in cash, stock or obligations of such other corporation, trust or entity, or any combination thereof, and may sell all or any part of the consideration so received and distribute any balance thereof in kind to holders of Common Stock. The merger or consolidation of the corporation into or with any other corporation, or the merger of any other corporation into it, or any purchase or redemption of shares of stock of the corporation of any class, shall not be deemed to be a dissolution, liquidation or winding up of the corporation for the purposes of this paragraph. 4. Such numbers of shares of Common Stock as may from time to time be required for such purpose shall be reserved for issuance (i) upon conversion of any shares of Preferred Stock or any obligation of the corporation convertible into shares of 8 Common Stock which is at the time outstanding or issuable upon exercise of any options or warrants at the time outstanding and (ii) upon exercise of any options or warrants at the time outstanding to purchase shares of Common Stock. PART III GENERAL PROVISIONS ------------------ 1. At any meeting of stockholders, the presence in person or by proxy of the holders of record of outstanding shares of stock of the corporation entitled to vote a majority of the votes entitled to be voted at such meeting shall constitute a quorum for all purposes, except as otherwise provided by this Certificate of Incorporation or required by applicable law. 2. Subject to the protective conditions or restrictions of any outstanding series of Preferred Stock, any amendment to this Certificate of Incorporation which shall increase or decrease the authorized capital stock of any class or classes may be adopted by the affirmative vote of the holders of a majority of the outstanding shares of the voting stock of the corporation. 3. No holder of stock of any class of the corporation shall be entitled as a matter of right to purchase or subscribe for any part of any unissued stock of any class, or of any ad- 9 ditional stock of any class of capital stock of the corporation, or of any bonds, certificates of indebtedness, debentures, or other securities convertible into stock of the corporation, now or hereafter authorized, but any such stock or other securities convertible into stock may be issued and disposed of pursuant to resolution by the Board of Directors to such persons, firms, corporations or associations and upon such terms and for such consideration (not less than the par value or stated value thereof) as the Board of Directors in the exercise of its discretion may determine and as may be permitted by law without action by the stockholders. The Board of Directors may provide for payment therefor to be received by the corporation in cash, personal property, real property (or leases thereof) or services. Any and all shares of stock so issued for which the consideration so fixed has been paid or delivered, shall be deemed fully paid and not liable to any further call or assessment. 4. Any corporate action upon which a vote of stockholders is required or permitted may be taken without a meeting or vote of stockholders with the written consent of stockholders having not less than a majority of all of the stock entitled to vote upon the action if a meeting were held; provided, that in no case shall the written consent be by holders having less than the minimum percentage of the vote required by statute fixed for 10 the proposed corporate action and further provided that prompt notice be given to all stockholders of the corporation of the taking of corporate action without a meeting and by less than unanimous written consent. FIFTH. The name and mailing address of the incorporator are: Name Mailing Address ---- --------------- Kenneth G. Pigott 1400 First National Bank Building Chicago, Illinois 60603 SIXTH. Elections of directors need not be by written ballot unless the By-laws of the corporation shall so provide. SEVENTH. Subject to the provisions of this Certificate of Incorporation requiring an increase or increases in the number of directors, the number of directors constituting the Board of Directors shall be that number as shall be fixed by the By-laws of the corporation. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the By-laws of the corporation. Wherever the term "Board of Directors" is used in this Certificate of Incorporation, such term shall mean the Board of Directors of the corporation; provided, however, that, to 11 the extent any committee of directors of the corporation is lawfully entitled to exercise the powers of the Board of Directors, such committee may exercise any right or authority of the Board of Directors under this Certificate of Incorporation. EIGHTH. No contract or transaction between the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (a) The material facts as to his interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by a vote sufficient for such purpose without counting the vote of the interested director or directors; or (b) The material facts as to his interest and as to the contract or transaction are disclosed or are known to the stock- 12 holders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. NINTH. (a) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or 13 proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or plea of nolo ---- contendere or its equivalent, shall not, of itself, create a presumption that - ---------- the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in 14 good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of Delaware or such other court shall deem proper. (c) To the extent that any person referred to in paragraphs (a) and (b) of this Article has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to therein or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (d) Any indemnification under paragraphs (a) and (b) of this Article (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a de- 15 termination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (a) and (b). Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum (as defined in the By-laws of the corporation) consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such quorum is not obtainable, or,even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. (e) Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the corporation. (f) The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any statute, By-law, agreement, vote or stockholders or disinterested directors or otherwise, both as to action in his official capacity and as 16 to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Notwithstanding the provisions of this Article, the corporation may indemnify any person referred to in paragraphs (a) and (b) of this Article to the full extent permitted under the laws of Delaware and any other applicable laws, now or hereafter in effect. (g) The corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article. TENTH. The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by the 17 laws of Delaware, and all rights conferred herein upon stockholders and directors are granted subject to this reservation. I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereto set my hand this 21st day of January, 1969. /s/ Kenneth G. Pigott ------------------------------------------- STATE OF ILLINOIS) ) SS. COUNTY OF COOK ) BE IT REMEMBERED that on this 21st day of January, A.D. 1969, personally came before me, a Notary Public for the State of Illinois, KENNETH G. PIGOTT, the party to the foregoing Certificate of Incorporation, known to me personally to be such, and acknowledged said certificate to be the act and deed of the signer and that the facts stated therein are true. GIVEN under my hand and seal of office the day and year aforesaid. NANCY STEHNO NOTARY PUBLIC COOK COUNTY, ILL. /s/ Nancy Stehno ----------------------------------------- Notary Public 18 STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF RESTATED CERTIFICATE OF INCORPORATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE TWENTY-FIFTH DAY OF JUNE, A.D. 1969, AT 10 O'CLOCK A.M. * * * * * * * * * * /s/ William T. Quillen (Seal) -------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *3902040 DATE: 05/18/1993 723138037 DRAFT OF CERTIFICATE OF INCORPORATION OF FIRST CHICAGO CORPORATION Pursuant to Title 8, Sections 242 and 245 of the Delaware Code. ------------------- Original Certificate of Incorporation was filed with the Secretary of State of Delaware on January 23, 1969. -------------------- FIRST. The name of the corporation is FIRST CHICAGO CORPORATION SECOND. The address of its registered office in the State of Delaware is No. 100 West Tenth Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. THIRD. The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH. The total number of shares of all classes of stock which the corporation shall have authority to issue is 14,500,000 shares which shall be divided into two classes as follows: 1,000,000 shares of Preferred Stock without par value (Preferred Stock) and 13,500,000 shares of Common Stock of the par value of $20.00 per share (Common Stock). The designations, voting powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions of the above classes of stock and other general provisions relating thereto shall be as follows: PART I PREFERRED STOCK --------------- 1. Shares of Preferred Stock may be issued in one or more series at such time or times and for such consideration or considerations as the Board of Directors may determine. All shares of any one series shall be of equal rank and identical in all respects except the dates from which dividends accrue or accumulate with respect thereto may vary. 2. The Board of Directors is expressly authorized at any time, and from time to time, to provide for the issuance of shares of Preferred Stock in one or more series, with such voting powers, full or limited but not to exceed one vote per share, or without voting powers and with such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as -2- shall be stated and expressed in the resolution or resolutions providing for the issue thereof adopted by the Board of Directors, and as are not stated and expressed in this Certificate of Incorporation, or any amendment thereto, including (but without limiting the generality of the foregoing) the following: (a) The distinctive designation and number of shares comprising such series, which number may (except where otherwise provided by the Board of Directors in creating such series) be increased or decreased (but not below the number of shares then outstanding) from time to time by action of the Board of Directors. (b) The dividend rate or rates on the shares of such series and the relation which such dividends shall bear to the dividends payable on any other class or classes or of any other series of capital stock, the terms and conditions upon which and the periods in respect of which dividends shall be payable, whether and upon what conditions such dividends shall be cumulative and, if cumulative, the date or dates from which dividends shall accumulate. (c) Whether the shares of such series shall be redeemable, the limitations and restrictions with respect to such redemption, the time or times when, the price or prices at which and the manner in which such shares shall be redeemable, including the -3- manner of selecting shares of such series for redemption if less than all shares are to be redeemed. (d) The rights to which the holders of shares of such series shall be entitled, and the preferences, if any, over any other series (or of any other series over such series), upon the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the corporation, which rights may vary depending on whether such liquidation, dissolution, distribution or winding up is voluntary or involuntary, and, if voluntary, may vary at different dates. (e) Whether the shares of such series shall be subject to the operation of a purchase, retirement or sinking fund, and, if so, whether and upon what conditions such purchase, retirement or sinking fund shall be cumulative or noncumulative, the extent to which and the manner in which such funds shall be applied to the purchase or redemption of the shares of such series for retirement or to other corporate purposes and the terms and provisions relative to the operation thereof. (f) Whether the shares of such series shall be convertible into or exchangeable for shares of any other class or classes or of any other series of any class or classes of capital stock of the corporation, and, if so convertible or exchangeable, the price or prices or the rate or rates of conversion or exchange -4- and the method, if any, of adjusting the same, and any other terms and conditions of such conversion or exchange. (g) The voting powers, full and/or limited, if any, of the shares of such series; and whether and under what conditions the shares of such series (alone or together with the shares of one or more other series having similar provisions) shall be entitled to vote separately as a single class, for the election of one or more additional directors of the corporation in case of dividend arrearages or other specified events, or upon other matters. (h) Whether the issuance of any additional shares of such series, or of any shares of any other series, shall be subject to restrictions as to issuance, or as to the powers, preferences or rights of any such other series. (i) Any other preferences, privileges and powers, and relative, participating, optional or other special rights, and qualifications, limitations or restrictions of such series, as the Board of Directors may deem advisable and as shall not be inconsistent with the provisions of this Certificate of Incorporation. 3. No dividends shall be paid or declared or set apart on any particular series of Preferred Stock in respect of any period unless accumulated dividends shall be or shall have been paid, -5- or declared and set apart for payment, pro rata on all shares of Preferred Stock at the time outstanding of each other series which ranks equally as to dividends with such particular series, so that the amount of dividends declared on such particular series shall bear the same ratio to the amount declared on each such other series as the dividend rate of such particular series shall bear to the dividend rate of such other series. 4. Unless and except to the extent otherwise required by law or provided in the resolution or resolutions of the Board of Directors creating any series of Preferred Stock pursuant to this Part I, the holders of the Preferred Stock shall have no voting power with respect to any matter whatsoever. In no event shall the Preferred Stock be entitled to more than one vote in respect of each share of stock. 5. Shares of Preferred Stock redeemed, converted, exchanged, purchased, retired or surrendered to the corporation, or which have been issued and reacquired in any manner, shall, upon compliance with any applicable provisions of the General Corporation Law of the State of Delaware, have the status of authorized and unissued shares of Preferred Stock and may be reissued by the Board of Directors as part of the series of which they were originally a part or may be reclassified into and reissued as part of a new series or as a part of any other series, all sub- -6- ject to the protective conditions or restrictions of any outstanding series of Preferred Stock. PART II COMMON STOCK 1. Except as provided by law or this Certificate of Incorporation, each holder of Common Stock shall have one vote in respect of each share of stock held by him of record on the books of the corporation on all matters voted upon by the stockholders. 2. Subject to the preferential dividend rights, if any, applicable to shares of Preferred Stock and subject to applicable requirements, if any, with respect to the setting aside of sums for purchase, retirement or sinking funds for Preferred Stock, the holders of Common Stock shall be entitled to receive, to the extent permitted by law, such dividends as may be declared from time to time by the Board of Directors. 3. In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the corporation, after distribution in full of the preferential amounts, if any, to be distributed to the holders of shares of Preferred Stock, holders of Common Stock shall be entitled to -7- receive all of the remaining assets of the corporation of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively. The Board of Directors may distribute in kind to the holders of Common Stock such remaining assets of the corporation or may sell, transfer or otherwise dispose of all or any part of such remaining assets to any other corporation, trust or other entity and receive payment therefor in cash, stock or obligations of such other corporation, trust or entity, or any combination thereof, and may sell all or any part of the consideration so received and distribute any balance thereof in kind to holders of Common Stock. The merger or consolidation of the corporation into or with any other corporation, or the merger of any other corporation into it, or any purchase or redemption of shares of stock of the corporation of any class, shall not be deemed to be a dissolution, liquidation or winding up of the corporation for the purposes of this paragraph. 4. Such numbers of shares of Common Stock as may from time to time be required for such purpose shall be reserved for issuance (i) upon conversion of any shares of Preferred Stock or any obligation of the corporation convertible into shares of Common Stock which is at the time outstanding or issuable upon exercise of any options or warrants at the time outstanding and -8- (ii) upon exercise of any options or warrants at the time outstanding to purchase shares of Common Stock. PART III GENERAL PROVISIONS 1. At any meeting of stockholders, the presence in person or by proxy of the holders of record of outstanding shares of stock of the corporation entitled to vote a majority of the votes entitled to be voted at such meeting shall constitute a quorum for all purposes, except as otherwise provided by this Certificate of Incorporation or required by applicable law. 2. Subject to the protective conditions or restrictions of any outstanding series of Preferred Stock, any amendment to this Certificate of Incorporation which shall increase or decrease the authorized capital stock of any class or classes may be adopted by the affirmative vote of the holders of a majority of the outstanding shares of the voting stock of the corporation. 3. No holder of stock of any class of the corporation shall be entitled as a matter of right to purchase or subscribe for any part of any unissued stock of any class, or of any additional stock of any class of capital stock of the corporation, or of any bonds, certificates of indebtedness, debentures, or -9- other securities convertible into stock of the corporation, now or hereafter authorized, but any such stock or other securities convertible into stock may be issued and disposed of pursuant to resolution by the Board of Directors to such persons, firms, corporations or associations and upon such terms and for such consideration (not less than the par value or stated value thereof) as the Board of Directors in the exercise of its discretion may determine and as may be permitted by law without action by the stockholders. The Board of Directors may provide for payment therefor to be received by the corporation in cash, personal property, real property (or leases thereof) or services. Any and all shares of stock so issued for which the consideration so fixed has been paid or delivered, shall be deemed full paid and not liable to any further call or assessment. 4. Any corporate action upon which a vote of stockholders is required or permitted may be taken without a meeting or vote of stockholders with the written consent of stockholders having not less than a majority of all of the stock entitled to vote upon the action if a meeting were held; provided, that in no case shall the written consent by holders having less than the minimum percentage of the vote required by statute fixed for the proposed corporate action and further provided that prompt notice be given to all stockholders of the corporation of the -10- taking of corporate action without a meeting and by less than unanimous written consent. FIFTH. The name and mailing address of the incorporator are: NAME MAILING ADDRESS ---- --------------- Kenneth G. Pigott 1400 First National Bank Building Chicago, Illinois 60603 SIXTH. Elections of directors need not be by written ballot unless the By-laws of the corporation shall so provide. SEVENTH. Subject to the provisions of this Certificate of Incorporation requiring an increase or increases in the number of directors, the number of directors constituting the Board of Directors shall be that number as shall be fixed by the By-laws of the corporation. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the By-laws of the corporation. Wherever the term "Board of Directors" is used in this Certificate of Incorporation, such term shall mean the Board of Directors of the corporation; provided, however, that, to the extent any committee of directors of the corporation is lawfully entitled to exercise the powers of the Board of Direc- -11- tors, such committee may exercise any right or authority of the Board of Directors under this Certificate of Incorporation. EIGHTH. No contract or transaction between the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (a) The material facts as to his interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by a vote sufficient for such purpose without counting the vote of the interested director or directors; or (b) The material facts as to his interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or -12- (c) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. NINTH. (a) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or -13- proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged -14- to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of Delaware or such other court shall deem proper. (c) To the extent that any person referred to in paragraphs (a) and (b) of this Article has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to therein or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (d) Any indemnification under paragraphs (a) and (b) of this Article (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (a) and (b). Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum (as defined in the -15- By-laws of the corporation) consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. (e) Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such acton, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the corporation. (f) The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnificiation may be entitled under any statute, By-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Notwithstanding the provisions of this Article, the corporation -16- may indemnify any person referred to in paragraphs (a) and (b) of this Article to the full extent permitted under the laws of Delaware and any other applicable laws, now or hereafter in effect. (g) The corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article. TENTH. The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by the laws of Delaware, and all rights conferred herein upon stockholders and directors are granted subject to this reservation. I, RUDOLPH E. PALLUCK, Executive Vice President of the aforesaid corporation, hereby certify that the foregoing Restated Certificate of Incorporation of said corporation was adopted by its Board of Directors and adopted separately by -17- the stockholders of said corporation in accordance with the provisions of Title 8, Sections 141, 242 and 245 of the Delaware Code. WITNESS my hand and the seal of said FIRST CHICAGO CORPORATION this 13th day of June, 1969. /s/ Rudolph E. Palluck ---------------------------------------- Rudolph E. Palluck Executive Vice President FIRST CHICAGO CORPORATION (Corporate Seal) DELAWARE 1969 ATTEST: /s/ Christopher W. Wilson - ----------------------------- Christopher W. Wilson Secretary -18- STATE OF ILLINOIS) ) SS COUNTY OF COOK ) BE IT REMEMBERED, that on this 13th day of June, 1969, personally came before me, LOUISE KAEHLER, a Notary Public in and for said State and County, RUDOLPH E. PALLUCK, Executive Vice President of FIRST CHICAGO CORPORATION, the corporation described in the foregoing Certificate, known to me personally to be such Officer, and he duly acknowledged said Certificate to be the act and deed of said corporation, and that the facts stated therein are true. IN WITNESS WHEREOF, I have hereto set my hand and official seal the day and year aforesaid. /s/ Louise Kaehler ----------------------------------- Notary Public LOUISE KAEHLER NOTARY PUBLIC COOK COUNTY, ILL. -19- STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE THIRD DAY OF SEPTEMBER, A.D. 1971, AT 10 O'CLOCK A.M. * * * * * * * * * * /s/ William T. Quillen (SEAL) ------------------------------------ William T. Quillen, Secretary of State AUTHENTICATION: *3902041 DATE: 05/18/1993 723138067 CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF FIRST CHICAGO CORPORATION FIRST CHICAGO CORPORATION, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify: First: That at a meeting of the Board of Directors of FIRST CHICAGO CORPORATION resolutions were duly adopted setting forth a proposed amendment to the Restated Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows: "RESOLVED, that the first sentence of Article Fourth of the Corporation's Restated Certificate of Incorporation be amended to read as follows: 'FOURTH. The total number of shares of all classes of stock which the corporation shall have authority to issue is 28,000,000 shares which shall be divided into two classes as follows: 1,000,000 shares of Preferred Stock without par value (Preferred Stock) and 27,000,000 shares of Common Stock of the par value of $10.00 per share (Common Stock).'" Second: That thereafter, pursuant to resolution of its Board of Directors, a special meeting of the stockholders of said corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. Third: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. Fourth: That the capital of said corporation shall not be reduced under or by reason of said amendment. IN WITNESS WHEREOF, said FIRST CHICAGO CORPORATION has caused its corporate seal to be hereunto affixed and this Certificate to be signed by Gaylord Freeman, its Chairman of the Board, and attested to by Neil McKay, its Secretary, this 1st day of September, 1971. /s/ Gaylord Freeman By ____________________________________________ Chairman of the Board ATTEST: /s/ Neil McKay ____________________________________ Secretary (CORPORATE SEAL) STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) Be it remembered that on this 1st day of September, A.D. 1971 personally came before me, Karen F. Kizer, a Notary Public in and for the county and State aforesaid, Gaylord Freeman, Chairman of the Board of FIRST CHICAGO CORPORATION, a corporation of the State of Delaware, the corporation described in and which executed the foregoing Certificate, known to me personally to be such, and he, the said Chairman of the Board, as such Chairman of the Board, duly executed said Certificate before me and acknowledged the said Certificate to be his act and deed and the act and deed of said corporation; that the signature of the said Chairman of the Board of said corporation to said foregoing Certificate is in the handwriting of the said Chairman of the Board of said corporation, and that the seal affixed to said Certificate is the common or corporate seal of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day and year aforesaid. /s/ Karen F. Kizer _____________________________________ Notary Public (SEAL) NOTARIAL SEAL STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE NINTH DAY OF APRIL, A.D. 1976, AT 10 O'CLOCK A.M. * * * * * * * * * * /s/ William T. Quillen (SEAL) ------------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *3902044 DATE: 05/18/1993 723138037 CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF FIRST CHICAGO CORPORATION FIRST CHICAGO CORPORATION, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify: First: That at a meeting of the Board of Directors of FIRST CHICAGO CORPORATION resolutions were duly adopted setting forth a proposed amendment to the Restated Certificate of Incorporation of said corporation, declaring said amendment to be advisable and that said amendment be submitted for the consideration and approval of the stockholders of said corporation at the Annual Meeting of Stockholders of said corporation to be held on April 9, 1976. The resolution setting forth the proposed amendment is as follows: "RESOLVED, that the first sentence of Article Fourth of the Corporation's Restated Certificate of Incorporation be amended to read as follows: 'FOURTH. The total number of shares of all classes of stock which the corporation shall have authority to issue is 59,000,000 shares which shall be divided into two classes as follows: 5,000,000 shares of Preferred Stock without par value (Preferred Stock) and 54,000,000 shares of Common Stock of the par value of $5.00 per share (Common Stock).'" Second: That thereafter, the Annual Meeting of Stockholders of said corporation was duly held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. Third: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. Fourth: That the capital of said corporation shall not be reduced under or by reason of said amendment. Fifth: That said amendment shall become effective at the close of business on the day it is filed in the office of the Secretary of State of Delaware. IN WITNESS WHEREOF, said FIRST CHICAGO CORPORATION has caused its corporate seal to be hereunto affixed and this Certificate to be signed by Neil McKay, Vice Chairman of the Board, and attested to be Laurence Goldman, Assistant Secretary, this 9th day of April, 1976. /s/ Neil McKay By _________________________________________ Neil McKay Vice Chairman of the Board ATTEST: /s/ Laurence Goldman _____________________________ Assistant Secretary (CORPORATE SEAL) STATE OF DELAWARE OFFICE OF SECRETARY OF STATE ---------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK DESIGNATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE EIGHTEENTH DAY OF OCTOBER, A.D. 1982, AT 2 O'CLOCK P.M. * * * * * * * * * * /s/ William T. Quillen (Seal) -------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *3902046 DATE: 05/18/1993 723138037 CERTIFICATE OF THE DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE PREFERRED STOCK WITH CUMULATIVE AND ADJUSTABLE DIVIDENDS (Without Par Value) OF FIRST CHICAGO CORPORATION ------------------------- Pursuant to Section 151 of the General Corporation Law of the State of Delaware ------------------------- The undersigned DOES HEREBY CERTIFY that the following resolution was duly adopted by the Board of Directors of First Chicago Corporation, a Delaware corporation (hereinafter called the "Corporation"), at a meeting duly convened and held on October 8, 1982, at which a quorum was present and acting throughout: "RESOLVED, that pursuant to authority conferred upon the Board of Directors (the "Board") of First Chicago Corporation, a Delaware corporation (the "Corporation"), by the Restated Certificate of Incorporation (the "Certificate of Incorporation") of the Corporation, the Board hereby provides for and authorizes the issuance of a series of Preferred Stock of the Corporation to consist of 2,500,000 shares, and hereby fixes the designation, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the shares of such series, in addition to those set forth in the Certificate of Incorporation, as follows: (a) Designation. The designation of the series of Preferred Stock created by this resolution shall be "Preferred Stock with Cumulative and Adjustable Dividends" (hereinafter called this "Series") and the number of shares constituting this Series is 2,500,000. Shares of this Series shall have a stated value of $50 per share. The number of authorized shares of this Series may be reduced by further resolution duly adopted by the Board and by the filing of a certificate pursuant to the provisions of the 2 General Corporation Law of the State of Delaware stating that such reduction has been so authorized, but the number of authorized shares of this Series shall not be increased. (b) Dividend Rate. (1) Dividend rates on the shares of this Series shall be: (i) for the period (the "Initial Dividend Period") from the date of their original issue to and including December 31, 1982, at such rate per annum as shall be approved by a resolution duly adopted by the Board of Directors of the Corporation, or by a committee of the Board duly authorized by the Board to fix such rate, and (ii) for each quarterly dividend period (hereinafter referred to as a "Quarterly Dividend Period"; and the Initial Dividend Period or any Quarterly Dividend Period being hereinafter individually referred to as a "Dividend Period" and collectively referred to as "Dividend Periods") thereafter, which Quarterly Dividend Periods shall commence on January 1, April 1, July 1 and October 1 in each year and shall end on and include the day next preceding the first day of the next Quarterly Dividend Period, at a rate per annum of the stated value thereof 1.00% below the Applicable Rate (as defined in paragraph (2) of this Section (b) in respect of such Quarterly Dividend Period. Anything to the contrary herein notwithstanding, the dividend rate for any Quarterly Dividend Period shall in no event be less than 7.00% or greater than 15.00% per annum. Such dividends shall be cumulative from the date of original issue of such shares and shall be payable, when and as declared by the Board, on March 31, June 30, September 30 and December 31 of each year, commencing December 31, 1982. Each such dividend shall be paid to the holders of record of shares of this Series as they appear on the stock register of the Corporation on such record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board. Dividends on account of arrears for any past Dividend Periods may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board. (2) Except as provided below in this paragraph, the "Applicable Rate" for any Quarterly Dividend Period 3 shall be the highest of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Twenty Year Constant Maturity Rate (each as hereinafter defined) for such Dividend Period. In the event that the Corporation determines in good faith that for any reason one or more of such rates cannot be determined for any Quarterly Dividend Period, then the Applicable Rate for such Dividend Period shall be the higher of whichever of such rates can be so determined. In the event that the Corporation determines in good faith that none of such rates can be determined for any Quarterly Dividend Period, then the Applicable Rate in effect for the preceding Dividend Period shall be continued for such Dividend Period. (3) Except as provided below in this paragraph, the "Treasury Bill Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calendar Period as provided below) for three-month U.S. Treasury bills, as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the ten calendar days immediately preceding the March 31, June 30, September 30 or December 31, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on this Series is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum market discount rate during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calendar Period as provided below) for three-month U.S. Treasury bills, as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum market discount rate for three-month U.S. Treasury bills shall not be published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published 4 during the relevant Calendar Period as provided below) for all of the U.S. Treasury bills then having maturities of not less than 80 nor more than 100 days, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such rates, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason no such U.S. Treasury Bill Rates are published as provided above during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the per annum market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable noninterest-bearing U.S. Treasury securities with a maturity of not less than 80 nor more than 100 days from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Treasury Bill Rate for any Quarterly Dividend Period as provided above in this paragraph, the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the per annum market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable interest-bearing U.S. Treasury securities with a maturity of not less than 80 nor more than 100 days from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. (4) Except as provided below in this paragraph, the "Ten Year Constant Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the ten calendar days immediately preceding the March 31, 5 June 30, September 30 or December 31, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on this Series is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Ten Year Average Yield during such Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum Ten Year Average Yield shall not be published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly average yield to maturity, if only one such yield shall be published during the relevant Calendar Period as provided below) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) then having maturities of not less than eight nor more than twelve years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Ten Year Constant Maturity Rate for any Quarterly Dividend Period as provided above in this paragraph, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eight nor more than twelve years from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three 6 recognized U.S. Government securities dealers selected by the Corporation. (5) Except as provided below in this paragraph, the "Twenty Year Constant Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum Twenty Year Average Yields (or the one weekly per annum Twenty Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the ten calendar days immediately preceding the March 31, June 30, September 30 or December 31, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on this Series is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Twenty Year Average Yield during such Calendar Period, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum Twenty Year Average Yields (or the one weekly per annum Twenty Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum Twenty Year Average Yield shall not be published by any Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly average yield to maturity, if only one such yield shall be published during the relevant Calendar Period as provided below) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) then having maturities of not less than eighteen nor more than twenty-two years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Twenty Year Constant 7 Maturity Rate for any Quarterly Dividend Period as provided above in this paragraph, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eighteen nor more than twenty-two years from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. (6) The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Twenty Year Constant Maturity Rate shall each be rounded to the nearest five hundredths of a percentage point. (7) The dividend rate with respect to each Quarterly Dividend Period will be calculated as promptly as practicable by the Corporation according to the appropriate method described herein. The mathematical accuracy of each such calculation will be confirmed in writing by independent accountants of recognized standing. The Corporation will cause each dividend rate to be published in a newspaper of general circulation in New York City prior to the commencement of the new Quarterly Dividend Period to which it applies and will cause notice of such dividend rate to be enclosed with the dividend payment checks next mailed to the holders of shares of this Series. (8) For purposes of this Section (b), the term (i) "Calendar Period" shall mean 14 calendar days; (ii) "Special Securities" shall mean securities which can, at the option of the holder, be surrendered at face value in payment of any Federal estate tax or which provide tax benefits to the holder and are priced to reflect such tax benefits or which were originally issued at a deep or substantial discount; 8 (iii) "Ten Year Average Yield" shall mean the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of ten years); and (iv) "Twenty Year Average Yield" shall mean the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of 20 years). (9) No full dividends shall be declared or paid or set apart for payment on Preferred Stock of any series ranking, as to dividends, on a parity with or junior to this Series for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on this Series for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of this Series and any other Preferred Stock ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any other Preferred Stock ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other Preferred Stock bear to each other. Holders of shares of this Series shall not be entitled to any dividend, whether payable in cash, property or stocks, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (10) So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation and other than as provided in paragraph (9) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a 9 parity with this Series as to dividends or upon liquidation, nor shall any Common Stock nor any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of this Series shall have been paid for all past dividend payment periods. (11) Dividends payable on each share of this Series for each full Quarterly Dividend Period shall be computed by dividing the dividend rate for such Quarterly Dividend Period by four and applying such rate against the stated value per share of this Series. Dividends payable on this Series for any period less than a full Quarterly Dividend Period, and for the Initial Dividend Period, shall be computed on the basis of a 360 day year consisting of 30 day months. (c) Redemption. (1) The shares of this Series shall not be redeemable prior to October 1, 1987. On and after October 1, 1987, the Corporation, at its option, may redeem shares of this Series, as a whole or in part, at any time or from time to time, at a redemption price (i) in the case of any redemption on a redemption date occurring on or after October 1, 1987, and prior to October 1, 1992, of $51.50 per share, and (ii) in the case of any redemption on a redemption date occurring on or after October 1, 1992, of $50 per share, plus, in each case, accrued and unpaid dividends thereon to the date fixed for redemption. (2) In the event that fewer than all the outstanding shares of this Series are to be redeemed, the number of shares to be redeemed shall be determined by the Board and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board or by any other method as may be determined by the Board in its sole discretion to be equitable. 10 (3) In the event the Corporation shall redeem shares of this Series, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (4) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the shares of this Series so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (5) Any shares of this Series which shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board. (6) Notwithstanding the foregoing provisions of this Section (c), if any dividends on this Series are in arrears, no shares of this Series shall be redeemed unless all outstanding shares of this Series are 11 simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Series; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of this Series pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of this Series. (d) Conversion or Exchange. The holders of shares of this Series shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. (e) Voting. The shares of this Series shall not have any voting powers either general or special, except that (1) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66-2/3% of all of the shares of this Series at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Certificate of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of Designation, Preferences and Rights or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of this Series; (2) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66-2/3% of all of the shares of this Series and all other series of Preferred Stock ranking on a parity with shares of this Series, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of 12 this Series and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the shares of this Series as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares; (3) If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends on the Preferred Stock shall exist, the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the holders of the Preferred Stock of all series shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of Common Stock, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Preferred Stock. Each director elected by the holders of shares of Preferred Stock (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at a meeting of the stockholders, or of the holders of shares of Preferred Stock, called for that purpose. So long as a default in any preference dividends on the Preferred Stock shall exist, (A) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (B)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (B) in the case of the removal of any Preferred Director, the vacancy may be filled 13 by the vote of the holders of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board of Directors of the Corporation shall be reduced by two. For the purposes hereof, a "default in preference dividends" on the Preferred Stock shall be deemed to have occurred whenever the amount of accrued dividends upon any series of the Preferred Stock shall be equivalent to six full quarter-yearly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Preferred Stock of each and every series then outstanding shall have been paid to the end of the last preceding quarterly dividend period. (f) Liquidation Rights. (1) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the shares of this Series shall be entitled to receive out of the assets of the Corporation, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the Preferred Stock upon liquidation, the amount of $50 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) Neither the sale of all or substantially all the property or business of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section (f). (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (f), the holders of this 14 Series as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (1) of this Secton (f), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (5) Upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of this Series then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (f) before any payment shall be made to the holders of any class of capital stock of the Corporation ranking junior upon liquidation to this Series. (g) For purposes of this resolution, any stock of any class or classes of the Corporation shall be deemed to rank: (1) prior to the shares of this Series, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of this Series. (2) on a parity with shares of this Series, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be 15 different from those of this Series, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (3) junior to shares of this Series, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes." IN WITNESS WHEREOF, First Chicago Corporation has caused its corporate seal to be hereunto affixed and this certificate to be signed by J. Mikesell Thomas, its Vice President, and the same to be attested by Kenneth G. Arneson, its Secretary, this 15th day of October, 1982. FIRST CHICAGO CORPORATION by /s/ J. Mikesell Thomas -------------------------- Vice President [Corporate Seal] ATTEST: /s/ Kenneth G. Arneson - -------------------------- Secretary STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK DESIGNATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE TWENTY-SECOND DAY OF FEBRUARY, A.D. 1983, AT 10 O'CLOCK A.M. * * * * * * * * * * /s/ William T. Quillen (Seal) -------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *3902047 DATE: 05/18/1993 723138037 CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE PREFERRED STOCK WITH CUMULATIVE AND ADJUSTABLE DIVIDENDS, SERIES B (Without Par Value) OF FIRST CHICAGO CORPORATION -------------------------- Pursuant to Section 151 of the General Corporation Law of the State of Delaware ------------------------- The undersigned DOES HEREBY CERTIFY that the following resolution was duly adopted by the Board of Directors of First Chicago Corporation, a Delaware corporation (hereinafter called the "Corporation"), at a meeting duly convened and held on February 11, 1983, at which a quorum was present and acting throughout: "RESOLVED, that pursuant to authority conferred upon the Board of Directors (the "Board") of First Chicago Corporation, a Delaware corporation (the "Corporation"), by the Restated Certificate of Incorporation (the "Certificate of Incorporation") of the Corporation, the Board hereby provides for and authorizes the issuance of a series of Preferred Stock of the Corporation to consist of 1,250,000 shares, and hereby fixes the voting powers, designation, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the shares of such series, in addition to those set forth in the Certificate of Incorporation, as follows: (a) Designation. The designation of the series of Preferred Stock created by this resolution shall be "Preferred Stock with Cumulative and Adjustable Dividends, Series B" (hereinafter called this "Series") and the number of shares constituting this Series is 1,250,000. Shares of this Series shall have a stated value of $100 per share. The number of authorized shares of this Series may be reduced by further resolution duly adopted by the Board and by the filing of a certificate pursuant to the provisions of the 2 General Corporation Law of the State of Delaware stating that such reduction has been so authorized, but the number of authorized shares of this Series shall not be increased. (b) Dividend Rate. (1) Dividend rates on the shares of this Series shall be: (i) for the period (the "Initial Dividend Period") from the date of their original issue to and including May 31, 1983, at such rate per annum as shall be approved by a resolution duly adopted by the Board of Directors of the Corporation, or by a committee of the Board duly authorized by the Board to fix such rate, and (ii) for each quarterly dividend period (hereinafter referred to as a "Quarterly Dividend Period"; and the Initial Dividend Period or any Quarterly Dividend Period being hereinafter individually referred to as a "Dividend Period" and collectively referred to as "Dividend Periods") thereafter, which Quarterly Dividend Periods shall commence on March 1, June 1, September 1 and December 1 in each year and shall end on and include the day next preceding the first day of the next Quarterly Dividend Period, at a rate per annum of the stated value thereof 3.75% below the Applicable Rate (as defined in paragraph (2) of this Section (b)) in respect of such Quarterly Dividend Period. Anything to the contrary herein notwithstanding, the dividend rate for any Quarterly Dividend Period shall in no event be less than 6.00% or greater than 12.00% per annum. Such dividends shall be cumulative from the date of original issue of such shares and shall be payable, when and as declared by the Board, on the last day of February, May, August and November of each year, commencing the last day of May, 1983. Each such dividend shall be paid to the holders of record of shares of this Series as they appear on the stock register of the Corporation on such record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board. Dividends on account of arrears for any past Dividend Periods may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board. (2) Except as provided below in this paragraph, the "Applicable Rate" for any Quarterly Dividend Period 3 shall be the highest of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Twenty Year Constant Maturity Rate (each as hereinafter defined) for such Dividend Period. In the event that the Corporation determines in good faith that for any reason one or more of such rates cannot be determined for any Quarterly Dividend Period, then the Applicable Rate for such Dividend Period shall be the higher of whichever of such rates can be so determined. In the event that the Corporation determines in good faith that none of such rates can be determined for any Quarterly Dividend Period, then the Applicable Rate in effect for the preceding Dividend Period shall be continued for such Dividend Period. (3) Except as provided below in this paragraph, the "Treasury Bill Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calander Period as provided below) for three-month U.S. Treasury bills, as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the ten calendar days immediately preceding the last day of February, May, August or November, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on this Series is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum market discount rate during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calendar Period as provided below) for three-month U.S. Treasury bills, as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum market discount rate for three-month U.S. Treasury bills shall not be published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published 4 during the relevant Calendar Period as provided below) for all of the U.S. Treasury bills then having maturities of not less than 80 nor more than 100 days, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such rates, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason no such U.S. Treasury Bill Rates are published as provided above during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the per annum market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable noninterest-bearing U.S. Treasury securities with a maturity of not less than 80 nor more than 100 days from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Treasury Bill Rate for any Quarterly Dividend Period as provided above in this paragraph, the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the per annum market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable interest-bearing U.S. Treasury securities with a maturity of not less than 80 nor more than 100 days from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. (4) Except as provided below in this paragraph, the "Ten Year Constant Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the ten calendar days immediately preceding 5 the last day of February, May, August or November, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on this Series is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Ten Year Average Yield during such Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum Ten Year Average Yield shall not be published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly average yield to maturity, if only one such yield shall be published during the relevant Calendar Period as provided below) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) then having maturities of not less than eight nor more than twelve years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Ten Year Constant Maturity Rate for any Quarterly Dividend Period as provided above in this paragraph, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eight nor more than twelve years from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three 6 recognized U.S. Government securities dealers selected by the Corporation. (5) Except as provided below in this paragraph, the "Twenty Year Constant Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum Twenty Year Average Yields (or the one weekly per annum Twenty Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the ten calendar days immediately preceding the last day of February, May, August or November, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on this Series is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Twenty Year Average Yield during such Calendar Period, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum Twenty Year Average Yields (or the one weekly per annum Twenty Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum Twenty Year Average Yield shall not be published by any Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly average yield to maturity, if only one such yield shall be published during the relevant Calendar Period as provided below) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) then having maturities of not less than eighteen nor more than twenty-two years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Twenty Year Constant 7 Maturity Rate for any Quarterly Dividend Period as provided above in this paragraph, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eighteen nor more than twenty-two years from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. (6) The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Twenty Year Constant Maturity Rate shall each be rounded to the nearest five hundredths of a percentage point. (7) The dividend rate with respect to each Quarterly Dividend Period will be calculated as promptly as practicable by the Corporation according to the appropriate method described herein. The mathematical accuracy of each such calculation will be confirmed in writing by independent accountants of recognized standing. The Corporation will cause each dividend rate to be published in a newspaper of general circulation in New York City prior to the commencement of the new Quarterly Dividend Period to which it applies and will cause notice of such dividend rate to be enclosed with the dividend payment checks next mailed to the holders of shares of this Series. (8) For purposes of this Section (b), the term (i) "Calendar Period" shall mean 14 calendar days; (ii) "Special Securities" shall mean securities which can, at the option of the holder, be surrendered at face value in payment of any Federal estate tax or which provide tax benefits to the holder and are priced to reflect such tax benefits or which were orginally issued at a deep or substantial discount; 8 (iii) "Ten Year Average Yield" shall mean the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of ten years); and (iv) "Twenty Year Average Yield" shall mean the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of 20 years). (9) No full dividends shall be declared or paid or set apart for payment on Preferred Stock of any series ranking, as to dividends, on a parity with or junior to this Series for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on this Series for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of this Series and any other Preferred Stock ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any other Preferred Stock ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other Preferred Stock bear to each other. Holders of shares of this Series shall not be entitled to any dividend, whether payable in cash, property or stocks, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (10) So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation and other than as provided in paragraph (9) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a 9 parity with this Series as to dividends or upon liquidation, nor shall any Common Stock or any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of this Series shall have been paid for all past dividend payment periods. (11) Dividends payable on each share of this Series for each full Quarterly Dividend Period shall be computed by dividing the dividend rate for such Quarterly Dividend Period by four and applying such rate against the stated value per share of this Series. Dividends payable on this Series for any period less than a full Quarterly Dividend Period, and for the Initial Dividend Period, shall be computed on the basis of a 360 day year consisting of 30 day months. (c) Redemption. (1) The shares of this Series shall not be redeemable prior to March 1, 1988. On and after March 1, 1988, the Corporation, at its option, may redeem shares of this Series, as a whole or in part, at any time or from time to time, at a redemption price (i) in the case of any redemption on a redemption date occurring on or after March 1, 1988, and prior to March 1, 1993, of $103 per share, and (ii) in the case of any redemption on a redemption date occurring on or after March 1, 1993, of $100 per share, plus, in each case, accrued and unpaid dividends thereon to the date fixed for redemption. (2) In the event that fewer than all the outstanding shares of this Series are to be redeemed, the number of shares to be redeemed shall be determined by the Board and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board or by any other method as may be determined by the Board in its sole discretion to be equitable. 10 (3) In the event the Corporation shall redeem shares of this Series, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) he place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (4) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the shares of this Series so called for redemption shall cease to accrue, and said shares no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (5) Any shares of this Series which shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board. (6) Notwithstanding the foregoing provisions of this Section (c), if any dividends on this Series are in arrears, no shares of this Series shall be redeemed unless all outstanding shares of this Series are 11 simultaneously redeemed, and the Corporatioon shall not purchase or otherwise acquire any shares of this Series; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of this Series pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of this Series. (d) Conversion or Exchange. The holders of shares of this Series shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. (e) Voting. The shares of this Series shall not have any voting powers either general or special, except that (1) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66-2/3% of all of the shares of this Series at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Certificate of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of Designation, Preferences and Rights or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of this Series; (2) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66-2/3% of all of the shares of this Series and all other series of Preferred Stock ranking on a parity with shares of this Series, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of 12 this Series and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the shares of this Series as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares; (3) If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends on the Preferred Stock shall exist, the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the holders of the Preferred Stock of all series shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of Common Stock, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Preferred Stock. Each director elected by the holders of shares of Preferred Stock (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at a meeting of the stockholders, or of the holders of shares of Preferred Stock, called for that purpose. So long as a default in any preference dividends on the Preferred Stock shall exist. (A) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (B)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (B) in the case of the removal of any Preferred Director, the vacancy may be filled 13 by the vote of the holders of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board of Directors of the Corporation shall be reduced by two. For the purposes hereof, a "default in preference dividends" on the Preferred Stock shall be deemed to have occurred whenever the amount of accrued dividends upon any series of the Preferred Stock shall be equivalent to six full quarter-yearly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Preferred Stock of each and every series then outstanding shall have been paid to the end of the last preceding quarterly dividend period. (f) Liquidation Rights. (1) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the shares of this Series shall be entitled to receive out of the assets of the Corporation, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the Preferred Stock upon liquidation, the amount of $100 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) Neither the sale of all or substantially all the property or business of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section (f). (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (f), the holders of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (f), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (5) Upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of this Series then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (f) before any payment shall be made to the holders of any class of capital stock of the Corporation ranking junior upon liquidation to this Series. (g) For purposes of this resolution, any stock of any class or classes of the Corporation shall be deemed to rank: (1) prior to the shares of this Series, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of this Series; (2) on a parity with shares of this Series, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be 15 different from those of this Series, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (3) junior to shares of this Series, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes." IN WITNESS WHEREOF, First Chicago Corporation has caused its corporate seal to be hereunto affixed and this certificate to be signed by J. Mikesell Thomas, its Vice President, and the same to be attested by Laurence Goldman, its Assistant Secretary, this 17th day of February, 1983. FIRST CHICAGO CORPORATION by /s/ J. Mikesell Thomas ____________________________ Vice President [Corporate Seal] ATTEST: /s/ Laurence Goldman ______________________ Assistant Secretary STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK DESIGNATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE SEVENTEENTH DAY OF FEBRUARY, A.D. 1984, AT 10 O'CLOCK A.M. * * * * * * * * * * /s/ William T. Quillen (Seal) -------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *3902049 DATE: 05/18/1993 723138037 CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE PREFERRED STOCK WITH CUMULATIVE AND ADJUSTABLE DIVIDENDS, SERIES C (Without Par Value) OF FIRST CHICAGO CORPORATION -------------------------- Pursuant to Section 151 of the General Corporation Law of the State of Delaware -------------------------- The undersigned DOES HEREBY CERTIFY that the following resolution was duly adopted by the Board of Directors of First Chicago Corporation, a Delaware corporation (hereinafter called the "Corporation"), at a meeting duly convened and held on November 18, 1983, at which a quorum was present and acting throughout: "RESOLVED, that pursuant to authority conferred upon the Board of Directors (the "Board") of First Chicago Corporation, a Delaware corporation (the "Corporation"), by the Restated Certificate of Incorporation (the "Certificate of Incorporation") of the Corporation, the Board hereby provides for and authorizes the issuance of a series of Preferred Stock of the Corporation to consist of 750,000 shares, and hereby fixes the voting powers, designation, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the shares of such series, in addition to those set forth in the Certificate of Incorporation, as follows: (a) Designation. The designation of the series of Preferred Stock created by this resolution shall be "Preferred Stock with Cumulative and Adjustable Dividends, Series C" (hereinafter called this "Series") and the number of shares constituting this Series is 750,000. Shares of this Series shall have a stated value of $100 per share. The number of authorized shares of this Series may be reduced by further resolution duly adopted by the Board and by the filing 2 of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such reduction has been so authorized, but the number of authorized shares of this Series shall not be increased. (b) Dividend Rate. (1) Dividend rates on the shares of this Series shall be: (i) for the period (the "Initial Dividend Period") from the date of their original issue to and including May 31, 1984, at such rate per annum as shall be approved by a resolution duly adopted by the Board of Directors of the Corporation, or by a committee of the Board duly authorized by the Board to fix such rate, and (ii) for each quarterly dividend period (hereinafter referred to as a "Quarterly Dividend Period"; and the Initial Dividend Period or any Quarterly Dividend Period being hereinafter individually referred to as a "Dividend Period" and collectively referred to as "Dividend Periods") thereafter, which Quarterly Dividend Periods shall commence on March 1, June 1, September 1 and December 1 in each year and shall end on and include the day next preceding the first day of the next Quarterly Dividend Period, at a rate per annum of the stated value thereof % below the Applicable Rate (as defined in paragraph (2) of this Section (b)) in respect of such Quarterly Dividend Period. Anything to the contrary herein notwithstanding, the dividend rate for any Quarterly Dividend Period shall in no event be less than 6.50% or greater than 12.50% per annum. Such dividends shall be cumulative from the date of original issue of such shares and shall be payable, when and as declared by the Board, on the last day of February, May, August and November of each year, commencing the last day of May 1984. Each such dividend shall be paid to the holders of record of shares of this Series as they appear on the stock register of the Corporation on such record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board. Dividends on account of arrears for any past Dividend Periods may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board. 3 (2) Except as provided below in this paragraph, the "Applicable Rate" for any Quarterly Dividend Period shall be the highest of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Twenty Year Constant Maturity Rate (each as hereinafter defined) for such Dividend Period. In the event that the Corporation determines in good faith that for any reason one or more of such rates cannot be determined for any Quarterly Dividend Period, then the Applicable Rate for such Dividend Period shall be the higher of whichever of such rates can be so determined. In the event that the Corporation determines in good faith that none of such rates can be determined for any Quarterly Dividend Period, then the Applicable Rate in effect for the preceding Dividend Period shall be continued for such Dividend Period. (3) Except as provided below in this paragraph, the "Treasury Bill Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calendar Period as provided below) for three-month U.S. Treasury bills, as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the ten calendar days immediately preceding the last day of February, May, August or November, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on this Series is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum market discount rate during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calendar Period as provided below) for three-month U.S. Treasury bills, as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum market discount rate for three-month U.S. Treasury bills shall not be published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum market 4 discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calendar Period as provided below) for all of the U.S. Treasury bills then having maturities of not less than 80 nor more than 100 days, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such rates, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason no such U.S. Treasury Bill Rates are published as provided above during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the per annum market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable noninterest-bearing U.S. Treasury securities with a maturity of not less than 80 nor more than 100 days from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Treasury Bill Rate for any Quarterly Dividend Period as provided above in this paragraph, the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the per annum market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable interest-bearing U.S. Treasury securities with a maturity of not less than 80 nor more than 100 days from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. (4) Except as provided below in this paragraph, the "Ten Year Constant Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly by the Federal Reserve 5 Board during the Calendar Period immediately prior to the ten calendar days immediately preceding the last day of February, May, August or November, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on this Series is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Ten Year Average Yield during such Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum Ten Year Average Yield shall not be published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly average yield to maturity, if only one such yield shall be published during the relevant Calendar Period as provided below) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) then having maturities of not less than eight nor more than twelve years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Ten Year Constant Maturity Rate for any Quarterly Dividend Period as provided above in this paragraph, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eight nor more than twelve years from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be 6 generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. (5) Except as provided below in this paragraph, the "Twenty Year Constant Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum Twenty Year Average Yields (or the one weekly per annum Twenty Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the ten calendar days immediately preceding the last day of February, May, August or November, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on this Series is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Twenty Year Average Yield during such Calendar Period, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum Twenty Year Average Yields (or the one weekly per annum Twenty Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum Twenty Year Average Yield shall not be published by any Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly average yield to maturity, if only one such yield shall be published during the relevant Calendar Period as provided below) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) then having maturities of not less than eighteen nor more than twenty-two years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the 7 Corporation cannot determine the Twenty Year Constant Maturity Rate for any Quarterly Dividend Period as provided above in this paragraph, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eighteen nor more than twenty-two years from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Coporation by at least three recognized U.S. Government securities dealers selected by the Corporation. (6) the Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Twenty Year Constant Maturity Rate shall each be rounded to the nearest five hundreths of a percentage point. (7) The dividend rate with respect to each Quarterly Dividend Period will be calculated as promptly as practicable by the Corporation according to the appropriate method described herein. The mathematical accuracy of each such calculation will be confirmed in writing by independent accountants of recognized standing. The Corporation will cause each dividend rate to be published in a newspaper of general circulation in New York City prior to the commencement of the new Quarterly Dividend Period to which it applies and will cause notice of such dividend rate to be enclosed with the dividend payment checks next mailed to the holders of shares of this Series. (8) For purposes of this Section (b), the term (i) "Calendar Period" shall mean 14 calendar days; (ii) "Special Securities" shall mean securities which can, at the option of the holder, be surrendered at face value in payment of any Federal estate tax or which provide tax benefits to the holder and are priced to reflect such tax benefits or which were originally issued at a deep or substantial discount; 8 (iii) "Ten Year Average Yield" shall mean the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of ten years); and (iv) "Twenty Year Average Yield" shall mean the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of 20 years). (9) No full dividends shall be declared or paid or set apart for payment on Preferred Stock of any series ranking, as to dividends, on a parity with or junior to this Series for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on this Series for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of this Series and any other Preferred Stock ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any other Preferred Stock ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other Preferred Stock bear to each other. Holders of shares of this Series shall not be entitled to any dividend, whether payable in cash, property or stocks, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (10) So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation and other than as provided in paragraph (9) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a 9 parity with this Series as to dividends or upon liquidation, nor shall any Common Stock or any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of this Series shall have been paid for all past dividend payment periods. (11) Dividends payable on each share of this Series for each full Quarterly Dividend Period shall be computed by dividing the dividend rate for such Quarterly Dividend Period by four and applying such rate against the stated value per share of this Series. Dividends payable on this Series for any period less than a full Quarterly Dividend Period, and for the Initial Dividend Period, shall be computed on the basis of a 360 day year consisting of 30 day months. (c) Redemption. (1) The shares of this Series shall not be redeemable prior to March 1, 1989. On and after March 1, 1989, the Corporation, at its option, may redeem shares of this Series, as a whole or in part, at any time or from time to time, at a redemption price (i) in the case of any redemption on a redemption date occurring on or after March 1, 1989, and prior to March 1, 1994, of $103 per share, and (ii) in the case of any redemption on a redemption date occurring on or after March 1, 1994, of $100 per share, plus, in each case, accrued and unpaid dividends thereon to the date fixed for redemption. (2) In the event that fewer than all the outstanding shares of this Series are to be redeemed, the number of shares to be redeemed shall be determined by the Board and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board or by any other method as may be determined by the Board in its sole discretion to be equitable. 10 (3) In the event the Corporation shall redeem shares of this Series, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (4) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the shares of this Series so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (5) Any shares of this Series which shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board. (6) Notwithstanding the foregoing provisions of this Section (c), if any dividends on this Series are in arrears, no shares of this Series shall be redeemed unless all outstanding shares of this Series are 11 simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Series; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of this Series pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of this Series. (d) Conversion or Exchange. The holders of shares of this Series shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. (e) Voting. The shares of this Series shall not have any voting powers either general or special, except that (1) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66-2/3% of all of the shares of this Series at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Certificate of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of Designation, Preferences and Rights or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or priviledges of this Series; (2) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66-2/3% of all of the shares of this Series and all other series of Preferred Stock ranking on a parity with shares of this Series, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of 12 this Series and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the shares of this Series as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares; (3) If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends on the Preferred Stock shall exist, the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the holders of the Preferred Stock of all series shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of Common Stock, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Preferred Stock. Each director elected by the holders of shares of Preferred Stock (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at a meeting of the stockholders, or of the holders of shares of Preferred Stock, called for that purpose. So long as a default in any preference dividends on the Preferred Stock shall exist, (A) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (B)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (B) in the case of the removal of any Preferred Director, the vacancy may be filled 13 by the vote of the holders of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end a default in preference dividends shall no longer exist, the number of directors constituting the Board of Directors of the Corporation shall be reduced by two. For the purposes hereof, a "default in preference dividends" on the Preferred Stock shall be deemed to have occurred whenever the amount of accrued dividends upon any series of the Preferred Stock shall be equivalent to six full quarter- yearly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Preferred Stock of each and every series then outstanding shall have been paid to the end of the last preceding quarterly dividend period. (f) Liquidation Rights. (1) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the shares of this Series shall be entitled to receive out of the assets of the Corporation, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the Preferred Stock upon liquidation, the amount of $100 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) Neither the sale of all or substantially all the property or business of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation or the merger consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section (f). (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (f), the holders of this 14 Series as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (f), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (5) Upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of this Series then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (f) before any payment shall be made to the holders of any class of capital stock of the Corporation ranking junior upon liquidation to this Series. (g) For purposes of this resolution, any stock of any class or classes of the Corporation shall be deemed to rank: (1) prior to the shares of this Series, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of this Series; (2) on a parity with shares of this Series, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be 15 different from those of this Series, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (3) junior to shares of this Series, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes." IN WITNESS WHEREOF, First Chicago Corporation has caused its corporate seal to be hereunto affixed and this certificate to be signed by J. Mikesell Thomas, its Senior Vice President, and the same to be attested by Laurence Goldman, its Assistant Secretary, this 17th day of February, 1984. FIRST CHICAGO CORPORATION by /s/ J. Mikesell Thomas ----------------------------- Senior Vice President (Corporate Seal) ATTEST: /s/ Laurence Goldman - ----------------------- Assistant Secretary STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE EIGHTEENTH DAY OF APRIL, A.D. 1984, AT 12 O'CLOCK P.M. * * * * * * * * * * /s/ William T. Quillen (Seal) -------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *3902051 DATE: 05/18/1993 723138037 CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF FIRST CHICAGO CORPORATION FIRST CHICAGO CORPORATION, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify: First: That at a meeting of the Board of Directors of FIRST CHICAGO CORPORATION resolutions were duly adopted setting forth a proposed amendment to the Restated Certificate of Incorporation of said corporation, declaring said amendment to be advisable and that said amendment be submitted for the consideration and approval of the stockholders of said corporation at the Annual Meeting of Stockholders of said corporation to be held on April 13, 1984. The resolution setting forth the proposed amendment is as follows: "RESOLVED, that the first sentence of Article Fourth of the Corporation's Restated Certificate of Incorporation be amended to read as follows: 'FOURTH. The total number of shares of all classes of stock which the corporation shall have authority to issue is 64,000,000 shares which shall be divided into two classes as follows: 10,000,000 shares of Preferred Stock without par value (Preferred Stock) and 54,000,000 shares of Common Stock of the par value of $5.00 per share (Common Stock).'" Second: That thereafter, the Annual Meeting of Stockholders of said corporation was duly held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. Third: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. Fourth: That the capital of said corporation shall not be reduced under or by reason of said amendment. Fifth: That said amendment shall become effective at the close of business on the day it is filed in the office of the Secretary of State of Delaware. IN WITNESS WHEREOF, FIRST CHICAGO CORPORATION has caused its corporate seal to be hereunto affixed and this Certificate to be signed by Richard L. Thomas, President of the Corporation, and attested to by Michael E. Jehle, Assistant Secretary, this 13th day of April, 1984. /s/ Richard L. Thomas ----------------------------------------- Richard L. Thomas President ATTEST: /s/ Michael E. Jehle - ---------------------------- Assistant Secretary (CORPORATE SEAL) STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF CERTIFICATE OF CHANGE OF ADDRESS OF REGISTERED AGENT AS IT APPLIES TO "FIRST CHICAGO CORPORATION" AS RECEIVED AND FILED IN THIS OFFICE ON THE TWENTH-SEVENTH DAY OF JULY, A.D. 1984 AT 4:30 O'CLOCK P.M. * * * * * * * * * * /s/ William T. Quillen (Seal) -------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *3902052 DATE: 05/18/1993 723138037 CERTIFICATE OF CHANGE OF ADDRESS OF REGISTERED OFFICE AND OF REGISTERED AGENT PURSUANT TO SECTION 134 OF TITLE 8 OF THE DELAWARE CODE To: DEPARTMENT OF STATE Division of Corporations Townsend Building Federal Street Dover, Delaware 19903 Pursuant to the provisions of Section 134 of Title 8 of the Delaware Code, the undersigned Agent for service of process, in order to change the address of the registered office of the corporations for which it is registered agent, hereby certifies that: 1. The name of the agent is: The Corporation Trust Company 2. The address of the old registered office was: 100 West Tenth Street Wilmington, Delaware 19801 3. The address to which the registered office is to be changed is: Corporation Trust Center 1209 Orange Street Wilmington, Delaware 19801 The new address will be effective on July 30, 1984. 4. The name of the corporations represented by said agent are set forth on the list annexed to this certificate and made a part hereof by reference. IN WITNESS WHEREOF, said agent has caused this certificate to be signed on its behalf by its Vice-President and Assistant Secretary this 25th day of July, 1984. THE CORPORATION TRUST COMPANY ------------------------------------------- (Name of Registered Agent) /s/ Virginia Colvell By ----------------------------------------- (Vice-President) ATTEST: /s/ Mary G. Murray - ------------------------------ (Assistant Secretary) PAGE 218 STATE OF DELAWARE - DIVISION OF CORPORATIONS CHANGE OF ADDRESS FILING FOR CORPORATION TRUST AS OF JULY 27, 1984 DOMESTIC 0700130 FIRST CHICAGO CORPORATION 01/23/1969 D DE STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE FIFTEENTH DAY OF APRIL, A.D. 1985, AT 2 O'CLOCK P.M. * * * * * * * * * * /s/ WILLIAM T. QUILLEN (SEAL) ---------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *3902054 DATE: 05/18/1993 723138037 CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF FIRST CHICAGO CORPORATION FIRST CHICAGO CORPORATION, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify: First: That at a meeting of the Board of Directors of FIRST CHICAGO CORPORATION resolutions were duly adopted setting forth a proposed amendment to the Restated Certificate of Incorporation of said corporation, declaring said amendment to be advisable and that said amendment be submitted for the consideration and approval of the stockholders of said corporation at the Annual Meeting of Stockholders of said corporation to be held on April 12, 1985. The resolution setting forth the proposed amendment is as follows: "RESOLVED, that the first sentence of Article Fourth of the Corporation's Restated Certificate of Incorporation be amended to read as follows: 'FOURTH. The total number of shares of all classes of stock which the corporation shall have authority to issue is 90,000,000 shares which shall be divided into two classes as follows: 10,000,000 shares of Preferred Stock without par value (Preferred Stock) and 80,000,000 shares of Common Stock of the par value of $5.00 per share (Common Stock).'" Second: That thereafter, the Annual Meeting of Stockholders of said corporation was duly held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. Third: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. Fourth: That the capital of said corporation shall not be reduced under or by reason of said amendment. Fifth: That said amendment shall become effective at the close of business on the day it is filed in the office of the Secretary of State of Delaware. IN WITNESS WHEREOF, FIRST CHICAGO CORPORATION has caused its corporate seal to be hereunto affixed and this Certificate to be signed by Richard L. Thomas, President of the Corporation, and attested to by Michael E. Jehle, Assistant Secretary, this 12th day of April, 1985. /s/ RICHARD L. THOMAS ------------------------------------------- Richard L. Thomas President ATTEST: /s/ MICHAEL E. JEHLE - ---------------------------- Assistant Secretary (CORPORATE SEAL) 3120S STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE --------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF CORRECTION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE THIRTEENTH DAY OF APRIL, A.D. 1987, AT 10 O'CLOCK A.M. * * * * * * * * * * /s/ WILLIAM T. QUILLEN ---------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *3902056 DATE: 05/18/1993 723138037 CERTIFICATE OF CORRECTION FILED TO CORRECT A CERTAIN ERROR IN THE CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE PREFERRED STOCK WITH CUMULATIVE AND ADJUSTABLE DIVIDENDS SERIES C (WITHOUT PAR VALUE) OF FIRST CHICAGO CORPORATION FILED IN THE OFFICE OF THE SECRETARY OF STATE OF DELAWARE ON FEBRUARY 17, 1984 First Chicago Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: 1. The name of the Corporation is First Chicago Corporation. 2. That a CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE PREFERRED STOCK WITH CUMULATIVE AND ADJUSTABLE DIVIDENDS SERIES C (WITHOUT PAR VALUE) OF FIRST CHICAGO CORPORATION was filed by the Secretary of State of Delaware on February 17, 1984 and that said certificate requires correction as permitted by subsection (F) of section 103 of The General Corporation Law of the State of Delaware. 3. The inaccuracy or defect of said certificate to be corrected is as follows: To insert a number in a blank in the calculation of the dividend rate on the Preferred Stock, Series C. 4. Paragraph (b)(1) of the certificate is corrected to read as follows: Dividend rates on the shares of this Series shall be: (i) for the period (the "Initial Dividend Period") from the date of their original issue to and including May 31, 1984, at such rate per annum as shall be approved by a resolution duly adopted by the Board of Directors of the Corporation, or by a committee of the Board duly authorized by the Board to fix such rate, and (ii) for each quarterly dividend period (hereinafter referred to as a "Quarterly Dividend Period"; and the Initial Dividend Period or any Quarterly Dividend Period being hereinafter individually referred to as a "Dividend Period" and collectively referred to as "Dividend Periods") thereafter, which Quarterly Dividend Periods shall commence on March 1, June 1, September 1 and December 1 in each year and shall end on and include the day next preceding the first day of the next Quarterly Dividend Period, at a rate per annum of the stated value thereof 1.80% below the Applicable Rate (as defined in paragraph (2) of this Section (b)) in respect of such Quarterly Dividend Period. Anything to the contrary herein notwithstanding, the dividend rate for any Quarterly Dividend Period shall in no event be less than 6.50% or greater than 12.50% per annum. Such dividends shall be cumulative from the date of original issue of such shares and shall be payable, when and as declared by the Board, on the last day of February, May, August and November of each year, commencing the last day of May 1984. Each such dividend shall be paid to the holders of record of shares of this Series as they appear on the stock register of the Corporation on such record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board. Dividends on account of arrears for any past Dividend Periods may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board. IN WITNESS WHEREOF, FIRST CHICAGO CORPORATION has caused this certificate to be signed by Kenneth G. Arnesen, its Executive Vice President, General Counsel and Secretary, and attested by Ilona M. Berry, its Assistant Secretary, this 10th day of April, 1987. First Chicago Corporation By /s/ Kenneth G. Arnesen ---------------------------------- Kenneth G. Arnesen Executive Vice President, General Counsel and Secretary ATTEST: By: /s/ Ilona M. Berry ------------------- Assistant Secretary (CORPORATE SEAL) 7851E STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF ''FIRST CHICAGO CORPORATION'' FILED IN THIS OFFICE ON THE THIRTEENTH DAY OF APRIL, A.D. 1987, AT 10:01 O'CLOCK A.M. * * * * * * * * * * /s/ William T. Quillen (SEAL) -------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *3902058 DATE: 05/18/1993 723138037 CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF FIRST CHICAGO CORPORATION FIRST CHICAGO CORPORATION, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify: First: That at a meeting of the Board of Directors of FIRST CHICAGO CORPORATION resolutions were duly adopted setting forth a proposed amendment to the Restated Certificate of Incorporation of said corporation, declaring said amendment to be advisable and that said amendment be submitted for the consideration and approval of the stockholders of said corporation at the Annual Meeting of Stockholders of said corporation to be held on April 10, 1987. The resolution setting forth the proposed amendment is as follows: "RESOLVED, that Article Ninth of the Corporation's Restated Certificate of Incorporation be amended to read as follows: 'NINTH. (a) No director shall be personally liable to the corporation or any stockholder for monetary damages for breach of fiduciary duty as a director, except for any matter in respect of which such director shall be liable under Section 174 of Title 8 of the Delaware Code (relating to the General Corporation Law of Delaware) or any amendment thereto or successor provision thereto or shall be liable by reason that, in addition to any and all other requirements for such liability, he (i) shall have breached his duty of loyalty to the corporation or its stockholders, (ii) shall not have acted in good faith or, in failing to act, shall not have acted in good faith, (iii) shall have acted in a manner involving intentional misconduct or a knowing violation of law or, failing to act, shall have acted in a manner involving intentional misconduct or a knowing violation of law, or (iv) shall have derived an improper personal benefit. (b) The corporation shall indemnify and hold harmless each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he, or a person of whom he is the legal respresentative,is or was a director, officer or employee of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation,partnership, joint venture, trust or other enterprise, to the fullest extent permitted by the General Corporation Law of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment) against all expenses (including attorney's fees, judgments, fines, penalties and amounts paid in settlement) actually and reasonably incurred by him in connection therewith. The corporation may, by action of the Board of Directors, provide indemnification to agents of the corporation with a lesser or the same scope and effect as the foregoing indemnification of directors, officers and employees of the corporation. (c) Expenses incurred by a director, officer or employee in defending a civil or criminal action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director, officer or employee to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation. Such expenses incurred by agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. (d) The indemnification and advancement of expenses provided by, or granted pursuant to, this Article Ninth shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any statute, By-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his offical capacity and as to action in another capacity while holding such office. (e) Neither the amendment nor repeal of this Article Ninth, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article Ninth, shall eliminate or reduce the effect of this Article Ninth in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article Ninth, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provison.' '' Second: That thereafter, the Annual Meeting of Stockholders of said corporation was duly held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. Third: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. Fourth: That said amendment shall become effective at the close of business on the day it is filed in the office of the Secretary of State of Delaware. IN WITNESS WHEREOF, FIRST CHICAGO CORPORATION has caused its corporate seal to be hereunto affixed and this Certificate to be signed by Kenneth G. Arnesen, Executive Vice President, General Counsel and Secretary of the Corporation, and attested to by Ilona M. Berry, Assistant Secretary, this 10th day of April, 1987. /s/ Kenneth G. Arnesen ---------------------------------- Kenneth G. Arnesen Executive Vice President, General Counsel and Secretary ATTEST: /s/ Ilona M. Berry - ------------------------ Assistant Secretary (CORPORATE SEAL) 7851E STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK DESIGNATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE THIRTIETH DAY OF SEPTEMBER, A.D. 1987, AT 10 O'CLOCK A.M. * * * * * * * * * * /s/ William T. Quillen (SEAL) -------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *3902060 DATE: 05/18/1993 723138037 CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS, OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE $3.75 CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES A (Without Par Value) OF FIRST CHICAGO CORPORATION ------------------------- Pursuant to Section 151 of the General Corporation Law of the State of Delaware ------------------------- The undersigned DOES HEREBY CERTIFY that the following resolution was duly adopted by the Board of Directors of First Chicago Corporation, a Delaware corporation (hereinafter called the "Corporation''), at a meeting duly convened and held on May 8, 1987, at which a quorum was present and acting throughout: "RESOLVED, that pursuant to authority conferred upon the Board of Directors (the "Board") of the Corporation, by the Restated Certificate of Incorporation (the "Certificate of Incorporation") of the Corporation, the Board hereby provides for and authorizes the issuance of a series of Preferred Stock of the Corporation to consist of 2,150,000 shares, and hereby fixes the voting powers, designation, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the shares of such series, in addition to those set forth in the Certificate of Incorporation, as follows: (a) Designation. The designation of the series of Preferred Stock created by this resolution shall be "$3.75 Cumulative Convertible Preferred Stock, Series A" (hereinafter called this "Series") and the number of shares constituting the Series is 2,150,000. Shares of this Series shall have a stated value of $50 per share. The number of authorized shares of this Series may be reduced by further resolution duly adopted by the Board and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such reduction has been so authorized, but the number of authorized shares of this Series shall not be increased. (b) Dividend Rate. (1) Shares of this Series shall be entitled to receive dividends at a fixed annual rate of $3.75 per share. Such dividends shall be cumulative from the date of original issue of such shares, that is, October 1, 1987, and shall be payable, when and as declared by the Board, on the first day of January, April, July and October of each year, commencing the first day of January, 1988. Each such dividend shall be paid to the holders of record of shares of this Series as they appear on the stock register of the Corporation on the applicable record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board. Dividends on account of arrears for any past dividend periods may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date as may be fixed by the Board which shall not exceed 45 days preceding such dividend payment date thereof. (2) No full dividends shall be declared or paid or set apart for payment on Preferred Stock of any series ranking, as to dividends, on a parity with this Series for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on this Series for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of this Series and any other Preferred Stock ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any other Preferred Stock ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other Preferred Stock bear to each other. Holders of shares of this Series shall not be entitled to any dividend, whether payable in cash, property or stocks, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (3) So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation and other than as provided in paragraph (2) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking -2- junior to or on a parity with this Series as to dividends or upon liquidation, nor shall any Common Stock or any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of this Series shall have been paid for all past dividend payment periods. (4) Dividends payable on this Series for any period less than a full quarterly dividend period, and for the dividend period beginning on the date of issuance of the shares of this Series, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of dividends payable on shares of this Series for each full quarterly dividend period shall be computed by dividing by four the annual rate per share set forth in Section (b)(1). (c) Redemption. (1) The shares of this Series shall not be redeemable prior to October 1, 1992. On and after October 1, 1992, the Corporation, at its option, may redeem shares of this Series, as a whole or in part, at any time or from time to time prior to the conversion thereof pursuant to Section (d) hereof, at a redemption price per share as indicated below, if such redemption is during the periods indicated:
If redeemed during Redemption the twelve month Price period beginning Per Share ------------------ ---------- October 1, 1992 $51.50 October 1, 1993 $51.20 October 1, 1994 $50.90 October 1, 1995 $50.60 October 1, 1996 $50.30 October 1, 1997 and thereafter $50.00
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- (3) In the event the Corporation shall redeem shares of this Series, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date; and (vi) the day on which conversion rights will terminate with respect to shares called for redemption as determined pursuant to paragraph (d)(1). (4) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the shares of this Series so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (5) Any shares of this Series which shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board. (6) Notwithstanding the foregoing provisions of this Section (c), if any dividends on this Series are in arrears, no shares of this Series shall be redeemed unless all outstanding shares of this Series are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Series; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of this Series (i) upon the conversion of the Series into shares of Common Stock pursuant to Section (d), (ii) in exchange for shares of Common Stock or any other class of stock ranking junior to the Series as to dividends or upon -4- liquidation, or (iii) pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of this Series. (d) Conversion. (1) Subject to the provisions for adjustment hereinafter set forth, each share of the Series shall be convertible at the option of the holder thereof, in the manner hereinafter set forth, into fully paid and nonassessable shares of Common Stock (as hereinafter defined) at the conversion rate, determined as hereinafter set forth, provided that if any shares of the Series are called for redemption, the conversion rights pertaining thereto will terminate at the close of business on the day which is five Business Days (as hereinafter defined) prior to the redemption date. Common Stock shall be delivered upon conversion of shares of the Series at an initial rate (the "Conversion Rate") of 1.391 shares of Common Stock for each share of this Series. The Conversion Rate shall be adjusted in certain instances as provided in paragraph (2) of this Section (d). Any holder of shares of the Series desiring to convert such shares into shares of Common Stock shall surrender the certificate or certificates for the shares being converted, duly endorsed or assigned to the Corporation or in blank, at the principal office of the Corporation or at a bank or trust company appointed by the Corporation for that purpose, accompanied by a written notice of conversion specifying the number of shares of the Series to be converted and the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued; in case such notice shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issue of shares of Common Stock in such name or names. Promptly after receipt of such notice of conversion, the Corporation shall issue and deliver or cause to be issued and delivered to such holder a certificate or certificates for shares of Common Stock resulting from such conversion. In case less than all of the shares of the Series represented by a certificate are to be converted by a holder, upon such conversion the Corporation shall also issue and deliver or cause to be issued and delivered to such holder a certificate or certificates for the shares of the Series not so converted. The holders of shares of the Series at the close of business on a dividend payment record date shall be entitled to receive the dividend payable on such shares (except shares redeemed on a redemption date between such record date and the dividend payment date) on the corresponding dividend payment date notwithstanding the conversion thereof or the Corporation's default in payment of the dividend due on such dividend payment date; provided, however, that shares surrendered for conversion during the period from the close of business on any dividend payment record date for the Series to the opening of business on the corresponding dividend payment date (except shares called for -5- redemption on a redemption date during such period) must be accompanied by payment of an amount equal to the dividend payable on such shares on such dividend payment date. A holder of shares on a dividend payment record date who (or whose transferee) converts shares on a dividend payment date will receive the dividend payable on such shares by the Corporation on such date, and the converting holder need not include payment in the amount of such dividend upon surrender of shares for conversion. Except as provided above, no payment or adjustment will be made on account of accrued or unpaid dividends upon the conversion of shares of the Series. (2) The Conversion Rate shall be adjusted from time to time as follows: (A) In case the Corporation shall pay or make a dividend or other distribution on all shares of any class of capital stock of the Corporation in shares of Common Stock, the Conversion Rate in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be increased by multiplying such Conversion Rate by a fraction of which the numerator shall be the sum of (i) the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and (ii) the total number of shares constituting such dividend or other distribution, and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination, such increase to become effective immediately after the opening of business on the day following the date fixed for such determination. (B) In case the Corporation shall issue rights or warrants to all holders of its shares of Common Stock entitling them to subscribe for or purchase Common Stock at a price per share less than the current market price per share (determined as provided in paragraph (3) hereof) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights or warrants, the Conversion Rate in effect at the opening of business on the day following the date fixed for such determination shall be increased by multiplying such Conversion Rate by a fraction of which the numerator shall be the sum of (i) the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and (ii) the number of shares of Common Stock so offered for subscription or purchase, and the denominator shall be the sum of (x) the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and (y) the number of shares of Common Stock which the aggregate offering price of the total number of shares of -6- Common Stock so offered for subscription or purchase would purchase at such current market price, such increase to become effective immediately after the opening of business on the day following the date fixed for such determination. In the event that any such rights or warrants are not so issued, or to the extent any such rights or warrants expire without having been exercised, the Conversion Rate shall again be readjusted retroactively to the Conversion Rate which would then be in effect if such record date had not been fixed with respect to such unissued or expired rights or warrants; such subsequent adjustment shall not affect the number of Common Shares issued upon any conversion prior to the date such subsequent adjustment is made. (C) In case the outstanding shares of Common Stock shall be subdivided into a greater number of shares, the Conversion Rate in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately increased, and, conversely, in case outstanding shares of Common Stock shall each be combined into a smaller number of shares, the Conversion Rate in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately reduced, such increase or reduction, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (D) In case the Corporation shall, by dividend or otherwise, distribute to all holders of shares of Common Stock evidences of indebtedness or assets (including securities, but excluding any rights or warrants referred to in paragraph (2)(B), any dividend or distribution paid in cash out of the surplus or retained earnings of the Corporation and any dividend or distribution referred to in paragraph (2)(A)), the Conversion Rate shall be adjusted so that it shall equal the rate determined by multiplying the Conversion Rate in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution by a fraction, the numerator of which shall be the current market price per share (determined as provided in paragraph (3)) of the Common Stock on the date fixed for such determination, the denominator of which shall be such current market price per share of Common Stock less the then fair market value (as determined by the Board of the Corporation, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed allocable to one share of Common Stock, such adjustment to become effective immediately prior to the opening of -7- business on the day following the date fixed for the determination of stockholders entitled to receive such distribution. (E) The reclassification of Common Stock into securities other than Common Stock (other than any reclassification upon a consolidation or merger to which paragraph (6) applies) shall be deemed to involve (i) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of stockholders entitled to receive such distribution" and the "date fixed for such determination" within the meaning of paragraph (2)(D)), and (ii) a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision becomes effective", or "the day upon which such combination becomes effective", as the case may be, and "the day upon which such subdivision or combination becomes effective" within the meaning of paragraph (2)(C) of this Section (d)). (3) For the purpose of any computation under paragraphs (2)(B) and (D), the current market price per share of Common Stock on any day shall be deemed to be the average of the daily Closing Prices (as hereinafter defined) per share of Common Stock for the 30 consecutive Trading Days (as hereinafter defined) ending five Trading Days before the day in question. (4) Notwithstanding the provisions of paragraph (2) above, no adjustment in the Conversion Rate shall be required unless such adjustment (plus any adjustments not previously made by reason of this paragraph (4)) would require an increase or decrease of at least 2 1/2% in such Conversion Rate; provided, however, that any adjustments which by reason of this paragraph (4) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section (d) shall be made to the nearest one-thousandth of a Common Share. (5) The Corporation may make such increases in the Conversion Rate, in addition to those required by this Section (d), as it considers to be advisable in order to avoid or diminish any income tax liability to any holder of shares of Common Stock resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes or for any other reasons. The Corporation shall have the power to resolve any ambiguity or correct any error in this Section (d) and its actions in so doing shall be final and conclusive in the absence of manifest error. -8- (6) In case the Corporation shall effect any capital reorganization of the Common Stock (other than a subdivision, combination, capital reorganization or reclassification provided for in paragraph (2)) or shall consolidate, merge or engage in a statutory share exchange with or into any other corporation (other than a consolidation, merger or share exchange in which the Corporation is the surviving corporation and each share of Common Stock outstanding immediately prior to such consolidation or merger is to remain outstanding immediately after such consolidation or merger) or shall sell or transfer all or substantially all its assets to any other corporation, lawful provision shall be made as a part of the terms of such transaction whereby the holders of shares of the Series shall receive upon conversion thereof, in lieu of each share of Common Stock which would have been issuable upon conversion of such stock if converted immediately prior to the consummation of such transaction, the same kind and amount of stock (or other securities, cash or property, if any) as may be issuable or distributable in connection with such transaction with respect to each share of Common Stock outstanding at the effective time of such transaction, subject to subsequent adjustments for subsequent stock dividends and distributions, subdivisions or combinations of shares, capital reorganizations, reclassifications, consolidations, mergers or share exchanges, as nearly equivalent as possible to the adjustments provided for in this Section (d). (7) Whenever the Conversion Rate is adjusted as herein provided: (A) the Corporation shall compute the adjusted Conversion Rate and shall cause to be prepared a certificate signed by the chief financial or accounting officer or treasurer of the Corporation setting forth the adjusted Conversion Rate and showing in reasonable detail the facts upon which such adjustment is based and the computation thereof and such certificate shall forthwith be filed with each transfer agent for the Series; and (B) a notice stating that the Conversion Rate has been adjusted and setting forth the adjusted Conversion Rate shall, as soon as practicable, be mailed to the holders of record of outstanding shares of the Series. (8) Conversion shall be deemed to have been made as of the date of surrender of certificates for the shares of this Series to be converted, and the giving of written notice and payment, as prescribed in paragraph (1) of this Section (d); and the person entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such Common Stock on such date. The Corporation shall not be required to deliver -9- certificates for shares of its Common Stock while the stock transfer books for such stock or for this Series are duly closed for any purpose, but certificates for shares of Common Stock shall be issued and delivered as soon as practicable after the opening of such books. (9) The term "Common Stock" as used in this resolution means the Corporation's Common Stock, $5.00 par value per share, as the same exists at the date of filing of the Certificate of Designation relating to this Series or any other class of stock resulting from successive changes or reclassifications of such Common Stock consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. (10) Any shares of this Series which shall at any time have been converted shall, after such conversion, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, for the purpose of issuance upon conversion of shares of the Series, the full number of shares of Common Stock then issuable upon the conversion of all shares of the Series then outstanding and shall take all action necessary so that shares of Common Stock so issued will be validly issued, fully paid and non-assessable; provided, however, that nothing contained herein shall preclude the Corporation from satisfying its obligations in respect of the conversion of the shares by delivery of purchased shares of Common Stock which are held in the treasury of the Corporation. (11) The Corporation will pay any and all stamp or similar taxes that may be payable in respect of the issuance or delivery of shares of Common Stock on conversion of shares of the Series. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of the Series so converted were registered, and no such issuance or delivery shall be made unless and until the person requesting such issuance has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid. (12) No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon the conversion of shares of the Series. If any such conversion would otherwise require the issuance of such a fractional share (determined to the extent of four decimal places after taking into account all shares of the Series being converted into Common Stock by the holder), an amount equal to such fraction multiplied by the Closing Price per share of Common Stock for the day of conversion shall be paid to the holder in cash by the Corporation. -10- (13) Notwithstanding anything elsewhere contained herein, any funds which at any time shall have been deposited by the Corporation or on its behalf with any paying agent for the purpose of paying dividends on or the redemption price of any shares of the Series and which shall not be required for such purposes because of the conversion of such shares shall after such conversion be repaid to the Corporation by the paying agent. (14) The certificate of any independent firm of public accountants of recognized standing selected by the Board verifying the correctness of any computation made under this Section (d) shall, in the absence of manifest error, be conclusive and final. (15) For purposes of this resolution, the term (i) "Closing Price" shall mean the last sale price as shown on the New York Stock Exchange Composite Transactions Tape, or in case no such sale takes place on such day, the average of the closing bid and asked prices on the New York Stock Exchange, or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if it is not listed or admitted to trading on any national securities exchange, on the National Association of Securities Dealers Automated Quotations National Market System, or, if the Common Stock is not listed or admitted to trading on any national securities exchange or quoted on such National Market System, the average of the closing bid and asked prices as furnished by any New York Stock Exchange member firm selected from time to time by the Board for such purposes (other than the Corporation or a subsidiary thereof). (ii) "Trading Day" shall mean a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for the transaction of business or, if the Common Stock is not listed or admitted to trading on any national securities exchange, a day which is a Business Day. (iii) "Business Day" shall mean a day which is not a Saturday, Sunday or other day on which commercial banking institutions in the City of Chicago, Illinois or The City of New York, New York are authorized or obligated by law or executive order to close. -11- (e) Voting ------ (1) The shares of this Series shall not have any voting powers either general or special, except that: (A) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66-2/3% of all of the shares of this Series at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provision of the Certificate of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of Designation, Preferences and Rights or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of this Series; (B) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66-2/3% of all of the shares of this Series and all other series of Preferred Stock ranking on a parity with shares of this Series, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the shares of this Series as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares; (C) If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends (as defined below) on the Preferred Stock shall exist, the number of directors constituting the Board of the Corporation shall be increased by two, and the holders of the Preferred Stock of all series shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of Common Stock, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Preferred Stock. Each director elected by the holders of shares of Preferred Stock (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he shall have been elected, notwithstanding that prior to the end of such -12- term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at a meeting of the stockholders, or of the holders of shares of Preferred Stock, called for that purpose. So long as a default in any preference dividends on the Preferred Stock shall exist, (i) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (ii)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (ii) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board of the Corporation shall be reduced by two. For the purposes hereof, a "default in preference dividends" on the Preferred Stock shall be deemed to have occurred whenever the amount of accrued dividends upon any series of the Preferred Stock shall be equivalent to six full quarter-yearly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Preferred Stock of each and every series then outstanding shall have been paid to the end of the last preceding quarterly dividend period. (2) A holder of shares of this Series shall be entitled to one vote per share of the Series held by him when such holder is permitted to vote pursuant to the foregoing. (f) Liquidation Rights. (1) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the shares of this Series shall be entitled to receive out of the assets of the Corporation, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the Preferred Stock upon liquidation, the amount of $50 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) Neither the sale of all or substantially all the property or business of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section (f). -13- (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (f), the holders of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (f), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (5) Upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of this Series then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (f) before any payment shall be made to the holders of any class of capital stock of the Corporation ranking junior upon liquidation to this Series. (q) Priority. For purposes of this resolution, any stock of any class or classes of the Corporation shall be deemed to rank: (1) prior to the shares of this Series, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of this Series; (2) on a parity with shares of this Series, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be different from those of this Series, if such stock is the Corporation's Preferred Stock with Cumulative and Adjustable Dividends (Without Par Value), Preferred Stock with Cumulative and Adjustable Dividends, Series B (Without Par Value) or Preferred Stock with Cumulative and Adjustable Dividends, Series C (Without Par Value), or if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (3) junior to shares of this Series, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes. (h) Sinking or Retirement Fund. The shares of this Series shall not be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such stock." IN WITNESS WHEREOF, First Chicago Corporation has caused its corporate seal to be hereunto affixed and this certificate to be signed by Robert A. Rosholt, its Senior Vice President and Treasurer, and the same to be attested by Jeffrey S. Lillien, its Assistant Secretary, this 29th day of September, 1987. FIRST CHICAGO CORPORATION /s/ Robert A. Rosholt By:_____________________________ Senior Vice President and Treasurer (Corporate Seal) ATTEST: /s/ Jeffrey S. Lillien _________________________ Assistant Secretary STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK DESIGNATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE FIFTEENTH DAY OF DECEMBER, A.D. 1987, AT 10 O'CLOCK A.M. * * * * * * * * * * /s/ William T. Quillen (SEAL) ---------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *3902063 DATE: 05/18/1993 723138037 CERTIFICATE OF INCREASE TO CERTIFICATE OF AMENDMENT OF FIRST CHICAGO CORPORATION ----------------------- Pursuant to Section 151 of the General Corporation Law of the State of Delaware ------------------------- The undersigned DOES HEREBY CERTIFY that the following action was taken pursuant to authority granted by the Board of Directors of First Chicago Corporation, a Delaware corporation (hereinafter called the "Corporation"), at a meeting duly convened and held on May 8, 1987, at which a quorum was present and acting throughout: The Certificate of Stock Designation relating to the Corporation's $3.75 Cumulative Convertible Preferred Stock, Series A, executed on September 29, 1987, and adopted pursuant to a resolution of the corporation's Board of Directors on May 8, 1987 is amended as follows: That the authorized number of shares of the series of "$3.75 Cumulative Convertible Preferred Stock, Series A" be increased from 2,150,000 to 2,152,462 shares; and This increase shall be deemed made as of the original effective date of the Corporation's Certificate of Designation relating to its $3.75 Cumulative Convertible Preferred Stock Series A. IN WITNESS WHEREOF, First Chicago Corporation has caused its corporate seal to be hereunto affixed and this certificate to be signed by Robert A. Rosholt, its Senior vice President and Treasurer, and the same to be attested by Paul K. Johnson, its Assistant Secretary, this 11th day of December, 1987. FIRST CHICAGO CORPORATION /s/ Robert A. Rosholt By: ______________________________ Senior Vice President and Treasurer (Corporate Seal) /s/ Paul K. Johnson Attest: _______________________ Assistant Secretary STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE EIGHTH DAY OF APRIL, A.D. 1988, AT 12 O'CLOCK P.M. * * * * * * * * * * /s/ William T. Quillen (SEAL) ---------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *3902066 DATE: 05/18/1993 723138037 CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF FIRST CHICAGO CORPORATION FIRST CHICAGO CORPORATION, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify: First: That at a meeting of the Board of Directors of FIRST CHICAGO CORPORATION resolutions were duly adopted setting forth a proposed amendment to the Restated Certificate of Incorporation of said corporation, declaring said amendment to be advisable and that said amendment be submitted for the consideration and approval of the stockholders of said corporation to be held on April 8, 1988. The resolution setting forth the proposed amendment is as follows: "RESOLVED, that the first sentence of Article Fourth of the Corporation's Restated Certificate of Incorporation be amended to read as follows: 'FOURTH. The total number of shares of all classes of stock which the corporation shall have authority to issue is 115,000,000 shares which shall be divided into two classes as follows: 15,000,000 shares of Preferred Stock without par value (Preferred Stock) and 100,000,000 shares of Common Stock of the par value of $5.00 per share (Common Stock).'" Second: That thereafter, the Annual Meeting of Stockholders of said corporation was duly held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. Third: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. Fourth: That the capital of said corporation shall not be reduced under or by reason of said amendment. Fifth: That said amendment shall become effective at the close of business on the day it is filed in the office of the Secretary of State of Delaware. IN WITNESS WHEREOF, FIRST CHICAGO CORPORATION has caused its corporate seal to be hereunto affixed and this Certificate to be signed by J. Mikesell Thomas, Executive Vice President and Chief Financial Officer of the Corporation, and attested to by Laurence Goldman, Assistant Secretary, this 8th day of April, 1988. /s/ J. Mikesell Thomas ----------------------------------------- J. Mikesell Thomas Executive Vice President and Chief Financial Officer ATTEST: /s/ Laurence Goldman - ---------------------------- Assistant Secretary (CORPORATE SEAL) 723138037 STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK DESIGNATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE TWENTIETH DAY OF JANUARY, A.D. 1989, AT 10 O'CLOCK A.M. * * * * * * * * * * /s/ William T. Quillen (SEAL) ---------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *3902068 DATE: 05/18/1993 723138037 CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS of SERIES A JUNIOR PARTICIPATING PREFERRED STOCK of FIRST CHICAGO CORPORATION (Pursuant to Section 151 of the Delaware General Corporation Law) -------------------------------- First Chicago Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the "Corporation"), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation as required by Section 151 of the General Corporation Law at a meeting duly called and held on November 18, 1988: RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (hereinafter called the "Board of Directors" or the "Board") in accordance with the provisions of the Certificate of Incorporation, the Board of Directors hereby creates a series of Preferred Stock, without par value (the "Preferred Stock"), of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, preferences, and limitations thereof as follows: Series A Junior Participating Preferred Stock: Section 1. Designation and Amount. The shares of such series shall be designated as "Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be 1,000,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock. Section 2. Dividends and Distributions. (A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock, par value $5.00 per share (the "Common Stock"), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Comon Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as pro- -2- vided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights: (A) Each share of Series A Preferred Stock shall entitle the holder thereof to one vote on all matters submitted to a vote of the stockholders of the Corporation. -3- (B) Except as otherwise provided herein, in any other Certificate of Designation, Preferences and Rights creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends, or make any other distributions on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire -4- shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law. Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be enti- -5- tled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common -6- Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. No Redemption. The shares of Series A Preferred Stock shall not be redeemable. Section 9. Rank. The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all other series of any class of the Corporation's Preferred Stock. Section 10. Amendment. The Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class. IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporatin by J. Mikesell Thomas, its Executive Vice President and Chief Financial Officer, and attested by an Assistant Secretary of the Corporation this 20th day of January, 1989. /s/ J. Mikesell Thomas ------------------------------------ J. Mikesell Thomas Executive Vice President and Chief Financial Officer Attest: /s/ Laurence Goldman - --------------------- Assistant Secretary [SEAL] -7- STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE TWENTIETH DAY OF APRIL, A.D. 1990, AT 2:30 O'CLOCK P.M. * * * * * * * * * * /s/ William T. Quillen (SEAL) ---------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *3902072 DATE: 05/18/1993 723138037 CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF FIRST CHICAGO CORPORATION FIRST CHICAGO CORPORATION, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify: First: That at a meeting of the Board of Directors of FIRST CHICAGO CORPORATION resolutions were duly adopted setting forth a proposed amendment to the Restated Certificate of Incorporation of said corporation, declaring said amendment to be advisable and that said amendment be submitted for the consideration and approval of the stockholders of said corporation to be held on April 20, 1990. The resolution setting forth the proposed amendment is as follows: "RESOLVED, that the first sentence of Article Fourth of the Corporation's Restated Certificate of Incorporation be amended to read as follows: 'FOURTH. The total number of shares of all classes of stock which the corporation shall have the authority to issue is 165,000,000 shares which shall be divided into two classes as follows: 15,000,000 shares of Preferred Stock without par value (Preferred Stock) and 150,000,000 shares of Common Stock of the par value of $5.00 per share (Common Stock).'" Second: That thereafter, the Annual Meeting of Stockholders of said corporation was duly held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. Third: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. Fourth: That the capital of said corporation shall not be reduced under or by reason of said amendment. Fifth: That said amendment shall become effective at the close of business on the day it is filed in the office of the Secretary of State of Delaware. IN WITNESS WHEREOF, FIRST CHICAGO CORPORATION has caused its corporate seal to be hereunto affixed and this Certificate to be signed by Robert A. Rosholt, Senior Vice President and Treasurer of the Corporation, and attested to by Laurence Goldman, Assistant Secretary, this 20th day of April, 1990. /s/ Robert A. Rosholt ---------------------------------------------- Robert A. Rosholt Senior Vice President and Treasurer ATTEST: /s/ Laurence Goldman - ---------------------------- Assistant Secretary (CORPORATE SEAL) STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK DESIGNATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE TWENTY-EIGHTH DAY OF MAY, A.D. 1991, AT 4:30 O'CLOCK P.M. * * * * * * * * * * /s/ William T. Quillen (Seal) -------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: 3902073 DATE: 05/18/1993 723138037 CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE 10% CUMULATIVE PREFERRED STOCK SERIES D (Stated Value $25 per share) OF FIRST CHICAGO CORPORATION ------------------------- Pursuant to Section 151 of the General Corporation Law of the State of Delaware ------------------------- The undersigned DOES HEREBY CERTIFY that the following resolutions were duly adopted by the Board of Directors (the "Board of Directors") of First Chicago Corporation, a Delaware corporation (the "Corporation"), and by the Preferred Stock Committee of the Board of Directors (the "Preferred Stock Committee"), respectively, pursuant to authority conferred upon the Board of Directors by the provisions of the Restated Certificate of Incorporation of the Corporation which authorizes the issuance of up to 15,000,000 shares of Preferred Stock without par value, and pursuant to authority conferred upon the Preferred Stock Committee by Section 141(c) of the General Corporation Law of the State of Delaware, by Article III, Section 10 of the By-Laws of the Corporation, by Section 141(f) of the General Corporation Law of the State of Delaware, and by the resolutions of the Board of Directors adopted at a meeting duly convened and held on June 8, 1990, at which a quorum was present and acting throughout: 1. The Board of Directors on June 8, 1990 adopted the following resolutions: RESOLVED, that the Corporation issue up to 6,000,000 shares of its Preferred Stock, without par value, having an aggregate issuance price of not more than $150,000,000 (the "Preferred Shares") by filing with the Secretary of the State of Delaware, pursuant to Section 151 of the General Corporation Law of the State of Delaware, a certificate prepared in accordance with such Section 151 (the "Certificate of Designation") in such form as is approved by subsequent action of the Board of Directors or by the Preferred Stock Committee of the Board of Directors (the "Preferred Stock Committee") relating to such Preferred Shares; and that the resolution set forth in said Certificate of Designation be, and it hereby is, adopted by the Board of Directors, and that the proper officers of the Corporation are authorized to execute and file such Certificate of Designation pursuant to the General Corporation Law of the State of Delaware; FURTHER RESOLVED, that the Board of Directors appoints a Preferred Stock Committee, composed of Messrs. Barry F. Sullivan and Richard L. Thomas, which shall have the powers set forth in these resolutions and in the General Corporation Law of the State of Delaware and that execution and delivery of any document or certificate signed by any member of the Preferred Stock Committee or by the Secretary of the Corporation shall be conclusive evidence of the action taken by the Preferred Stock Committee as contemplated, required or authorized by these resolutions; and the Preferred Stock Committee or any member thereof be, and they hereby are, given full power and authority to authorize the execution of such documents and the taking of such actions (including the filings with all necessary governmental or regulatory agencies) as may be necessary or desirable to effectuate the issuance and sale of the Preferred Shares as contemplated by these resolutions; FURTHER RESOLVED, that the Preferred Stock Committee is authorized and empowered, with full power and authority, to act on behalf and in the stead of the Board of Directors to authorize the issuance of the Preferred Shares, to fix the dividend rate or rates of the Preferred Shares, to determine the number of Preferred Shares, to determine the price at which the Preferred Shares will be sold by the Corporation, to determine whether the Preferred Shares shall be convertible into shares of the Corporation's Common Stock, $5 par value per share (the "Common Shares") and, if determined to be so convertible, the basis (which may be by formula) and terms upon which the shares of Preferred Shares shall be so convertible into the Common Shares, to determine the liquidation preference (which may be less than the offering price) of the Preferred Shares, to determine any redemption provisions of the Preferred Shares and to determine the designations, preferences and privileges, the relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof, to the fullest extent permitted by the General Corporation Law of the State of Delaware as it now exists or is hereafter amended; FURTHER RESOLVED, that the Certificate of Designation for the Preferred Shares shall provide that such series of Preferred Stock (the "Series") shall have the following voting rights: (1) The shares of this Series shall not have any voting powers either general or special, except that: (A) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Certificate of Incorportion or of any certificate amendatory thereof or supplemental thereto (including any Certificate of Designation, Preferences and Rights or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of this Series; (B) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series and all other series of Preferred Stock ranking on a parity with shares of this Series, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the shares of this Series as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares; (C) If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends (as defined below) on the Preferred Stock shall exist, the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the holders of the Preferred Stock of all series shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of Common Stock, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Preferred Stock. Each director elected by the holders of shares of Preferred Stock (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at a meeting of the stockholders, or of the holders of shares of Preferred Stock, called for that purpose. So long as a default in any preference dividends on the Preferred Stock shall exist, (i) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (ii)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (ii) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board of Directors of the Corporation shall be reduced by two. For the purposes hereof, a "default in preference dividends" on the Preferred Stock shall be deemed to have occurred whenever the amount of accrued dividends upon any series of the Preferred Stock shall be equivalent to six full quarter-yearly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Preferred Stock of each and every series then outstanding shall have been paid to the end of the last preceding quarterly dividend period. (2) A holder of shares of this Series shall be entitled to one vote per share of the Series held by him when such holder is permitted to vote pursuant to the foregoing. 2. The Preferred Stock Committee on May 22, 1991, pursuant to the authority conferred upon the Preferred Stock Committee by Section 141(c) of the General Corporation Law of the State of Delaware, by Article III, Section 10 of the By-Laws of the Corporation and Section 141(f) of the General Corporation Law of the State of Delaware and by the resolutions of the Board of Directors set forth above, adopted the following resolutions: RESOLVED, that pursuant to authority conferred upon the Preferred Stock Committee of the Corporation, pursuant to resolutions adopted by the Board of Directors of the Corporation on June 8, 1990, the Preferred Stock Committee hereby provides for and authorizes the issuance of a series of Preferred Stock of the Corporation to consist of 6,000,000 shares, and hereby fixes the designation, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the shares of such series, in addition to those set forth in the Certificate of Incorporation, as follows: (a) Designation. The designation of the series of Preferred Stock created by this resolution shall be "10% Cumulative Preferred Stock, Series D" (hereinafter called this "Series") and the number of shares constituting this Series is 6,000,000. Shares of this Series shall have a stated value of $25 per share. The number of authorized shares of this Series may be reduced by further resolution duly adopted by the Board of Directors or the Preferred Stock Committee and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such reduction has been so authorized, but the number of authorized shares of this Series shall not be increased. (b) Dividend Rate. (1) Shares of this Series shall be entitled to receive dividends at a fixed annual rate of $2.50 per share. Such dividends shall be cumulative from the date of original issue of such shares, that is, May 30, 1991, and shall be payable, when and as declared by the Board of Directors, on the first day of January, April, July and October of each year, commencing the first day of July, 1991. Each such dividend shall be paid to the holders of record of shares of this Series as they appear on the stock register of the Corporation on the applicable record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board of Directors. Dividends on account of arrears for any past dividend periods may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date as may be fixed by the Board of Directors which shall not exceed 45 days preceding such dividend payment date thereof. (2) No full dividends shall be declared or paid or set apart for payment on Preferred Stock of any series ranking, as to dividends, on a parity with this Series for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on this Series for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of this Series and any other Preferred Stock ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any other Preferred Stock ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other Preferred Stock bear to each other. Holders of shares of this Series shall not be entitled to any dividend, whether payable in cash, property or stocks, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (3) So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation and other than as provided in paragraph (2) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a parity with this Series as to dividends or upon liquidation, nor shall any Common Stock or any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of this Series shall have been paid for all past dividend payment periods. (4) Dividends payable on this Series for any period less than a full quarterly dividend period, and for the dividend period beginning on the date of issuance of the shares of this Series, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of dividends payable on shares of this Series for each full quarterly dividend period shall be computed by dividing by four the annual rate per share set forth in Section (b)(1). (c) Redemption. (1) The shares of this Series shall not be redeemable prior to June 1, 1994. On and after June 1, 1994, the Corporation, at its option, and with the prior consent of the Board of Governors of the Federal Reserve System may redeem shares of this Series, as a whole or in part, at any time or from time to time, at a redemption price per share as indicated below, if such redemption is during the periods indicated:
If redeemed during Redemption the twelve month Price period beginning Per Share ------------------ ---------- June 1, 1994 $25.75 June 1, 1995 $25.375 June 1, 1996 and thereafter $25.00
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 notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (5) Any shares of this Series which shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. (6) Nothwithstanding the foregoing provisions of this Section (c), if any dividends on this Series are in arrears, no shares of this Series shall be redeemed unless all outstanding shares of this Series are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Series; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of this Series pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of this Series. (d) Conversion. The holders of shares of this Series shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. (e) Liquidation Rights. (1) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the shares of this Series shall be entitled to receive out of the assets of the Corporation, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the Preferred Stock upon liquidation, the amount of $25 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) Neither the sale of all or substantially all the property or business of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section (e). (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (e), the holders of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (e), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (5) Upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of this Series then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (e) before any payment shall be made to the holders of any class of capital stock of the Corporation ranking junior upon liquidation to this Series. (f) Priority. For purposes of this resolution, any stock of any class or classes of the Corporation shall be deemed to rank: (1) prior to the shares of this Series, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holder of shares of this Series; (2) on a parity with shares of this Series, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be different from those of this Series, if such stock is the Corporation's Preferred Stock with Cumulative and Adjustable Dividends (Without Par Value), Preferred Stock Cumulative and Adjustable Dividends, Series B (Without Par Value), Preferred Stock with Cumulative and Adjustable Dividends, Series C (Without Par Value), or the Corporation's $3.75 Cumulative Convertible Preferred Stock, Series A (Without Par Value) or if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (3) junior to shares of this Series, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes. (g) Sinking or Retirement Fund. The shares of this Series shall not be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such stock." IN WITNESS WHEREOF, First Chicago Corporation has caused its corporate seal to be hereunto affixed and this certificate to be signed by Richard L. Thomas, its President, and the same to be attested by Mark K. Cullen, its Assistant Secretary, this 22nd day of May, 1991. FIRST CHICAGO CORPORATION By: /s/ Richard L. Thomas ---------------------- President (Corporate Seal) ATTEST: /s/ Mark K. Cullen - ------------------- Assistant Secretary 7489E STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK DESIGNATION OF FIRST CHICAGO CORPORATION FILED IN THIS OFFICE ON THE TWELFTH DAY OF NOVEMBER, A.D. 1992, AT 9 O'CLOCK A.M. A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING. * * * * * * * * * * /s/ William T. Quillen (SEAL) -------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *3902075 DATE: 05/18/1993 723138037 CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE 8.45% CUMULATIVE PREFERRED STOCK, SERIES E (Stated Value $625 per share) OF FIRST CHICAGO CORPORATION ------------------------- Pursuant to Section 151 of the General Corporation Law of the State of Delaware ------------------------- The undersigned DOES HEREBY CERTIFY that the following resolutions were duly adopted by the Board of Directors (the "Board of Directors") of First Chicago Corporation, a Delaware corporation (the "Corporation"), and by the Preferred Stock Committee of the Board of Directors (the "Preferred Stock Committee"), respectively, pursuant to authority conferred upon the Board of Directors by the provisions of the Restated Certificate of Incorporation of the Corporation which authorizes the issuance of up to 15,000,000 shares of Preferred Stock without par value, and pursuant to authority conferred upon the Preferred Stock Committee by Section 141(c) of the General Corporation Law of the State of Delaware, by Article III, Section 10 of the By-Laws of the Corporation, by Section 141(f) of the General Corporation Law of the State of Delaware, and by the resolutions of the Board of Directors adopted by means of a unanimous written consent of the Board of Directors dated August 21, 1992: 1. The Board of Directors on August 21, 1992 adopted the following resolutions: RESOLVED, that the Corporation issue up to 480,000 shares of its Preferred Stock, without par value, having an aggregate issuance price of not more than $300,000,000 (the "Preferred Shares") by filing with the Secretary of State of Delaware, pursuant to Section 151 of the General Corporation Law of the State of Delaware, a certificate prepared in accordance with such Section 151 (the "Certificate of Designation") in such form as is approved by subsequent action of the Board of Directors or by the Preferred Stock Committee of the Board of Directors (the "Preferred Stock Committee") relating to such Preferred Shares; and that the resolution set forth in said Certificate of Designation be, and it hereby is, adopted by the Board of Directors, and that the proper officers of the Corporation are authorized to execute and file such Certificate of STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 09:00 AM 11/12/1992 732317001 - 700130 Designation pursuant to the General Corporation Law of the State of Delaware; FURTHER RESOLVED, that the Board of Directors appoints a Preferred Stock Committee, composed of Messrs. Richard L. Thomas and John H. Bryan, which shall have the powers set forth in these resolutions and in the General Corporation Law of the State of Delaware and that execution and delivery of any document or certificate signed by any member of the Preferred Stock Committee or by the Secretary of the Corporation shall be conclusive evidence of the action taken by the Preferred Stock Committee as contemplated, required or authorized by these resolutions; and the Preferred Stock Committee or any member thereof be, and they hereby are, given full power and authority to authorize the execution of such documents and the taking of such actions (including the filings with all necessary governmental or regulatory agencies) as may be necessary or desirable to effectuate the issuance and sale of the Preferred Shares as contemplated by these resolutions; FURTHER RESOLVED, that the Preferred Stock Committee is authorized and empowered, with full power and authority, to act on behalf and in the stead of the Board of Directors to authorize the issuance of the Preferred Shares, to fix the dividend rate or rates of the Preferred Shares, to determine the number of Preferred Shares, to determine the price at which the Preferred Shares will be sold by the Corporation, to determine whether the Preferred Shares shall be convertible into shares of the Corporation's Common Stock, $5 par value per share (the "Common Shares") and, if determined to be so convertible, the basis (which may be by formula) and terms upon which the shares of Preferred Shares shall be so convertible into the Common Shares, to determine whether the Preferred Shares shall be represented by depositary shares (the "Depositary Shares") and, if so determined, the fractional interest of a Preferred Share to be represented by each Depositary Share, to determine the liquidation preference (which may be less than the offering price) of the Preferred Shares, to determine any redemption provisions of the Preferred Shares and to determine the designations, preferences and privileges, the relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof, to the fullest extent permitted by the General Corporation Law of the State of Delaware as it now exists or is hereafter amended; FURTHER RESOLVED, that the Certificate of Designation for the Preferred Shares shall provide that such series of Preferred Stock (the "Series") shall have the following voting rights: (1) The shares of this Series shall not have any voting powers either general or special, except that: (A) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Certificate of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of Designation, Preferences and Rights or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of this Series; (B) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series and all other series of Preferred Stock ranking on a parity with shares of this Series, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the shares of this Series as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares; (C) If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends (as defined below) on the Preferred Stock shall exist, the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the holders of the Preferred Stock of all series shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of Common Stock, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Preferred Stock. Each director elected by the holders of shares of Preferred Stock (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at a meeting of the stockholders, or of the holders of shares of Preferred Stock, called for that purpose. So long as a default in any preference dividends on the Preferred Stock shall exist, (i) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (ii)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (ii) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board of Directors of the Corporation shall be reduced by two. For the purposes hereof, a "default in preference dividends" on the Preferred Stock shall be deemed to have occurred whenever the amount of accrued dividends upon any series of the Preferred Stock shall be equivalent to six full quarter-yearly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Preferred Stock of each and every series then outstanding shall have been paid to the end of the last preceding quarterly dividend period. (2) A holder of shares of this Series shall be entitled to one vote per share of the Series held by him when such holder is permitted to vote pursuant to the foregoing. 2. The Preferred Stock Committee on November 5, 1992, pursuant to the authority conferred upon the Preferred Stock Committee by Section 141(c) of the General Corporation Law of the State of Delaware, by Article III, Section 10 of the By-Laws of the Corporation and Section 141(f) of the General Corporation Law of the State of Delaware and by the resolutions of the Board of Directors set forth above, adopted the following resolutions: RESOLVED, that pursuant to authority conferred upon the Preferred Stock Committee of the Corporation, pursuant to resolutions adopted by the Board of Directors of the Corporation on August 21, 1992, the Preferred Stock Committee hereby provides for and authorizes the issuance of a series of Preferred Stock of the Corporation to consist of 160,000 shares, and hereby fixes the designation, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the shares of such series, in addition to those set forth in the Certificate of Incorporation, as follows: (a) Designation. The designation of the series of Preferred Stock created by this resolution shall be "8.45% Cumulative Preferred Stock, Series E" (hereinafter called this "Series") and the number of shares constituting this Series is 160,000. Shares of this Series shall have a stated value of $625 per share. The number of authorized shares of this Series may be reduced by further resolution duly adopted by the Board of Directors or the Preferred Stock Committee and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such reduction has been so authorized, but the number of authorized shares of this Series shall not be increased. (b) Dividend Rate. (1) Shares of this Series shall be entitled to receive dividends at a fixed annual rate of $52.8125 per share. Such dividends shall be cumulative from the date of original issue of such shares, that is, November 16, 1992, and shall be payable, when and as declared by the Board of Directors, on the first day of January, April, July and October of each year, commencing the first day of January, 1993. Each such dividend shall be paid to the holders of record of shares of this Series as they appear on the stock register of the Corporation on the applicable record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board of Directors. Dividends on account of arrears for any past dividend periods may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date as may be fixed by the Board of Directors which shall not exceed 45 days preceding such dividend payment date thereof. (2) No full dividends shall be declared or paid or set apart for payment on Preferred Stock of any series ranking, as to dividends, on a parity with this Series for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on this Series for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of this Series and any other Preferred Stock ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any other Preferred Stock ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other Preferred Stock bear to each other. Holders of shares of this Series shall not be entitled to any dividend, whether payable in cash, property or stocks, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (3) So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation and other than as provided in paragraph (2) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a parity with this Series as to dividends or upon liquidation, nor shall any Common Stock or any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of this Series shall have been paid for all past dividend payment periods. (4) Dividends payable on this Series for any period less than a full quarterly dividend period, and for the dividend period beginning on the date of issuance of the shares of this Series, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of dividends payable on shares of this Series for each full quarterly dividend period shall be computed by dividing by four the annual rate per share set forth in Section (b)(1). (c) Redemption. (1) The shares of this Series shall not be redeemable prior to November 16, 1997. On and after November 16, 1997, the Corporation, at its option, and with the prior consent of the Board of Governors of the Federal Reserve System may redeem shares of this Series, as a whole or in part, at any time or from time to time, at a redemption price per share of $625, plus, in each case, accrued and unpaid dividends thereon to the date fixed for redemption. (2) In the event that fewer than all the outstanding shares of this Series are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board of Directors or by any other method as may be determined by the Board of Directors in its sole discretion to be equitable. (3) In the event the Corporation shall redeem shares of this Series, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (4) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the shares of this Series so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (5) Any shares of this Series which shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. (6) Notwithstanding the foregoing provisions of this Section (c), if any dividends on this Series are in arrears, no shares of this Series shall be redeemed unless all outstanding shares of this Series are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Series; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of this Series pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of this Series. (d) Conversion. The holders of shares of this Series shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. (e) Liquidation Rights. (1) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the shares of this Series shall be entitled to receive out of the assets of the Corporation, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the Preferred Stock upon liquidation, the amount of $625 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) Neither the sale of all or substantially all the property or business of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section (e). (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (e), the holders of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (e), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (5) Upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of this Series then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (e) before any payment shall be made to the holders of any class of capital stock of the Corporation ranking junior upon liquidation to this Series. (f) Priority. For purposes of this resolution, any stock of any class or classes of the Corporation shall be deemed to rank: (1) prior to the shares of this Series, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holder of shares of this Series; (2) on a parity with shares of this Series, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be different from those of this Series, if such stock is the Corporation's Preferred Stock with Cumulative and Adjustable Dividends (Without Par Value), Preferred Stock with Cumulative and Adjustable Dividends, Series B (Without Par Value), Preferred Stock with Cumulative and Adjustable Dividends, Series C (Without Par Value), $3.75 Cumulative Convertible Preferred Stock, Series A (Without Par Value), or the Corporation's 10% Cumulative Peferred Stock, Series D (stated value $25 per share), or if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (3) junior to shares of this Series, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes. (g) Sinking or Retirement Fund. The shares of this Series shall not be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such stock. IN WITNESS WHEREOF, First Chicago Corporation has caused its corporate seal to be hereunto affixed and this certificate to be signed by Robert A. Rosholt, its Treasurer, and the same to be attested by Michael Lipsitz, its Assistant Secretary, this 5th day of November, 1992. FIRST CHICAGO CORPORATION /s/ Robert A. Rosholt By:______________________________ Senior Vice President and Treasurer (Corporate Seal) ATTEST: /s/ Michael Lipsitz ___________________________ Assistant Secretary 1295E/1-9 PAGE 1 State of Delaware Office of the Secretary of State -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK DESIGNATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE FIFTH DAY OF MARCH, A.D. 1993, AT 10 O'CLOCK A.M. A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING. * * * * * * * * * * (SEAL) /s/ William T. Quillen -------------------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *3902077 DATE: 05/18/1993 723138037 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 10:00 AM 03/05/1993 733064007-700130 CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE 5 3/4% CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES B (Stated Value $5,000 per share) OF FIRST CHICAGO CORPORATION -------------- Pursuant to Secton 151 of the General Corporation Law of the State of Delaware -------------- The undersigned DOES HEREBY CERTIFY that the following resolutions were duly adopted by the Board of Directors (the "Board of Directors") of First Chicago Corporation, a Delaware corporation (the "Corporation"), and by the Preferred Stock Committee of the Board of Directors (the "Preferred Stock Committee"), respectively, pursuant to authority conferred upon the Board of Directors by the provisions of the Restated Certificate of Incorporation of the Corporation which authorizes the issuance of up to 15,000,000 shares of Preferred Stock without par value, and pursuant to authority conferred upon the Preferred Stock Committee by Section 141(c) of the General Corporation Law of the State of Delaware, by Article III, Section 10 of the By-Laws of the Corporation, by Section 141(f) of the General Corporation Law of the State of Delaware, and by the resolutions of the Board of Directors adopted by means of a unanimous written consent of the Board of Directors dated August 21, 1992 and by resolutions adopted by the Board of Directors on February 12, 1993: 1. The Board of Directors on August 21, 1992 adopted the following resolutions: RESOLVED, that the Corporation issue up to 480,000 shares of its Preferred Stock, without par value, having an aggregate issuance price of not more than $300,000,000 (the "Preferred Shares") by filing with the Secretary of the State of Delaware, pursuant to Section 151 of the General Corporation Law of the State of Delaware, a certificate prepared in accordance with such Section 151 (the "Certificate of Designation") in such form as is approved by subsequent action of the Board of Directors or by the Preferred Stock Committee of the Board of Directors (the "Preferred Stock Committee") relating to such Preferred Shares; and that the resolution set forth in said Certificate of Designation be, and it hereby is, adopted by the Board of Directors, and that the proper 1 officers of the Corporation are authorized to execute and file such Certificate of Designation pursuant to the General Corporation Law of the State of Delaware; FURTHER RESOLVED, that the Board of Directors appoints a Preferred Stock Committee, composed of Messrs. Richard L. Thomas and John H. Bryan, which shall have the powers set forth in these resolutions and in the General Corporation Law of the State of Delaware and that execution and delivery of any document or certificate signed by any member of the Peferred Stock Committee or by the Secretary of the Corporation shall be conclusive evidence of the action taken by the Preferred Stock Committee as contemplated, required or authorized by these resolutions; and the Preferred Stock Committee or any member thereof be, and they hereby are, given full power and authority to authorize the execution of such documents and the taking of such actions (including the filings with all necessary governmental or regulatory agencies) as may be necessary or desirable to effectuate the issuance and sale of the Preferred Shares as contemplated by these resolutions; FURTHER RESOLVED, that the Preferred Stock Committee is authorized and empowered, with full power and authority, to act on behalf and in the stead of the Board of Directors to authorize the issuance of the Preferred Shares, to fix the dividend rate or rates of the Preferred Shares, to determine the number of Preferred Shares, to determine the price at which the Preferred Shares will be sold by the Corporation, to determine whether the Preferred Shares shall be convertible into shares of the Corporation's Common Stock, $5 par value per share (the "Common Shares") and, if determined to be so convertible, the basis (which may be by formula) and terms upon which the shares of Peferred Shares shall be so convertible into the Common Shares, to determine whether the Preferred Shares shall be represented by depositary shares (the "Depositary Shares") and, if so determined, the fractional interest of a Preferred Share to be represented by each Depositary Share, to determine the liquidation preference (which may be less than the offering price) of the Preferred Shares, to determine any redemption provisions of the Preferred Shares and to determine the designations, preferences and privileges, the relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof, to the fullest extent permitted by the General Corporation Law of the State of Delaware as it now exists or is hereafter amended; FURTHER RESOLVED, that the Certificate of Designation for the Preferred Shares shall provide that such series of Preferred Stock (the "Series") shall have the following voting rights: (1) The shares of this Series shall not have any voting powers either general or special, except that: (A) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 2 66 2/3% of all of the shares of this Series at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisons of the Certificate of Incorportion or of any certificate amendatory thereof or supplemental thereto (including any Certificate of Designation, Preferences and Rights or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of this Series; (B) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series and all other series of Preferred Stock ranking on a parity with shares of this Series, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the shares of this Series as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares; (C) If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends (as defined below) on the Preferred Stock shall exist, the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the holders of the Preferred Stock of all series shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of Common Stock, to elect two directors of the Corporaton to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Preferred Stock. Each director elected by the holders of shares of Preferred Stock (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at a meeting of the stockholders, or of the holders of shares of 3 Preferred Stock, called for that purpose. So long as a default in any preference dividends on the Preferred Stock shall exist, (i) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (ii)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (ii) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board of Directors of the Corporation shall be reduced by two. For the purposes hereof, a "default in preference dividends" on the Preferred Stock shall be deemed to have occurred whenever the amount of accrued dividends upon any series of the Preferred Stock shall be equivalent to six full quarter-yearly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Preferred Stock of each and every series then outstanding shall have been paid to the end of the last preceding quarterly dividend period. (2) A holder of shares of this Series shall be entitled to one vote per share of the Series held by him when such holder is permitted to vote pursuant to the foregoing. 2. The Board of Directors on February 12, 1993 adopted the following resolutions: RESOLVED, that the second paragraph of the Resolution duly adopted by this Board of Directors on August 12, 1993 (the "Resolution") providing for the appointment of a Preferred Stock Committee of this Board of Directors is hereby amended and restated in its entirety as follows: FURTHER RESOLVED, that the Board of Directors appoints a Preferred Stock Committee, composed of Messrs. Richard L. Thomas, Leo F. Mullin and David J. Vitale, which shall have the powers set forth in these resolutions and in the General Corporation Law of the State of Delaware and that execution and delivery of any document or certificate signed by any member of the Preferred Stock Committee or by the Secretary of the Corporation shall be conclusive evidence of the action taken by the Peferred Stock Committee as contemplated, required or authorized by these resolutions; and the Preferred Stock Committee or any member thereof be, and they hereby are, given full power and authority to authorize the execution of such documents and the taking of such actions (including 4 the filings with all necessary governmental or regulatory agencies) as may be necessary or desirable to effectuate the issuance and sale of the Shares (as defined below) as contemplated by these resolutions; FURTHER RESOLVED, that except as set forth above, the Resolution is and shall be in full force and effect as of its date. 3. The Preferred Stock Committee on March 1, 1993, pursuant to the authority conferred upon the Preferred Stock Committee by Section 141(c) of the General Corporation Law of the State of Delaware, by Article III, Section 10 of the By-Laws of the Corporation and Section 141(f) of the General Corporation Law of the State of Delaware and by the resolutions of the Board of Directors set forth above, adopted the following resolutions: RESOLVED, that pursuant to authority conferred upon the Preferred Stock Committee of the Corporation, pursuant to resolutions adopted by the Board of Directors of the Corporation on August 21, 1992, as amended on February 12, 1993, the Preferred Stock Committee hereby provides for and authorizes the issuance of a series of Preferred Stock of the Corporation to consist of 40,000 shares, and hereby fixes the designation, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the shares of such series, in addition to those set forth in the Certificate of Incorporation, as follows: (a) Designation. The designation of the series of Preferred Stock created by this resolution shall be "5 3/4% Cumulative Convertible Preferred Stock, Series B" (hereinafter called this "Series") and the number of shares constituting this Series is 40,000. Shares of this Series shall have a stated value of $5,000 per share. The number of authorized shares of this Series may be reduced by further resolution duly adopted by the Board of Directors or the Preferred Stock Committee and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such reduction has been so authorized, but the number of authorized shares of this Series shall not be increased. (b) Dividend Rate. (1) Shares of this Series shall be entitled to receive dividends at a fixed annual rate of $287.50 per share. Such dividends shall be cumulative from the date of original issue of such shares, that is, March 9, 1993, and shall be payable, when and as declared by the Board of Directors, on the first day of January, April, July and October of each year, commencing the first day of July, 1993. Each such dividend shall be paid to the holders of record of shares of this Series as they appear on the stock register of the Corporation on the applicable record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board of Directors. Dividends on account of arrears for any past dividend periods may be declared and paid at any time. 5 without reference to any regular dividend payment date, to holders of record on such date as may be fixed by the Board of Directors which shall not exceed 45 days preceding such dividend payment date thereof. (2) No full dividends shall be declared or paid or set apart for payment on Preferred Stock of any series ranking, as to dividends, on a parity with this Series for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on this Series for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of this Series and any other Peferred Stock ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any other Preferred Stock ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other Peferred Stock bear to each other. Holders of shares of this Series shall not be entitled to any dividend, whether payable in cash, property or stocks, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (3) So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation and other than as provided in paragraph (2) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a parity with this Series as to dividends or upon liquidation, nor shall any Common Stock or any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of this Series shall have been paid for all past dividend payment periods. (4) Dividends payable on this Series for any period less than a full quarterly dividend period, and for the dividend period beginning on the date of issuance of the shares of this Series, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of dividends payable on shares of this Series for each full quarterly dividend period shall be computed by dividing by four the annual rate per share set forth in Section (b)(1). 6 (c) Redemption. (1) The shares of this Series shall not be redeemable prior to April 1, 1997. On and after April 1, 1997, the Corporation, at its options, and with the prior consent of the Board of Governors of the Federal Reserve System may redeem shares of this Series, as a whole or in part, at any time or from time to time, at a redemption price as set forth below, plus, in each case, accrued and unpaid dividends thereon to the date fixed for redemption: If Redeemed During the Twelve-Month Period Redemption Price Beginning on April 1, per share ---------------------- ---------------- 1997 $5,172.50 1998 5,143.75 1999 5,115.00 2000 5,086.25 2001 5,057.50 2002 5,028.75 2003 and thereafter 5,000.00 (2) In the event that fewer than all the outstanding shares of this Series are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board of Directors or by any other method as may be determined by the Board of Directors in its sole discretion to be equitable. (3) In the event the Corporation shall redeem shares of this Series, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the then current Conversion Price (as defined herein), together with a statement that all conversion rights with respect to the shares of the Series called for redemption will terminate at the close of business on the fifth Business Day preceding the redemption date; (v) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (4) Notice having been mailed as aforesaid, from and after the redemption 7 date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the shares of this Series so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (5) Any shares of this Series which shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. (6) Notwithstanding the foregoing provisions of this Section (c), if any dividends on this Series are in arrears, no shares of this Series shall be redeemed unless all outstanding shares of this Series are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Series; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of this Series (i) upon the conversion of shares of the Series into shares of Common Stock pursuant to Section (d) hereof or (ii) pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of this Series. (d) Conversion. (1) (A) Subject to the provisions for adjustment hereinafter set forth, each share of the Series shall be convertible at the option of the holder thereof, in whole or part, in the manner hereinafter set forth, into fully paid and nonassessable shares of Common Stock (as hereinafter defined) at the conversion price, determined as hereinafter provided, in effect on the date of conversion, each share of the Series being credited at its stated value; provided that if any shares of the Series are called for redemption, the conversion rights pertaining thereto will terminate at the close of business on the fifth Business Day preceding the redemption date, unless the Corporation shall default in providing money for the payment of the redemption price as provided in Section (c) hereof. The price at which shares of Common Stock shall be delivered upon conversion of the shares of the Series (hereinafter referred to as the "Conversion Price") shall be initially $53.625 per share of Common Stock. The Conversion Price shall be adjusted in certain instances as provided in paragraph (2) of this Section (d). 8 (B) Any holder of shares of the Series desiring to convert such stock into shares of Common Stock shall surrender the certificate or certificates for the shares of the Series being converted, duly endorsed or assigned to the Corporation or in blank, at the principal office of the Corporation for that purpose, accompanied by a written notice of conversion specifying the number of shares of the Series to be converted and the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued; in case such notice shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issue of shares of Common Stock in such name or names. In case less than all of the shares of the Series represented by a certificate are to be converted by a holder, upon such conversion the Corporation shall issue and deliver or cause to be issued and delivered to such holder a certificate or certificates for the shares of the Series not so converted. The holders of shares of the Series at the close of business on a dividend payment record date shall be entitled to receive the dividend payable on such shares of the Series (except shares of the Series redeemed on a redemption date between such record date and the dividend payment date) on the corresponding dividend payment date notwithstanding the subsequent conversion thereof or the Corporation's default in payment of the dividend due on such dividend payment date. However, shares of the Series surrendered for conversion during the period from the close of business on any dividend payment record date for the Series to the opening of business on the corresponding dividend payment date (except shares of the Series called for redemption on a redemption date after the dividend payment record date and on or before the fifth business day following the dividend payment date) must be accompanied by payment of an amount equal to the dividend payable on such shares of the Series on such dividend payment date. A holder of shares of the Series on a dividend payment record date who (or whose transferee) converts shares of the Series on a dividend payment date will receive the dividend payable on such shares of the Series by the Corporation on such date, and the converting holder need not include payment in the amount of such dividend upon surrender of shares of the Series for conversion. Except as provided above, no payment or adjustment will be made on account of accrued or unpaid dividends upon the conversion of shares of the Series. (C) As promptly as practicable after the surrender of certificates for shares of the Series as aforesaid, the Corporation shall issue and shall deliver at such office to such holder, or on his or her written order, a certificate or certificates for the number of full shares of Common Stock issuable upon the conversion of such shares in accordance with the provisions of this Section (d), and any fractional interest in respect of a share of Common Stock arising upon such conversion shall be promptly settled as provided in paragraph (11) of this Section (d). (D) Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which the certificates for shares of the Series shall have been surrendered and such notice (and if applicable, payment of an amount equal to the dividend payable on such shares) received by the Corporation as aforesaid; 9 the shares of the Series so surrendered for conversion shall no longer be deemed to be outstanding and all rights with respect to such shares of the Series shall cease, except the right of the holders thereof to receive full shares of Common Stock in exchange therefor and payment for any fractional shares; and the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby at such time on such date and such conversion shall be at the Conversion Price in effect at such time on such date, unless the stock transfer books of the Corporation shall be closed on that date, in which event such person or persons shall be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Conversion Price in effect on the date upon which such shares shall have been surrendered and such notice received by the Corporation. All shares of Common Stock delivered upon conversions of shares of the Series will upon delivery be duly and validly issued and fully paid and nonassessable. (2) The Conversion Price shall be adjusted from time to time as follows: (A) In case the Corporation shall pay or make a dividend or other distribution on any class of capital stock of the Corporation in shares of Common Stock, the Conversion Price in effect at the opening of business on the date following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination, and the denominator shall be the sum of (i) such number of shares and (ii) the total number of shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the date following the date fixed for such determination. (B) In case the Corporation shall issue rights or warrants (in each case, other than the Preferred Share Purchase Rights) to all holders of its shares of Common Stock entitling them to subscribe for or purchase Common Stock at a price per share less than the current market price per share (determined as provided in paragraph (3)) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights or warrants, the Conversion Price in effect at the opening of business on the date following the date fixed for such determination shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the sum of (i) the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus (ii) the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such current market price, and the denominator shall be the sum of (x) the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus 10 (y) the number of shares of Common Stock so offered for subscription or purchase, such reduction to become effective immediately after the opening of business on the date following the date fixed for such determination. (C) In case the Corporation shall, by dividend or otherwise, distribute to all holders of shares of Common Stock evidences of indebtedness or assets (including securities, but excluding any rights or warrants referred to in paragraph (2)(B), the Preferred Share Purchase Rights, any dividend or distribution paid in cash out of the surplus or retained earnings of the Corporation and any dividend or distribution referred to in paragraph (2)(A)), the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution by a fraction of which the numerator shall be the current market price per share (determined as provided in paragraph (3)) of the Common Stock on the date fixed for such determination, less the then fair market value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed allocable to one share of Common Stock, and the denominator shall be such current market price per share of Common Stock, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such distribution. Notwithstanding the foregoing, in the event that the Corporation shall distribute or shall have distributed any rights or warrants to acquire capital stock ("Rights") pursuant to this subparagraph (C), this distribution of separate certificates representing the Rights subsequent to their initial distribution (whether or not the initial distribution of the Rights shall have occurred prior to the date of the issuance of the Series) shall be deemed to be the distribution of the Rights for purposes of this subparagraph (C); provided that the Corporation may, in lieu of making any adjustment pursuant to this subparagraph (C) upon a distribution of separate certificates representing the Rights, make proper provision so that each holder of the Series who converts the shares of this Series (or any portion thereof) (i) on or before the record date for such distribution of separate certificates shall be entitled to receive upon conversion shares of Common Stock issued with Rights and (ii) after such record date and prior to the expiration, redemption or termination of the Rights shall be entitled to receive upon conversion, in addition to the shares of Common Stock issuable upon conversion, the same number of Rights as would a holder of the number of shares of Common Stock that the shares of such Series so converted would have entitled the holder thereof to purchase in accordance with the terms and provisions applicable to the Rights if the shares of such Series were converted immediately prior to the record date for such distribution. Common Stock owned by or held for the account of the Corporation or any majority owned subsidiary shall not be deemed outstanding for the purpose of any adjustment required under this subparagraph (C). (D) In case the outstanding shares of Common Stock shall be subdivided into a greater number of shares, the Conversion Price in effect at the opening of business on 11 the date following the date upon which such subdivision becomes effective shall be proportionately reduced, and, conversely, in case outstanding shares of Common Stock shall each be combined into a smaller number of shares, the Conversion Price in effect at the opening of business on the date following the date upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the date upon which such subdivision or combination becomes effective. (E) The reclassification of Common Stock into securities other than Common Stock (other than any reclassification upon a consolidation or merger to which paragraph (6) applies) shall be deemed to involve (i) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of stockholders entitled to receive such distribution" and the "date fixed for such determination" within the meaning of paragraph (2)(C)), and (ii) a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock oustanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision becomes effective," or "the day upon which such combination becomes effective," as the case may be, and "the day upon which such subdivision or combination becomes effective" within the meaning of paragraph (2)(D) of this Section (d)). (3) For the purpose of any computation under paragraphs (2)(B) and (2)(C), the current market price per share of Common Stock on any day shall be deemed to be the average of the daily Closing Prices (as hereinafter defined) per share of Common Stock for the 30 consecutive Trading Days (as hereinafter defined) ending on the fifth Trading Day before the day in question. (4) Notwithstanding the provisions of paragraph (2) above, no adjustment in the Conversion Price shall be required unless such adjustment (plus any adjustments not previously made by reason of this paragraph (4)) would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this paragraph (4) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. Notwithstanding any other provisions of this Section (d), the Corporation shall not be required to make any adjustment to the Conversion Price for the issuance of any shares of Common Stock pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Corporation and the investment of additional optional amounts in shares of Common Stock under such plan. All calculations under this Section (d) shall be made to the nearest 1/100 of a cent (with $.00005 being rounded upward) or to the nearest 1/10,000 of a share (with .00005 of a share being rounded upward), as the case may be. 12 (5) The Corporation may make such reductions in the Conversion Price, in addition to those required by this Section (d), as it considers to be advisable in order to avoid or diminish any income tax to any holder of shares of Common Stock resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes or for any other reasons. The Corporation shall have the power to resolve any ambiguity or correct any error in this Section (d) and its actions in so doing shall be final and conclusive. (6) In case the Corporation shall effect any capital reorganization of the Common Stock (other than a subdivision, combination, capital reorganization or reclassification provided for in paragraph (2)) or shall consolidate, merge or engage in a statutory share exchange with or into any other corporation (other than a consolidation, merger or share exchange in which the Corporation is the surviving corporation and each share of Common Stock outstanding immediately prior to such consolidation or merger is to remain outstanding immediately after such consolidation or merger) or shall sell or transfer all or substantially all its assets to any other corporation, lawful provision shall be made as a part of the terms of such transaction whereby the holders of shares of the Series shall receive upon conversion thereof, in lieu of each share of Common Stock which would have been issuable upon conversion of such stock if converted immediately prior to the consummation of such transaction, the same kind and amount of stock (or other securities, cash or property, if any) as may be issuable or distributable in connection with such transaction with respect to each share of Common Stock outstanding at the effective time of such transaction subject to subsequent adjustments for subsequent stock dividends and distributions, subdivisions or combinations of shares, capital reorganizations, reclassifications, consolidations, mergers or share exchanges, as nearly equivalent as possible to the adjustments provided for in this Section (d). (7) Whenever the Conversion Price is adjusted as herein provided: (A) the Corporation shall compute the adjusted Conversion Price and shall cause to be prepared a certificate signed by the chief financial or accounting officer of the Corporation setting forth the adjusted Conversion Price and showing in reasonable detail the facts upon which such adjustment is based and the computation thereof and such certificate shall forthwith be filed with each transfer agent for the Series; and (B) a notice stating that the Conversion Price has been adjusted and setting forth the adjusted Conversion Price shall, as soon as practicable, be mailed to the holders of record of outstanding shares of the Series. (8) In case: (A) the Corporation shall declare a dividend or other distribution on the Common Stock other than in cash out of its surplus or retained earnings and other than the Preferred Share Purchase Rights; 13 (B) the Corporation shall authorize the granting to the holders of the Common Stock of rights or warrants (other than the Preferred Share Purchase Rights) entitling them to subscribe for or purchase any shares of capital stock of any class or of any other rights (other than the Preferred Share Purchase Rights); (C) of any reclassification of the Common Stock (other than a subdivision or combination of outstanding shares of Common Stock), or of any consolidation, merger or share exchange to which the Corporation is a party and for which approval of any stockholders of the Corporation is required, or of the sale or transfer of all or substantially all the assets of the Corporation; or (D) of the voluntary or involuntary liquidation, dissolution or winding up of the Corporation; then the Corporation shall cause to be mailed to each transfer agent for the Series and to the holders of record of the outstanding shares of the Series, at least 20 days (or 10 days in any case specified in paragraphs (A) or (B) above) prior to the applicable record or effective date hereinafter specified, a notice stating (i) the date as of which the holders of record of shares of Common Stock to be entitled to such dividend, distribution, rights or warrants are be determined, or (ii) the date on which such reclassification, consolidation, merger, share exchange, sale, transfer, liquidation, dissolution or winding up is expected to become effective and the date as of which it is expected that holders of record of Common Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, share exchange, sale, transfer, liquidation, dissolution or winding up. Such notice shall also state whether such transaction will result in any adjustment in the Conversion Price applicable to the Series and, if so, shall state what the adjusted Conversion Price will be and when it will become effective. Neither the failure to give the notice required by this paragraph (8), nor any defect therein, to any particular holder shall affect the sufficiency of the notice or the legality or validity of the proceedings described in paragraphs (8)(A) through (8)(D). (9) Any shares of this Series which shall at any time have been converted shall, after such conversion, have the status as authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock for the purpose of issuance upon conversion of shares of the Series, the full number of shares of Common Stock then issuable upon the conversion of all shares of the Series then outstanding and shall take all action necessary so that shares of Common Stock so issued will be validly issued, fully paid and nonassessable; provided, however, that nothing contained herein shall preclude the Corporation from satisfying its obligations in respect of the conversion of the shares by delivery of purchased shares of Common Stock which are held in the treasury of the Corporation. 14 (10) The Corporation will pay any and all stamp or similar taxes that may be payable in respect of the issuance or delivery of shares of Common Stock on conversion of shares of the Series. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of the Series so converted were registered, and no such issuance or delivery shall be made unless and until the person requesting such issuance has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid. (11) No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon the conversion of shares of the Series. If any such conversion would otherwise require the issuance of such a fractional share (determined to the extent of four decimal places after taking into account all shares of the Series being converted into Common Stock by the holder), an amount equal to such fraction multiplied by the Closing Price per share of Common Stock for the day of conversion shall be paid to the holder in cash by the Corporation. Any share of the Series may be converted, at the request of its holder, in part into Common Stock. If a part of a share of the Series is converted, then the Corporation will convert such shares into the requested shares of Common Stock (subject to this paragraph (11)) and issue a fractional share of the Series evidencing the remaining interest of such holder. (12) Notwithstanding anything elsewhere contained herein, any funds which at any time shall have been deposited by the Corporation or on its behalf with any paying agent for the purpose of paying dividends on, or the redemption price of, any shares of the Series and which shall not be required for such purposes because of the conversion of such shares shall after such conversion be repaid to the Corporation by the paying agent. (13) In any case in which paragraph (2) of this Section (d) provides that an adjustment shall become effective on the day next following a record date for an event, the Corporation may defer until the occurrence of such event (a) issuance to the holder of any share of this Series converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment and (B) paying to such holder any amount in cash in lieu of any fraction pursuant to paragraph (11) of this Section (d). (14) If any action or transaction would require adjustment of the Conversion Price pursuant to more than one paragraph of this Section 7, only one adjustment shall be made and such adjustment shall be the amount of adjustment that has the highest absolute value. (15) If the Corporation shall take any action affecting the Common Stock, other than action described in this Section (d), that in the opinion of the Board of Directors would materially adversely affect the conversion rights of the holders of the shares of the Series, the Conversion Price for the Series may be adjusted, to the extent permitted by law, in such 15 manner, if any, and at such time, as the Board of Directors may determine to be equitable in the circumstances. (16) The certificate of any independent firm of public accountants of recognized standing selected by the Board shall be presumptive evidence of the correctness of any computation made under this Section (d). (17) For purposes of this resolution, the following terms shall have the following meanings: (i) "Closing Price" shall mean the last sale price as shown on the New York Stock Exchange Composite Transactions Tape, or in case no such sale takes place on such day, the average of the closing bid and asked prices on the New York Stock Exchange, or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if it is not listed or admitted to trading on any national securities exchange, on the National Association of Securities Dealers Automated Quotations National Market System, or, if the Common Stock is not listed or admitted to trading on any national securities exchange or quoted on such National Market System, the average of the closing bid and asked prices as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors for such purposes (other than the Corporation or a subsidiary thereof). (ii) "Common Stock" shall mean the Corporation's Common Stock, $5.00 par value per share, as the same exists at the date of filing of the Certificate of Designation relating to this Series or any other class of stock resulting from successive changes or reclassifications of such Common Stock consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. (iii) "Trading Day" shall mean a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for the transaction of business or, if the Common Stock is not listed or admitted to trading on any national securities exchange, a day which is a Business Day. (iv) "Business Day" shall mean a day which is not a Saturday, Sunday or other day on which commercial banking institutions in the City of Chicago, Illinois or The City of New York, New York are authorized or obligated by law or executive order to close. (v) "Preferred Share Purchase Rights" shall mean the preferred share purchase rights of the Corporation which were declared as a dividend on each outstanding share of the Corporation's Common Stock on November 18, 1988, and are described in that certain Rights Agreement dated November 18, 1988 between the Corporation and Bankers Trust Company, as Rights Agent, and as amended from time to time, or rights 16 to purchase any capital stock of the Corporation under any successor shareholder rights plan or plan adopted in replacement of the Corporation's Rights Agreement. (e) Liquidation Rights. (1) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the shares of this Series shall be entitled to receive out of the assets of the Corporation, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the Preferred Stock upon liquidation, the amount of $5,000 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) Neither the sale of all or substantially all the property or business of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section (e). (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (e), the holders of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (e), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (5) Upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of this Series then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (e) before any payment shall be made to the holders of any class of capital stock of the Corporation ranking junior upon liquidation to this Series. (f) Priority. For purposes of this resolution, any stock of any class or classes of the Corporation shall be deemed to rank: 17 (1) prior to the shares of this Series, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holder of shares of this Series; (2) on a parity with shares of this Series, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking provisions, if any, be different from those of this Series, if such stock is the Corporation's Preferred Stock with Cumulative and Adjustable Dividends (Without Par Value), Preferred Stock with Cumulative and Adjustable Dividends, Series B (Without Par Value), Preferred Stock with Cumulative and Adjustable Dividends, Series C (Without Par Value), $3.75 Cumulative Convertible Preferred Stock, Series A (Without Par Value), 10% Cumulative Preferred Stock, Series D (Stated Value $25 per share), or the Corporation's 8.45% Cumulative Preferred Stock, Series E (Stated Value $625 per share), or if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (3) junior to shares of this Series, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes. (g) Sinking or Retirement Fund. The shares of this Series shall not be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such stock. 18 IN WITNESS WHEREOF, First Chicago Corporation has caused its corporate seal to be hereunto affixed and this certificate to be signed by David P. Bolger, its Treasurer, and the same to be attested by Michael Lipsitz, its Assistant Secretary, this 4th day of March, 1993. FIRST CHICAGO CORPORATION David P. Bolger By:_______________________________ Senior Vice President and Treasurer (Corporate Seal) ATTEST: Michael Lipsitz _________________________ Assistant Secretary 19 PAGE 1 STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF MERGER, WHICH MERGES: "LAKE SHORE BANCORP., INC.", A DELAWARE CORPORATION, WITH AND INTO "FIRST CHICAGO CORPORATION" UNDER THE NAME OF "FIRST CHICAGO CORPORATION", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE EIGHTH DAY OF JULY, A.D. 1994, AT 1:30 O'CLOCK P.M. [SEAL OF THE STATE OF DELAWARE] [SEAL OF THE SECRETARY OF STATE] /s/ EDWARD J. FREEL ------------------------------ SECRETARY OF STATE 0700130 8100M AUTHENTICATION: 7174855 944125619 DATE: 07-08-94 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 01:30 PM 07/08/1994 944125527 - 700130 CERTIFICATE OF MERGER OF LAKE SHORE BANCORP., INC. INTO FIRST CHICAGO CORPORATION ------------------------- ****** The undersigned corporation, organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the name and state of incorporation of each of the constituent corporations of the merger is as follows: NAME STATE OF INCORPORATION ---- ---------------------- First Chicago Corporation Delaware Lake Shore Bancorp., Inc. Delaware SECOND: That an Amended and Restated Agreement and Plan of Merger effective as of November 21, 1993, (the "Agreement") between the parties to the merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of subsection (c) of section 251 of the General Corporation Law of the State of Delaware. THIRD: That the name of the surviving corporation of the merger is First Chicago Corporation. FOURTH: That the Restated Certificate of Incorporation of First Chicago Corporation shall be the certificate of incorporation of the surviving corporation. FIFTH: That the executed Agreement is on file at the principal place of business of the surviving corporation. The address of the principal place of business of the surviving corporation is One First National Plaza, Suite 0287, Chicago, Illinois 60670. SIXTH: That a copy of the Agreement will be furnished by the surviving corporation, on request and without cost to any stockholder of any constituent corporation. SEVENTH: This Certificate of Merger shall be effective upon filing (the "Effective Time") in accordance with the provisions of Sections 103 and 251(c) of the General Corporation Law of the State of Delaware. Dated: July 8, 1994 FIRST CHICAGO CORPORATION By: /s/ Robert A. Rosholt --------------------------- Robert A. Rosholt Executive Vice President and Chief Financial Officer ATTEST: By: /s/ Michael Lipsitz ---------------------------- Michael Lipsitz Assistant Secretary 2 PAGE 1 State of Delaware Office of the Secretary of State -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF OWNERSHIP, WHICH MERGES: "HAMPTON PARK CORPORATION", A ILLINOIS CORPORATION, WITH AND INTO "FIRST CHICAGO CORPORATION" UNDER THE NAME OF "FIRST CHICAGO CORPORATION", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE FOURTEENTH DAY OF OCTOBER, A.D. 1994, AT 9 O'CLOCK A.M. [SEAL OF THE STATE OF DELAWARE] [SEAL OF THE SECRETARY OF STATE] /S/ EDWARD J. FREEL ----------------------------------- Edward J. Freel, Secretary of State AUTHENTICATION: 7416113 DATE: 02-22-95 0700130 8100M 950039241 CERTIFICATE OF OWNERSHIP AND MERGER MERGING HAMPTON PARK CORPORATION INTO FIRST CHICAGO CORPORATION * * * * FIRST CHICAGO CORPORATION, a corporation organized and existing under the laws of Delaware, DOES HEREBY CERTIFY: FIRST: That this corporation was incorporated on the 23rd day of January, 1969, pursuant to the General Corporation Law of the State of Delaware. SECOND: That this corporation owns all of the outstanding shares of the stock of Hampton Park Corporation, a corporation incorporated on the 1st day of July, 1969, pursuant to the Business Corporation Act of the State of Illinois. THIRD: That this corporation, in accordance with resolutions, attached hereto as Attachment A, of its Board of Directors, duly adopted on the 12th day of November, 1993, has determined to and does hereby merge into itself said Hampton Park Corporation, pursuant to Section 253 of the General Corporation Law of the State of Delaware, and assumes all of its obligations. FOURTH: That the merger shall be effective upon the date of filing with the Secretary of State of Delaware. FIFTH: Anything herein or elsewhere to the contrary notwithstanding, this merger may be amended or terminated and abandoned by the Board of Directors of First Chicago Corporation at any time prior to the date of filing the merger with the Secretary of State. IN WITNESS WHEREOF, said First Chicago Corporation has caused this Certificate to be signed by W. G. Jurgensen, its Executive Vice President and attested by Michael Lipsitz, its Assistant Secretary, this 14th day of October, 1994. FIRST CHICAGO CORPORATION BY /s/ W. G. Jurgensen -------------------------- W. G. Jurgensen Executive Vice President ATTEST: BY /s/ Michael Lipsitz ----------------------- Michael Lipsitz Assistant Secretary 2 Attachment A I, Michael Lipsitz, DO HEREBY CERTIFY, that I am an Assistant Secretary of First Chicago Corporation, and keeper of its records and corporate seal, and that attached hereto is a true and correct copy of resolutions duly adopted by the Directors of the Corporation at a duly authorized meeting of the Board of Directors of this Corporation duly held at Chicago, Illinois on the 12th day of November, 1993, at which meeting a quorum of the Directors was present and voted in favor thereof, as is set forth in the minutes of said meeting; and that said resolutions have not been amended or rescinded and are in full force and effect. IN WITNESS WHEREOF, I have subscribed my name and affixed the seal of this Corporation this 1st day of October, 1994. /s/ Michael Lipsitz ----------------------- Assistant Secretary (SEAL) RESOLVED, that the Corporation is authorized to acquire for a purchase price not to exceed $7.1 million (subject to such adjustments and expense reimbursements as may be provided for in the acquisition agreements referenced below) all of the issued and outstanding shares of capital stock (the "Hampton Park Shares") of Hampton Park Corporation ("Hampton Park"); FURTHER RESOLVED, that the purchase price for the Hampton Park Shares shall be paid in cash as shall be set forth in the definitive acquisition agreements (the "Acquisition Agreements"), and the acquisition of the Hampton Park Shares (the "Acquisition") may be accomplished by means of (1) a merger with or into the Corporation or one of its subsidiaries, or (2) the purchase thereof directly from the stockholders of Hampton Park, or (3) a combination of the foregoing, all as provided for in the Acquisition Agreements; FURTHER RESOLVED, that any Senior Vice President or more senior officer of the Corporation (each, an "Authorized Officer"), and each of them, be and hereby is authorized and empowered to negotiate, execute and deliver in the name and on behalf of the Corporation such documents relating to the acquisition of Hampton Park as the Authorized Officer executing the same deems necessary or appropriate, including, without limitation, a letter of intent, term sheet, stockholder agreements, option agreement and Acquisition Agreements, such agreements to contain such terms, provisions, representations, warranties, covenants and closing conditions as the Authorized Officer executing the same deems necessary or appropriate, and the approval of the terms of such agreements to be conclusively evidenced by the execution thereof by such Authorized Officer; FURTHER RESOLVED, that each and every Authorized Officer be and hereby is authorized and empowered, for and in the name and on behalf of the Corporation, to execute and deliver to (1) the Board of Governors of the Federal Reserve System (the "Board") an application pursuant to the Bank Holding Company Act of 1956, as amended, for prior approval by the Board of the acquisition by the Corporation of the Hampton Park Shares and (2) any applicable federal or state banking or other regulatory authority such application or applications as may be deemed necessary or advisable by any officer of the Corporation in connection with the Acquisition; FURTHER RESOLVED, that this Board of Directors hereby adopts the form of any and all resolutions required by any federal or state banking, securities or other regulatory authority in connection with any application, report, issuer's covenant, irrevocable consent to service of process, power of attorney or other paper or instrument relating to the Acquisition, if (1) in the opinion of the officer of the Corporation so acting, the adoption of such resolutions is necessary or advisable, and (2) the Secretary of the Corporation evidences such adoption by filing with the minutes of this meeting copies of such resolutions, which shall thereupon be deemed to be adopted by this Board and incorporated in the minutes as a part of this resolution and with the same force and effect as if presented in terms to this meeting; FURTHER RESOLVED, that, for purposes of carrying out the foregoing resolutions, any person authorized to execute any document or take or cause to be taken any action on behalf of the Corporation is authorized to grant, execute and deliver the power of attorney of the Corporation or such person to any person or persons (whether or not such individual is an employee of the Corporation) as the individual executing the power of attorney may deem appropriate; and FURTHER RESOLVED, that (1) the officers of the Corporation be and each of them hereby is authorized to take or cause to be taken all such additional or other actions and to execute or cause to be executed such additional or other documents, certificates, writings or other instruments as may be deemed by such officer or officers in their discretion necessary, desirable or appropriate in order to carry out the intent and accomplish the purposes of the foregoing resolutions and (2) any actions heretofore or hereafter taken by any officer of the Corporation or any of its subsidiaries in good faith with respect to the acquisition of Hampton Park are hereby in all respects ratified and confirmed as the official actions of the Corporation. EX-10.G 3 SAVINGS INCENTIVE PLAN EXHIBIT 10(G). FIRST CHICAGO CORPORATION SAVINGS INCENTIVE PLAN (AS AMENDED AND RESTATED EFFECTIVE AS OF APRIL 1, 1989, INCLUDING AMENDMENTS THROUGH DECEMBER 15, 1994) TABLE OF CONTENTS
ARTICLE PAGE ------- ---- 1 Introduction........................................................ 1 The Plan............................................................ 1 Purpose of the Plan................................................. 1 The Trust........................................................... 1 Effective Date...................................................... 1 Administration...................................................... 1 2 Definitions......................................................... 1 Account............................................................. 1 Active Participant.................................................. 1 Actual Deferral Percentage.......................................... 1 After-Tax Contributions............................................. 2 Bank................................................................ 2 Before-Tax Contributions............................................ 2 Code................................................................ 2 Committee........................................................... 2 Company Stock....................................................... 2 Compensation........................................................ 2 Contribution Percentage............................................. 2 Corporation......................................................... 2 Designated Beneficiary.............................................. 2 Earnings............................................................ 2 Effective Date...................................................... 2 Employer............................................................ 3 Employer Discretionary Contribution................................. 3 Highly Compensated Participant...................................... 3 Hour of Service..................................................... 3 Investment Funds.................................................... 4 Leave of Absence.................................................... 4 Matching Contributions.............................................. 4 Participant......................................................... 4 Plan................................................................ 4 Plan Year........................................................... 4 Settlement Date..................................................... 4 Trust............................................................... 4 Trust Fund.......................................................... 4 Valuation Date...................................................... 4 Year of Service..................................................... 5
ARTICLE PAGE ------- ---- 3 Plan Participants.................................................. 5 Participation...................................................... 5 Employees of Foreign Subsidiaries.................................. 5 Cessation of Participation......................................... 5 Resumption of Participation........................................ 5 Participants' Right to Share in Employer Contributions............. 5 Notice of Participation............................................ 6 Leased Employees................................................... 6 4 Employers' Contributions........................................... 6 Employers' Contributions........................................... 6 Employers' Matching Contributions.................................. 6 Before-Tax Contributions........................................... 6 Employer Discretionary Contributions............................... 6 Payment of Employers' Contributions................................ 7 Deduction Limitation............................................... 7 Verification of Employers' Contributions........................... 7 5 Before-Tax and After-Tax Contributions............................. 7 Before-Tax Contributions........................................... 7 Distribution of Excess Deferrals................................... 8 Actual Deferral Percentage Test Limitation on Before-Tax Contributions...................................................... 8 After-Tax Contributions............................................ 8 Form of Participant Contributions.................................. 8 Variation, Discontinuance and Resumption of Participant Contributions...................................................... 9 Rollover Contributions............................................. 9 Transferred Benefits............................................... 9 Contribution Percentage Test Limitation on Employer Matching Contributions and Participant After-Tax Contributions............. 9 Multiple Use....................................................... 10 6 Plan Accounting and Investment Alternatives........................ 10 Separate Participant Accounts...................................... 10 Investment Alternatives............................................ 10 Investment Elections............................................... 11 Charging Payments and Distributions................................ 11 Adjustment of Accounts............................................. 12 Statement of Accounts.............................................. 12 Investments in Company Stock....................................... 12 Allocation of Company Stock........................................ 12 Additional Accounting Rules for Company Stock...................... 13
ARTICLE PAGE ------- ---- Voting and Tender of Company Stock................................. 13 7 Distribution of Account Balances................................... 13 Settlement Date.................................................... 13 Methods of Benefit Payment......................................... 14 Selection of Time and Manner of Benefit Payment.................... 14 Designated Beneficiaries........................................... 14 Eligible Rollover Distributions.................................... 14 Payment of Certain Benefits From Transfer Account.................. 15 8 Withdrawals and Loans During Employment............................ 16 Withdrawal of Before-Tax Contributions, Employer Matching Contributions and Employer Discretionary Contributions on Account of Financial Hardship.............................................. 16 Withdrawal of After-Tax Contributions.............................. 17 Withdrawal of Prior Employer Contributions......................... 17 Withdrawal After Age 59 1/2........................................ 17 Loans to Participants.............................................. 17 Special Rule for Married Participants.............................. 18 9 Maximum Contributions.............................................. 18 Contribution Limitations........................................... 18 Participant Covered by Defined Contribution Plan Only.............. 18 Participant Covered by Defined Contribution Plan and Defined Benefit Plan....................................................... 19 10 General Provisions................................................. 19 Payment to Substitute Beneficiaries................................ 19 Payment with Respect to Incapacitated Participants or Beneficiaries...................................................... 20 Examination of Plan Documents...................................... 20 Notices............................................................ 20 Nonalienation of Plan Benefits..................................... 20 No Employment or Benefit Guaranty.................................. 20 Litigation......................................................... 20 Evidence........................................................... 21 Gender and Number.................................................. 21 Waiver of Notice................................................... 21 Applicable Law..................................................... 21 Severability....................................................... 21 Fiduciary Responsibilities......................................... 21 Funding of Plan Benefits........................................... 21 Supplements........................................................ 21 11 Relating to Plan Administration.................................... 22 Committee Appointed by Corporation................................. 22 Resignation or Removal of Committee Member......................... 22
ARTICLE PAGE ------- ---- Committee Secretary................................................. 22 Powers of Committee................................................. 22 Action by Committee................................................. 22 Committee Support................................................... 23 Decision of Committee Final......................................... 23 Review of Benefit Determinations.................................... 23 Uniform Rules....................................................... 23 Indemnification..................................................... 23 12 Relating to the Employers........................................... 23 Action by Employers................................................. 23 Additional Employers, the First Chicago Companies................... 24 Restrictions as to Reversion of Trust Fund to Employers............. 24 13 Amendment and Termination........................................... 24 Amendment........................................................... 24 Termination......................................................... 24 Vesting on Termination.............................................. 25 Plan Merger......................................................... 25 Notice of Amendment, Termination or Plan Merger..................... 25 14 Top-Heavy Plan Rules................................................ 25 Key Employees....................................................... 25 Top-Heavy Plan...................................................... 26 Aggregation Groups.................................................. 26 Special Minimum Contributions....................................... 26
FIRST CHICAGO CORPORATION SAVINGS INCENTIVE PLAN ARTICLE 1 Introduction 1.1 The Plan. The First Chicago Corporation Savings Incentive Plan (the "Plan") was first established as a profit sharing plan and trust known as "The First National Bank of Chicago Employees' Profit-Sharing Trust" by The First National Bank of Chicago (the "Bank") by trust agreement dated January 13, 1953. Effective January l, 1971 said profit-sharing plan was amended and restated in the form of a separate document entitled "The First National Bank of Chicago Profit-Sharing Plan," and such plan was subsequently amended and restated effective January 1, 1980 and January 1, 1987. The First Chicago Corporation ("Corporation") amended and restated such plan as this Plan effective April 1, 1989. The provisions hereof constitute an amendment and restatement effective April 1, 1989 of the Plan by the Corporation incorporating all amendments to the Plan through December 15, 1994. 1.2 Purpose of the Plan. The purpose of the Plan is to enable eligible employees of the Corporation and the Bank and eligible employees of the Corporation's subsidiaries and other related companies which adopt the Plan (the "Employers") with the Corporation's consent to accumulate their own funds and share in the contributions of their Employers, and thereby assist such employees in providing for their future security. The Plan is intended to meet the requirements of Section 401(a) of the Internal Revenue Code of 1986 ("Code"), as amended, and the Employee Retirement Income Security Act of 1974, as amended. The Plan is intended to qualify as a cash and deferred arrangement under Section 401(k) of the Code. The provisions of this Plan shall apply only to an employee who is employed by an Employer on or after the Effective Date. The rights and benefits, if any, of a former employee shall be determined in accordance with provisions of the Plan in effect on the date his employment is terminated. 1.3 The Trust. Funds contributed under the Plan will be held and invested until distributed by the person or persons from time to time appointed by the Corporation to serve as the trustee of the First Chicago Corporation Savings Incentive Plan Trust (the "Trust"). 1.4 Effective Date. The "Effective Date" of the Plan, as set forth herein, is April 1, 1989. 1.5 Administration. The Plan will be administered by the Retirement Committee (the "Committee") described in section 11 and any other persons so authorized by the Committee. Copies of the Plan and Trust, which forms a part of the Plan, are on file at the principal offices of the Bank where they may be examined by any employee of an Employer. The provisions of and benefits under the Plan are subject to the Trust. ARTICLE 2 Definitions The following terms, when used in the Plan, shall have the following definitions unless the context expressly requires otherwise: 2.1 Account means the record, maintained by the Committee for each Participant, of his interest in the Trust Fund. The Committee also will maintain, for each Participant, (i) such separate accounts as it deems necessary to reflect contributions to the Plan (as described in section 6.1) and (ii) a record of the portion of his account that is invested in each of the Investment Funds. 2.2 Active Participant means a Participant who is making Before-Tax or After- Tax Contributions pursuant to Article 5. 2.3 Actual Deferral Percentage means for a specified group of Participants for any Plan Year, the average of ratios (computed separately for each Participant) of (i) the Before-Tax Contributions (and any other Employer contributions which meet the withdrawal restrictions and vesting requirements of Sections 401(k)(2)(B) and (C) of the Code, except, however, Employer Matching Contributions are not intended to be used in the computation of this percentage or for purposes of section 5.3) for each Participant in such group for such Plan Year to (ii) the Participant's Earnings for such Plan Year. G-1 2.4 After-Tax Contributions means the voluntary contributions which an employee elects to make under section 5.4. 2.5 Bank means The First National Bank of Chicago. 2.6 Before-Tax Contributions means the amount by which a Participant's Compensation is reduced at his election pursuant to section 5.1 and which is contributed to the Trust Fund on his behalf by the Employer pursuant to section 4.1(b). 2.7 Code means the Internal Revenue Code of 1986, as amended and in effect from time to time. 2.8 Committee means the Retirement Committee of the Corporation. 2.9 Company Stock means "qualifying employer securities", as defined in Section 407(d)(5) of the Employee Retirement Income Security Act of 1974, as amended, of the Corporation. 2.10 Compensation means the basic salary or regular hourly pay (estimated where necessary) paid to or for the benefit of a Participant during a Plan Year as a U.S.-based employee of an Employer for the Participant's services as an employee not in excess of $200,000, ($150,000 after December 31, 1993) (or such other amount as may be permitted from time to time by the Secretary of the Treasury or his delegate or by law) including amounts withheld from his pay pursuant to (i) a salary reduction agreement and which are not includible in his gross income under Sections 125 and 402(a)(8) of the Code, or (ii) a voluntary salary deferral program and excluding overtime and supplemental pay, bonuses, sales commissions, shift differentials and amounts paid before the date he became a Participant, or after the date he no longer is eligible to participate. 2.11 Contribution Percentage means for a specified group of Participants for any Plan Year the average of the ratios (computed separately for each Participant in such group) (i) of Matching Contributions and After-Tax Contributions (and any Employer contributions described in Section 401(m)(3)(A) of the Code or which meets the withdrawal and vesting requirements of Section 401(k)(2)(B) and (C) of the Code, if the Employer elects, in accordance with Treasury Regulations, to take such contributions into account) for each eligible employee in such group for such Plan Year to (ii) the Participant's Earnings for such Plan Year. 2.12 Corporation means First Chicago Corporation, a Delaware corporation, or its successor or successors. 2.13 Designated Beneficiary means any person or persons designated by a Participant in accordance with section 7.4 to receive any benefits on account of the death of the Participant. 2.14 Earnings with respect to each employee of the Employer means total remuneration for services rendered to the Corporation during the Plan Year as reported for federal income tax purposes on Form W-2 plus any amounts which are not includible in the employee's gross income under Sections 125 or 402(a)(8) of the Code; but excluding amounts in excess of $200,000 ($150,000 after December 31, 1993) (or such other amount as may be permitted by the Secretary of the Treasury or his delegate or by law). Earnings shall not exceed the applicable limit as defined herein for any "family group." A "family group" includes a Participant who is a 5% owner as defined in subparagraph 14.1(c) or is one of the ten "highly-compensated employees" (as defined in Code Section 414(q) and Regulations thereunder) paid the greatest compensation during the Plan Year, and that Participant's spouse or descendants under age 19 who are also Participants as of the close of the period used to compute Earnings. If the aggregate Earnings for the family group exceeds the applicable limit, then the Earnings considered under the Plan for each family group member is proportionally reduced so the total equals the applicable limit described herein. 2.15 Effective Date means April 1, 1989. G-2 2.16 Employer means the Corporation, the Bank and any subsidiary of the Corporation or the Bank or any related company (as defined in section 12.2) that has adopted or adopts the Plan with the Corporation's consent in accordance with provisions of section 12.2. The Corporation and its subsidiaries or related companies that adopt the Plan are sometimes referred to herein collectively as the "Employers" and individually as an "Employer." For purposes of Articles 9 and 14, Employer shall include any related company as defined in section 12.2 notwithstanding whether such company or entity has adopted the Plan. 2.17 Employer Discretionary Contribution means, effective as of January 1, 1994, the discretionary contribution an Employer may make on behalf of each eligible employee as described in subsection (c) of section 4.1. 2.18 Highly Compensated Participant means an employee of an Employer who for any Plan Year was at any time during the Plan Year or the preceding Plan Year: a. a 5-percent owner as defined in Section 416(i)(1) of the Code, or b. received Earnings from an Employer in excess of $75,000 (or such other maximum amount as may be permitted from time to time by the Secretary of the Treasury or his delegate or by law), or c. received Earnings from an Employer in excess of $50,000 (or such other maximum amount as may be permitted from time to time by the Secretary of the Treasury or his delegate or by law) and was in the group consisting of the top 20 percent of the Employer's employees when ranked on the basis of Earnings paid during such year, or d. was an officer and received Earnings greater than 150 percent of the amount in effect under Section 415(c)(1)(A) of the Code for such year, provided that no more than 50 employees (or, if lesser, the greater of three employees or 10 percent of the employees) shall be treated as officers and provided further that if for any year no officer of an Employer is described in this subparagraph (d), the highest paid officer of an Employer for such Plan Year shall nonetheless be treated as if he were described herein. In the case of the Plan Year for which a determination of Highly Compensated Participants is required for purposes of sections 5.3 and 5.9, an employee not described in section 2.17(b), (c) and (d) for the preceding Plan Year shall not be treated as described in section 2.17(b), (c) and (d) unless such employee is a member of the group consisting of the 100 employees paid the greatest Earnings during the Plan Year for which such determination is being made. If any individual is a member of the family of a 5-percent owner or of a Highly Compensated Employee in the group consisting of the 10 Highly Compensated Employees paid the greatest Earnings during the year, then such individual shall not be considered a separate employee and any Earnings paid to such individual (and any applicable contribution on behalf of such individual) shall be treated as if it were paid to (or on behalf of) the 5-percent owner or Highly Compensated Participant. The term "family" means for this purpose with respect to any employee, such employee's spouse and lineal ascendants or descendants and the spouses of such lineal ascendants or descendants. A former employee of the Employer shall be treated as a Highly Compensated Participant if such employee was a Highly Compensated Participant when such employee separated from service or such employee was a Highly Compensated Participant at any time after attaining age 55. 2.19 Hour of Service means: a. Each hour for which an employee is employed is directly or indirectly compensated, or employed, by a First Chicago Company (as defined in section 12.2). An employee shall be credited with 45 hours of service for each week for which he is directly or indirectly compensated, or employed, by a First Chicago Company; b. Each other hour required by federal law to be counted as an "hour of service," including (i) each such hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the First Chicago Companies; and (ii) each such hour for which an employee is on maternity or paternity leave of absence; provided, that not more than 501 hours of service shall be credited for payments of G-3 back pay, to the extent that such back pay is awarded for a period of time during which the employee did not or would not have performed duties as an employee and not more than 501 hours of service shall be credited by reason of a maternity or paternity leave of absence; and (iii) for any person who becomes an employee of the First Chicago Companies who has at least 1,500 hours of service as a leased employee in any preceding Plan Year, each such hour shall be counted but not to exceed one such year of service. Hours described in subsection (b) next above for employees on a maternity or paternity leave of absence shall be determined in the same manner as compensated hours of service, hours shall be credited for the period in which such duties were performed (regardless of when payment is due) or for which such compensation was paid and for this purpose the rules for crediting hours of service set forth in Section 2530.200b-2 of the Department of Labor Regulations are hereby incorporated by reference. 2.20 Investment Funds means those funds to be established within the Trust Fund for the investment of Participants' Accounts as described at section 6.2. 2.21 Leave of Absence means: a. A leave of absence required by law or granted by an Employer on account of service in military or governmental branches described in any applicable statute granting reemployment rights to employees who enter such branches, or any other military or governmental branch designated by the Employer. b. A Leave of Absence for any period the employee is absent from work by reason of the employee's pregnancy, the birth of a child of the employee, the placement of a child with the employee in connection with the adoption of the child by the employee or the caring for the child for a period beginning immediately after such birth or placement. c. Any other absence from active employment with an Employer that is approved by it and not treated by it as a termination of employment. Leaves of Absence granted by an Employer will be governed by rules uniformly applied to all similarly situated employees of that Employer. 2.22 Matching Contributions means contributions which the Employer makes as a percentage of a Participant's Before-Tax Contributions under section 4.1(a). 2.23 Participant means an employee or former employee of an Employer who has met the eligibility requirements of Article 3 to participate in the Plan. An employee who becomes a Participant will continue as such until complete distribution of his benefits is made to him or on his behalf under section 7.2. 2.24 Plan means the First Chicago Corporation Savings Incentive Plan. 2.25 Plan Year means the calendar year. 2.26 Settlement Date means, as to a Participant, the date as of which the Committee receives sufficient written notice that a Participant has terminated employment with all of the First Chicago Companies, whether because of death, retirement or otherwise or, in the case of a Participant who has attained age 59 1/2, the date the Committee receives the election contemplated under section 8.4. 2.27 Trust means the First Chicago Corporation Savings Incentive Plan Trust. 2.28 Trust Fund means, as of any date, all property of every kind then held by the trustee pursuant to the terms of the Trust. 2.29 Valuation Date means the last day of each calendar month and any other date specified by the Committee. The one month period (or shorter period in the case of a special Valuation Date) ending on each Valuation Date is sometimes referred to herein as a "Valuation Period." G-4 2.30 Year of Service means a 12 consecutive month period commencing on the date an employee first completes an Hour of Service and in which the employee has completed at least 1,000 Hours of Service, provided, however, that an employee will not be credited with a Year of Service until the end of such 12- month period. ARTICLE 3 Plan Participants 3.1 Participation. Each Participant in the Plan immediately prior to the Effective Date will continue as a Participant in the Plan on and after that date, subject to the conditions and limitations of the Plan. Each other employee of an Employer will become a Participant in the Plan on the first payroll date after April 1, 1989, coincident with or following the date he meets all of the following requirements: a. He is employed by the Employer. However, employees covered by a collective bargaining agreement shall not participate unless the collective bargaining agreement states otherwise; b. He is either (i) a salaried employee (that is, an employee whose compensation is expressed on his Employer's records as a rate per year rather than rate per hour) who has completed one calendar month of employment following the date he first performs an Hour of Service or (ii) for any Plan Year beginning before January 1, 1993 and any Plan Year beginning after December 31, 1993, an hourly employee scheduled to regularly work 20 or more hours per week who has completed at least one Year of Service and is at least age 21 (but in no event shall an employee who actually works 1,000 hours during the Plan Year be excluded from participating by virtue of being scheduled to work less than 20 hours per week) or (iii) effective January 1, 1993, an hourly paid employee scheduled to regularly work 20 or more hours per week who has completed at least one Year of Service and is at least age 21 and was a Participant in the Plan as of December 31, 1992; c. He is classified by his Employer as a U.S.-based employee; and d. He has completed and submitted the enrollment form to contribute to the Plan, as provided by the Committee. 3.2 Employees of Foreign Subsidiaries. A United States citizen employed by a foreign subsidiary (as defined in Section 3121(1)(8) of the Code) of any domestic Employer shall be considered an employee of that Employer if it has entered into an agreement under Section 3121(1) of the Code which applies to such foreign subsidiary and if contributions under a funded plan of deferred compensation are not provided by any person other than such Employer with respect to the remuneration paid to such individual by such foreign subsidiary, and in such event, his remuneration from, and employment with, said foreign subsidiary shall be deemed to be Compensation and to be employment with an Employer, respectively. 3.3 Cessation of Participation. Once an employee of an Employer has become a Participant in the Plan in accordance with section 3.1 above, such employee shall remain a Participant in the Plan until the date that the Participant's entire account balances under the Plan have been distributed to him or on his behalf in accordance with the Plan. 3.4 Resumption of Participation. A Participant who ceases to be a Participant will become a Participant again when he meets the eligibility requirements of section 3.1. A Participant who elects to discontinue making Before-Tax Contributions in accordance with section 5.1 or After-Tax Contributions in accordance with section 5.4, may elect again to contribute as of the first day of any payroll period following a period of at least three months (six months in the case of an officer, as defined under Section 16 of the Securities and Exchange Act of 1934 and the regulations promulgated thereunder, investing in Company Stock) from the date he ceased making contributions, by properly completing and filing the written election described in section 5.1 or making the election described in section 5.4. 3.5 Participants' Right to Share in Employer Contributions. Only those Participants who are employed by an Employer and are receiving Compensation for a pay period are entitled to share in Employer G-5 contributions made in accordance with subsections 4.1(a) and 4.1(b) with respect to a pay period. Designated beneficiaries of deceased Participants will be treated as Participants; provided, that such beneficiaries shall not be entitled to share in Employer contributions under Article 4 and may not designate additional beneficiaries in accordance with section 7.4, and, accordingly, any unpaid benefits remaining upon the death of a Designated Beneficiary of a deceased Participant shall be distributed in accordance with the provisions of section 10.1. 3.6 Notice of Participation. Each employee will be notified of the date he becomes a Participant. 3.7 Leased Employees. Any "leased employee," as defined below, shall not be treated as a Participant; however, to the extent a leased employee later becomes a Participant, his service while a leased employee shall be counted as if he were a Participant. A "leased employee" means any person who is not otherwise an employee and who, pursuant to an agreement between the recipient Employer and any other person (the "leasing organization"), has performed services for an Employer, or for an Employer and related persons (determined in accordance with Section 414(n)(6) of the Code), on a substantially full-time basis for a period of at least one year, and such services are of a type historically performed by employees in the business field of the recipient; provided, that a person shall not be treated as a leased employee for any Plan Year if, during such Plan Year, (i) such person is covered by a money purchase pension plan maintained by the leasing organization which provides for immediate participation, full and immediate vesting, and a nonintegrated employer contribution rate of at least 10% of such employee's compensation (as defined in Section 415(c)(3) of the Code), and (ii) leased employees do not constitute more than 20% of the Employer's nonhighly compensated workforce, as defined in Section 414(n) of the Code. Notwithstanding anything to the contrary in this paragraph, the Plan will treat an individual as a leased employee only to the extent required under Treasury Regulations. ARTICLE 4 Employers' Contributions 4.1 Employers' Contributions. Subject to the conditions and limitations of this Article 4 and Article 9, for each Plan Year the Employers will make contributions to the Trust Fund in an amount equal to the sum of the amounts determined in accordance with subsections (a) and (b) below: a. Employers' Matching Contributions. With respect to each Participant who has made a Before-Tax Contribution to the Plan on or prior to the last day of the calendar month, the Employers shall make, as of such last day of the calendar month, a Matching Contribution on behalf of each such Participant equal to fifty (50) percent of the Before-Tax Contributions which such Participant makes to the Plan on the payroll dates occurring during that month. Beginning May 1, 1992, the Employers shall make a Matching Contribution on behalf of each Participant equal to one hundred (100) percent of the first $500 of Before-Tax Contributions which such Participant makes to the Plan after May 1, 1992 and a Matching Contribution equal to fifty (50) percent of Before-Tax Contributions in excess of $500 made after such date during the 1992 Plan Year. Beginning January 1, 1993 and for all Plan Years thereafter, the Employers' Matching Contributions shall equal one hundred (100) percent of the first $500 of Before-Tax Contributions made by each Participant during the Plan Year and fifty (50) percent of the Before-Tax Contributions in excess of $500. Effective January 1, 1994 and for all Plan Years thereafter, the Employer's Matching Contribution shall equal one hundred (100) percent of the first $750 of Before-Tax Contributions made by each Participant during the Plan Year and fifty (50) percent of the Before-Tax Contributions in excess of $750. b. Before-Tax Contributions. For each payroll date of an Employer which ends during a Plan Year, each Employer will contribute to the Trust Fund 100 percent of the Before-Tax Contributions, if any, elected by each Active Participant employed by it on that payroll date. c. Employer Discretionary Contribution. Effective as of January 1, 1994, as of the first business day of each Plan Year, the Employers may contribute a uniform amount to the account of each "eligible G-6 employee," as defined in the following sentence, such amount as to be determined in the absolute discretion of the Corporation's Board of Directors or Organization, Compensation and Nominating Committee (without regard to the Corporation's current and accumulated net profits) on or before such date; however, in the case of eligible employees designated by their employer as hourly paid employees, the uniform amount contributed to such employee's accounts may be a fixed percentage of the amount contributed to eligible employees designated by their employer as salaried paid employees. An eligible employee is any employee of an Employer who (i) is otherwise eligible to participate in the Plan as of the first day of the Plan Year for which the contribution is made (without taking into consideration subsection 3.1(d)), (ii) is in salary grade 18 or below (or its equivalent) and (iii) has completed a period of service determined by the Organization, Compensation and Nominating Committee for purposes of determining eligibility for an Employer Discretionary Contribution (which period of service shall comply with Section 401(a) of the Code and shall not discriminate in favor of Highly Compensated Participants). 4.2 Payment of Employers' Contributions. It is intended that each Employer's contributions under the Plan to be made in accordance with subsection 4.1(a) for a Plan Year shall be paid to the Trust Fund (as described in section 10.14) under the Plan, without interest, to the extent practicable as of the last day of each calendar month, but in no event later than the time prescribed by law for filing the Employer's federal income tax return for its fiscal year coinciding with the Plan Year for which such contributions are made, including any extensions of time thereof. Each Employer's contributions under the Plan to be made in accordance with subsection 4.1(b) for any payroll date shall be paid to the Trust Fund, without interest, as soon as practicable after that payroll date, but in any event no later than 90 days from the end of the applicable payroll date. Each Employer's contributions under the Plan to be made in accordance with subsection 4.1(c) shall be paid to the Trust Fund, without interest, as soon as practicable following the first day of the Plan Year for which the contribution is made, but in no event later than the time prescribed by law for filing the Employer's federal income tax return for its fiscal year coinciding with the Plan Year for which such contributions are made, including any extensions. 4.3 Deduction Limitation. Each Employer's aggregate contributions under the Plan for any Plan Year in no event shall exceed an amount equal to the maximum amount deductible on account thereof by that Employer for its fiscal year coinciding with that Plan Year as an expense for purposes of federal taxes on income. 4.4 Verification of Employers' Contributions. The certificate of an independent certified public accountant selected by the Corporation as to the correctness of any amounts or calculations relating to the Employers' contributions under the Plan for any Plan Year shall be conclusive on all persons. ARTICLE 5 Before-Tax and After-Tax Contributions 5.1 Before-Tax Contributions. Subject to the conditions and limitations of this Article 5 and Article 9, for each payroll date beginning after April 1, 1989 each Participant may elect to reduce his Compensation from his Employer by an amount equal to not less than one percent nor more than six percent (in multiples of one whole percent) of his Compensation for such payroll date, and his Employer shall in accordance with subsection 4.1(b) contribute the amount of each such reduction for a payroll date to the Plan on his behalf as a Before-Tax Contribution; provided that a Participant's aggregate Before-Tax Contributions may not exceed $7,000 (or such other maximum amount as may be permitted from time to time by the Secretary of the Treasury or his delegate or by law) in any calendar year. Each Participant desiring to have Before-Tax Contributions made on his behalf shall file a written election with the Committee on such form, in such manner and at such times as the Committee shall require. Completion of such election form shall evidence the Participant's authorization of his Employer to reduce his Compensation and, accordingly, his agreement (until subsequently modified by him as permitted in section 5.6) to have Before-Tax Contributions made on his behalf at his chosen rate. G-7 5.2 Distribution of Excess Deferrals. If not later than the March 1 next following the end of a calendar year, a Participant notifies the Committee that he has made Before-Tax Contributions to this Plan and one or more other plans in excess of the maximum Before-Tax Contributions permissible during such calendar year and further notifies the Committee of the amount of such excess allocated to this Plan, such excess amount shall be paid to such Participant (along with any income or loss allocable thereto) as soon as practicable following such notification, but in any event by the April 15 following the calendar year with respect to which such excess deferrals were made. 5.3 Actual Deferral Percentage Test Limitation on Before-Tax Contributions. In addition to being subject to the contribution limitations of sections 5.1, 9.2 and 9.3, Before-Tax Contributions shall be subject to the nondiscrimination limitations of Sections 401(k)(3) and 401(m)(9) of the Code and Treasury Regulations (S)(S)1.401(k)-1(b) and 1.401(m)-2. For this purpose, Before-Tax Contributions shall be adjusted each Plan Year by the Committee as provided below in this section, by making the adjustment necessary, so that either: a. The Actual Deferral Percentage for the group of Highly Compensated Participants shall not exceed 125 percent of the Actual Deferral Percentage for all other Participants for such Plan Year; or b. The Actual Deferral Percentage for the group of Highly Compensated Participants shall not exceed the Actual Deferral Percentage for all other Participants for such Plan Year by more than two percentage points, and the Actual Deferral Percentage for Highly Compensated Participants shall not exceed 200 percent of the Actual Deferral Percentage for all other Participants or such lesser amount as the Secretary of the Treasury prescribes to prevent the multiple use of this alternative with respect to any Highly Compensated Participant. An adjustment shall be made hereunder only if neither subsection (a) nor (b) above is satisfied. If any adjustment is required hereunder, then, in the first instance, where it is determined that an adjustment is required before the end of the Plan Year, the maximum amount of Before-Tax Contributions that may be elected by each Highly Compensated Participant shall be reduced on a prospective basis for the remainder of the Plan Year to the smallest whole percentage which will cause either subsection (a) or (b) above to be satisfied. Alternatively, (or in addition as the case may be) if upon conclusion of the Plan Year, it is determined that further adjustment is required, then the Before-Tax Contributions elected by all Highly Compensated Participants which are in excess of such reduced maximum percentage shall be reduced to cause either subsection (a) or (b) to be satisfied. The amount by which a Participant's Before-Tax Contributions are reduced hereunder shall be paid to such Participant (along with any income or loss allocable thereto) as soon as practicable following such determination, but in any event by the fifteenth day of the third calendar month following the end of the Plan Year with respect to which such Before-Tax Contributions were made or shall be treated as an After- Tax Contribution under section 5.4 of the Plan to the extent permitted in regulations under Section 401(k) of the Code and subject to the limitations of section 5.9 of the Plan. Employer Discretionary Contributions may be utilized in computing the Actual Deferral Percentage for each Participant to the extent necessary to satisfy the limitations of this section. 5.4 After-Tax Contributions. Subject to the conditions of this Article 5 or Article 9 and in addition to, or in lieu of, Before-Tax Contributions permitted under section 5.1, any Participant may elect to make After-Tax Contributions with respect to a Plan Year in an amount of not less than one percent nor more than ten percent (in multiples of one whole percent) of the Participant's Compensation for such Plan Year. The Committee may adopt appropriate regulations, procedures or forms pertaining to After-Tax Contributions. 5.5 Form of Participant Contributions. All After-Tax Contributions shall be made by payroll deduction (or periodically corresponding to payroll deduction) or by any other method agreed to by the Committee; provided that all After-Tax Contributions for a Plan Year must be made within 30 days after the end of that Plan Year. After-Tax Contributions must be made in the form of cash. After-Tax Contributions shall be credited to a Participant's account and paid to the Trust Fund, without interest, as soon as practicable following the payroll for which they are made but in any event no later than 90 days from the end of the applicable payroll date. G-8 5.6 Variation, Discontinuance and Resumption of Participant Contributions. Each Participant shall initially elect his rate of Before-Tax Contributions and After-Tax Contributions effective as of the date he is first eligible to participate in the Plan or by written notice filed with the Committee twenty- one days in advance of any payroll date, which written election will evidence the Participant's agreement (until subsequently modified by him in accordance with this section) to have his Compensation reduced and contributions made on his behalf in accordance with sections 5.1 and 5.4. A Participant may elect to change the rate of his contributions (within the limits specified in this Article 5 and, for changes prior to September 1, 1994, no more than four times during any 12-month period) as of any payroll date by filing a superseding written election with the Committee within a time period announced from time to time by the Committee to Participants. A Participant may elect to discontinue making all contributions as of any payroll date by filing a superseding written election with the Committee at least 21 days before such date (or by such earlier date as the Committee may require). A Participant who has discontinued making some or all contributions hereunder may resume making such contributions by filing an election form with the Committee at least 21 days prior to any payroll date, provided that if a Participant completely discontinues making Before-Tax Contributions or After-Tax Contributions, such Participant may not resume making the type of contributions which were discontinued for at least three months following the payroll date as of which the contributions were discontinued. Any elections made in accordance with this section 5.6 shall be made on a form provided by the Committee for such purposes and shall be signed by the Participant. 5.7 Rollover Contributions. A Participant may not make a rollover contribution to this Plan of amounts distributed from another plan or from an individual retirement account. 5.8 Transferred Benefits. If an employee of an Employer had previously participated in any other qualified pension, profit sharing stock bonus or other retirement or employee benefit plan maintained by the Employer and such other plan permits the transfer to this Plan of the vested portion of such employee's benefits under such other plan, and if so directed by the Committee in its discretion, the trustee of the Trust Fund shall accept a transfer of cash to this Plan equal to the vested benefits of such employee under such other plan which are being transferred to this Plan (and such covered employee shall thereby become a Participant if he was not already a Participant) provided that the amount transferred shall not consist of After-Tax Contributions. 5.9 Contribution Percentage Test Limitation on Employer Matching Contributions and Participant After-Tax Contributions. In addition to being subject to the contribution limitations of sections 5.4, 9.2 and 9.3, Matching Contributions and After-Tax Contributions shall be subject to the nondiscrimination limitations of Section 401(m) of the Code and Treasury Regulations (S)(S)1.401(m)-1(b) and 1.401(m)-2. For this purpose, such Matching Contributions and After-Tax Contributions shall be adjusted each Plan Year by the Committee as provided below in this section, by making the adjustment necessary, so that either: a. The Contribution Percentage for the group of Highly Compensated Participants shall not exceed 125 percent of the Contribution Percentage for all other Participants for such Plan Year; or b. The Contribution Percentage for the group of Highly Compensated Participants shall not exceed the Contribution Percentage for all other Participants for such Plan Year by more than two percentage points, and the Contribution Percentage for Highly Compensated Participants shall not exceed 200 percent of the Contribution Percentage for all other Participants or such lesser amount as the Secretary of the Treasury prescribes to prevent the multiple use of this alternative with respect to any Highly Compensated Participant. An adjustment shall be made hereunder only if neither subsection (a) nor (b) above is satisfied. If any adjustment for a Plan Year is required hereunder the After-Tax Contributions of the Highly Compensated Participants shall be reduced or eliminated first on a prospective basis for the remainder of the Plan Year. Alternatively, upon conclusion of the Plan Year, the excess for such Plan Year of the aggregate amount of Employer Matching Contributions and After-Tax Contributions over the maximum amount of such contributions permitted under the limitations of this section (determined first by reducing aggregate G-9 contributions made on behalf of Highly Compensated Participants in order of their Contribution Percentages beginning with the highest of such percentages), along with any income allocable thereto, shall be distributed to such Highly Compensated Participants as soon as practicable following such determination, but in any event by the fifteenth day of the third calendar month following the end of the Plan Year with respect to which such contributions were made. Employer Discretionary Contributions may be utilized in computing the Contribution Percentage for each Participant to the extent necessary to satisfy the limitations of this section. 5.10 Multiple Use. The Committee will administer the Plan to prevent the "multiple use" of the alternative limitations of sections 5.3(b) and 5.9(b) in accordance with regulations issued by the Secretary of the Treasury. If the Committee determines that multiple use exists, then the Committee, at its option, may elect to reduce the Actual Deferral Percentage, Contribution Percentage, or both using the method described in sections 5.3 or 5.9 or such other method prescribed in the regulations to eliminate any multiple use. ARTICLE 6 Plan Accounting and Investment Alternatives 6.1 Separate Participant Accounts. The Committee will establish and maintain the following separate Accounts with respect to Participants: a. An "Employer Matching Contributions Account" will be maintained in the name of each Participant which will reflect the Employers Matching Contributions made on his behalf to this Plan and the income, losses, appreciation and depreciation attributable thereto. b. A "Before-Tax Contributions Account" will be maintained in the name of each Participant which will reflect the Before-Tax Contributions made on his behalf to this Plan and the income, losses, appreciation and depreciation attributable thereto. c. An "After-Tax Contributions Account" will be maintained in the name of each Participant which will reflect the amount of the After-Tax Contributions made by him and the income, losses, appreciation and depreciation attributable thereto. d. A "Transfer Account" will be maintained in the name of each Participant with respect to whom a transfer of benefits (as described in section 5.8) is made which will reflect the portions of his transferred benefits from another plan and the income, losses, appreciation and depreciation attributable thereto. e. Effective January 1, 1994, an "Employer Discretionary Contribution Account" will be maintained in the name of each Participant with respect to whom an Employer Discretionary Contribution is made which will reflect the Employer Discretionary Contributions made on his behalf to this Plan and the income, losses, appreciation and depreciation attributable thereto. The Committee also may maintain such other Accounts in the names of Participants as it considers desirable, including Accounts reflecting contributions made to the Plan as in effect prior to the Effective Date. Unless the context indicates otherwise, reference in the Plan to a Participant's Accounts or Account balances shall refer to all accounts maintained in his name under the Plan. The maintenance of separate Accounts as provided above shall not require any physical segregation of the Trust Fund with respect to such Accounts. Participants shall at all times have 100 percent vested and nonforfeitable interests in all of their Accounts under the Plan. 6.2 Investment Alternatives. In addition to other investment alternatives, from time to time the trustee of the Trust Fund at the direction of the Committee may cause one or more Investment Funds to be established. The continued availability of any Investment Fund is necessarily conditioned upon the terms and conditions of the applicable investment management agreements and the continued availability of Investment Funds established cannot be assured on the same terms and conditions as may apply from time to time. Participants G-10 will be informed from time to time of the availability of Investment Funds as they are established or superseded. As of the Effective Date, the following Investment Funds are maintained: a. A "cash management fund" which will be invested in the Institutional Cash Management Fund maintained by the trustee. b. An "equity fund" which will be invested in the Institutional Equity Fund and Institutional Foreign Equity Fund maintained by the trustee or its successor. c. A "diversified fund" which will be invested in the Institutional Multi-Asset Portfolio maintained by the trustee or its successor. d. A "Company Stock Fund" which will be invested primarily in Company Stock and, to the extent needed for liquidity for distribution and while contributions are pending investment in Company Stock, the Institutional Cash Management Fund maintained by the trustee or its successor. e. Effective September 1, 1994, a "global bond fund" which will be invested in the Global Bond Fund maintained by the Brinson Trust Company or its successor. 6.3 Investment Elections. Account balances maintained under the Plan as in effect prior to the Effective Date will be invested in accordance with the terms of the Plan as in effect prior to the Effective Date until June 30, 1989, or such later date as the Committee determines; thereafter and until the next investment election date, as provided below, such Account balances shall be allocated among the Investment Funds described in section 6.2 in accordance with the directions of the Committee. As of the investment election date next following June 30, 1989 or such later date as the Committee determines in accordance with the previous sentence, each Participant may elect to invest such Account balances in accordance with the rules applicable to contributions made after April 1, 1989, as described below. Effective June 1, 1989, and on the first day of each month thereafter, (but, for elections made prior to September 1, 1994, no more than four times in any twelve month period), each Participant may elect, by giving written notice to the Committee at least two weeks in advance (or such other date as the Committee may require), in accordance with uniform rules established by the Committee and on a form provided by it for this purpose, to have his Account balances as of the opening of business on that date invested in accordance with his election entirely in one of the Investment Funds or partially in each of two or more of the Investment Funds so that a multiple of five (5) percent of his Account balances is invested as of such date in each Investment Fund. Alternatively, a Participant may similarly elect that any whole percentage of, or whole dollar amount in, an Investment Fund be transferred to one or more of the remaining Investment Funds. Similarly, as of the first day of each month (effective September 1, 1994, as of the first pay day of each month), each Participant may elect, (but, for elections made prior to September 1, 1994, no more than four times in any twelve month period), by giving written notice to the Committee at least two weeks in advance (or such other date as the Committee may require), in accordance with uniform rules established by the Committee and on a form provided by it for this purpose, to have future contributions (including loan payments) made by him or on his behalf (prior to any subsequent election he may make) invested in accordance with his election entirely in one of the Investment Funds or partially in each of two or more of the Investment Funds so that a multiple of five (5) percent of such future contributions is invested in each Investment Fund. During any period for which a Participant has not made either or both of the above elections, he will be considered to have elected to have his Account balances or his future contributions (including loan payments), or both, as the case may be, invested entirely in the cash management fund. The Committee shall from time to time notify each trustee with custody of an Investment Fund of the aggregate amounts to be invested in each Investment Fund in accordance with Participants' elections. 6.4 Charging Payments and Distributions. All payments, withdrawals or other distributions made to or on behalf of a Participant or his beneficiary will be charged to the Participant's Accounts as of the appropriate Valuation Date. G-11 6.5 Adjustment of Accounts. As of each Valuation Date, the Committee shall adjust the Account balances of Participants to reflect payments and withdrawals of benefits, adjustments in the values of the Investment Funds and Employers' and Participants' contributions, as follows: a. First, the Accounts of each Participant shall be credited with his pro rata share of any increase, or charged with his pro rata share of any decrease, since the next preceding Valuation Date in the value of the adjusted net worth (as defined below) of each Investment Fund in which he has an interest as of that date; b. Next, the Employers' contributions that are to be credited as of that date shall be credited to the proper Participants' Employer Matching Contributions Account and Before-Tax Contributions Account; c. Next, the After-Tax Contributions which are to be credited as of that date shall be credited to the proper Participant's After-Tax Contributions Account; d. Next, all payments, loans, withdrawals and transfers of benefits made since the last preceding Valuation Date that have not been charged previously shall be charged to the proper Accounts; and e. Finally, transferred benefits, if any, that are to be credited as of that date shall be credited to the proper Participants' Accounts. The "adjusted net worth" of an Investment Fund as of any date means the then net worth of the Investment Fund as determined by the trustee, less an amount equal to the sum of any Employers' contributions and Participants' contributions (including transferred benefits) not yet credited to the Accounts of Participants and further adjusted as appropriate to reflect other activity affecting the Investment Funds such as loan prepayments and advance distributions. 6.6 Statement of Accounts. As soon as practicable after the last day of each calendar quarter, and at such other times as the Committee considers desirable, each Participant will be furnished with a statement reflecting the balance of his Accounts as of the Valuation Date coincident with the end of the calendar quarter. No Participant, except a member of the Committee, shall have the right to inspect the records reflecting the Accounts of any other Participant. 6.7 Investments in Company Stock. Participants may elect to have a portion or all of their Accounts invested by the trustee in the Company Stock Fund. For this purpose it is intended that the Plan be considered an "eligible individual account plan" which explicitly provides for the acquisition and holding of "qualifying employer securities" (as those terms are defined in Sections 407(d)(3) and 407(d)(5) of the Employee Retirement Income Security Act of 1974, as amended) and that the trustee may invest up to 100 percent of the Trust Fund held by it in Company Stock, to the extent elected by Participants. Company Stock may be acquired by the trustee through purchases on the open market, private purchases, purchases from the Employers (including purchases from the Corporation of treasury shares or authorized but unissued shares), contributions in kind by the Employers, or otherwise. The trustee in its discretion may hold a portion of the Company Stock Fund in cash or cash equivalents to meet liquidity needs for distribution and while pending investment in Company Stock. 6.8 Allocation of Company Stock. As of each Valuation Date all unallocated Company Stock then held under the Trust shall be considered as purchased for the Accounts of Participants who have elected to invest in Company Stock to the extent their respective Accounts can be charged therefore on the basis of the average purchase price paid for such stock, and such Company Stock shall be so allocated to Participants' Accounts and their Accounts charged therefore. For purposes of allocating Company Stock and charging Accounts therefore, the average purchase price of Company Stock to be charged to Participants' Accounts shall be determined by dividing the total purchase price paid for all Company Stock purchased by the trustee since the preceding Valuation Date by the total number of shares of unallocated Company Stock (excluding Company Stock resulting from stock dividends on or split ups of allocated Company Stock). In applying the provisions of the next preceding sentence, unallocated Company Stock which has been contributed by the G-12 Employers as a part of the Employers' contribution shall be deemed to have been purchased by the trustee for an amount equal to the fair market value of such shares when they were contributed. In addition, any unallocated Company Stock to be allocated as of a Valuation Date shall include Company Stock resulting from trades which have been executed but not settled by that Valuation Date. Company Stock which becomes available for sale as a result of the election of separating Participants to receive their distribution in cash or elections to transfer funds from the Company Stock Fund to another Investment Fund shall likewise be allocated to Participants' Accounts, and their Accounts charged therefore. For purposes of allocating said shares of Company Stock and charging Accounts therefore, the average purchase price of such Company Stock shall be the fair market value of such shares on the preceding Valuation Date. 6.9 Additional Accounting Rules For Company Stock. The following additional accounting rules apply regarding Company Stock: a. As of each Valuation Date, uncredited cash dividends attributable to Company Stock previously allocated to a Participant's Accounts shall be credited to his Accounts. b. As of each Valuation Date, uncredited whole and fractional Company Stock resulting from stock dividends or splits attributable to Company Stock previously allocated to a Participant's Accounts shall be credited to his Accounts. c. If rights or warrants are issued with respect to any Company Stock held by the trustee, such rights or warrants shall be appropriately reflected in Participants' Accounts in accordance with rules established by the Committee and uniformly applied until sold or exercised by the trustee and the proceeds appropriately reflected as directed by the Committee. 6.10 Voting and Tender of Company Stock. The Committee shall furnish to each Participant who has Company Stock credited to his Accounts notice of the date and purpose of each meeting of the stockholders of the Corporation at which Company Stock are entitled to be voted. The Committee shall request from each such Participant instructions as to the voting at that meeting of Company Stock credited to his Accounts. If the Participant furnishes such instructions within the time specified in the notification given to him, the trustee shall vote such Company Stock in accordance with the Participant's instructions. All Company Stock credited to Accounts as to which the trustee does not receive voting instructions as specified above and all unallocated Company Stock held by the trustee shall be voted by the trustee proportionately in the same manner as it votes Company Stock to which the trustee has received voting instructions as specified above. Similarly, the Committee shall furnish to each Participant who has Company Stock credited to his Accounts notice of any tender offer for, or a request or invitation for tenders of, Company Stock made to the trustee. The Committee shall request from each such Participant instructions as to the tendering of Company Stock credited to his Accounts and for this purpose the Participants shall be provided with a reasonable period of time in which they may consider any such tender offer for, or request or invitation for tenders of, Company Stock. The trustee shall tender the Company Stock as to which the trustee has received instructions to tender from Participants within the time specified. Company Stock credited to Accounts as to which the trustee has not received instructions from Participants shall not be tendered. As to all unallocated Company Stock held by the trustee, the trustee shall tender the same proportion thereof of the Company Stock as to which the trustee has received instructions from Participants to tender bear to all Company Stock with respect to which the trustee has received instructions from Participants to tender and not to tender. ARTICLE 7 Distribution of Account Balances 7.1 Settlement Date. A Participant's Account balances shall be distributable to the Participant or, in the event of his death, to his beneficiary, in accordance with section 7.2, as of the Valuation Date coincident with or next following (i) his Settlement Date and (ii) the receipt by the Committee of the required tax withholding G-13 instructions and distribution election instructions, if applicable, but only after all adjustments required under the Plan as of that date have been made, and subject to any further adjustments required under the Plan as of subsequent Valuation Dates prior to complete distribution of his Accounts. 7.2 Methods of Benefit Payment. A Participant's Account balances which are distributable under section 7.1 shall be paid to or for the benefit of the Participant or his beneficiary following his Settlement Date by (i) payment in a lump sum, or (ii) payment in a series of substantially equal annual or more frequent installments over a period of time not exceeding the lesser of (A) 15 years, or (B) the life expectancy of the Participant or, if the Participant has designated a beneficiary who is an individual, the joint life and last survivor expectancy of the Participant and his Designated Beneficiary (as determined by the Committee in accordance with actuarial tables adopted by it for this purpose and in accordance with incidental death benefit rules of Code Section 401(a)(9) and Regulations thereunder). Payments shall be in cash; however, Company Stock held in a Participant's Account shall be distributed in kind, unless the Participant requests such distribution or a portion of such distribution to be made in cash or elects an installment distribution. Effective April 1, 1989 through December 3, 1993 and notwithstanding the provisions of section 6.7, if payment hereunder is made wholly or partially in installment payments or deferred beyond the Participant's Settlement Date, the Participant's Accounts shall be liquidated and transferred to the cash management fund. Notwithstanding the foregoing, if a Participant dies before his entire interest has been distributed to him, the remaining portion of such interest will be distributed to his Designated Beneficiary in a lump sum. 7.3 Selection of Time and Manner of Benefit Payment. Unless the Participant whose Account balances exceed $3,500 elects to defer payment, payment of a Participant's benefits normally will be made within a reasonable period of time after a Participant's Settlement Date as described in section 7.1 (or the date of a Participant's consent described in the next sentence, if later); however, in no event shall payments commence later than 60 days after the end of the Plan Year in which occurs the later of the Participant's (i) termination of employment, (ii) completion of 10 years of service or (iii) his attainment of age 65 years; provided that payment of each Participant's Account balances must be made (or installments must commence) no later than the April 1 of the calendar year following the calendar year in which he attains age 70 1/2 years. In addition, notwithstanding anything in this Article 7 to the contrary if and while a Participant's Account balances exceed $3,500 as of a Valuation Date, no amount shall be distributable to the Participant without his consent prior to the date he attains age 65 years. If, upon attaining age 65 or at any time thereafter, a Participant ceases to be employed by the Corporation or any of its affiliates and the Participant has not elected installment distributions, the Participant shall be paid his entire interest in the Plan in a lump sum as soon as administratively practicable. 7.4 Designated Beneficiaries. A Participant may from time to time designate a beneficiary or beneficiaries to whom the Participant's benefits will be distributed in the event of the Participant's death prior to complete payment of his benefits under the Plan. A Participant may designate contingent or successive beneficiaries and may name individuals, legal persons or entities, trusts, estates, trustees or other legal representatives as beneficiaries. Notwithstanding the foregoing or any beneficiary designation filed by a Participant, if a Participant is married at the date of his death, the Participant's surviving spouse will be his Designated Beneficiary for all purposes of the Plan unless the surviving spouse consents to the Participant's designation of another beneficiary. The consent of a Participant's spouse to the designation of another beneficiary must (i) be in writing, (ii) designate the beneficiary or beneficiaries, (iii) acknowledge the effect of such designation, and (iv) be witnessed by a Plan representative or a notary public. In addition, such designation of another beneficiary may not be changed without further spousal consent unless the consent of the spouse expressly permits further designations without any requirement of further consent. Beneficiary designations must be completed on a form prescribed by the Committee and filed with the Committee during the Participant's lifetime. A beneficiary designation properly completed and filed will cancel all such designations filed earlier. 7.5 Eligible Rollover Distributions: This section applies to distributions made on or after January 1, 1993. a. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this section, a distributee may elect, at the time and in the manner prescribed G-14 by the Committee, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. The terms "distributee," "eligible rollover distribution," "eligible retirement plan" and "direct rollover" are defined in paragraphs (b) through (e) of this section 7.5 and are only applicable for purposes of this section 7.5. b. Eligible rollover distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: (i) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; (ii) any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and (iii) the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to Company Stock). c. Eligible retirement plan: An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. d. Distributee: A distributee includes a Participant. In addition, the Participant's surviving spouse and the Participant's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. e. Direct rollover: A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. 7.6 Payment of Certain Benefits from Transfer Account. a. Notwithstanding anything to the contrary in this Plan, if a Participant is married on the date his account becomes distributable and if any portion of the amounts credited to a Participant's Account were transferred from a plan to which Section 401(a)(11) of the Code applies, the amounts so transferred (or any of the earnings attributable thereto) which are available for distribution shall be used to purchase a single premium, nontransferable annuity contract which shall be distributed to the Participant or, in the event of his death, to his surviving spouse. Such annuity contract shall provide for the payment of benefits in the form of a "qualified joint and survivor annuity" if the Participant is living and married on the date his accounts become distributable, (in the form of a "straight life annuity" if the Participant is living and not married on the date his accounts become distributable), or in the form of a "qualified survivor annuity" if the Participant is not living on such date. For the purposes of this paragraph: (i) the term "qualified joint and survivor annuity" means an annuity for the life of the Participant, with a survivor annuity for the Participant's surviving spouse which is 50% of the amount payable during the joint lives of the Participant and his spouse. Such joint and survivor annuity shall be the actuarial equivalent (determined under the assumptions then in use for such purpose by the insurer from which the contract is purchased) of a single annuity for the life of the Participant; (ii) the term "qualified survivor annuity" means a single annuity for the life of the Participant's surviving spouse. b. Paragraph (a) shall not apply to any Participant if: (i) the amount available for distribution which is attributable to such transferred amounts does not exceed $3,500; or G-15 (ii) in the case of a qualified joint and survivor, the Participant elects (as provided below in this paragraph) to waive such form of benefit; or (iii) in the case of a qualified survivor annuity: (A) the Participant has effectively designated someone other than his spouse as his Designated Beneficiary, or (B) the Participant's spouse elects a different form of payment during the period specified in paragraph (c) below, or (C) the Participant has not been married for at least one year on the date of his death. An election to waive the straight life or qualified joint and survivor annuity shall be made in writing filed with the Committee at any time during the period specified in paragraph (c) below, and shall not be effective unless accompanied by a valid written consent which is signed by the Participant's spouse. Such consent shall be valid only if it is signed by the spouse to whom the Participant is married on the earlier of the date of his death or the date his benefit payments commence, and then only if it acknowledges the effect of the Participant's election, is witnessed by a Plan representative or a notary public and, if applicable, designates the beneficiary or beneficiaries. An election to waive a straight life or qualified joint and survivor annuity may be revoked by the Participant, in writing, at any time during the period specified in paragraph (c) below. c. The elections referred to above shall be made in writing by the Participant or his Beneficiary during the 90 day period ending on the date the Participant's benefit payments are scheduled to commence; provided, that in the case of a Participant who is entitled to make the elections described above, such period shall not end until at least 90 days after the date on which the Participant is provided with a written explanation of: (i) the terms and conditions of the joint and survivor and qualified survivor annuities; (ii) the Participant's right to make, and the effect of, an election to waive the joint and survivor annuity; (iii) the rights of the Participant's spouse with respect to any such election; and (iv) the Participant's right to make, and the effect of, a revocation of such election. ARTICLE 8 Withdrawals and Loans During Employment 8.1 Withdrawal of Before-Tax Contributions, Employer Matching Contributions and Employer Discretionary Contributions on Account of Financial Hardship. A Participant experiencing a financial hardship may at any time request a withdrawal of all or any portion of his Account attributable to Before-Tax Contributions, Employer Matching Contributions and Employer Discretionary Contributions, as well as any amounts attributable to elective deferrals made under the Plan in effect prior to the Effective Date, credited as of the immediately preceding Valuation Date to such Accounts (but not earnings credited after December 31, 1988), by filing a written request with the Committee (on such form and at such time as the Committee may require). Notwithstanding the foregoing, amounts attributable to a Participant's Employer Matching Contributions Account (including the earnings thereon) and Employer Discretionary Contributions (including earnings thereon) may not be withdrawn under this section 8.1 to the extent the Employer uses such Employer Matching Contributions to meet the actual deferral percentage test under section 5.3. A Participant may not withdraw any amount in accordance with this section 8.1 unless he has first withdrawn all amounts which could then be withdrawn by him in accordance with section 8.2. Each request for a hardship withdrawal must describe the hardship for which the withdrawal is requested. A withdrawal shall be considered on account of financial hardship only if (i) it is on account of the Participant's immediate and heavy financial need (including the purchase of a principal residence for the Participant (excluding mortgage payments), payment of tuition and related educational fees of post-secondary education for the next 12 months for the Participant, his spouse or his dependents, medical expenses of the Participant, his spouse or his dependents or prevention of eviction from or foreclosure on the mortgage of the Participant's principal residence), (ii) it does not exceed the amount required to relieve such financial need and (iii) it cannot be reasonably met through other sources. The Committee will have discretion to grant or deny requests for G-16 withdrawals in accordance with the above-stated standards and to establish rules or guidelines in responding to such requests as it considers appropriate. All withdrawals of Before-Tax Contributions shall be made in cash and must normally be at least $500. Amounts used as security for loans provided under section 8.4 may not be withdrawn under this section 8.1. 8.2 Withdrawal of After-Tax Contributions. A Participant may request at any time a withdrawal of all or any portion of the amount in his After-Tax Contributions Account as of the immediately preceding Valuation Date by filing a written request with the Committee (on such form and at such time as the Committee may require). All withdrawals of After-Tax Contributions and earnings thereon shall be in cash and normally must be at least $500. 8.3 Withdrawal of Prior Employer Contributions. A Participant may request, in accordance with rules and procedures established by the Committee and subject to applicable law, a withdrawal of all or any portion of Employer contributions made on behalf of Plan Years ending prior to the Effective Date; provided that except in the case of a financial hardship (as defined in section 8.1 above), a Participant may not withdraw any amounts that he could have, but did not, elect to receive in cash and further provided that amounts contributed by an Employer from 1980 through 1986 which a Participant could not elect to receive in cash may not be withdrawn for any reason. 8.4 Withdrawal After Age 59 1/2. A Participant who has attained age 59 1/2 may request a withdrawal of all or any portion of his Accounts by filing a written request with the Committee (on such form and at such time as the Committee may require). All withdrawals pursuant to this section 8.4 shall be made in a lump sum. 8.5 Loans to Participants. While it is the primary purpose of the Plan to provide funds for Participants when they retire, it is recognized under some circumstances that it would be in the best interests of Participants to permit loans to be made to them from their Accounts. Accordingly, the Committee may direct that a loan be made to a Participant for such purposes as are described below, subject to the following: a. Each request for a loan under this section must be by written application to the Committee on a form furnished by the Committee, supported by such evidence as it requests to review and approve the Participant's request. A Participant may not have more than one home loan and one personal loan outstanding at any time. Such request must be received by the Committee by the 15th of the month preceding the month in which payment of the loan proceeds is desired. b. Each loan must be evidenced by a note in a form furnished by the Committee and must be secured by a pledge of the Participant's Accounts. c. Each loan will bear interest at a commercially reasonable fixed rate of interest determined by the Committee as of the date of the loan, and must be amortized in level biweekly payments over the life of the loan. Repayment of a loan will be through biweekly deductions from each Participant's payroll. A Participant may, as of the last day of any calendar month, repay in full an outstanding loan; however, partial prepayments are not permitted. d. The aggregate principal amount of all loans may not exceed the lesser of $50,000 (reduced by the aggregate amount of principal payments made on any other Plan loans during the one year period prior to the date of the new loan) or 50 percent of the Participant's eligible Account balances. The minimum loan amount a Participant may request is $1,000. "Eligible Account balances" shall not include the Participant's After-Tax Contributions Account. e. Each loan will be for a term not exceeding five years; provided that the term of a loan may be for a term not exceeding fifteen years where the loan is to be used to acquire any dwelling unit which within a reasonable time is to be used as a principal residence of the Participant. f. If after any Participant's Settlement Date any loan made to him or any part thereof, together with accrued interest thereon, remains unpaid, the total of the unpaid balance or balances and accrued G-17 interest shall be charged to the balances of the Participant's Accounts, as otherwise adjusted under the Plan as of that date. The distribution of a Participant's cancelled note to him (or to his beneficiary in the event of his death) shall be considered as a payment for purposes of the Plan. g. Each note evidencing a loan to a Participant shall be held on the Participant's behalf and shall be considered an investment of his Accounts. Accordingly, principal and interest payments on the note shall be credited to such Accounts on the Participant's behalf. 8.6 Special Rule for Married Participants. If a Participant is married on the date as of which a loan or withdrawal is requested pursuant to this Article 8, and if any portion of the amounts credited to such Participant's Account was transferred from a plan to which Section 401(a)(11) of the Code applies, no portion of the amounts so transferred (or of any earnings attributable thereto) shall be loaned or distributed to the Participant unless the Participant's spouse consents in writing to such loan or distribution and such consent is witnessed by a representative of the Plan or a notary public. ARTICLE 9 Maximum Contributions 9.1 Contribution Limitations. Section 415 of the Code imposes certain limitations on the amount of contributions that may be allocated to a Participant under a defined contribution plan (as defined in Section 414(i) of the Code) maintained by his Employer. If a Participant in a defined contribution plan maintained by his Employer also is a Participant in a defined benefit plan (as defined in Section 414(j) of the Code) maintained by his Employer, Section 415 of the Internal Revenue Code imposes certain combined limitations as to the aggregate amount of contributions and benefits that may be provided for the Participant under both types of Plans. This Plan is a defined contribution plan and, therefore, each Participant in the Plan shall be subject to the maximum contribution and benefit limitations set forth in section 9.2 or section 9.3, whichever applies, irrespective of any other provisions of the Plan. For purposes of Section 415 of the Code and this Article 9, the "limitation year" with respect to this Plan is the Plan Year, and a Participant's "total compensation" means, with respect to any Plan Year, the total compensation paid to the Participant during that year for services rendered to the Employer as an employee that is subject to withholding for federal income tax purposes (before taking into account any withholding exemptions), but excluding any noncash compensation and any compensation deferred beyond the Participant's Settlement Date. In applying the limitations set forth in sections 9.2 and 9.3, reference to the Plan shall mean the Plan and all other defined contribution plans (whether or not terminated) maintained by the Employers and reference to a defined benefit plan maintained by the Employer shall mean that plan and all other defined benefit plans (whether or not terminated) maintained by the Employers. 9.2 Participant Covered by Defined Contribution Plan Only. If a Participant in the Plan is not covered by a defined benefit plan maintained by the Employers, the annual addition (as defined below) which is allocated to his Accounts under this Plan and under any other defined contribution plans maintained by the Employers shall not exceed the lesser of (i) $30,000 (or, if greater, one-fourth of the defined benefit dollar limitation set forth in Section 415(b)(1) of the Code for such year) or (ii) 25 percent of the Participant's total compensation (as defined in section 9.1). In applying the preceding limitation, the annual addition to a Participant's Accounts under any such other defined contribution plan will be limited before the annual addition to his Account under this Plan is limited. Any Employers' Matching Contributions described in subsection 4.1(a) which cannot be credited to a Participant's Accounts because of the limitations of section 5.10, this section 9.2 or section 9.3 shall be returned to the Employers. Any Employer Discretionary Contributions described in section 4.1(c) which cannot be credited to a Participant's Accounts because of the limitations of sections 9.2 or 9.3 shall be returned to the Employers. Any Before-Tax Contributions described in subsection 4.1(b) elected by a Participant in accordance with section 5.1 which cannot be credited to a Participant's Accounts because of the limitations of section 5.3, this section 9.2 or section 9.3 shall be paid to such Participant as soon as practicable. A Participant's "annual addition" for any Plan Year means the sum for that year of his G-18 contributions and the contributions of the Employer credited to his accounts under defined contribution plans maintained by the Corporation, Bank or any related company (as defined under section 12.2) in which the Participant is an active Participant. 9.3 Participant Covered by Defined Contribution Plan and Defined Benefit Plan. If a Participant in the Plan also is a Participant in a defined benefit plan maintained by the Employer, the contributions made on behalf of the Participant and the benefits payable to the Participant shall be determined in a manner consistent with Section 415 of the Code, as follows: a. A fraction shall be determined indicating the ratio of the Participant's annual additions under the defined contribution plans of the Employer for each Plan Year to the aggregate of the "defined contribution limitation amount" in effect for each year of the Participant's employment by the Employer. The "defined contribution limitation amount" for any Plan Year shall be the lesser of (i) 1.25 multiplied by the dollar limitation in effect under Section 415(c)(1)(A) of the Code for such year, provided that in any year in which the Plan would be a top-heavy Plan if 90 percent were substituted for 60 percent in section 14.2, 1.0 shall be substituted for 1.25, or (ii) 1.4 multiplied by 25 percent of the Participant's total compensation (as defined in section 9.1) for such year. b. A fraction shall also be determined which will equal the benefits accrued or payable to or for such Participant under the defined benefit plans of the Employers as of the end of the Plan Year divided by the "defined benefit limitation amount" in effect for that year. The "defined benefit limitation amount" for any Plan Year shall be the lesser of (i) 1.25 multiplied by the dollar limitation in effect under Section 415(b)(1)(A) of the Code for such year, provided that in any year in which the Plan would be a top-heavy plan if 90 percent were substituted for 60 percent in section 14.2, 1.0 shall be substituted for 1.25, or (ii) 1.4 multiplied by 100 percent of the Participant's average annual total compensation for the three consecutive Plan Years during which he actively participated in a defined benefit plan of the Employers and in which his aggregate total compensation was the greatest; provided that such amount shall be appropriately adjusted if necessary as provided in Section 415(b) of the Code. c. The contributions under this Plan and under any other defined contribution plans of the Employer and the benefits under all defined benefit plans of the Employer will be adjusted to the extent necessary (by first adjusting the benefits and contributions under such other Plans) so that the sum of the fractions determined with respect to any Participant in accordance with subsections (a) and (b) above will not exceed 1.0 (or such other applicable maximum amount permitted by law). ARTICLE 10 General Provisions 10.1 Payment to Substitute Beneficiaries. If benefits remain to be paid with respect to a Participant at a time when the Committee is unable to locate the Participant and his Designated Beneficiary, or following the death of the Participant and such Designated Beneficiaries, then the Committee shall cause the Participant's benefits to be distributed or paid to the person or persons who can be located and agree to accept such amounts within the applicable priority categories set forth below. Participants and Designated Beneficiaries are required to maintain a current post office address on file with the Committee. A substitute beneficiary will not be determined under this section with respect to a missing Participant or missing Designated Beneficiary unless the Participant or Designated Beneficiaries, as the case may be, have failed to claim the Participant's Account balances or notify the Committee of their whereabouts within three years after the Committee notifies such Participant or Designated Beneficiaries of their entitlement to benefits at their last post office addresses filed with the Committee. Such notice shall describe the amounts to which the Participant or the Designated Beneficiaries are entitled and shall describe the substitution procedures of this section. In disposing of a Participant's benefits in accordance with this section, the Committee shall cause the Participant's benefits to be distributed by lump sum in accordance with the following priority categories: a. In the event of a missing Participant benefits will be distributed to the Participant's Designated Beneficiary. G-19 b. In the event the Participant, and all Designated Beneficiaries are missing, benefits will be distributed in such proportions as the Committee decides to one or more of the Participant's relatives by blood, marriage or adoption. c. After unsuccessful attempts have been made by the Committee to locate persons described in the priority categories set forth above, the benefits of the Participant or of any beneficiary will be disposed of in any manner permitted by law which the Plan administrator considers to be fair and equitable. 10.2 Payment with Respect to Incapacitated Participants or Beneficiaries. If any person entitled to benefits under the Plan is under a legal disability or, in the Committee's opinion, is incapacitated in any way so as to be unable to manage his financial affairs, the Committee may in its sole discretion direct the payment of such benefits to such person's legal representative or to a relative or friend of such person for such person's benefit, or the Committee may direct the application of such benefits for the benefit of such person in any manner which the Committee may select that is permitted by federal law and is consistent with the Plan. Any payments made in accordance with the foregoing provisions of this section shall be a full and complete discharge of any liability for such payments. 10.3 Examination of Plan Documents. Copies of the Plan and any amendments thereto will be on file at the principal office of the Corporation where they may be examined by any Participant or any other person entitled to benefits under the Plan. 10.4 Notices. Any notice or document relating to the Plan required to be given to or filed with the Committee or any Employer shall be considered as given or filed if delivered or mailed by registered or certified mail, postage prepaid, to the Committee, in care of the Company at the following address: The Retirement Committee First Chicago Corporation Mail Suite 0002 Chicago, IL 60670-0002 10.5 Nonalienation of Plan Benefits. The rights or interests of any Participant or any Participant's beneficiaries to any benefits or future payments under the Plan shall not be subject to attachment or garnishment or other legal process by any creditor of any such Participant or beneficiary, nor shall any such Participant or beneficiary have any right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or rights which he may expect to receive (contingently or otherwise) under the Plan, except as to any debt owing to an Employer with respect to which a Participant entitled to a distribution has voluntarily issued a revocable assignment of an amount not in excess of ten percent of the distribution, and except as may be required by the tax withholding provisions of the Code or of a state's income tax act or pursuant to a qualified domestic relations order (as defined in Section 414(p) of the Code). 10.6 No Employment or Benefit Guaranty. None of the establishment of the Plan, any modification thereof, the creation of any fund or Account, or the payment of any benefits shall be construed as giving to any Participant or other person any legal or equitable right against the Employers, the Committee or any trustee except as provided herein. Under no circumstances shall the maintenance of this Plan constitute a contract of employment or shall the terms of employment of any Participant be modified or in any way affected hereby. Accordingly, participation in the Plan will not give any Participant a right to be retained in the employ of any Employer. Neither the Committee nor any Employer in any way guarantees any assets of the Plan from loss or depreciation or any payment to any person. The liability of the Committee or any Employer as to any payment or distribution of benefits under the Plan is limited to the available assets of the Trust Fund. 10.7 Litigation. In any action or proceeding regarding any Plan assets, any Plan benefits or the administration of the Plan, employees or former employees of the Employers, their beneficiaries and any other persons claiming to have an interest in the Plan shall not be necessary parties and shall not be entitled to any notice of process. Any final judgment which is not appealed or appealable and which may be entered in any G-20 such action or proceeding shall be binding and conclusive on the parties hereto and on all persons having or claiming to have any interest in the Plan. To the extent permitted by law, if a legal action is begun against the Committee, an Employer, or any trustee by or on behalf of any person and such action results adversely to such person, or if a legal action arises because of conflicting claims to a Participant's or other person's benefits, the cost of the Employers, the Committee, or the trustee of defending the action will be charged to the sums, if any, which were involved in the action or were payable to the Participant or the other person concerned. Acceptance of participation in the Plan shall constitute a release of the Employers, the Committee, any trustee and their agents from any and all liability and obligation not involving willful misconduct or gross neglect to the extent permitted by applicable law. Notwithstanding any other provisions of the Plan, if the Committee is required by a final court order to distribute the benefits of a Participant other than in a manner required under the Plan, then the Committee shall cause the Participant's benefits to be distributed in a manner consistent with such final court order. The Committee shall not be required to comply with the requirements of a final court order in an action in which the Committee, a trustee, the Plan or the Trust was not a party, except to the extent such a final court order is a qualified domestic relations order. 10.8 Evidence. Evidence required of anyone under the Plan shall be signed, made or presented by the proper party or parties and may be by certificate, affidavit, document or other information which the person acting thereon considers pertinent and reliable. 10.9 Gender and Number. Words denoting the masculine gender shall include the feminine and neuter genders, the singular shall include the plural and the plural shall include the singular wherever required by the context. 10.10 Waiver of Notice. Any notice required under the Plan may be waived by the person entitled to notice. 10.11 Applicable Law. The Plan shall be construed in accordance with the provisions of the Employee Retirement Income Security Act of 1974, as amended and other applicable federal laws and, to the extent not inconsistent with such laws, with the laws of the State of Illinois and not the laws of conflict. 10.12 Severability. If any provisions of the Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if such illegal and invalid provisions had never been set forth in the Plan. 10.13 Fiduciary Responsibilities. It is specifically intended that all provisions of the Plan shall be applied so that all fiduciaries with respect to the Plan shall be required to meet the prudence and other requirements and responsibilities of applicable law to the extent such requirements or responsibilities apply to them. No provisions of the Plan are intended to relieve a fiduciary from any responsibility, obligation, duty or liability imposed by applicable law. In general, a fiduciary shall discharge his duties with respect to the Plan solely in the interests of Participants and other persons entitled to benefits under the Plan and with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims. 10.14 Funding of Plan Benefits. A "Trust Fund", as defined in section 2.27, will be maintained in order to implement and carry out the provisions of the Plan. The Trust Fund from time to time shall consist of one or more funds established through one or more Trust agreements. Such funds shall be maintained for the purpose of receiving and holding contributions to the Plan and the interest and other income thereon and paying benefits provided under the Plan. The trustee under the Trust or Trusts shall determine the form and terms of each Trust agreement and from time to time may direct the transfer of amounts held in any such fund to any such other fund in accordance with the provisions of the applicable Trust agreements. 10.15 Supplements. From time to time supplements may by amendment be attached to and form a part of this Plan. Such supplements may modify or supplement the provisions of the Plan as they apply to G-21 particular groups of employees or groups of Participants, shall specify the persons affected by such supplements and shall supersede the other provisions of the Plan to the extent necessary to eliminate inconsistencies between the Plan provisions and the provisions of such supplements. ARTICLE 11 Relating to Plan Administration 11.1 Committee Appointed by Corporation. The Committee will be the Retirement Committee of the Corporation which will consist of two or more persons appointed from time to time by the Corporation. 11.2 Resignation or Removal of Committee Member. Each member of the Committee shall serve until his death, resignation or removal from such office. Any member may resign at any time by notice in writing to the Corporation and to the remaining Committee members. The Corporation may remove any Committee member at any time by written notice to him and to the remaining Committee members. 11.3 Committee Secretary. The Committee may appoint a Secretary who may, but need not, be a Committee member. Any document required to be filed with, or any notice required to be given to, the Committee will be properly filed or given if mailed by registered mail, or delivered, to the Secretary of the Committee in care of the Corporation. 11.4 Powers of Committee. Effective November 9, 1990, the Committee may amend the Plan in any non-material respect. Whether an amendment is material shall be determined by the Committee in its sole discretion. In addition, the Committee shall have the responsibility, and the full power and authority, to administer the Plan and, within the limits provided by the Plan: a. To determine in its sole discretion all benefits and resolve all questions pertaining to the construction, interpretation and administration of the Plan, including, but not by way of limitation, the determination of the rights or eligibility under the Plan of employees, Participants, and beneficiaries, and the amount of their respective benefits, and to interpret and remedy ambiguities, inconsistencies, or omissions; b. To adopt such rules and regulations as it may in its sole discretion deem reasonably necessary for the proper and efficient administration of the Plan and consistent with its purpose; c. To enforce the Plan, in accordance with its terms and with the Committee's rules and regulations; d. To direct the trustee with respect to all matters involving distributions from the Trust Fund; e. To create subcommittees and appoint agents, and to delegate such of its rights, powers, and discretions to such subcommittees or agents as it deems desirable; and f. To do all other acts, in its judgment necessary or desirable, for the proper and advantageous administration of the Plan. 11.5 Action by Committee. During a period in which two or more Committee members are acting, the following provisions shall apply: a. The Committee members may act by meeting or by writing signed without meeting and may sign any documents by signing one document or concurrent documents; b. Any action or decision of a majority of the Committee members as to a matter shall be as effective as if taken or made by all Committee members; c. If, because of the number qualified to act, there is an even division of opinion among the Committee members as to a matter, the Company shall decide the matter; d. To the extent permitted by law, no Committee member shall be liable or responsible for an act or omission of another Committee member in which the former has not concurred; G-22 e. The certificate of the Secretary of the Committee or of a majority of the Committee members that the Committee has taken or authorized any action shall become conclusive in favor of any person relying on the certificate; f. A Committee member who is a Participant may not take part in Committee action on any matter that may affect his interest under the Plan in a manner which is inconsistent with the members fiduciary responsibility to the Plan; and g. A Committee member may delegate, in writing, to any other member or members any power, right or duty granted to, or imposed upon, the delegating member by the Plan. 11.6 Committee Support. The Corporation and the Bank shall provide the Committee with all the clerical, bookkeeping and stenographic help and facilities that may be necessary to enable it to perform its functions hereunder. The Committee may appoint consultants, accountants or other assistants to perform any of the Committee's non-discretionary functions under its supervision and upon its direction. No compensation will be paid to a Committee member as such. 11.7 Decision of Committee Final. Subject to applicable law and the provisions of section 11.8, any interpretation of the provisions of the Plan and any decision on any matter within the discretion of the Committee made by the Committee in good faith shall be final and binding on all persons. A misstatement or other mistake of fact shall be corrected when it becomes known and the Committee shall make such adjustment on account thereof as the Committee considers equitable and practicable. 11.8 Review of Benefit Determinations. If a claim for benefits made by a Participant or his beneficiary is denied, the Committee shall within 90 days (or 180 days if special circumstances require an extension of time) after the claim is made furnish the person making the claim with a written notice specifying the reasons for the denial. Such notice shall also refer to the pertinent Plan provisions on which the denial is based, describe any additional material or information necessary for properly completing the claim and explain why such material or information is necessary, and explain the Plan's claim review procedures. If requested in writing, the Committee shall afford each claimant whose claim has been denied a full and fair review of the Plan administrator's decision and, within 60 days (120 days if special circumstances require additional time) of the request for reconsideration of the denied claim, the Committee shall notify the claimant in writing of the Committee's final decision. If a Participant or beneficiary shall fail to file a request for review of his claim denial, he shall have no right to review and shall have no right to bring action in any court and the denial of his claim shall become final and binding on all persons for all purposes. 11.9 Uniform Rules. The Committee shall perform its duties with respect to Plan administration on a reasonable and nondiscriminatory basis and shall apply uniform rules to all Participants similarly situated. 11.10 Indemnification. To the extent permitted by law, no person (including the Employers, a trustee, any present or former Committee member, and any present or former director, officer or employee of any Employer) shall be personally liable for any act done or omitted to be done in good faith in the administration of the Plan or the investment of the Trust Fund. To the extent permitted by law, each present or former director, officer or employee of any Employer to whom the Committee or an Employer has delegated any portion of its responsibilities under the Plan and each present or former Committee member shall be indemnified and saved harmless by the Employers (to the extent not indemnified or saved harmless under any liability insurance or other indemnification arrangement with respect to the Plan) from and against any and all claims of liability to which they are subjected by reason of any act done or omitted to be done in good faith in connection with the administration of the Plan or the investment of the Trust Fund, including all expenses reasonably incurred in their defense if the Employers fail to provide such defense. ARTICLE 12 Relating to the Employers 12.1 Action by Employers. Any action required or permitted of an Employer under the Plan shall be by resolution of its Board of Directors or by a duly authorized committee of its Board of Directors, or by a person or persons authorized by resolution of its Board of Directors or such committee. G-23 12.2 Additional Employers, the First Chicago Companies. Any subsidiary or other related company that is not an Employer may adopt the Plan and become an Employer thereunder by filing with the trustee and the Committee a certified copy of a resolution of the Board of Directors of the subsidiary or other related company providing for its adoption of the Plan and a certified copy of a resolution of the Board of Directors of the Corporation consenting to such adoption. For this purpose, a "subsidiary" means any corporation 50 percent or more of the voting stock of which is directly or indirectly owned by the Corporation and a "related company" means any corporation which directly or indirectly owns 50 percent or more of the voting stock of the Corporation and any corporation (other than the Corporation and its subsidiaries) 50 percent or more of the voting stock of which is directly or indirectly owned by any corporation which directly or indirectly owns 50 percent or more of the voting stock of the Corporation. The term "First Chicago Companies" includes the Employers and all subsidiaries and related companies that have not adopted the Plan (and each such corporation is sometimes referred to herein individually as a "First Chicago Company.") Any corporation which is not an Employer under the Plan and which does not qualify as a subsidiary or related company but is either (i) a member of a controlled group of corporations (within the meaning of Section 1563(a) of the Code, determined without regard to Sections 1563(a)(4) and 1563(e)(3)(C) thereof) which contains an Employer under the Plan, or (ii) a member of an affiliated service group (as defined in Section 414(m) of the Code) which contains an Employer under the Plan shall, for purposes of the Plan, be considered as a subsidiary or related company that has not adopted the Plan and, therefore, as a First Chicago Company for purposes of certain determinations as to employment with the First Chicago Companies. 12.3 Restrictions as to Reversion of Trust Fund to Employers. The Employers shall have no right, title or interest in the assets of the Plan, nor will any part of the assets of the Plan at any time revert or be repaid to an Employer, directly or indirectly, except as follows: a. If the Internal Revenue Service initially determines that the Plan, as applied to any Employer, does not meet the requirements of a "qualified plan" under Section 401(a) of the Code, the assets of the Plan attributable to contributions made by that Employer under the Plan shall be returned to that Employer within one year of the date of denial of qualification of the Plan as applied to that Employer. b. If a contribution or a portion of a contribution is made by an Employer as a result of a mistake of fact, such contribution shall not be considered to have been contributed under the Plan by that Employer and, after having been reduced by any losses of the Trust Fund allocable thereto, shall be returned to that Employer within one year of the date the amount is contributed under the Plan. c. Each contribution made by an Employer is conditioned upon the continued qualification of the Plan and the deductibility of such contribution as an expense for federal income tax purposes and, therefore, to the extent that a contribution is made by an Employer under the Plan for a period for which the Plan is not a qualified plan or the deduction for a contribution made by the Employer is disallowed, then such contribution or portion of a contribution, after having been reduced by any losses of the Trust Fund allocable thereto, shall be returned to that Employer within one year of the date of determination of the nonqualified status of the Plan or the date of disallowance of the deduction. ARTICLE 13 Amendment and Termination 13.1 Amendment. While the Employers expect and intend to continue the Plan, the Corporation must necessarily reserve and hereby does reserve the right, subject to section 12.3, to amend the Plan from time to time, except that the duties and liabilities of the Committee cannot be changed substantially without its consent and no amendment shall reduce the value of a Participant's benefits to less than the amount he would be entitled to receive if he had resigned from the employ of all of the First Chicago Companies on the day of the amendment. 13.2 Termination. The Plan will terminate as to all Employers on any date specified by the Corporation, and as to any Employer on any date specified by that Employer, if thirty days' advance written notice of the G-24 termination is given to the Committee, the trustee, and, in the case of the termination of the entire Plan, any other Employers. The Plan also will terminate as to an individual Employer on the first to occur of the date that Employer is judicially declared bankrupt or insolvent, the date that Employer ceases to qualify as a subsidiary or related company, or the dissolution, merger, consolidation or reorganization of that Employer, or the sale by that Employer of all or substantially all of its assets, except that in any such event arrangements may be made with the consent of the Corporation whereby the Plan will be continued by any successor to that Employer or any purchaser of all or substantially all of its assets without a termination thereof, in which case the successor or purchaser will be substituted for that Employer under the Plan; provided that if any Employer is merged, dissolved or in any way reorganized into, or consolidated with, any other Employer, the Plan as applied to the former Employer will automatically continue in effect without a termination thereof. Notwithstanding the foregoing, if any of the events described above should occur but some or all of the Participants employed by an Employer are transferred to employment with one or more of the other Employers coincident with or immediately after the occurrence of such event, the Plan as applied to those Participants will automatically continue in effect without a termination thereof. 13.3 Vesting on Termination. As provided in section 6.1, the rights of all affected employees in their Account balances is nonforfeitable and shall remain nonforfeitable on termination or partial termination of the Plan as respects all Employers or any single Employer. 13.4 Plan Merger. In no event shall there be any merger or consolidation of the Plan with, or transfer of assets or liabilities to, any other plan unless each Participant in the Plan would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit the Participant would have been entitled to receive immediately before the merger, consolidation or transfer (if the Plan had then terminated). 13.5 Notice of Amendment, Termination or Plan Merger. Participants affected thereby will be notified of an amendment, termination, merger or consolidation of the Plan within a reasonable time. ARTICLE 14 Top-Heavy Plan Rules 14.1 Key Employees. An employee or former employee shall be a "key employee" for any Plan Year if during such Plan Year or during any of the four preceding Plan Years the employee is: a. an officer of an employer (as defined below) having an annual compensation (as defined in section 9.1) greater than 150 percent of the amount in effect under Section 415(c)(1)(A) of the Code for any such Plan Year, or b. one of the ten employees of an employer having annual compensation from an employer of more than the limitation in effect under Section 415(c)(1)(A) of the Code and owning (or considered as owning within the meaning of Section 318 of the Code) the largest interests in the employer, or c. any person who owns (or is considered as owning within the meaning of Section 318 of the Code) more than five percent of the outstanding stock of the employer or stock possessing more than five percent of the total combined voting power of all the Company Stock, or d. any person having annual compensation in excess of $150,000 who owns (or is considered as owning within the meaning of Section 318 of the Code) more than one percent of the outstanding stock of the employer or stock possessing more than one percent of the total combined voting power of all the employer's stock. For purposes of subparagraph (a) above, if the number of officers exceeds 50, only the 50 officers with the highest compensation shall be considered key employees and if the number of officers is less than 50, the number of officers considered key employees shall not exceed the greater of three such officers or ten percent of all employees. For purposes of subparagraphs (c) and (d) above, Section 318(a)(2)(C) of the Code shall be G-25 applied by substituting "five percent" for the reference to "50 percent" therein and the rules of Section 414(b), (c) and (m) of the Code shall not apply for determining ownership in the employer. For purposes of this Article 14, the term "employer" includes all corporations which are members of a controlled group of corporations which includes the Corporation under Section 414(b) of the Code, all trades or businesses (whether or not incorporated) which are under common control with the Corporation under Section 414(c) of the Code and any service or other organization which is a member of an affiliated service group with the Corporation under Section 414(m) of the Code. The beneficiary of a key employee shall be considered a key employee. 14.2 Top-Heavy Plan. The Plan will be considered a "top-heavy plan" for any Plan Year if as of the last day of the preceding Plan Year (but the last day of the initial Plan Year in the case of that year) (the "determination date") the sum of (i) the aggregate of the Accounts of all key employees under the Plan and all other defined contribution plans in an aggregation group of plans as described in section 14.3 below, and (ii) the present value of the aggregate cumulative accrued benefits for key employees under all defined benefit plans in an aggregation group of plans exceeds 60 percent of such sum determined for all Participants under all such plans, excluding Participants who are former key employees. There shall be included in the determination of a Participant's Accounts and accrued benefit under such plans any amounts distributed to him during the preceding five year period. Notwithstanding the foregoing, if any individual has not performed any services for the employer at any time during the five-year period ending on the determination date, any Account of such individual (and the accrued benefit for such individual) shall not be included for purposes of this section. Furthermore, a rollover contribution initiated by a Participant and made to any Plan in an aggregation group of plans shall not be taken into account for purposes of determining whether the Plan is a top- heavy plan. 14.3 Aggregation Groups. All employer plans in a required aggregation group of plans shall be considered to be top-heavy plans if either the required or permissive aggregation group of plans is determined to be top-heavy under section 14.2 above. If the required or permissive aggregation group of plans is not a top-heavy group, no employer plans in the group shall be considered to be top-heavy plans. A "required aggregation group of plans" shall include each employer plan in which a key employee participates and any other employer plan which enables any plan in which a key employee participates to meet the coverage and nondiscrimination requirements of Sections 401(a)(4) or 410 of the Code. A "permissive aggregation group of plans" shall include all plans in the required aggregation group plus any other employer plans which satisfy the requirements of Sections 401(a)(4) and 410 of the Code when considered together with the required aggregation group of plans. 14.4 Special Minimum Contributions. Notwithstanding the provisions of subsections 3.1(a) above, the amount contributed by an employer in accordance with subsections 3.1(a) for each Participant (whether active or inactive) for each Plan Year in which the Plan is considered a top-heavy plan (as defined in section 14.2) shall not be less than the lesser of (i) four percent of the Participant's total compensation for that year, or (ii) the highest percentage of compensation contribution (disregarding compensation in excess of $200,000 or such other maximum amount as may be permitted from time to time by the Secretary of the Treasury or his delegate or by law) contributed by such employer under subsection 4.1(a) for such Plan Year on behalf of a key employee; provided, however, that in the case of an employee covered under this Plan and a defined benefit plan maintained by the employer, for each Plan Year for which this Plan and such defined benefit plans are considered top-heavy plans, if such employee receives the top-heavy minimum contribution specified in such defined benefit plan, such employee need not receive the minimum contribution specified in this section. G-26 EX-10.J 4 INDIV CHANGE OF CONTROL EXHIBIT 10(J). INDIVIDUAL CHANGE OF CONTROL EMPLOYMENT AGREEMENT Agreement by and between First Chicago Corporation, a Delaware corporation (the "Company"), and (the "Executive"), dated as of the day of , 1994. The Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control, to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control and to provide the Executive with compensation and benefit arrangements upon a Change of Control which ensure that the compensation and benefit expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. Now, Therefore, it is Hereby Agreed as Follows: 1. Certain Definitions. (a) The "Effective Date" shall mean the first date during the Change of Control period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated or the Executive ceases to be an officer of the Company prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment or cessation of status as an officer (i) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (ii) otherwise arose in connection with or anticipation of the Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment or cessation of status as an officer. (b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the third anniversary of such date; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. 2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, but excluding, for this purpose, any such acquisition by the Company or any of its subsidiaries, or any employee benefit plan (or related trust) of the Company or its subsidiaries, or any corporation with respect to which, following such acquisition, more than 50% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the common stock and voting securities of the Company immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the then J-1 outstanding shares of Common Stock of the Company or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, as the case may be; or (b) Individuals who, as of the date hereof, constitute the Board (as of the date hereof, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to the date hereof, whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or (c) Approval by the stockholders of the Company of a reorganization, merger or consolidation of the Company, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the common stock and voting securities of the Company immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation, or a complete liquidation or dissolution of the Company or of the sale or other disposition of all or substantially all of the assets of the Company. 3. Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, subject to the terms of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of such date (the "Employment Period"). 4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 90-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office which is the headquarters of the Company and is less than 35 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period, it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid on a monthly basis, at least equal to twelve times the highest monthly base salary paid or payable to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. J-2 During the Employment Period, the Annual Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be substantially consistent with increases in base salary generally awarded in the ordinary course of business to other peer executives of the Company and its affiliated companies. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company. (ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the average annualized (for any fiscal year consisting of less than twelve full months or with respect to which the Executive has been employed by the Company for less than twelve full months) bonus paid or payable, including by reason of any deferral, to the Executive by the Company and its affiliated companies in respect of the three fiscal years immediately preceding the fiscal year in which the Effective Date occurs (the "Recent Average Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. As used below in this Agreement, the term "Annual Bonus Reference Amount" shall mean, with respect to any fiscal year of the Company, the lesser of (A) the Executive's Annual Base Salary for such fiscal year and (B) the greater of (1) the Annual Bonus paid or payable, including by reason of any deferral, to the Executive (and annualized for any fiscal year consisting of less than twelve full months or for which the Executive has been employed for less than twelve full months) for the most recently completed fiscal year during the Employment Period, if any, and (2) the Recent Average Bonus. (iii) Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 90-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at J-3 any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled, in the aggregate, to fringe benefits in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. 5. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably). (b) Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean (i) repeated violations by the Executive of the Executive's obligations under Section 4(a) of this Agreement (other than as a result of incapacity due to physical or mental illness) which are demonstrably willful and deliberate on the Executive's part, which are committed in bad faith or without reasonable belief that such violations are in the best interests of the Company and which are not remedied in a reasonable period of time after receipt of written notice from the Company specifying such violations or (ii) the conviction of the Executive of a felony involving moral turpitude. (c) Good Reason; Window Period. The Executive's employment may be terminated (i) during the Employment Period by the Executive for Good Reason or (ii) during the Window Period by the Executive without any reason. For purposes of this Agreement, the "Window Period" shall mean the 30-day period immediately following the first anniversary of the Effective Date. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities J-4 as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location other than that described in Section 4(a)(i)(B) hereof; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement, provided that such successor has received at least ten days prior written notice from the Company or the Executive of the requirements of Section 11(c) of the Agreement. For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive without any reason during the Window Period or for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than fifteen days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive during the Window Period or for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 6. Obligations of the Company upon Termination. (a) Good Reason or during the Window Period; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment either for Good Reason or without any reason during the Window Period: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the Annual Bonus Reference Amount and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation J-5 pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2) and (3) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount (such amount shall be hereinafter referred to as the "Severance Amount") equal to the product of (1) two and one-half (2) the sum of (x) the Executive's Annual Base Salary and (y) the Annual Bonus Reference Amount; provided, however, that such amount shall be reduced by the present value (determined as provided in Section 280G(d)(4) of the Internal Revenue Code of 1986, as amended (the "Code")) of any other amount of severance relating to salary or bonus continuation to be received by the Executive upon termination of employment of the Executive under any severance plan, policy or arrangement of the Company; and C. a separate lump-sum supplemental retirement benefit equal to the difference between (1) the actuarial equivalent (utilizing for this purpose the actuarial assumptions utilized with respect to The First National Bank of Chicago Pension Plan (or any successor plan thereto) (the "Retirement Plan") during the 90-day period immediately preceding the Effective Date) of the benefit payable under the Retirement Plan and any supplemental and/or excess retirement plan of the Company and its affiliated companies providing benefits for the Executive (the "SERP") which the Executive would receive if the Executive's employment continued at the compensation level provided for in Sections 4(b)(i) and 4(b)(ii) of this Agreement for the remainder of the Employment Period, assuming for this purpose that all accrued benefits are fully vested and that benefit accrual formulas are no less advantageous to the Executive than those in effect during the 90-day period immediately preceding the Effective Date, and (2) the actuarial equivalent (utilizing for this purpose the actuarial assumptions utilized with respect to the Retirement Plan during the 90-day period immediately preceding the Effective Date) of the Executive's actual benefit (paid or payable), if any, under the Retirement Plan and the SERP (the amount of such benefit shall be hereinafter referred to as the "Supplemental Retirement Amount"); and (ii) for the remainder of the Employment Period, or such longer period as any plan, program, practice or policy may provide, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated in accordance with the most favorable plans, practices, programs or policies of the Company and its affiliated companies as in effect and applicable generally to other peer executives and their families during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility (such continuation of such benefits for the applicable period herein set forth shall be hereinafter referred to as "Welfare Benefit Continuation"). For purposes of determining eligibility of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until the end of the Employment Period and to have retired on the last day of such period; and (iii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive and/or the Executive's family any other amounts or benefits required to be paid or provided or which the Executive and/or the Executive's family is eligible to receive pursuant to this Agreement and under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies as in effect and applicable generally to other peer executives and their families during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally thereafter with respect to other peer executives of the Company and its affiliated companies and their families (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). J-6 (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for (i) payment of Accrued Obligations (which shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination) and the timely payment or provision of the Welfare Benefit Continuation and Other Benefits (excluding, in each case, Death Benefits (as defined below)) and (ii) payment to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination of an amount equal to the greater of (A) the sum of the Severance Amount and the Supplemental Retirement Amount and (B) the present value (determined as provided in Section 280G(d)(4) of the Code) of any cash amount to be received by the Executive or the Executive's family as a death benefit pursuant to the terms of any plan, policy or arrangement of the Company and its affiliated companies, but not including any proceeds of life insurance covering the Executive to the extent paid for directly or on a contributory basis by the Executive (which shall be paid in any event as an Other Benefit). (The benefits included in this clause (b) shall be hereinafter referred to as the "Death Benefits".) (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for (i) payment of Accrued Obligations (which shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination) and the timely payment or provision of the Welfare Benefit Continuation and Other Benefits (excluding, in each case, Disability Benefits (as defined below)) and (ii) payment to the Executive in a lump sum in cash within 30 days of the Date of Termination of an amount equal to the greater of (A) the sum of the Severance Amount and the Supplemental Retirement Amount and (B) the present value (determined as provided in Section 280G(d)(4) of the Code) of any cash amount to be received by the Executive as a disability benefit pursuant to the terms of any plan, policy or arrangement of the Company and its affiliated companies, but not including any proceeds of disability insurance covering the Executive to the extent paid for directly or on a contributory basis by the Executive (which shall be paid in any event as an Other Benefit). (The benefits included in this clause (B) shall be hereinafter referred to as the "Disability Benefits".) (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive the Annual Base Salary through the Date of Termination, plus the amount of any compensation previously deferred by the Executive, in each case to the extent theretofore unpaid. If the Executive terminates employment during the Employment Period, excluding a termination either for Good Reason or without any reason during the Window Period, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 7. Non-exclusivity of Rights. Except as provided in Sections 6(a)(ii), 6(b) and 6(c) of this Agreement, nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of, or any contract or agreement with, the Company or any of its affiliated companies at, or subsequent to, the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 8. Full Settlement; Resolution of Disputes. (a) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other J-7 action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, except as provided in Section 6(a)(ii) of this Agreement and the immediately following sentence, such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code. (b) If there shall be any dispute between the Company and the Executive (i) in the event of any termination of the Executive's employment by the Company, whether such termination was for Cause, or (ii) in the event of any termination of employment by the Executive, whether Good Reason existed, then, unless and until there is a final, nonappealable judgment by a court of competent jurisdiction declaring that such termination was for Cause or that the determination by the Executive of the existence of Good Reason was not made in good faith, the Company shall pay all amounts, and provide all benefits, to the Executive and/or the Executive's family or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant to Section 6(a) hereof as though such termination were by the Company without Cause or by the Executive with Good Reason; provided, however, that the Company shall not be required to pay any disputed amounts pursuant to this paragraph except upon receipt of an undertaking by or on behalf of the Executive to repay all such amounts to which the Executive is ultimately adjudged by such court not to be entitled. 9. Certain Reduction of Payments by the Company. For purposes of this Section 9, (i) "Payment" shall mean any payment or distribution in the nature of compensation to, or for the benefit of, the Executive (whether paid or payable pursuant to this Agreement or otherwise, but determined without regard to any reductions required by this Section 9); (ii) "Net After Tax Receipt" shall mean the Present Value of a Payment net of all taxes imposed on the Executive with respect thereto under the Code; (iii) "Present Value" shall mean such value as determined in accordance with Section 280G(d)(4) of the Code; and (iv) "Reduced Amount" shall mean the smallest Present Value of Payments which (a) is less than the Present Value of all Payments and (b) results in aggregate Net After Tax Receipts which are equal to or greater than the Net After Tax Receipts which would result if the Present Value of Payments were any amount (x) other than the Reduced Amount and (y) equal to or less than the Present Value of all Payments. Anything in this Agreement to the contrary notwithstanding, in the event Arthur Andersen & Co. (the "Accounting Firm") shall determine that receipt of all Payments would subject the Executive to tax under Section 4999 of the Code, it shall determine whether some amount of Payments would meet the definition of a Reduced Amount. If the Accounting Firm determines that there is a Reduced Amount, the aggregate Payments shall be reduced to such Reduced Amount. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. If the Accounting Firm determines that aggregate Payments should be reduced to the Reduced Amount, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof, and the Executive may then elect which and how much of the Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Payments equals the Reduced Amount), and shall advise the Company in writing of such election within ten days of his receipt of notice. If no such election is made by the Executive within such ten-day period, the Company may elect which of such Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Payments equals the Reduced Amount) and shall notify the Executive promptly of such election. All determinations made by the Accounting Firm under this Section 9 shall be made within 15 business days of the Date of Termination. J-8 As promptly as practicable following such determination, the Company shall pay to or distribute to or for the benefit of the Executive such Payments as are then due to the Executive and shall promptly pay to or distribute to or for the benefit of the Executive in the future such Payments as become due to the Executive. While it is the intention of the Company and the Executive to reduce the amounts payable or distributable to the Executive hereunder only if the aggregate Net After Tax Receipts to the Executive would thereby be increased, as a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefit of the Executive pursuant to this Agreement which should not have been so paid or distributed ("Overpayment") or that additional amounts which will have not been paid or distributed by the Company to or for the benefit of the Executive pursuant to this Agreement could have been so paid or distributed ("Underpayment"), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either the Company or the Executive which the Accounting Firm believes has a high probability of success, determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of the Executive shall be treated for all purposes as a loan to the Executive which the Executive shall repay to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such loan shall be deemed to have been made, and no amount shall be payable by the Executive, to the Company if and to the extent such deemed loan and payment would not either reduce the amount on which the Executive is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. 10. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 11. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement J-9 are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- If to the Company: First Chicago Corporation One First National Plaza Chicago, Illinois 60670 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right that the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, prior to the Effective Date, may be terminated by either the Executive or the Company at any time. Moreover, if prior to the Effective Date, (i) the Executive's employment with the Company terminates or (ii) the Executive ceases to be an officer of the Company, then the Executive shall have no further rights under this Agreement. (g) This Agreement embodies the entire agreement and understanding among the Company and Executive and supersedes all prior agreements and understandings among the Company and Executive relating to the subject matter thereof. In Witness Whereof, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. ------------------------------------- First Chicago Corporation By: _________________________________ J-10 EX-10.M 5 DIR RETIRE INCOME PLAN EXHIBIT 10(M). FIRST CHICAGO CORPORATION DIRECTOR RETIREMENT INCOME PLAN 1. Purpose and Effective Date. The purpose of the First Chicago Corporation Director Retirement Income Plan is to provide additional recognition and compensation for service on the Board so as to align the remuneration of non- officer directors with peer practice, and encourage director's continued service on the Board, thus, helping to ensure the continued quality of Board membership. The effective date of the Plan shall be March 31, 1994. 2. Definitions. The following terms shall have the meanings set forth below, if capitalized: (a) "Annual Retainer" means the annual retainer paid to Board members for service on the Board as adjusted from time to time. The definition does not include any additional amounts paid, such as amounts paid pursuant to the Director Retainer Stock Plan, or for service on a Board committee or as Board committee chairman or any amount specifically paid for attendance at Board or Board committee meetings. (b) "Board" means the Board of Directors of First Chicago Corporation and The First National Bank of Chicago. (c) "Committee" means the Organization, Compensation and Nominating Committee of the Board. (d) "Designated Beneficiary" means the person designated by an Eligible Director to receive payments pursuant to the terms of Section 3 or 4 of this Plan in the case of the Eligible Director's death. The Eligible Director's beneficiary shall be designated on a form provided by the Committee and delivered by the Eligible Director to the Secretary of the Committee. If a beneficiary is not designated, the Eligible Director's estate shall be deemed the Designated Beneficiary. (e) "Eligible Director" means a member of the Board who is not, and has not been, an officer of First Chicago Corporation or any of its subsidiaries. In order to be eligible, a director must also be a member of the Board on or after the effective date of the Plan. (f) "Plan" means the First Chicago Corporation Director Retirement Income Plan, as amended from time to time. (g) "Retirement" occurs when an Eligible Director ceases to be a member of the Board either (i) after serving on the Board for all or part of any 20 calendar quarters or (ii) as a result of death or disability (disability to be determined by the Committee in its sole discretion.) 3. Retirement payments. (a) Quarterly benefit payments. Upon Retirement, an Eligible Director or an Eligible Director's Designated Beneficiary (in the case of Retirement due to death) shall be paid each quarter in cash an amount equal to one- eighth of the current Annual Retainer. The initial payment shall be made as of the last day of the calendar quarter in which Retirement occurs and the payment shall continue until the number of quarterly benefit payments paid to the Eligible Director equals the Eligible Director's number of calendar quarters of service on the Board prior to Retirement; however, the number of quarterly payments shall not exceed 40. Any portion of the calendar quarter in which a director serves on the Board will be counted as a full quarter of service for purposes of determining the occurrence of an Eligible Director's Retirement and the amount and duration of retirement payments. (b) Lump sum election. An Eligible Director may elect to have the benefits payable pursuant to paragraph (a) of this Section 3 paid to the Eligible Director or the Eligible Director's Designated Beneficiary in a single cash lump sum payment, discounted to present value, by filing a written notice of election with the Secretary of the Committee prior to completing 20 calendar quarters of service as a member of the Board or by April 30, 1994, whichever occurs later. M-1 4. Payment in Case of Eligible Director's Death after Commencement of Retirement Payments. If an Eligible Director dies after commencement of retirement payments pursuant to Section 3, such Director's Designated Beneficiary shall receive a lump sum payment equal to one-half of the remaining quarterly payments the Eligible Director would have received but for his death. 5. Change of Control. Notwithstanding anything else contained in the Plan, upon an Eligible Director's termination of service as a director within one year following a Change of Control (as defined below), the entire amount of retirement payments payable to each Eligible Director as calculated under Section 3 hereof shall be immediately paid in a single cash lump sum (discounted to present value) to each Eligible Director. Payment shall be made to an Eligible Director irrespective of whether the termination of service constitutes a Retirement of the Eligible Director. For purposes of this Section, "Change of Control" means any of the following events: (a) The acquisition, other than from the Corporation, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of 20% or more of either the then outstanding shares of common stock of the Corporation or the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors, but excluding, for this purpose, any such acquisition by the Corporation or any of its subsidiaries, or any employee benefit plan (or related trust) of the Corporation or its subsidiaries, or any corporation with respect to which, following such acquisition, more than 50% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the common stock and voting securities of the Corporation immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the then outstanding shares of common stock of the Corporation or the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors, as the case may be; or (b) Individuals who, as of the date hereof, constitute the Board of Directors (as of the date hereof the "Incumbent Board of Directors") cease for any reason to constitute at least a majority of the Board of Directors, provided that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board of Directors shall be considered as though such individual were a member of the Incumbent Board of Directors, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Corporation (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended); or (c) Approval by the stockholders of the Corporation of a reorganization, merger or consolidation of the Corporation, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the common stock and voting securities of the Corporation immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation, or a complete liquidation or dissolution of the Corporation or of the sale or other disposition of all or substantially all of the assets of the Corporation. 6. Administration. The Plan shall be administered by the Committee who shall have the sole authority to construe and interpret the Plan, and to establish or adopt rules, regulations and forms relating to the administration of the Plan. The Committee shall have no authority to add to, delete from or modify the terms M-2 of the Plan without the prior approval of the Board. Neither the Committee nor any member of the Board shall be liable for any act or determination made in good faith. The Committee may delegate its administrative duties to any officer of First Chicago Corporation or The First National Bank of Chicago. 7. Determination of Present Value. The present value of any payments discounted to present value under this plan shall be calculated using the Pension Benefit Guaranty Corporation's immediate annuity rate in effect on the last day of the quarter in which the Eligible Director's Retirement occurs. 8. Gross Misconduct. If an Eligible Director ceases to serve on the Board as a result of gross misconduct, as determined by the Board in its sole discretion, any retirement benefits payable under the Plan to such Eligible Director shall be immediately and irrevocably cancelled. 9. Amendment and Termination. The Board reserves the right to amend, suspend or terminate this Plan at any time. However, no amendment, suspension or termination will reduce an Eligible Director's benefits to less than an amount equal to the amount the Eligible Director would have been entitled to receive if such Eligible Director's Retirement had occurred on the day of the amendment, suspension or termination. 10. Prohibition on Alienation. No Eligible Director shall have the right to alienate, assign, encumber, hypothecate, or pledge such director's interest in any payments to be made under the Plan, voluntarily or involuntarily, and any attempt to dispose of any such interest shall be void. First Chicago Corporation shall have the right to set off against retirement payments under the Plan any amounts due and owing from the Eligible Director to First Chicago Corporation or its subsidiaries or affiliates, to the extent permitted by law. 11. Unfunded Plan. The Plan is unfunded and First Chicago Corporation shall not be required to physically segregate any cash or establish any separate account or accounts to fund any retirement payment to be made under the Plan. 12. Entire Plan. This document is a complete statement of the Plan and as of its effective date supersedes all prior plans, proposals, representations, promises, inducements, written or oral, relating to its subject matter. First Chicago Corporation shall not be bound by or liable to any director for any representation, promise, or inducement made by any person which is not embodied in this document or in any authorized written amendment to the Plan. 13. Applicable Law. The Plan will be construed and enforced in accordance with the laws of Illinois. M-3 EX-10.N 6 SR MAN ANN INCENTIVE PLAN EXHIBIT 10(N). FIRST CHICAGO CORPORATION SENIOR MANAGEMENT ANNUAL INCENTIVE PLAN 1. PURPOSE The First Chicago Corporation Senior Management Annual Incentive Plan is designed to (i) assist First Chicago Corporation in attracting, retaining and motivating senior management employees, (ii) associate Participants' interests with those of the Corporation's stockholders and (iii) qualify compensation paid to Participants who are "covered employees" as "other performance-based compensation" within the meaning of Section 162(m) of the Code or a successor provision. 2. DEFINITIONS Terms not otherwise defined herein shall have the following meanings: 2.1 "Board" means the Board of Directors of First Chicago Corporation. 2.2 "Change of Control" means a change of control as defined in the First Chicago Corporation Stock Incentive Plan or any successor thereto. 2.3 "Code" means the Internal Revenue Code of 1986, as amended. 2.4 "Committee" means the committee appointed by the Board to establish and administer the Plan as provided herein. Unless otherwise determined by the Board, the Organization, Compensation and Nominating Committee of the Board shall be the Committee. 2.5 "Corporation" means First Chicago Corporation and its successors and assigns and any corporation which shall acquire substantially all of its assets. In addition, Corporation shall include any corporation or other entity, whether domestic or foreign, in which the Corporation has or obtains, directly or indirectly, a proprietary interest of more than 50% by reason of stock ownership or otherwise. 2.6 "Incentive Payment" means a payment under this Plan made to a Participant, subject to Sections 4.1 through 4.5 hereof. The Incentive Payment for any Incentive Period for each Participant who is a "covered employee" under Section 162(m) of the Code and/or a member of the Senior Management Committee (as designated by the Chief Executive Officer of First Chicago Corporation) shall in no event exceed 200% of the greater of (a) such Participant's base salary rate as of the first day of the applicable Incentive Period or (b) such Participant's base salary rate as set by the Board or Committee prior to or at the time the Committee establishes the Performance Goals for the Incentive Period pursuant to Section 4.1(a) or such later date as may be permitted under Code Section 162(m), in Treasury Regulations or Internal Revenue Service announcements, notwithstanding that payment of such base salary rate will not commence until a later date. 2.7 "Incentive Period" means the calendar year, except to the extent the Committee determines otherwise. 2.8 "Participant" means an employee of the Corporation who is a member of senior management and is designated by the Committee as eligible to receive an Incentive Payment under the Plan for an Incentive Period. 2.9 "Performance Goals" means (a) earnings per share, (b) return on average equity, (c) return on average assets, or (d) any other objective performance goals as may be established by the Committee for an Incentive Period. Performance Goals may be absolute in their terms or measured against or in relationship N-1 to other companies comparably, similarly or otherwise situated and may be based on or adjusted for any other objective goals, events, or occurrences established by the Committee for an Incentive Period, including earnings, earnings growth, revenues, expenses, stock price, market share, charge-offs, loan loss reserves, reductions in non-performing assets, return on assets, return on equity or return on investment, regulatory compliance, satisfactory internal or external audits, improvement of financial ratings, achievement of balance sheet or income statement objectives, extraordinary charges, losses from discontinued operations, restatements and accounting changes and other unplanned special charges such as restructuring expenses, acquisition expenses including goodwill, unplanned stock offerings and strategic loan loss provisions. Such Performance Goals may be particular to a line of business, subsidiary or other unit or may be based on the performance of the Corporation generally. Such Performance Goals may cover such period as may be specified by the Committee. 2.10 "Plan" means the First Chicago Corporation Senior Management Annual Incentive Plan. 3. ADMINISTRATION 3.1 The Plan shall be administered by the Committee. The Committee shall have authority to determine the terms of all Incentive Payments hereunder, including, without limitation, the Participants to whom, and the time or times at which, payments are made, the amount of a Participant's Incentive Payments, the Incentive Period to which each Incentive Payment shall relate, the actual dollar amount to be paid, and when the Incentive Payments shall be made (which payments may, without limitation, be made during or after an Incentive Period, on a deferred basis or installments). 3.2 Subject to the express provisions of the Plan, the Committee shall have authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it and to make all other determinations deemed necessary or advisable for the administration of the Plan. The determinations of the Committee pursuant to its authority under the Plan shall be conclusive and binding. 3.3 The Committee may, in its discretion, authorize the Chief Executive Officer of First Chicago Corporation to act on its behalf, except with respect to matters relating to such Chief Executive Officer or any executive vice president or above of First Chicago Corporation. 4. DETERMINATION OF PARTICIPANTS, PERFORMANCE GOALS, PERFORMANCE/PAYOUT SCHEDULE, INCENTIVE PAYMENTS 4.1 Prior to the completion of 25% of the Incentive Period or such earlier date as required under Section 162(m) of the Code, the Committee shall, in its sole discretion, for each such Incentive Period determine and establish in writing the following: (a) The Performance Goals applicable to the Incentive Period; and (b) The performance/payout schedule detailing the total dollar amount which may be available for payout to all Participants as Incentive Payments based upon the relative level of attainment of the Performance Goals. 4.2 After the end of each Incentive Period, the Committee shall: (a) Certify in writing, prior to the unconditional payment of any Incentive Payment, that the Performance Goals for the Incentive Period were satisfied and to what extent they were satisfied; (b) Determine the total dollar amount available for Incentive Payments pursuant to the performance/payout schedule established in Section 4.1(b) above which amount shall be based upon the extent to which the Performance Goals established by the Committee for the Incentive Period have been achieved; (c) In its sole discretion, reduce the size of or eliminate the total dollars available for payment for an Incentive Period; and N-2 (d) In its sole discretion, determine the share, if any, of available dollars to be paid to each Participant as that Participant's Incentive Payment and authorize payment of such amount; except, however, in the case of a Participant who is at or above the level of executive vice president of First Chicago Corporation, the Board shall approve (but only to the extent permitted under Section 162(m) of the Code and underlying regulations) the Committee's determination of such Participant's share before the Committee may authorize payment. 4.3 The Committee may authorize a conditional payment of a Participant's Incentive Payment prior to the end of an Incentive Period based upon the Committee's good faith determination of the projected size of (i) the total dollar amount which will become available for payout as Incentive Payments for the Incentive Period pursuant to Section 4.2 above, (ii) and such Participant's share of such total dollar amount. 4.4 Unless otherwise determined by the Committee or required by applicable law, no payment pursuant to this Plan shall be made to a Participant unless the Participant is employed by the Corporation as of the date of payment. 4.5 Incentive Payments shall be subject to applicable federal, state and local withholding taxes and other applicable withholding in accordance with the Corporation's payroll practices as from time-to-time in effect. 5. TRANSFERABILITY Incentive Payments shall not be subject to the claims of creditors and may not be assigned, alienated, transferred or encumbered in any way by a Participant other than by will or pursuant to the laws of descent and distribution. 6. TERMINATION OR AMENDMENT The Board may amend, modify or terminate the Plan in any respect at any time without the consent of Participants. Any such action of the Board may be taken without the approval of the Corporation's stockholders, but only to the extent that such stockholder approval is not required by applicable law or regulation, including specifically Section 162(m) of the Code. 7. CHANGE OF CONTROL Notwithstanding anything contained in this Plan, in the event of a Change of Control, the following provisions shall be applicable: (a) The Incentive Period will be deemed to have concluded on the date of the Change of Control and the dollar amount available pursuant to Section 4.2 will fund on a pro-rata basis (based upon the number of days in such Incentive Period elapsed through the date of Change of Control) assuming the Corporation had attained Performance Goals at a level generating funding at 200% of target funding; and (b) The Committee in its sole discretion will determine the share of available dollars payable to each Participant as that Participant's Incentive Payment (provided that in all events the entire amount of dollars available as calculated pursuant to Section 7(a) shall be paid to Participants as Incentive Payments) and payments shall be made to each Participant as soon thereafter as is practicable. 8. SAVINGS CLAUSE This Plan is intended to comply in all aspects with applicable law and regulations, including, with respect to those Participants who are "covered employees," Section 162(m) of the Code. In case any one or more of the provisions of this Plan shall be held invalid, illegal or unenforceable in any respect under applicable law and regulations, the validity, legality and enforceability of the remaining provisions shall not in any way be N-3 affected or impaired thereby and the invalid, illegal or unenforceable provision shall be deemed null and void; however, to the extent permissible by law, any provision which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit this Plan to be construed in compliance with all applicable laws (including Code Section 162(m)), so as to foster the intent of this Plan. 9. CONFER NO OTHER RIGHTS The establishment of the Plan shall not confer upon any Participant any legal or equitable right against the Corporation, except as expressly provided in the Plan. 10. NO RIGHT TO EMPLOYMENT The Plan, an Incentive Payment, or the designation of an employee as a Participant for an Incentive Period do not constitute an inducement or consideration for the employment of any Participant, nor is the Plan or any Incentive Payment a contract between the Corporation and any Participant. Participation in the Plan shall not give a Participant any right to be retained in the employ of the Corporation. 11. OTHER PLANS Nothing contained in this Plan shall prevent the Board or Committee from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required, and such arrangements may benefit Participants and may be either generally applicable or applicable only in specific cases. 12. GOVERNING LAW To the extent that federal laws do not control, the Plan shall be governed, construed and administered in accordance with and governed by the internal laws of the State of Illinois. 13. EFFECTIVE DATE; TERM OF THE PLAN The Plan shall be effective as of January 1, 1995 subject to its approval by the stockholders of the Corporation at the annual meeting to be held April 21, 1995, or any adjournment thereof. Unless sooner terminated by the Board pursuant to Section 6, to the extent necessary to ensure that Incentive Payments made to "covered employees" as defined under Section 162(m) of the Code may be deductible for federal income tax purposes, the Plan shall terminate as of the date of the first meeting of the Corporation's stockholders occurring during the year 2000, unless the term of the Plan is extended and reapproved at such stockholders' meeting. No additional Incentive Payments may be paid after termination of the Plan. Termination of the Plan shall not affect any Incentive Payments due and outstanding on the date of termination and such Incentive Payments shall continue to be subject to the terms of the Plan notwithstanding its termination. N-4 EX-12 7 COMPUTATION OF RATIOS EXHIBIT 12. STATEMENTS RE COMPUTATION OF RATIOS The ratios of income to fixed charges have been computed on the basis of the total enterprise (as defined by the Commission) by dividing income before fixed charges and income taxes by fixed charges. Fixed charges consist of interest expense on all long-term and short-term borrowings, excluding or including interest on deposits as indicated. The computations of other ratios presented in the Corporation's 1994 Annual Report to Stockholders and incorporated by reference into the Form 10-K are evident from the information presented in the 1994 Annual Report to Stockholders. EX-13 8 ANNUAL REPORT EXHIBIT 13 FIRST CHICAGO CORPORATION [LOGO OF FIRST CHICAGO CORPORATION] Annual Report 1994 The mission of First Chicago Corporation is to be a world-class financial services company with a reputation for customer excellence. To fulfill this mission, we commit to: Focus on our customers. We will anticipate and meet our customers' needs by providing quality products, technology, and service. Invest in our employees. We will respect and value our work force and will offer competitive opportunities for professional growth and financial reward. Reward our shareholders. We will produce attractive returns on equity and long-term earnings growth based on a strong financial position and prudent risk management practices. Support our communities. We will be responsible corporate citizens and participate in enriching the quality of community life. Take personal responsibility for the success of First Chicago. We will each demonstrate the highest level of professionalism and integrity in all that we do. We commit to being FIRST in all we do. [FCC LOGO] Table of Contents ------------------------------------------------------- 3 Financial Highlights ------------------------------------------------------- 4 Letter to Stockholders ------------------------------------------------------- 12 Business Highlights, Outlook and Strategy ------------------------------------------------------- 16 Board of Directors ------------------------------------------------------- 17 Financial Review ------------------------------------------------------- 70 Executive Officers ------------------------------------------------------- 71 U.S. Offices and International Facilities ------------------------------------------------------- 72 Corporate Information ------------------------------------------------------- First Chicago Corporation 2 Annual Report 1994
Financial Highlights (Dollars in millions, except per share data) 1994 1993 Change ------------------------------------------------------------------------------------- For the Year Net interest income--tax-equivalent basis...... $1,355.2 $1,264.0 + 7% Combined credit provisions..................... 225.7 274.2 -18 Noninterest income............................. 1,874.6 2,202.4 -15 Noninterest expense*........................... 1,916.9 1,853.9 + 3 Net income..................................... 689.7 804.5 -14 Return on assets............................... 1.08% 1.42% Return on common stockholders' equity.......... 17.0% 24.2% ------------------------------------------------------------------------------------- At Year-End Assets......................................... $65,900 $52,560 +25% Loans.......................................... 25,947 23,103 +12 Deposits....................................... 31,666 28,186 +12 Common stockholders' equity.................... 3,922 3,503 +12 Risk-based capital ratio....................... 13.4% 13.6% ------------------------------------------------------------------------------------- Average Balances Assets......................................... $64,138 $56,854 +13% Loans.......................................... 23,293 21,997 + 6 Deposits....................................... 29,430 29,677 -1 ------------------------------------------------------------------------------------- Common Share Data Earnings per share Net income--primary.......................... $ 7.04 $ 8.78 -20% Net income--fully diluted.................... 6.88 8.43 -18 Dividends declared............................. 1.95 1.30 +50 Book value, year-end........................... 43.65 40.55 + 8 Market price, year-end......................... 47.75 43.25 +10 ------------------------------------------------------------------------------------- Nonfinancial Data (Year-End) Number of employees (full-time-equivalent)..... 17,630 17,355 Number of common stockholders of record........ 14,773 15,034 -------------------------------------------------------------------------------------
*Excludes provisions for other real estate. First Chicago Corporation 3 Annual Report 1994 To The Owners of First Chicago Operating in the extremely competitive financial services environment, it is our responsibility to man- age the Corporation to produce attractive near- term results at the same time that we provide for the Corporation's long-term stability and growth. First Chicago's senior management feels strongly that communicating clearly our strategic direction, our core values and our commitment to our various constituencies is critically important to the Corporation's success. For this reason, we have developed a new corporate mission statement: to be a world-class financial services company with a reputation for customer excellence. The key elements in this mission are a commit- ment to focus on customers, to invest in employees, to reward stockholders, to support our communi- ties, and for each employee to take personal responsibility for the success of First Chicago. The basic elements of our strategy to fulfill this mission are: . a commitment to be a national player in both consumer and corporate banking, and to enhance our capability to serve corporations and institutions on a global basis; . a recognition that our success will depend on tailoring and delivering value-added products to customers; . continued and increased investment in technology; and . prudent risk management and shareholder- oriented management of our capital. In conjunction with our mission statement, we established a new goal for First Chicago: to become one of the top ten U.S. bank holding companies in market capitalization. This is an ambitious goal, but we believe that it is attainable over time. It symbolizes our desire to be a world-class institution headquartered in a world-class city. Our mission reinforces our focus on serving cus- tomers with excellence, and it creates an energizing environment for employees to work together toward that purpose. COMMITMENT TO CUSTOMERS First Chicago's success is deeply rooted in its com- mitment to customer relationships. This customer focus across all our business lines -- credit card, community banking, corporate and institutional banking, and middle market banking -- has enabled us to build leading market positions. In 1994 we put even greater emphasis on serving customers with quality and innovation. For example, through our Corporate and Institutional Banking "Customer First" program, we are imple- menting new processes to deliver complex solutions to customer needs, anchored in what our customers tell us they value. This approach should broaden and deepen our relationships, streamline our work and improve our competitiveness. Our commitment to customers is reinforced by senior management throughout the Corporation, particularly in programs recognizing employee innovation and quality customer service. We celebrate outstanding performance through an extensive process that promotes the First Chicago mission and recognizes "value-added" activity, courteous action and responsive service to external and internal customers. In this way we continue to strengthen all parts of our franchise. This valuable franchise provides First Chicago a solid foundation for continued attractive financial performance. Information about 1994 business activities as well as an overview of our strategy and outlook for each business are presented in the section that follows this letter. First Chicago Corporation 4 Annual Report 1994 RISK MANAGEMENT Risk management has always been an important part of First Chicago's culture. However, the business of banking has evolved over the past several years in such a way that understanding, assuming and man- aging risk have become even more complex and important. [PHOTO APPEARS HERE] We provide our diverse customer base a broad range of products and services to manage their risks, and we devote substantial resources to [PHOTO CAPTION FOLLOWS] the management of risk for our own account. (Left to Right) Leo F. Mullin We believe that First Chicago's Richard L. Thomas risk profile is excellent: David J. Vitale . Credit quality is superior, with a low level of non-performing assets and very strong reserves. . Exposure to market risk is appropriate to our size. . Our vulnerability to changing interest rates is minimal. . Operating and liquidity risk are both modest. The strength of our risk profile is the result of a disciplined management approach and good execution of policies over the past several years. Our policy of minimizing structural interest rate risk proved to be especially important in the volatile climate of 1994 as we were able to protect both asset values and net interest margins. Our venture capital portfolio is another example of our approach to risk management. We made the strategic decision in 1992 to reduce this portfolio over time because of its inherent volatility and regulatory changes. In 1994 our $1.6 billion portfolio generated earnings of $95 million, representing a return on equity of 26%, and we hedged a large portion of our holdings to reduce future earnings volatility. We anticipate that the venture capital portfolio will continue to produce meaningful revenue over the next several years. CAPITAL MANAGEMENT In conjunction with prudent risk management policies, we are committed to managing capital for the maximum benefit of our stockholders. The Corporation's capital position is very strong. Our regulatory capital ratios at year-end continued to exceed "well-capitalized" guidelines by a wide margin. Our priority is to ensure that we have ample capital to both support existing businesses and invest in attractive new core business opportuni- ties. When appropriate, we will also return excess capital to stockholders. Since late 1993 we have First Chicago Corporation 5 Annual Report 1994 taken aggressive actions in this regard. During this time we increased the annual dividend 83%, and we repurchased 4.8 million shares of common stock. INVESTING IN EMPLOYEES In a rapidly changing industry like financial services, our success depends on our talented and motivated employees continuing to work together in a spirit of teamwork. But this is not enough. To accomplish First Chicago's mission, it is crucial that we invest in our employees as both the work force and the workplace change over time. We must foster a healthy work environment, and we must also provide our employees the products and technology necessary to achieve competitive advantage in the marketplace. [PHOTO APPEARS HERE] [PHOTO CAPTION FOLLOWS] Based on the belief that quality health care is cost effective, First Chicago's wellness programs promote employee health while helping to constrain medical costs. Working in partnership with the Benefits Unit, Medical Director Dr. Wayne Burton develops and administers a variety of employee wellness initiatives including prenatal care programs. [PHOTO APPEARS HERE] [PHOTO CAPTION FOLLOWS] Investing in employees' development is an important part of First Chicago's mission. Titus Fair, staff member of the First Development Center, participates in a computer training session. We have an excellent record in addressing issues of concern to our employees. We place particular emphasis on providing a cost-effective, quality health care program, and we have received national recognition, including the C. Everett Koop Award, for our activities related to employee wellness, mammography, prenatal care and mental health. In late 1993 the senior management of First Chicago launched a new initiative to help us more effectively promote and manage diversity through- out the Corporation. We call this the LEAD initia- tive, which stands for Leadership, Equality, Affirmative Action and Diversity. During 1994 we made significant progress with LEAD. We strengthened our mentoring programs to increase employee development and retention; we expanded diversity awareness and appreciation programs; and we initiated an awards program to recognize employees who champion the LEAD commitment. First Chicago Corporation 6 Annual Report 1994 Through our educational programs, we continue to invest in our employees' ongoing development, especially in the areas of leadership, change management and technology-based skills. In addition, we provide basic skills education for entry-level employees. Finally, we were very proud to have been select- ed in 1994 by Working Mother magazine as one of the 100 Best Companies in the United States. Our award was based on our Work and Family Resource Center, which last year helped more than 2,000 employees obtain information about child care or care for aging parents; our continuing innovation in helping employees design flexible work arrangements; our Women's Health Care Program; and the First Card Child Care Center. These are just a few examples of the ways that First Chicago is investing in employees. And, we are very encouraged by the fact that employees, in turn, are investing in First Chicago. In aggregate, our employees own more than 4 million shares of the Corporation's common stock, or nearly 5% of shares outstanding. And, enrollment in the 1994 offering of the Employee Stock Purchase and Savings Plan was at an all-time high -- nearly 43% of our employees are participating in the program. [PHOTO APPEARS HERE] [PHOTO CAPTION FOLLOWS] Through stock ownership, employees can experience the rewards of taking personal responsibility for the success of First Chicago. Executive Compensation Specialist Cristina Escueta adminis- ters the Employee Stock Purchase and Savings Plan through which employees can conveniently save for stock purchase through payroll deduction. First Chicago Corporation 7 Annual Report 1994 SUPPORT FOR OUR COMMUNITIES Although First Chicago has operations throughout the world, we are especially fortunate to be head- quartered in Chicago, a world-class city by any definition. We have a sense of responsibility to all the communities in which we do business, but we feel a particular obligation to help make our headquarters city and its suburban communities an even better place in which to live and work. [PHOTO APPEARS HERE] [PHOTO CAPTION FOLLOWS] Little Village Branch President Francisco Menchaca (right) visits customers Mario and Guadalupe Salazar in their balloon and party goods store, Roy's Funland. Mr. and Mrs. Salazar were assisted in their business start-up by ACCION-Chicago, a non-profit organization that helps Little Village entrepreneurs obtain micro business loans. First Chicago played a key role in establishing the ACCION program in Chicago. First Chicago employees are active in many facets of community life. They serve as directors and trustees of more than 300 institutions and organizations in Chicago, ranging from premier health and cultural entities to small neighborhood development associations. Our employees also give generously to the United Way/Crusade of Mercy. Indeed, in 1994 the combined pledges of the Corporation and the employees to United Ways in our various locations across the country totaled $5.1 million. In the Chicago area, our com- bined pledge of $4.9 million was the largest of the entire metropolitan campaign. We feel strongly that our success is closely related to the health and prosperity of our community. In our lending and investment activities we seek to implement policies that will benefit neighborhoods, assure equal access to credit and promote economic develop- ment. We believe we are mak- ing a difference, and we shall strive to continue to do so. REGIONAL ECONOMY In the context of a national economy that continues to perform very well, we are especially fortunate to be headquartered in Chicago, one of the most vibrant metropolitan areas in the country. Furthermore, economic conditions in the entire Midwest region, driven by strength in the capital goods and automotive First Chicago Corporation 8 Annual Report 1994 [PHOTO APPEARS HERE] [PHOTO CAPTION FOLLOWS] First Chicago provides community support through financial contributions and employees' personal involvement in non- profit organizations. As chairman of First Chicago's 1994 United Way campaign, John Ballantine tours the United Way- funded Children's Home & Aid Society of Illinois' Rice Center in Evanston where Occupancy Planner Penny Varnava volunteers on weekends. First Chicago Corporation 9 Annual Report 1994 [PHOTO APPEARS HERE] [PHOTO CAPTION FOLLOWS] First Card's Visa(R) Gold Card is accepted by over 12 million establishments around the world, including First Chicago banking customer Keith Alm's Green Bay Maritime Galleries in Winnetka. First Card is the world's largest issuer of Gold Cards. sectors, have been exceptionally buoy- ant during the past year. The region experienced record highs in heavy manu- facturing sector profits, which in turn generated service sector gains. With burgeoning exports and low unemployment, the outlook for the Midwest continues to be positive, which is very favorable for First Chicago and our customers. 1994 FINANCIAL RESULTS First Chicago produced excellent results in 1994 with net income of $690 million, or $6.88 per fully diluted share. Furthermore, with a 1994 return on equity of 17%, we have established a pattern of consistent performance. Our return on equity has met or exceeded 15% for nine consecutive quar- ters. These results reflect the superior mix of our customer franchises as well as the diversity of our earnings: an outstanding contribution from our credit card, record performance in our middle market business, improvement in community banking and excellent venture capital results. In large corporate banking, our business units that serve customers in various market segments performed well, and we continued to build our position as a leading provider of finance, risk management, cash management and other First Chicago Corporation 10 Annual Report 1994 operating services. However, trading results were significantly lower due largely to very difficult market conditions. While achieving our earnings objectives for 1994, we further improved credit quality, strength- ened the balance sheet, and protected our net interest margin through disciplined management of interest rate risk. In sum, we believe that First Chicago is strongly positioned for 1995 and the future. We are very pleased that during 1994 First Chicago stockholders saw tangible appreciation in the value of their holdings. From year-end 1993 to year-end 1994, the price of First Chicago common stock increased by more than 10%, considerably more than most bank stocks or the broader market indices. Further, dividend increases announced in November 1993, May 1994 and November 1994 brought the annual dividend rate from $1.20 to $2.20 per share. INDUSTRY OUTLOOK As we enter 1995, the commercial banking industry is extremely healthy. Its capital base is stronger than at any time in recent history, credit quality is generally very good, and the economic environment is excellent. Further, we are heartened by the favorable Congressional actions of 1994: interstate banking, regulatory relief and bankruptcy reform. In our opinion, these legislative developments represent a more constructive attitude in Washington toward commercial banking. Over the longer term, however, our industry faces significant challenges. To compete against financial service providers that are not subject to bank regulations, the banking industry will need greater authority to offer new products and to operate with greater freedom and flexibility. We are cautiously optimistic that we can build upon the successes achieved in 1994, and we are committed to working diligently to that end. CONCLUSION In committing to be FIRST in all we do, we are confident that First Chicago will fulfill its mission to be a world-class financial services company with a reputation for customer excellence. Our franchise is based in one of the finest markets in the country, and our variety of businesses provides a diversity of earnings that serves to insulate us from unfavorable cycles in any one market segment. With continued focus on our customers, pru- dent risk management and shareholder-oriented capital management, and investments in both our employees and our community, we are confident that First Chicago can perform at the high level necessary to generate superior returns for stock- holders over time. We are optimistic about First Chicago's future. We are committed to fulfilling our mission. And, we appreciate your ongoing support in our endeavors toward that goal. /s/ R. L. Thomas Richard L. Thomas Chairman /s/ Leo F. Mullin Leo F. Mullin President /s/ David J. Vitale David J. Vitale Vice Chairman First Chicago Corporation 11 Annual Report 1994 Business Highlights, Outlook and Strategy CONSUMER BANKING First Chicago has an exceptional consumer franchise. We are a premier bankcard issuer in the U.S. and the leader in the Chicago retail market. Consumer banking, driven by our credit card business, was our largest contributor to profits in 1994 and, despite an increasingly competitive marketplace, generated record earnings. Credit Card We are proud to have one of the foremost bankcard operations in the United States. With over 12 million customers nationwide, First Card ranks among the industry leaders in receivables and transaction volume and is the world's No.1 issuer of Gold Cards. First Card's extremely success- ful Mileage Plus(R) program with United Airlines also differentiates us from other issuers. In 1994 First Card achieved record earnings of $309 million, generating an exceptional return on equity of 58%. For the third consecutive year, more than 2 million new accounts were opened. Average managed receivables grew about 20%, and outstandings at year-end were $12 billion. First Chicago has thrived in an extremely competitive environment, which has presented extensive challenges to all major bankcard issuers. The reasons for our success are straightforward. We offer valued-added competitive products; we utilize sophisticated information-based marketing techniques and credit management tools; our operations are extremely efficient; and we benefit from an experienced and loyal work force. These strengths will continue to give us a competitive edge. We are committed to growing our bankcard franchise. We will continue aggressive solicitation and retention programs, and we may also consider portfolio acquisitions to enhance growth. We believe that the credit card industry will enjoy sustained volume growth (12-15% annually) as consumers increasingly favor the convenience of bankcards over other forms of payment or credit. We also anticipate that our credit card business will equal or exceed that rate of growth for the foreseeable future. Although competitive price pressures are likely to constrain earnings growth, we are confident that our card operations will continue to generate excellent returns. Community Banking With a 24% market share, First Chicago has the strongest retail banking franchise in Chicagoland, serving consumers and small businesses with more than 80 branches. Including Chicago area credit card customers, nearly 50% of the area's 2.7 million households have a relationship with First Chicago. To improve the profitability of this franchise, we have implemented a three-year plan focusing on strategy, cost and culture. Our strategy is based on customer segmentation with approaches tailored to customers' individual needs and preferences for financial products and services. Reducing cost while improving quality and responsiveness is key to improving our retail profitability. We have simplified sales and service processes to increase the effectiveness of our branches and backroom operations. And, as recent acquisitions are integrated into Community Banking, a common culture and operating philoso- phy are being reinforced throughout the network. In 1994 Community Banking generated earn- ings of $22 million with a return on equity of 5%, which reflect the repositioning it is undergoing. First Chicago Corporation 12 Annual Report 1994 [PHOTO APPEARS HERE] [PHOTO CAPTION FOLLOWS] Personal Banker Alice Farmer pays a call on her client Stuart Brent at his vintage store, Stuart Brent Books, located for 48 years on North Michigan Avenue. Having banked with Lake Shore National Bank for 50 years, Brent is now a valued First Chicago customer. We believe substantial progress will be demonstrated in 1995 toward our goals of improving net income by $100 million and achieving a return on equity of 15% or greater by 1997. During 1994 the consumer business of Lake Shore Bancorp., Inc. was successfully integrated into Community Banking. To provide retail customers even greater convenience and speed of service, First Chicago will invest in emerging technology to expand Direct Banking services in Chicago and nationally. In January 1995 First Chicago Investment Management Company was launched to better First Chicago Corporation 13 Annual Report 1994 serve the mutual fund and 401(k) plan needs of retail and business clients. We may also consider acquisitions to bolster our product capabilities in the investment management area. CORPORATE BANKING First Chicago serves the operational, financial and advisory needs of large corporate and institutional customers on a global basis and mid-sized compa- nies in Chicago and throughout the Midwest. With an excellent reputation in both our large corporate and middle market segments, our customer rela- tionships have never been stronger. Corporate and Institutional Banking In Corporate and Institutional Banking, First Chicago ranks No.1 with Midwest companies and among the top banks nationally. In capital markets, [PHOTO APPEARS HERE] [PHOTO CAPTION FOLLOWS] Staying on top of fast-paced foreign exchange transactions are (clockwise from bottom) traders Elizabeth Schulz, Joseph Busch and Rajeev Bahri. First Chicago is well recognized as a key player in foreign exchange, which is a critical core component of our capital markets capabilities. [PHOTO APPEARS HERE] [PHOTO CAPTION FOLLOWS] First Chicago's Procurement Card offers corporations like Amoco the opportunity to reduce payment processing expense on small-dollar purchases while maintaining appropriate purchasing controls. Amoco employees Mark Byrnside, who helped implement the program at Amoco, and Toni Blackmon like the convenience the Procurement Card provides. we are a key player in foreign exchange and in interest rate and currency derivatives. In operating products technology, we are a recognized leader and rank among the top three banks in cash management. In 1994 we won an important new contract with the Internal Revenue Service to process electronic tax payments, and we made excellent progress in selling our innovative Procurement Card to corporate customers. Corporate and Institutional Banking had earn- ings of $134 million and return on equity of 7% in 1994. As discussed earlier, its performance was affected by difficult financial market conditions. The fundamental purpose of Corporate and Institutional Banking is to meet our customers' needs by providing a broad range of integrated financial solutions in a manner that creates shareholder value. To accomplish this mission, we have broadened our product range and dramatically improved our risk profile over the past several years. Combined with the reduction of our real estate portfolio and a de-emphasis on customers who used only the First Chicago Corporation 14 Annual Report 1994 loan product, the broader range of product offer- ings has significantly decreased the importance of lending. In 1994 average loans outstanding equaled $9.5 billion, a reduction of nearly 50% from 1990, and loan product revenue was about 20% of Corporate and Institutional Banking's total revenue. Meeting the changing needs of large corporate customers requires that we continually tailor our approach to serving them. In this regard, we will be making significant investments in technology in 1995 and beyond. During 1994 we renewed our commitment to enhance our international capabilities in light of our multinational customers' increasing needs for global banking services. We may also pursue acquisitions, alliances and joint ventures to support further growth and extend our capabilities in both operating products and the international arena. With sound execution of our strategy, aided by more favorable financial markets, we believe that Corporate and Institutional Banking offers good upside potential and has the capacity to generate a double-digit return on equity in 1995 and meet our 15% return on equity goal over time. Middle Market Banking Primarily through our subsidiary American National Corporation, we serve the vibrant middle market in greater Chicagoland, home to almost 10,000 middle market companies with annual sales of $5-$150 million. With an exemplary reputation for customer service, American National is the leader in the middle market with a 22% market share. A key accomplishment in 1994 was the integration of the commercial business of Lake Shore Bancorp., Inc., which further solidified American National's No.1 position in the Chicagoland middle market. In 1994 American National generated record earnings, contributing net income of $74 million and a 19% return on equity. This excellent performance reflects strong loan growth and the healthy Midwest economy. With this firm base, we anticipate that American National should have steady earnings growth and the capacity to earn consistent returns on equity in the range of 16-18%. [PHOTO APPEARS HERE] [PHOTO CAPTION FOLLOWS] Allan Maca (left), Chief Executive Officer of Sommer and Maca Industries, meets with American National Commercial Banker David Mook. A Cicero-based manufacturer of equipment for the glass industry, Sommer and Maca has been an American National customer for almost ten years. With exports growing as trade barriers fall around the world, Sommer and Maca benefits from American National's international banking and trade services. First Chicago Corporation 15 Annual Report 1994 Board of Directors Richard L. Thomas Chairman of the Board and Chief Executive Officer First Chicago Corporation Leo F. Mullin President and Chief Operating Officer First Chicago Corporation David J. Vitale Vice Chairman of the Board First Chicago Corporation John H. Bryan* Chairman of the Board and Chief Executive Officer Sara Lee Corporation Global manufacturer and marketer of brand name products Dean L. Buntrock Chairman of the Board and Chief Executive Officer WMX Technologies, Inc. Comprehensive environmental and engineering services company James S. Crown General Partner Henry Crown and Company (Not Incorporated) Diversified investments Donald V. Fites* Chairman of the Board and Chief Executive Officer Caterpillar Inc. Manufacturer of a wide range of construction, earthmoving and material handling equipment and engines Donald P. Jacobs Dean of the J.L. Kellogg Graduate School of Management Northwestern University Education and research Andrew J. McKenna* Chairman of the Board, President and Chief Executive Officer Schwarz Paper Company Printer, converter and distributor of packaging materials Richard M. Morrow* Retired Chairman Amoco Corporation Diversified international petroleum company Earl L. Neal Principal Earl L. Neal & Associates Law firm James J. O'Connor Chairman and Chief Executive Officer Unicom Corporation Production, distribution and sale of electric energy Jerry K. Pearlman Chairman and Chief Executive Officer Zenith Electronics Corporation Manufacturer and distributor of a diversified line of electronics products Jack F. Reichert Chairman of the Board and Chief Executive Officer Brunswick Corporation A multinational company with leadership positions in marine power, pleasure boating and recreation Patrick G. Ryan President and Chief Executive Officer Aon Corporation A broad-based insurance holding company Adele Simmons President The John D. and Catherine T. MacArthur Foundation Philanthropic foundation Roger W. Stone Chairman of the Board, President and Chief Executive Officer Stone Container Corporation Manufacturer of paper, paper- related products and packaging systems equipment *Member of the Audit Committee First Chicago Corporation 16 Annual Report 1994 Index to Financial Review - -------------------------------------------------------------------------- Five-Year Summary of Selected Financial Information 18 - -------------------------------------------------------------------------- Business Segments 19 - -------------------------------------------------------------------------- Earnings Analysis 21 - -------------------------------------------------------------------------- Risk Management 25 - -------------------------------------------------------------------------- Liquidity Risk Management 25 - -------------------------------------------------------------------------- Market Risk Management 26 - -------------------------------------------------------------------------- Credit Risk Management 31 - -------------------------------------------------------------------------- Derivative Financial Instruments 35 - -------------------------------------------------------------------------- Capital Management 37 - -------------------------------------------------------------------------- Consolidated Financial Statements 40 - -------------------------------------------------------------------------- Notes to Consolidated Financial Statements 44 - -------------------------------------------------------------------------- Report of Management on Responsibility for Financial Reporting 64 - -------------------------------------------------------------------------- Report of Independent Public Accountants 65 - -------------------------------------------------------------------------- Selected Statistical Information 66 - -------------------------------------------------------------------------- First Chicago Corporation 17 Annual Report 1994
Five-Year Summary of Selected Financial Information First Chicago Corporation and Subsidiaries - ------------------------------------------------------------------------------------------------------------------------------- (Dollars in millions, except per share data) 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------------------------------------------------- Selected Financial Data for the Year Net interest income............................ $1,331.0 $1,225.8 $1,183.0 $1,080.0 $1,197.6 Tax-equivalent adjustment...................... 24.2 38.2 34.0 37.9 44.2 --------- -------- -------- -------- -------- Net interest income--tax-equivalent basis...... 1,355.2 1,264.0 1,217.0 1,117.9 1,241.8 Combined credit provisions Assets held for accelerated disposition...... -- -- 625.0 -- -- Other........................................ 225.7 274.2 481.9 544.3 518.8 Noninterest income............................. 1,874.6 2,202.4 1,488.2 1,225.2 1,199.3 Noninterest expense (1)........................ 1,916.9 1,853.9 1,764.4 1,597.0 1,565.9 Income (loss) before cumulative effect of changes in accounting principles............. 689.7 804.5 (114.5) 116.3 249.3 Cumulative effect of changes in accounting principles................................... -- -- 208.0 -- -- Net income..................................... 689.7 804.5 93.5 116.3 249.3 - ------------------------------------------------------------------------------------------------------------------------------- Earnings per share Primary Income (loss) before cumulative effect of changes in accounting principles........ $7.04 $8.78 $(2.08) $1.15 $3.35 Net income................................... 7.04 8.78 0.64 1.15 3.35 Fully diluted Income (loss) before cumulative effect of changes in accounting principles........ 6.88 8.43 (2.08) 1.15 3.32 Net income................................... 6.88 8.43 0.64 1.15 3.32 Dividends declared per common share............ 1.95 1.30 1.20 2.00 2.00 - ------------------------------------------------------------------------------------------------------------------------------- At Year-End Assets......................................... $65,900 $52,560 $49,281 $48,963 $50,779 Loans.......................................... 25,947 23,103 22,692 25,661 27,706 Deposits....................................... 31,666 28,186 29,740 32,091 32,543 Long-term debt................................. 2,271 2,065 1,705 1,725 1,428 Common stockholders' equity.................... 3,922 3,503 2,732 2,401 2,393 Stockholders' equity........................... 4,533 4,264 3,401 2,970 2,812 - ------------------------------------------------------------------------------------------------------------------------------- Average Balances Assets......................................... $64,138 $56,854 $54,768 $52,655 $53,097 Earning assets................................. 52,627 48,517 46,706 44,512 45,502 Loans.......................................... 23,293 21,997 24,347 27,281 30,609 Deposits....................................... 29,430 29,677 31,694 32,819 34,213 Common stockholders' equity.................... 3,757 3,092 2,733 2,431 2,343 Stockholders' equity........................... 4,443 3,886 3,314 2,938 2,762 - ------------------------------------------------------------------------------------------------------------------------------- Financial Ratios Return on stockholders' equity................. 15.5% 20.7% 2.8% 4.0% 9.0% Return on common stockholders' equity.......... 17.0 24.2 1.8 3.2 9.4 Return on assets............................... 1.08 1.42 0.17 0.22 0.47 - ------------------------------------------------------------------------------------------------------------------------------- Capital Ratios (2) Common-equity-to-assets........................ 6.6% 7.2% 5.9% 5.1% 4.8% Regulatory leverage ratio...................... 7.5 8.0 6.6 5.8 5.0 Risk-based capital Tier 1 ratio................................. 8.8 8.8 6.7 5.5 4.9 Total capital ratio.......................... 13.4 13.6 10.8 9.4 8.3 Tier 1 capital............................... $4,325 $4,098 $3,223 $2,804 $2,642 Total capital................................ 6,566 6,292 5,221 4,762 4,441 - ------------------------------------------------------------------------------------------------------------------------------- Common Share and Stockholder Data Market price, end of year...................... $47-3/4 $43-1/4 $36-3/4 $24-5/8 $16-1/2 Book value, end of year........................ 43.65 40.55 33.19 34.90 36.27 Common dividends............................... 172.7 109.6 89.3 135.5 131.8 Preferred dividends (3)........................ 52.2 57.0 44.6 38.2 29.8 Dividend payout ratio.......................... 27.7% 14.8% 187.5% 174.0% 59.7% Number of common stockholders of record........ 14,773 15,034 15,995 13,089 12,445 Average common and common-equivalent shares.... 90,529,136 85,173,941 76,496,506 67,666,850 65,525,045
- ------------------------------------------------------------------------------ (1) Excludes provisions for other real estate. (2) Net of investment in First Chicago Capital Markets, Inc. (3) 1994 includes a $4.5 million premium related to the redemption of Preferred Stock, Series D. First Chicago Corporation 18 Annual Report 1994
- ---------------------------------------------------------------------------------------------------------------------------------- BUSINESS SEGMENTS - ---------------------------------------------------------------------------------------------------------------------------------- Consumer Corporate Other First Chicago Banking Banking Activities (1) Corporation (Dollars in millions, ---------------- ---------------- ---------------- ---------------- except where noted) 1994 1993 1994 1993 1994 1993 1994 1993 - ---------------------------------------------------------------------------------------------------------------------------------- Net income....................... $ 331 $ 258 $ 208 $ 291 $151 $255 $ 690 $ 804 Return on equity................. 36% 35% 9% 15% N/M N/M 17% 24% Average assets (presecuritized) (in billions).................. $16.0 $14.4 $52.3 $45.5 $1.4 $1.8 $69.7 $61.7 Average common equity (in billions).................. 0.9 0.7 2.1 1.7 0.8 0.7 3.8 3.1 - ----------------------------------------------------------------------------------------------------------------------------------
(1) Includes results from the accelerated asset disposition portfolio, the venture capital group and other special corporate items. See Note 4, on page 47, for further details. N/M--Not meaningful. Financial results are aligned by customer segment-- Consumer and Corporate--and by major businesses within these categories. The results are derived from the internal profitability reporting system and reflect full allocation of all institutional and overhead items. This system uses a detailed funds transfer methodology and a common equity allocation based on risk elements. Consumer Bank- ing results are presented before the securitization of credit card receivables (``presecuritized'') to facilitate analysis of trends. See the discussions of net interest income on page 22 and a reconciliation of reported to presecuritized results on page 66. - ---------------------------------------------------- PIE CHART: 1994 Earnings Mix ($ In millions) % Credit Card $309 44.8% Community Banking 22 3.2 Corporate & Institutional 134 19.4 Middle Market 74 10.7 Venture Capital 95 13.8 Other 56 8.1 Total $690 100.0 - ----------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- CONSUMER BANKING* - ----------------------------------------------------------------------------------------------------------------------------------- Credit Card Community Banking (Dollars in millions, --------------------------------- -------------------------------- except where noted) 1994 1993 1992 1994 1993 1992 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income--tax-equivalent basis... $ 905 $783 $593 $363 $322 $314 Combined credit provisions.................. 454 405 349 31 26 25 Noninterest income.......................... 519 432 343 188 198 184 Noninterest expense (1)..................... 477 396 330 486 473 425 Net income.................................. $ 309 $248 $153 $ 22 $ 10 $ 29 Return on equity............................ 58% 60% 47% 5% 2% 10% Efficiency ratio (2)........................ 33% 33% 35% 88% 91% 85% Average assets (in billions)................ $10.5 $9.0 $7.4 $5.5 $5.4 $5.0 Average loans (in billions)................. 10.4 8.5 7.1 4.6 4.1 3.7 Average common equity (in billions)......... 0.5 0.4 0.3 0.4 0.3 0.2 - -----------------------------------------------------------------------------------------------------------------------------------
*Contribution from $0.8 billion in Chicago credit card relationships is split equally between Credit Card and Community Banking. (1) Excludes provisions for other real estate. (2) Noninterest expense as a percentage of total revenue. CONSUMER BANKING First Chicago serves local consumers and small businesses through more than 80 retail banking branches. Nationally, it reaches consumers through First Card, which is one of the largest issuers of bank credit cards in the U.S. In total, Consumer Banking earned $331 million, nearly half of the Corporation's net income, in 1994. Return on equity, driven by the credit card business, was 36%. Credit Card The Corporation continued to invest aggressively in its credit card business, and by almost any measure First Card had its most successful year in 1994. Despite increasing competitive pressures, net income rose 25% to $309 mil- lion, and return on equity was an outstanding 58%. First Chicago Corporation 19 Annual Report 1994 - ------------------------------------------------------------- Average credit card loans, including securitized receiv- ables, increased 21%. (For business segment reporting, half of the Chicagoland credit card accounts and profits are included in Community Banking results.) Consequently, net interest income for the year was up 16% and noninter- est income grew 20%. Community Banking In 1994, Community Banking earned $22 million, gener- ating a return on equity of 5%. During the year, a restruc- turing plan was announced for this business, which calls for a profit improvement of $100 million by 1997. A sig- nificant initiative is under way to reduce the expense base in Community Banking. A special charge of $7 million was recorded related to the reduction of 600 staff positions. Results for 1994 reflect the addition at midyear of a por- tion of the portfolio of Lake Shore Bancorp., Inc. Net inter- est income for the year increased 13% due to wider spreads and higher volumes.
- ------------------------------------------------------------------------------------------------------------------------ CORPORATE BANKING - ------------------------------------------------------------------------------------------------------------------------ Corporate and Institutional Banking Middle Market Banking (ANC) (Dollars in millions, ----------------------------------- ----------------------------- except where noted) 1994 1993 1992 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------ Net interest income--tax-equivalent basis...... $ 393 $ 416 $ 482 $257 $224 $213 Combined credit provisions..................... (36) 35 261 29 42 53 Noninterest income............................. 511 825 556 82 81 72 Noninterest expense (1)........................ 716 771 721 191 192 184 Net income..................................... $ 134 $ 247 $ 38 $ 74 $ 44 $ 29 Return on equity............................... 7% 15% 1% 19% 13% 9% Efficiency ratio (2)........................... 79% 62% 69% 57% 63% 65% Average assets (in billions)................... $46.5 $40.0 $39.2 $5.8 $5.5 $5.5 Average loans (in billions).................... 9.5 10.2 13.6 4.3 3.8 3.7 Average common equity (in billions)............ 1.7 1.4 1.4 0.4 0.3 0.3 - ------------------------------------------------------------------------------------------------------------------------
(1) Excludes provisions for other real estate. (2) Noninterest expense as a percentage of total revenue. CORPORATE BANKING The Corporation is the leading provider of banking serv- ices to large corporations, governments, institutions and investors in Chicago and the Midwest. It is also among the top U.S. banking companies serving national and interna- tional customers. The large corporate banking business is conducted in Corporate and Institutional Banking. The Corporation ranks first with Chicagoland's middle market businesses, which are primarily served by its Amer- ican National Corporation subsidiary. For 1994, Corporate Banking businesses contributed $208 million, or about 30% of total corporate earnings. Return on equity was 9%. Corporate and Institutional Banking Profitability in Corporate and Institutional Banking was down substantially from 1993, principally as a result of the weakness in financial markets. Net income was $134 mil- lion, and return on equity was 7% for the year. Total rev- enues, which include net interest income and noninterest income, declined to $0.9 billion from $1.2 billion in 1993. - ----------------------------------------------------------------- Total Revenue (In millions) 1994 1993 1992 - ----------------------------------------------------------------- Trading....................... $130 $ 387 $ 332 Servicing..................... 377 370 316 Lending....................... 186 213 186 Financing..................... 152 208 117 Other......................... 59 63 87 ---- ------ ------ Total....................... $904 $1,241 $1,038 ==== ====== ====== - ----------------------------------------------------------------- - ----------------------------------------------------------------- Trading Revenue (In millions) 1994 1993 1992 - ----------------------------------------------------------------- Foreign exchange and derivatives.... $ 40 $ 98 $103 Fixed income and derivatives........ 66 114 94 Emerging markets.................... (49) 57 21 Funding and arbitrage............... 39 63 74 Other trading....................... 34 55 40 ---- ---- ---- Total............................. $130 $387 $332 ==== ==== ==== - ----------------------------------------------------------------- Revenue related to trading activities was $130 million, down from a record $387 million in 1993. Most of the shortfall came in the emerging markets segment and in the foreign exchange and derivatives category. Net interest income, and lending revenue in particular, continued to decline due to careful management of the loan portfolio. Average loans dropped to $9.5 billion from $10.2 billion in 1993. The year's results included $17 mil- lion of cash interest collections related to Brazilian debt, compared with $28 million in 1993. The largest revenue source in Corporate and Institutional Banking in 1994 was the broad category of servicing. Although total servicing revenue was up only slightly from 1993, revenue from cash management operations increased while securities services fees were essentially flat. Financing revenues decreased primarily because of reduced equity securities gains related to the corporate financing business; these revenues were exceptionally high in 1993. First Chicago Corporation 20 Annual Report 1994 - --------------------------------------------------------------- Credit quality in the large corporate business was excellent in 1994 as reflected in the negative provision for credit losses. This is a benefit of the successful accelerated asset disposition program initiated in 1992. Noninterest expense declined 7% to $716 million in 1994. Much of the decrease was due to lower incentive compen- sation payments. Middle Market Banking (American National Corporation) American National Corporation turned in a record per- formance in 1994, reflecting its leading share of Chicago- land's middle market business banking. The addition of Lake Shore Bancorp., Inc.'s middle market portfolio in July further strengthened American National's market leadership position. American National's contribution to total corporate earnings was $74 million in 1994, and return on equity was a strong 19%. Net interest income increased 15% and average loans grew 13% from 1993. Credit quality continued to improve as provision expense dropped to $29 million from $42 mil- lion in 1993. American National's disciplined expense management also contributed to its excellent 1994 per- formance. OTHER ACTIVITIES The venture capital portfolio contributed gains of $189 million in 1994, compared with $381 million in 1993. Net income was $95 million and return on equity 26% in 1994. Net gains from the management of assets held in the accel- erated disposition portfolio totaled $46 million for the year. A gain of $35 million from the sale of an interest in an investment management business is also included in noninterest income. Key expense components included a charge of $25 million related to the depreciation of personal computer equip- ment, and other corporate expenses of $19 million. STAFFING LEVELS Staff levels for each business segment as well as corporate support functions were as follows. - --------------------------------------------------------------- Average Full-Time- Equivalent Staff 1994 1993 1992 - --------------------------------------------------------------- Corporate and Institutional....... 6,349 6,280 6,178 Community Banking................. 4,558 4,640 4,592 Credit Card....................... 2,874 2,664 2,436 Middle Market..................... 2,108 2,032 2,090 Corporate Support................. 1,522 1,502 1,530 ------ ------ ------ First Chicago Corporation....... 17,411 17,118 16,826 ====== ====== ====== - --------------------------------------------------------------- EARNINGS ANALYSIS Summary Net income for 1994 was $689.7 million, or $6.88 per com- mon share, versus $804.5 million, or $8.43 per share, in 1993 and $93.5 million, or 64 cents per share, in 1992.
- -------------------------------------------------------------------------------------- (In millions, except per share data) 1994 1993 1992 1991 1990 - -------------------------------------------------------------------------------------- Net income Income (loss) before cumu- lative effect of changes in accounting principles......... $689.7 $804.5 $(114.5) $116.3 $249.3 Cumulative effect of changes in accounting principles.................... -- -- 208.0 -- -- Net income...................... $689.7 $804.5 $ 93.5 $116.3 $249.3 Fully diluted earnings per share Income (loss) before cumu- lative effect of changes in accounting principles......... $6.88 $8.43 $(2.08) $1.15 $3.32 Cumulative effect of changes in accounting principles.................... -- -- 2.72 -- -- Net income...................... $6.88 $8.43 $ 0.64 $1.15 $3.32 - --------------------------------------------------------------------------------------
The Corporation's 1994 results continued to reflect excel- lent performance in its core businesses. Highlights of the year were: . The credit card business posted record earnings of $309 million. Average credit card receivables increased 21% and overall managed receivables topped $12 billion at year-end 1994. . American National Corporation, which serves the Corporation's middle market customers, posted record results, principally through both loan growth and im- proved credit quality. . Credit quality continued to improve. Combined credit provisions were $226 million, down 18% from 1993. Nonperforming assets declined to $158 million at year- end, resulting in a nonperforming asset ratio of 0.6% and a reserve coverage ratio of 556%. . Noninterest expense was well managed. Overall expense growth in 1994 was limited to 3%. . The Corporation expanded both its retail and middle market businesses through its merger with Lake Shore Bancorp., Inc. in July 1994. . The venture capital portfolio produced excellent results, with net income of $95 million and a 26% return on equity. . The Corporation remains in a healthy capital position and has enhanced stockholder returns by increasing the annual dividend to $2.20 per common share, an 83% increase since 1993. Return on common equity was 17.0% for 1994, compared with 24.2% for 1993 and 1.8% for 1992. Return on assets was 1.08% for 1994 and 1.42% for 1993. The Corporation's regulatory capital ratios continued to exceed the well-capitalized guidelines. At December 31, 1994, the risk-based capital ratio was 13.4%, while the reg- ulatory leverage ratio was 7.5%. These ratios were 13.6% and 8%, respectively, at December 31, 1993. First Chicago Corporation 21 Annual Report 1994 - ------------------------------------------------------------------------------ Net Interest Income Net interest income includes fundamental spreads on earning assets, as well as such items as loan fees, cash inter- est collections on problem loans, dividend income, inter- est reversals, and income or expense on interest rate derivatives used to manage interest rate risk. Net interest margin measures the efficiency of the use of the Corporation's earning assets and its underlying capital. In order to analyze fundamental trends in net interest margin, it is useful to adjust for: 1) securitization of credit card receivables and 2) the activities of First Chicago Capital Markets, Inc. (FCCM).
- ------------------------------------------------------------------------------------------- (In millions) 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------------- Reported: Net interest income-- tax-equivalent basis....... $1,355 $1,264 $1,217 $1,118 $1,242 Average earning assets..................... $52,627 $48,517 $46,706 $44,512 $45,502 Adjusted: Net interest income-- tax-equivalent basis....... $1,891 $1,724 $1,554 $1,401 $1,421 Average earning assets..................... $48,998 $46,610 $44,994 $44,857 $45,607 - -------------------------------------------------------------------------------------------
When credit card receivables are sold in securitization transactions, the Corporation's earnings are unchanged. However, the net interest income related to these high- yield assets is displaced by increased servicing fees, net of related credit losses. The average levels of securitized receivables were $5.5 billion in 1994, $4.8 billion in 1993 and $3.9 billion in 1992. Additional information on the effect of securitization transactions on financial results is presented on page 66. FCCM is the Corporation's wholly owned subsidiary engaged in permissible investment banking activities. Because capital requirements for FCCM are risk-exposure driven rather than based on asset levels, FCCM can gener- ate substantial volumes of relatively riskless, thin-spread earning assets that require little additional capital. The Corporation's net interest margin trends can be better analyzed if these earning assets and related margins are excluded. - -------------------------------------------------------- BAR CHART: Net Interest Margin 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- Reported 2.73% 2.51% 2.61% 2.61% 2.58% Adjusted 3.12% 3.12% 3.45% 3.70% 3.86% - -------------------------------------------------------- Cash interest collections related to Brazilian debt added 3 basis points to adjusted net interest margin in 1994. For 1993, the adjusted net interest margin included 9 basis points from Brazilian cash interest collections and the effect of revaluing the leveraged lease portfolio because of a change in federal income tax rates. Excluding these special items, the adjusted net interest margin in 1994 increased 22 basis points from 1993 levels. Improved margins over the last three years resulted from a more profitable earning asset mix, reflecting asset growth from the credit card, retail and middle market businesses. In 1994, this margin improvement was achieved despite a significant increase in short-term interest rates because of the Corporation's practice of limiting its structural interest rate risk through asset and liability management practices. A breakdown of average loans adjusted for credit card securitizations is presented in the following chart. - ------------------------------------------------------------------ BAR CHART: Average Loans $ in billions 1990 1991 1992 1993 1994 Corp. & Institutional 18.2 16.5 13.6 10.2 9.5 Credit Card 6.1 6.4 7.1 8.5 10.4 Community Banking 4.0 3.7 3.7 4.1 4.6 Middle Market 4.2 3.9 3.7 3.8 4.3 Yearly Totals 32.5 30.5 28.1 26.6 28.8 Rounded To 33.0 31.0 28.0 27.0 29.0 - ------------------------------------------------------------------ The cost of carrying nonperforming assets declined as average nonperforming assets (including those held for accelerated disposition) decreased to $0.3 billion in 1994 from $0.6 billion in 1993 and $1.2 billion in 1992. Provision for Credit Losses Details of the Corporation's 1994 credit risk management strategy and performance, including the provision for credit losses and provision for loans held for accelerated disposition, are presented in the Credit Risk Management section, beginning on page 31. First Chicago Corporation 22 Annual Report 1994 - ------------------------------------------------------------------------------ Noninterest Income Noninterest income was $1.875 billion in 1994, down from the record $2.202 billion in 1993 and compared with $1.488 billion in 1992.
- ------------------------------------------------------------------------------------ (In millions) 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------ Combined trading profits................. $ 65.7 $ 284.6 $ 177.3 $ 185.8 $ 163.4 Equity securities gains................... 228.6 480.2 204.6 63.0 105.2 Investment securities gains (losses).......... 1.2 0.3 8.6 (3.3) 7.5 -------- -------- -------- -------- -------- Market-driven revenue................. 295.5 765.1 390.5 245.5 276.1 Credit card fee revenue................. 832.1 694.2 516.1 411.8 354.5 Service charges and commissions............. 421.9 432.5 381.0 348.7 307.4 Fiduciary and invest- ment manage- ment fees............... 199.2 200.7 189.8 174.8 168.3 Accelerated dispo- sition portfolio gains................... 45.9 60.0 -- -- -- Gain on sale of investment advi- sory business........... 34.5 -- -- 15.0 -- Gain on lease- financing residuals............... 7.4 18.1 3.0 14.7 1.6 Other..................... 38.1 31.8 7.8 14.7 35.9 Gain on partial settle- ment of pension obligations............. -- -- -- -- 55.5 -------- -------- -------- -------- -------- Total............. $1,874.6 $2,202.4 $1,488.2 $1,225.2 $1,199.3 ======== ======== ======== ======== ======== - ------------------------------------------------------------------------------------
The significant reduction in market-driven revenue, prin- cipally trading profits and equity securities gains, was the cause of the decline in noninterest income in 1994. Combined trading profits were $65.7 million, compared with a record $284.6 million in 1993 and $177.3 million in 1992. The following factors contributed to depressed trading profits in 1994: . reduced market liquidity and significant volatility, which caused losses in emerging market trading activities; . the sharp rise in short-term interest rates, which led to reduced financial asset values and profit opportunities; and . well-publicized issues related to the use of derivative financial instruments throughout the banking industry, which resulted in reduced customer transaction activity. Equity securities gains during 1994 were $228.6 million, compared with a record $480.2 million in 1993 and $204.6 million in 1992. Equity securities gains arise prin- cipally from the Corporation's venture capital activities, and to a lesser extent from corporate finance activities and from the sale of securities received in troubled-debt restructurings, as presented in the following schedule. - ----------------------------------------------------------------- (In millions) 1994 1993 1992 - ----------------------------------------------------------------- Venture capital.................... $189.3 $380.7 $188.1 Corporate finance.................. 38.6 65.0 6.3 Debt restructuring................. 0.7 34.5 10.2 ------ ------ ------ Total equity securities gains...... $228.6 $480.2 $204.6 ====== ====== ====== - ----------------------------------------------------------------- The venture capital and corporate finance gains include changes in the fair value of investments. Details of the venture capital activities are presented on page 30. Fee-based revenue from credit card, fiduciary and invest- ment management, and other product areas totaled $1.45 billion in 1994, compared with $1.33 billion in 1993 and $1.09 billion in 1992. Credit card fee revenue, adjusted for the effects of credit card securitizations, grew 17% in 1994 to $535.5 million and 26% in 1993 to $457.1 million. Revenue growth in both periods resulted from increased transaction volume, due in part to a growing cardholder base. The total number of accounts at year-end 1994 was 12.2 million, compared with 10.3 million in 1993 and 8.9 million in 1992. Fiduciary and investment management fees were $199.2 million in 1994, compared with $200.7 million in 1993 and $189.8 million in 1992. First Chicago Trust Company of New York, a leading provider of corporate shareholder services, generated $80.6 million of these revenues in 1994, compared with $81.4 million in 1993 and $72 million in 1992. Revenue growth in this business was dampened somewhat by industry consolidation and price competition. Service charges and commissions in 1994 were $421.9 mil- lion, compared with $432.5 million in 1993 and $381 mil- lion in 1992. During 1994, the growth in retail deposit fees was more than offset by a decline in deficient balance fees and fees from corporate lending and syndication activities. Net gains from the active management of assets held in the accelerated disposition portfolio totaled $45.9 million in 1994, compared with $60 million in 1993. Details of the asset disposition portfolio activities are presented on page 31 in the Credit Risk Management section. Other noninterest income in 1994 included a $34.5 mil- lion gain related to the sale of the Corporation's remaining interest in Brinson Holdings, Inc. to Brinson's management. First Chicago Corporation 23 Annual Report 1994 - ------------------------------------------------------------------------------ Noninterest Expense Operating expense in 1994 was $1.917 billion, compared with $1.854 billion in 1993 and $1.764 billion in 1992. Expense growth in 1994 was limited to 3%, representing higher staff costs, increased equipment costs and invest- ments in selected businesses.
- ---------------------------------------------------------------------------------------- (Dollars in millions) 1994 1993 1992 1991 1990 - ---------------------------------------------------------------------------------------- Salaries and em- ployee benefits......... $ 868.9 $ 853.9 $ 748.0 $ 722.8 $ 688.8 Occupancy expense of premises, net........ 137.3 147.7 186.0 152.8 138.9 Equipment rentals, depreciation, and maintenance............. 157.4 110.3 111.2 107.5 101.5 Amortization of intangible assets....... 67.1 87.4 76.1 69.5 68.3 Deposit insurance expense................. 43.1 52.9 49.9 44.0 23.2 Other..................... 643.1 601.7 593.2 433.4 526.7 -------- -------- -------- -------- -------- Operating expense............. 1,916.9 1,853.9 1,764.4 1,530.0 1,547.4 Provision for other real estate held for accelerated disposition............. -- -- 134.0 -- -- Provision for other real estate............. 1.7 4.2 56.9 104.3 24.8 Restructuring provision............... -- -- -- 67.0 18.5 -------- -------- -------- -------- -------- Total............. $1,918.6 $1,858.1 $1,955.3 $1,701.3 $1,590.7 ======== ======== ======== ======== ======== Average Full-Time- Equivalent Staff........ 17,411 17,118 16,826 17,018 17,153 ====== ====== ====== ====== ====== - ----------------------------------------------------------------------------------------
Employee expense increased in both 1994 and 1993 as a result of higher staffing levels in specific business units as well as increased pension and medical costs. This was par- tially offset in 1994 by lower performance-based incentive expense accruals related primarily to lower trading profits. Occupancy expense declined by 7% in 1994 to $137.3 mil- lion. Occupancy expense in 1993 included the incremental costs associated with both the relocation of the Corpora- tion's shareholder services business and a reduction in other occupancy needs. Relocation and space reduction costs of $29.1 million were included in occupancy expense in 1992. Excluding these charges, occupancy expense was 6% lower in 1993 than in 1992. Equipment expense in 1994 increased 43% to $157.4 mil- lion, reflecting the expensing of personal computer equip- ment; previously, purchases of such equipment were cap- italized and depreciated. A special charge of $24.5 million was taken in 1994 to reflect the reduction in the estimated useful life of existing personal computer equipment. Intangible amortization expense decreased $20.3 million in 1994 as core deposit intangibles related to certain acqui- sitions became fully amortized. 1993 results included a $12.4 million charge for the accelerated amortization of certain acquired intangibles. Excluding special corporate expense items, other operat- ing expense increased 6.2% in 1994 and 9.6% in 1993. The expense growth in both periods reflects increased bank- card solicitation and volume-related costs as well as costs associated with the continued integration and reengineer- ing of the Corporation's Consumer and Corporate Banking businesses. Special corporate expenses totaled $19 million in 1994, $13.8 million in 1993 and $57 million in 1992, primarily representing costs associated with litigation and other cor- porate activities. Applicable Income Taxes The following table shows the Corporation's income before income taxes, applicable income taxes and effective tax rate for each of the past five years.
- ------------------------------------------------------------------------------------- (Dollars in millions) 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------- Income (loss) before income taxes................ $1,063.0 $1,300.1 $(200.1) $163.9 $312.2 Applicable income taxes (benefit)............. 373.3 495.6 (85.6) 47.6 62.9 Effective tax rate............ 35.1% 38.1% 42.8% 29.0% 20.1% - -------------------------------------------------------------------------------------
The decrease in the effective tax rate for 1994 compared with 1993 reflects a one-time tax benefit related to the implementation of the final Internal Revenue Service bad debt recapture regulations as well as the effect of favor- able tax rulings, which occurred in 1994, and the effect of an accelerated intangible charge in 1993. Income tax expense for 1990 was reduced by tax benefits related to the 1987 book net-operating loss and tax credit carryforwards, which totaled $28.2 million. Excluding these benefits, the effective tax rate in 1990 was 29.2%. Also contributing to the difference in effective tax rates between 1992 and both 1991 and 1990 is the relationship between tax-exempt income and the level of income (loss) before income taxes. First Chicago Corporation 24 Annual Report 1994 - --------------------------------------------------------------- RISK MANAGEMENT The Corporation's various business activities generate liquidity, market and credit risks: o Liquidity risk is the possibility of being unable to meet all present and future financial obligations in a timely manner. o Market risk is the possibility that changes in future mar- ket rates or prices will make the Corporation's positions less valuable. o Credit risk is the possibility that a loss might occur from the failure of a customer to perform according to the terms of a transaction. The Corporation is compensated by customers for assum- ing these risks; this compensation is reflected in interest income, trading profits and fee income. In addition, the Corporation considers these risks in allocating capital to support its various business activities, as discussed in the Capital Management section, on page 37. The Corporation is a party to a broad range of financial instruments that create risks that may or may not be reflected in a traditional balance sheet. The Corporation's risk management policies monitor and limit exposure to liquidity, market and credit risks that arise from all these financial instruments, which can be subdivided into three categories: o Cash financial instruments, generally characterized as on-balance-sheet transactions, include such instruments as loans, bonds, stocks and deposits. o Credit-related financial instruments include such instru- ments as commitments to extend credit and standby letters of credit. o Derivative financial instruments include such instru- ments as interest rate, foreign exchange, commodity price and equity price contracts, including forwards, swaps and options. Credit-related and derivative financial instruments are generally characterized as off-balance-sheet transactions; however, the carrying values of derivative financial instru- ments are reflected in the Corporation's balance sheet. LIQUIDITY RISK MANAGEMENT Liquidity is used to satisfy customer needs and provide a cushion for unforeseen events. In order to meet these obli- gations, the Corporation has fashioned liquidity manage- ment policies and guidelines, which are designed to cover balance sheet assets and liabilities as well as off-balance- sheet items that are potential sources and uses of liquidity. The policy objectives are to: o maintain adequate liquid assets; o maintain liability diversification among markets, instru- ments, maturities and customers; o maintain a continuously strong market presence and customer funding base; o minimize total funds-gathering expense; and o improve credit ratings. The Corporation views strong capital ratios, high credit quality and solid core earnings as essential to retaining high credit ratings and, thereby, cost-effective access to market liquidity. In addition to these policies, a contin- gency funding plan has been established that identifies actions to be taken in response to a liquidity event. The Corporation's Statement of Cash Flows, on page 43, presents data on cash and cash equivalents provided and used by the Corporation in its operating, investing and financing activities. Asset Liquidity The Corporation considers liquid assets to be an effective and important vehicle for managing and providing overall liquidity. Liquid assets are defined as federal funds sold and interest-bearing deposit placements with other banks. In 1994, as part of its overall liquidity management, the Corporation set a minimum guideline of liquid assets to total assets at 12% for The First National Bank of Chicago (FNBC) and FCC National Bank (FCCNB) combined. During 1994, as well as in 1993, these combined entities maintained an average liquid asset ratio of 20%. While there is a cost to providing higher liquidity by maintain- ing lower-spread assets, this emphasis on liquidity allows the Corporation to pursue such market opportunities as offering unfunded commitments to customers, and the Corporation believes that the capital necessary to support these activities is minimal. The investment securities portfolio includes U.S. govern- ment, municipal and other debt securities, and equity investments. The non-equity portion of the investment portfolio is primarily used to meet collateral requirements for certain customer deposits. The equity securities pri- marily represent the Corporation's venture capital invest- ments. These investments ultimately provide an additional source of liquidity, but generally are not readily saleable due to the form or size of the Corporation's equity interest in the underlying entity. Also, the portfolio is not com- monly used to manage structural interest rate risk but is included in the Corporation's overall interest rate sensi- tivity position. Note 5, on page 49, provides a detailed breakdown of the investment portfolio. As part of the Corporation's normal liquidity management process, assets are securitized and sold. Securitization of credit card receivables is an important funding vehicle that enables the Corporation to diversify its funding sources and to access large amounts of term funding in a cost- effective manner. During 1994, $2 billion of credit card receivables was securitized, bringing the total amount of securitized credit card receivables to $6.1 billion at year- end 1994. Liability Liquidity The Corporation, through FNBC, FCCNB and American National Bank and Trust Company of Chicago (ANB), maintains direct access to the local retail market as a source of funds and uses a network of brokers for gathering retail certificates of deposits on a national basis. The Corpora- tion depends less on wholesale funding as the growth of its retail deposits continues. However, the wholesale mar- ket continues to be an important source of liquidity where customer relationships are important to retaining a diver- sified funding base. Consequently, it is the Corporation's policy to maintain direct relationships with its large insti- tutional funding customers. This approach has proved successful in creating reliable sources of funds as the Corporation maintains its active participation in global capital markets. First Chicago Corporation 25 Annual Report 1994 - --------------------------------------------------------------- The Corporation benefits from its diversified institutional customer base in which concentrations among funding sources are closely monitored. Commercial paper, cus- tomer deposits, bank notes, bank investment contracts, medium-term notes and long-term debt also provide fund- ing for the Corporation and its subsidiaries. Access to a variety of funding markets and customers is vital both to liquidity management and to cost minimization. The Corporation believes it has prudent policies to ensure adequate liquidity to fund anticipated needs based on its assessment of asset liquidity, core deposit levels, wholesale funding sources, and contractual asset and liability matu- rities. The following table shows the Corporation's funding source mix.
Deposits and Other Purchased Funds - ------------------------------------------------------------------------------------------------------------ December 31 (In millions) 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------------------------------ Domestic offices Demand............................................ $ 7,647 $ 8,184 $ 7,575 $ 6,200 $ 7,065 Savings........................................... 7,448 7,541 7,618 7,059 5,166 Time Under $100,000.................................. 2,548 2,312 2,737 3,865 3,828 $100,000 and over............................... 2,601 2,613 3,525 5,666 6,074 Foreign offices Banks in foreign countries........................ 4,836 2,463 2,693 2,599 2,372 Foreign governments and official institutions..... 1,469 750 926 983 784 Other time and savings............................ 4,847 4,126 4,493 5,439 7,022 Other demand...................................... 270 197 173 280 232 ------- ------- ------- ------- ------- Total deposits.............................. 31,666 28,186 29,740 32,091 32,543 - ------------------------------------------------------------------------------------------------------------ Federal funds purchased and securities under repurchase agreements............................. 13,026 8,255 6,962 5,145 6,250 Commercial paper.................................... 147 164 172 226 237 Other funds borrowed................................ 7,518 5,843 3,997 2,712 2,770 Long-term debt...................................... 2,271 2,065 1,705 1,725 1,428 ------- ------- ------- ------- ------- Total other purchased funds................. 22,962 16,327 12,836 9,808 10,685 ------- ------- ------- ------- ------- Total....................................... $54,628 $44,513 $42,576 $41,899 $43,228 ======= ======= ======= ======= ======= - ------------------------------------------------------------------------------------------------------------
MARKET RISK MANAGEMENT Overview Market risk arises from changes in interest rates, exchange rates, commodity prices and equity prices. The Corpora- tion maintains risk management policies that monitor and limit exposure to market risk. Through its trading activi- ties, it strives to take advantage of profit opportunities avail- able in interest and exchange rate movements. In asset and liability management activities, the Corporation attempts to minimize structural interest rate and foreign exchange rate risk. The measurement of market risk associated with financial instruments is meaningful only when all related and offsetting on- and off-balance-sheet transactions are aggregated, and the resulting net positions are identified. Disclosures about fair value of financial instruments, which reflect changes in market prices and rates, can be found in Note 17, beginning on page 61. Trading Activities The Corporation maintains active trading positions in a variety of markets and instruments, including U.S. govern- ment, municipal and money market securities. It also main- tains positions in derivative products associated with these markets and instruments, such as interest rate and cur- rency swaps, and commodity and equity index options. Most of the Corporation's trading activities are customer- oriented, and trading positions are established as necessary for customers. However, in order to anticipate customer demand for such transactions, the Corporation also car- ries an inventory in capital markets instruments, and main- tains its access to market liquidity by making bid-offer prices to other market makers. Although these two activi- ties constitute its proprietary trading business, they are essential in order to continue providing customers with capital markets products at competitive prices. Many trading positions are kept open for brief periods of time, often less than one day. Other trading positions are maintained for longer periods, and these positions are valued at prevailing market rates on a present value basis. Realized and unrealized gains and losses on these trading positions are also included in noninterest income as com- bined trading profits. The Corporation has adopted policies designed to strictly monitor trading positions at all times. The overall market risk that any business unit can assume is approved by a committee of the Board of Directors through a risk point limit. Risk points represent the Corporation's estimate of the amount of potential overnight loss in a capital markets product. Products that have more inherent price volatility incur more risk points. A business unit will use up more of its risk point limit if it trades in the more volatile prod- ucts. The risk point system, therefore, is the means by which the Corporation manages its value at risk. First Chicago Corporation 26 Annual Report 1994 - --------------------------------------------------------------- The Corporation monitors value at risk in each of its signif- icant trading portfolios on a daily basis. The following charts show average, maximum and minimum daily value at risk for each quarter of 1994, and the actual trading revenue for each quarter. - --------------------------------------------------------------- BAR CHART: Daily Value at Risk -- 1994 (In Millions) 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. -------- -------- -------- -------- Average $55 $41 $44 $42 Maximum $66 $46 $53 $47 Minimum $42 $34 $36 $38 BAR CHART: Trading Revenue -- 1994* (In Millions) 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. -------- -------- -------- -------- $2 $42 $56 $30 *Includes trading profits and net interest income - --------------------------------------------------------------- Value at risk is estimated using statistical models calibrated at a three-standard-deviation confidence interval, which means that the actual daily result should exceed the value at risk one day out of each two hundred. The value at risk shown represents portfolio aggregates and overstates the Corporation's value at risk because it only partially con- siders offsets and correlations across different trading port- folios. The Corporation is continuing its progress toward a fully consolidated view of market risk. A committee of the Board of Directors also approves the Corporation's overall policies governing market risk. More specific market risk policies are approved by the Corpora- tion's Market Risk Committee, which is composed of senior capital markets managers. In addition to managing market risk through the risk point system, each business unit establishes dollar limits govern- ing intra-day trading activity, and allocates them to the dealers depending on their trading experience. These dollar limits are reviewed and approved by the Market Risk Committee. This committee also reviews and approves statistical models used for measuring market risk, or for pricing and hedging transactions; reviews audit and inter- nal control issues arising from the Corporation's trading operations; and approves the business plans for new capi- tal markets activities. Independent oversight of trading activities is provided by the Market Risk Management Department. As part of this oversight role, the department monitors the credit risk associated with capital markets products. The credit exposure for certain derivative financial instru- ments fluctuates as market prices change. As a result, the credit exposure for these instruments includes both the current fair value of the instrument and an incremental amount that represents the potential adverse movement in its fair value over its remaining life. This incremental amount of credit exposure is calculated using statistical models that estimate the change over time in exchange rates, interest rates and other market indices. The resultant credit exposure is used to monitor total cus- tomer credit exposure and manage credit risks associated with capital markets products. Structural Interest Rate Risk Management The Corporation actively manages its asset and liability positions with the goal of minimizing the impact on earn- ings of interest rate market volatility. Conservative manage- ment of its asset and liability positions has allowed the Corporation to maintain a relatively consistent net inter- est margin despite a sharp rise in short-term interest rates. As a result of this neutral interest rate risk profile, it is estimated that an immediate change in rates of 100 basis points would affect annual pretax earnings by only $12 million. Net interest income can fluctuate with movements in the interest rate market due to an imbalance in the repricing or maturity of the Corporation's assets and liabilities. Whenever possible, assets are matched with liabilities of similar repricing characteristics. However, the loans and deposits generated through the Corporation's ordinary business activity do not naturally create offsetting positions with respect to repricing or maturity. For assets having indefinite maturities or repricing sensitivities, liability pools based on such assets' estimated maturities and repric- ing characteristics may be used to match the interest rate risk. Finally, asset and liability positions that are not appro- priately offset with either specific on-balance-sheet trans- actions or with liability pools are offset through off-balance- sheet derivatives positions (ALM derivatives). Traditional gap analysis is one of a variety of measure- ment tools used to monitor and control the Corporation's interest rate risk position. Gap analysis measures the dif- ference between the volume of assets and liabilities matur- ing or repricing in a given future time period. Certain assumptions are made for those assets or liabilities whose expected prepayment or withdrawal behavior may not be reflected by their maturity dates. In addition, credit card securitizations, which subject credit card servicing fee rev- enue to interest rate risk, are included in the gap analysis measure. In addition to static gap analysis, the Corpora- tion identifies the more dynamic interest rate risk expo- sures of its businesses through duration of equity measures, stress testing of earnings simulation, and income sensitiv- ity measurement of specific key portfolios. First Chicago Corporation 27 Annual Report 1994 - --------------------------------------------------------------- The following table shows the "managerial" interest rate gap analysis as of December 31, 1994, used to identify the Corporation's exposure from domestic asset and liability positions. Interest rate risks in trading and overseas earn- ing asset and liability positions are excluded from the gap analysis and managed principally as trading risks. A posi- tive cumulative one-year gap position indicates more assets than liabilities are anticipated to reprice over the next 12-month period. Such a position implies that, assuming no management action, the Corporation's net interest income would be positively affected by rising interest rates and negatively affected by falling rates. Interest Rate Sensitivity
- ----------------------------------------------------------------------------------------------------------------- December 31, 1994 0-90 91-180 181-365 1-5 Beyond (Dollars in millions) days days days years 5 years Total - ----------------------------------------------------------------------------------------------------------------- Loans.......................................... $21,569 $1,376 $ 390 $ 2,171 $ 4,977 $30,483 Investment securities.......................... 341 161 194 1,556 392 2,644 Other earning assets........................... 21,057 95 70 181 281 21,684 Nonearning assets.............................. 5,816 39 47 127 438 6,467 ------- ------ ------- ------- ------- ------- Total domestic assets...................... $48,783 $1,671 $ 701 $ 4,035 $ 6,088 $61,278 ======= ====== ======= ======= ======= ======= - ----------------------------------------------------------------------------------------------------------------- Deposits....................................... $14,045 $1,030 $ 1,792 $ 1,195 $ 4,125 $22,187 Other interest-bearing liabilities............. 25,225 439 161 3,733 1,604 31,162 Noninterest-bearing liabilities................ 2,386 15 16 390 620 3,427 Equity......................................... 311 -- -- 100 4,091 4,502 ------- ------ ------- ------- ------- ------- Total domestic liabilities and equity...... $41,967 $1,484 $ 1,969 $ 5,418 $10,440 $61,278 ======= ====== ======= ======= ======= ======= - ----------------------------------------------------------------------------------------------------------------- Balance sheet sensitivity gap.................. $ 6,816 $ 187 $(1,268) $(1,383) $(4,352) -- - ----------------------------------------------------------------------------------------------------------------- Cumulative gap as % of domestic assets......... 11.12% 11.43% 9.36% 7.10% -- -- - ----------------------------------------------------------------------------------------------------------------- Effect of off-balance-sheet ALM derivative transactions: Specific transactions...................... $(2,522) $ (653) $ 347 $ 1,632 $ 1,196 -- Specific asset or liability pools.......... (2,632) (54) 730 1,864 92 -- - ----------------------------------------------------------------------------------------------------------------- Interest rate sensitivity gap.................. $ 1,662 $ (520) $ (191) $ 2,113 $(3,064) -- - ----------------------------------------------------------------------------------------------------------------- Cumulative gap................................. $ 1,662 $ 1,142 $ 951 $ 3,064 -- -- - ----------------------------------------------------------------------------------------------------------------- Cumulative gap as % of domestic assets......... 2.71% 1.86% 1.55% 5.00% -- -- - -----------------------------------------------------------------------------------------------------------------
As of December 31, 1994, the Corporation's on-balance- sheet assets and liabilities created a cumulative one-year gap position of 9.36% of total domestic assets. Because it is the Corporation's policy to remain structurally neutral to interest rate changes, off-balance-sheet transactions, prin- cipally interest rate swaps, have been used to adjust the interest sensitivity of specific transactions as well as pools of assets or liabilities. The net result of the ALM deriva- tives is to reduce the cumulative one-year gap position from 9.36% to 1.55% of total domestic assets. It is the Cor- poration's policy to maintain the cumulative one-year gap position, including ALM derivatives, to within 2% of total domestic assets. The stability of this interest rate risk position is evident in the following charts. Between year-end 1991 and year-end 1994, the Corporation's cumulative one-year gap has con- sistently been within 2% of total domestic assets. This has allowed the Corporation to maintain a consistent adjusted net interest margin (adjusted for credit card securitizations and FCCM) of between 3.5% and 4.0% despite a rise in short-term interest rates of approximately 275 basis points since the first quarter of 1993. - --------------------------------------------------------------- BAR CHART: Cumulative 1-Year Gap as % of Total Domestic Assets 12/91 12/92 12/93 3/94 6/94 9/94 12/94 ----- ----- ----- ---- ---- ---- ----- 0.68% -0.24% 1.42% 1.42% 0.13% 1.12% 1.55% Policy Guideline = -2% to +2% - --------------------------------------------------------------- First Chicago Corporation 28 Annual Report 1994
- ------------------------------------------------------------------------------------------------------------------ 2-LINE GRAPH: Adjusted Net Interest Margin vs. Short-Term Interest Rates 3/93 6/93 9/93 12/93 3/94 6/94 9/94 12/94 Adj. Net Int. Margin 3.610% 3.580% 3.980% 3.620% 3.930% 3.930% 3.850% 3.740% 1-Month LIBOR 3.125% 3.125% 3.125% 3.190% 3.630% 4.500% 5.000% 5.940% - ------------------------------------------------------------------------------------------------------------------
Access to the derivatives market is an important element in the Corporation's ability to maintain its gap position within policy guidelines. As of year-end 1994, the Corpo- ration had a total of $8.5 billion in ALM interest rate swaps, including $4.6 billion of ALM interest rate swaps against specific transactions and $3.9 billion against specific pools of assets or liabilities. Swaps used to adjust the interest rate sensitivity of specific transactions will not need to be replaced as they mature since the corresponding asset or liability will mature along with the swap. However, swaps against the asset and liability pools will have an impact on the Corporation's risk position as they mature and, assum- ing no change to the underlying pool's characteristics, will need to be reissued to maintain the same neutral interest rate risk profile. These swaps could create modest sensi- tivity of earnings to changes in interest rates. Growth in the volume of stable retail liabilities and declines in the volume of longer-term fixed rate assets over the last few years have made it necessary to increase the use of swaps associated with specific pools of assets or liabilities to bal- ance the Corporation's repricing risk. The following table summarizes the interest rate swaps used by the Corpora- tion for asset and liability management purposes. Asset and Liability Management Swaps
- ---------------------------------------------------------------------------------------------------------- December 31, 1994 Receive Fixed Pay Fixed Basis (Notional amounts in millions) Pay Floating Receive Floating Swaps Total - ---------------------------------------------------------------------------------------------------------- Swaps associated with: Specific Pool Specific Pool Pool -------- ---- -------- ---- ---- Loans........................... $ -- $ 561 $ 30 $223 $275 $1,089 Securitizations................. 1,725 -- -- -- -- 1,725 Deposits........................ 306 2,325 -- -- 175 2,806 Other funds borrowed............ 429 -- 916 -- 325 1,670 Long-term debt.................. 1,238 -- -- -- -- 1,238 ------ ------ ---- ---- ---- ------ Total......................... $3,698 $2,886 $946 $223 $775 $8,528 ====== ====== ==== ==== ==== ====== - ----------------------------------------------------------------------------------------------------------
For most of its asset and liability management swaps, the Corporation receives a fixed rate and pays a floating rate of interest. Substantially all interest rate swaps used by the Corporation for asset and liability management activity are standard interest rate swap contracts. The table that fol- lows summarizes the contractual maturities and weighted average pay and receive rates for the asset and liability management swap position at December 31, 1994. The vari- able interest rates, which generally are the three-month and six-month LIBOR rates in effect on the date of repric- ing, have been assumed to remain constant. However, the variable interest rates will change with changes in interest rates and would affect the related weighted average infor- mation presented in the following table.
- ------------------------------------------------------------------------------------------------------- (Dollars in millions) 1995 1996 1997 1998 1999 Thereafter Total - ------------------------------------------------------------------------------------------------------- Receive fixed swaps Notional amount......... $1,731 $1,858 $1,373 $229 $86 $1,307 $6,584 Weighted average: Receive rate........ 5.57% 6.96% 6.29% 6.57% 8.69% 7.21% 6.51% Pay rate............ 6.14% 6.18% 6.34% 6.55% 7.32% 6.50% 6.29% Pay fixed swaps Notional amount......... $1,118 $ 25 $ 7 -- -- $ 19 $1,169 Weighted average: Receive rate........ 6.25% 5.91% 6.47% 6.15% 6.24% Pay rate............ 9.26% 7.34% 5.18% 6.23% 9.14% Basis swaps Notional amount......... $ 775 -- -- -- -- -- $ 775 Weighted average: Receive rate........ 5.68% 5.68% Pay rate............ 5.78% 5.78% - ------------------------------------------------------------------------------------------------------- Total notional amount....... $3,624 $1,883 $1,380 $229 $86 $1,326 $8,528 - -------------------------------------------------------------------------------------------------------
First Chicago Corporation 29 Annual Report 1994 - --------------------------------------------------------------- Foreign Exchange Risk Management Wherever possible, foreign currency-denominated assets are funded with liability instruments denominated in the same currency. If a liability denominated in the same cur- rency is not immediately available or desired, a forward foreign exchange contract is used to fully hedge the for- eign exchange risk due to cross-currency funding. To minimize the earnings and capital impact of transla- tion gains or losses measured on an after-tax basis, the Corporation uses forward foreign exchange contracts to hedge the exposure created by investments in overseas branches and subsidiaries. Venture Capital Activities The Corporation's portfolio of venture capital investments is composed of publicly traded equity securities held directly, publicly traded equity securities held indirectly (e.g., through limited partnerships), and investments in private companies. Equity securities gains related to ven- ture capital activities totaled $189.3 million in 1994, $380.7 million in 1993 and $188.1 million in 1992. Net income related to the venture capital portfolio in 1994 was $95 million, or $0.94 per share, compared with $204 million, or $2.16 per share, in 1993. While the Corporation intends to reduce its exposure to equity risk in its existing venture capital portfolio, it will continue to participate in this business primarily through participation in a venture capital fund established by the former management of the Corporation's venture capital subsidiaries, through existing investment commitments and through other corporate financing activities. The Corporation uses fair value accounting for its venture capital portfolio. Under this method, fair value of publicly traded securities is determined by quoted market valua- tions, adjusted for illiquidity due to the size or nature of the Corporation's holdings. Privately held securities are valued using traditional valuation techniques conser- vatively applied. Venture Capital Portfolio
- -------------------------------------------------------------------------- Investments Investments December 31, 1994 Held Held (In millions) Directly Indirectly Total - -------------------------------------------------------------------------- Publicly traded equity investments Gross value....................... $448 $ 544 $ 992 Discount.......................... (15) (129) (144) ---- ----- ------ Fair value...................... $433 $ 415 848 ==== ===== Investments in private companies.... 731 ------ Total........................... $1,579 ====== - --------------------------------------------------------------------------
The Corporation has instituted a program intended to reduce volatility relative to expected returns through the use of equity derivatives, including options, and the sale of investments. As an example, during the first quarter of 1994 the Corporation issued Debt Exchangeable for Common Stock (DECS) related to 7.475 million shares of its holdings in NEXTEL Communications, Inc. The DECS transaction limits the Corporation's downside risk on this investment to the $271 million DECS proceeds and, at the same time, allows the Corporation to share in potential market appreciation. At December 31, 1994, 68% of the Corporation's $848 million in publicly traded investments was hedged under this program. Management intends to continue to use these and other techniques to hedge the price risk inherent in this portfolio. The following table provides fair value and sale informa- tion on the portfolio during 1994. Venture Capital Portfolio Activity
- ------------------------------------------------------------------------ Publicly Traded Private (In millions) Companies Companies Total - ------------------------------------------------------------------------ Fair value, December 31, 1993....... $ 759 $698 $1,457 Additional investments.............. 92 124 216 Appreciation recorded as equity securities gains........... 189 56 245 Sales proceeds (1).................. (189) (57) (246) Other (2)........................... (3) (90) (93) ----- ---- ------ Fair value, December 31, 1994 (3)... $ 848 $731 $1,579 ===== ==== ====== Unrealized appreciation at December 31, 1994................. $ 554 $ 45 $ 599 ===== ==== ====== - ------------------------------------------------------------------------
(1) Net of transaction costs. (2) Includes principal repayments, fund distribution and sales, and certain reclassifications. (3) Publicly traded amount includes net unrealized gains of $166 mil- lion related to hedging instruments used to reduce the earnings volatility of the venture capital portfolio. In addition to the $1.6 billion of investments in the ven- ture capital portfolio at December 31, 1994, there were unfunded commitments of $145 million. First Chicago Corporation 30 Annual Report 1994 - --------------------------------------------------------------- CREDIT RISK MANAGEMENT Overview The Corporation has developed policies and procedures to manage the level and composition of risk in its credit portfolio. The objective of this credit risk management process is to reduce the risk of a loss resulting from a customer's failure to perform according to the terms of a transaction. Customer transactions create credit exposure that is reported both on and off the Corporation's balance sheet. On-balance-sheet credit exposure includes such items as loans and derivative financial instruments. Off-balance- sheet credit exposure includes credit-related and deriv- ative financial instruments. Credit exposure is managed according to a clearly defined process. The Credit Strategy Committee is responsible for the strategic direction and management oversight of that process, the elements of which include: o identifying the types of customers that are consistent with the Corporation's strategic business objectives; o assessing the credit structure, return and potential risk of loss for any extension of credit within market-driven guidelines and prudent banking practice; o monitoring the financial performance and compliance with contractual obligations of credit customers in order to identify deterioration on a timely basis; o reviewing the credit portfolio to verify the risk assess- ment of individual credits and to assess the risk profile and composition of the portfolio; and o verifying that policies and procedures have been fol- lowed in the initial underwriting and ongoing monitor- ing of the credit portfolio. A major element of the credit risk management process is portfolio diversification, which is achieved by limiting credit concentrations in a number of ways. Concentrations to individual customers or a related group of customers are limited according to the degree of repayment risk. In addition, concentrations are limited on a portfolio basis by risk rating, credit product, industry and geography. During 1994, the Corporation developed a commercial credit risk measurement framework that incorporates sev- eral dimensions of risk, including credit risk classification, industry risk classification, term of the facility, funding assumptions in the event of default, and severity of loss. The Corporation believes this framework improves its ability to allocate capital and set commercial portfolio diversification limits. Accelerated Asset Disposition Portfolio During the third quarter of 1992, the Corporation segre- gated approximately $2.0 billion of commercial real estate exposure at The First National Bank of Chicago to be managed under an accelerated disposition program. By year-end 1994, the liquidation of this portfolio had been virtually completed. During 1994, assets having nearly $250 million in original contractual exposure were sold or otherwise liquidated. This resulted in a $75 million reduction in the portfolio's carrying value and the recognition of net gains of $46 mil- lion in noninterest income during 1994. The carrying value of the remaining assets in the portfolio was $51 million at year-end 1994, representing 22% of original contractual exposure. Remaining Credit Portfolio The quality of the remaining credit portfolio, which includes all credit exposure that was not transferred to the accelerated asset disposition portfolio, continued to improve in 1994. Nonperforming assets at year-end 1994 were $158 million, or 0.6% of total loans and other real estate. This was the lowest absolute level of nonperforming assets since 1976.
- --------------------------------------------------------------------------------------------------------------- Five-Year Selected Statistical Information - --------------------------------------------------------------------------------------------------------------- (Dollars in millions) 1994 1993 1992 1991 1990 - --------------------------------------------------------------------------------------------------------------- At Year-End Loans outstanding............................................ $25,947 $23,103 $22,692 $25,661 $27,706 Nonperforming loans.......................................... 130 234 391 843 854 Other real estate, net....................................... 28 43 23 457 529 Nonperforming assets......................................... 158 277 414 1,300 1,383 Allowance for credit losses (1).............................. 723 683 624 759 897 Nonperforming assets/loans outstanding and other real estate, net..................................... 0.6% 1.2% 1.8% 5.0% 4.9% Allowance for credit losses/loans outstanding (1)............ 2.8 3.0 2.8 3.0 3.2 Allowance for credit losses/nonperforming loans (1).......... 556 292 160 90 105 For the Year Average loans outstanding.................................... $23,293 $21,997 $24,347 $27,281 $30,609 Net charge-offs (2).......................................... 151 182 373 550 781 Net charge-offs/average loans................................ 0.6% 0.8% 1.5% 2.0% 2.6% - ---------------------------------------------------------------------------------------------------------------
(1) The reserve related to securitized credit card receivables has been reclassified to other assets for all periods presented. (2) Excludes $636 million of charge-offs in 1992 recorded upon transfer to the accelerated disposition portfolio. First Chicago Corporation 31 Annual Report 1994 - --------------------------------------------------------------- Allowance for Credit Losses Although the allowance for credit losses is available to absorb potential losses inherent in the Corporation's total credit portfolio, its composition reflects an internal alloca- tion to the consumer and commercial segments. The allowance for credit losses is tested by analyzing on- balance-sheet credit exposure for such items as loans and derivative financial instruments and off-balance-sheet exposure for credit-related and derivative financial instru- ments. The method used to test the adequacy of the allow- ance has four elements. First, the consumer reserve is established based on a statistical analysis of historical loss. Second, specific reserves are allocated for commercial credits that have identified loss potential. Third, a reserve for potential losses not specifically identified, which are inherent in the commercial credit portfolio, is computed by assigning a specific reserve factor to each risk category of the portfolio based on a statistical analysis of the Corporation's history. Fourth, management's best judgment is applied to determine any additional amount needed for loss potential based largely on portfolio trends and an assessment of the impact of the current economic environment. Allowance for Credit Losses
- -------------------------------------------------------------------------- (Dollars in millions) 1994 - -------------------------------------------------------------------------- Commercial Consumer Total - -------------------------------------------------------------------------- Balance, beginning of period........ $488 $ 195 $ 683 Provision for credit losses......... 3 221 224 Net charge-offs..................... 9 (160) (151) Other, transferred to other assets, related to securitized receivables....................... -- (49) (49) Acquisitions and dispositions, net............................... 16 -- 16 ---- ----- ----- Balance, end of period.............. $516 $ 207 $ 723 ==== ===== ===== Allowance/loans outstanding......... 3.2% 2.1% 2.8% Allowance/nonperforming loans....... 397 -- 556 - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- (Dollars in millions) 1993 - -------------------------------------------------------------------------- Commercial Consumer Total - -------------------------------------------------------------------------- Balance, beginning of period........ $488 $ 136 $ 624 Provision for credit losses......... 78 192 270 Net charge-offs..................... (78) (104) (182) Other, transferred to other assets, related to securitized receivables....................... -- (29) (29) ---- ----- ----- Balance, end of period.............. $488 $ 195 $ 683 ==== ===== ===== Allowance/loans outstanding......... 3.4% 2.2% 3.0% Allowance/nonperforming loans....... 209 -- 292 - --------------------------------------------------------------------------
The allowance for credit losses is maintained at a level considered adequate to provide for inherent losses in the credit portfolio. The Corporation evaluates the adequacy of the allowance each quarter and reports the findings to a committee of the Board of Directors. After reviewing the adequacy of the allowance, the committee approves the provision for credit losses. - ------------------------------------------------------------------------------- BAR CHART: Allowance for Credit Losses as % of Nonperforming Loans* 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- 105% 90% 160% 292% 556% *At year-end - ------------------------------------------------------------------------------- The Corporation's provision for credit losses decreased to $224 million in 1994 from $270 million in 1993. A $29 mil- lion increase in the consumer provision in 1994 was offset by a $75 million reduction in the commercial provision. The increase in the consumer provision was primarily the result of growth in credit card receivables. The decline in the commercial provision to only $3 million reflects the Corporation's judgment as to the portfolio's improved overall credit quality. At year-end 1993, the Corporation reclassified its reserve for securitized credit card receivables from the allowance for credit losses to other assets. This reclassification was made to conform to prevalent industry practice and had no impact on reserves available for losses or on reported earnings. The reserve totaled $255 million at December 31, 1994, compared with $196 million at year-end 1993. Effective January 1, 1995, the Corporation adopted new Financial Accounting Standards addressing "impaired loans," which include loans where it is probable that all principal and interest amounts due will not be collected in accordance with contractual terms. The Corporation does not expect the adoption of these standards to have a material effect on its earnings or its allowance for credit losses. First Chicago Corporation 32 Annual Report 1994 - --------------------------------------------------------------- Nonperforming Assets Nonperforming assets, which consist of nonperforming loans and other real estate, decreased from $277 million at December 31, 1993, to $158 million at December 31, 1994. Although quarterly fluctuations may occur, the Corporation does not expect nonperforming assets to increase significantly in 1995. Nonperforming Assets
- ------------------------------------------------------------------------------------------- December 31 (Dollars in millions) 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------------- Nonperforming loans Commercial real estate.................... $ 68 $108 $ 93 $ 309 $ 274 Troubled-country debtor................... 1 50 76 150 210 Other..................................... 61 76 222 384 370 ---- ---- ---- ------ ------ Total nonperforming loans............... 130 234 391 843 854 Other real estate, net Owned assets.............................. 14 29 10 283 433 In-substance foreclosed assets............ 14 14 13 174 96 ---- ---- ---- ------ ------ Total other real estate, net............ 28 43 23 457 529 ---- ---- ---- ------ ------ Total nonperforming assets.............. $158 $277 $414 $1,300 $1,383 ==== ==== ==== ====== ====== - ------------------------------------------------------------------------------------------- Nonperforming loans/loans outstanding....... 0.5% 1.0% 1.7% 3.3% 3.1% Nonperforming assets/loans outstanding and other real estate......................... 0.6 1.2 1.8 5.0 4.9 - -------------------------------------------------------------------------------------------
Nonperforming Loans Nonperforming loans include loans on which the Corpo- ration does not accrue interest (nonaccrual loans) and loans that bear a rate of interest that has been reduced below market rates due to the deteriorating financial con- dition of the borrower (accrual renegotiated loans). Other Real Estate Other real estate includes assets that either have been acquired in satisfaction of debt or have been classified as in-substance foreclosures. The Corporation had $28 mil- lion of other real estate at year-end 1994, compared with $43 million at year-end 1993. The provision for other real estate was $2 million in 1994, compared with $4 million in 1993. Consumer Risk Management Consumer loans consist of credit card receivables as well as home mortgage loans, home equity loans and other forms of installment credit. The consumer loan portfolio increased $1.2 billion during the year to $9.9 billion at year-end 1994. Including securitized credit card receiv- ables, the consumer portfolio increased $2.4 billion, or 18%, to $16.0 billion at year-end 1994. The consumer risk management process focuses on the credit card segment separately from other parts of the portfolio. For both the on-balance-sheet and the securi- tized credit card portfolios, loss potential is tested using statistically expected levels of losses based on the source, age and other risk characteristics of each portfolio. For the other segments of the consumer portfolio, reserve factors are based on historical loss rates by loan type and vintage that are adjusted to reflect changes in the credit risk of new accounts and forecasted regional delinquency levels and trends. - --------------------------------------------------------------- BAR CHART: Nonperforming Assets as % of Loans and Other Real Estate* 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- 4.9% 5.0% 1.8% 1.2% 0.6% * At year-end - --------------------------------------------------------------- Total credit card receivables (held in the portfolio plus sold to investors through securitization transactions) were $12.5 billion at December 31, 1994, a 16% increase from $10.7 billion at December 31, 1993. Average credit card receivables rose to $10.9 billion in 1994, up 21% from 1993. Net charge-offs in 1994 for the total owned and securitized credit card portfolio were $394 million, or 3.6% of aver- age receivables, compared with net charge-offs of $332 mil- lion, or 3.7% of receivables, in 1993. In 1994, the increase in net charge-offs primarily reflects continued portfolio growth; the Corporation expects the net charge-off rate in 1995 to be similar. At year-end 1994, the allowance for credit losses related to the consumer portfolio was $207 million, or 2.1% of loans. Comparable figures for 1993 were $195 million, or 2.2%. Net charge-offs were $160 million in 1994, compared with $104 million in 1993. First Chicago Corporation 33 Annual Report 1994
- --------------------------------------------------------------------------------------------------------- Consumer Loans - --------------------------------------------------------------------------------------------------------- December 31 (In millions) 1994 1993 1992 1991 1990 - --------------------------------------------------------------------------------------------------------- Credit card loans................................... $ 6,337 $ 5,778 $ 4,135 $3,843 $3,930 Securitized credit card receivables................. 6,117 4,958 4,500 3,573 3,130 ------- ------- ------- ------ ------ Total managed credit card receivables........... 12,454 10,736 8,635 7,416 7,060 Other consumer loans................................ 3,580 2,896 2,737 2,482 2,494 ------- ------- ------- ------ ------ Total....................................... $16,034 $13,632 $11,372 $9,898 $9,554 ======= ======= ======= ====== ====== - ---------------------------------------------------------------------------------------------------------
Average Credit Card Receivables - --------------------------------------------------------------------------------------------------------- (Dollars in millions) 1994 1993 1992 1991 1990 - --------------------------------------------------------------------------------------------------------- Credit card loans outstanding....................... $ 5,320 $ 4,170 $ 3,537 $3,516 $4,497 Securitized credit card receivables................. 5,538 4,839 3,918 3,320 2,063 ------- ------- ------- ------ ------ Total credit card receivables....................... $10,858 $ 9,009 $ 7,455 $6,836 $6,560 ======= ======= ======= ====== ====== Total net charge-offs (including securitizations)... $ 394 $ 332 $ 316 $ 309 $ 245 ======= ======= ======= ====== ====== Net charge-offs/average total receivables........... 3.6% 3.7% 4.2% 4.5% 3.7% === === === === === - ---------------------------------------------------------------------------------------------------------
Commercial Risk Management Commercial credit quality continued to improve as recov- eries exceeded charge-offs in 1994. This compares with commercial net charge-offs totaling $78 million in 1993. In addition, the provision for commercial credit losses decreased to $3 million in 1994 from $78 million in 1993; this represents 2 basis points of related loans, a significant improvement from 54 basis points in 1993. The year-end commercial reserve of $516 million represented 3.2% of total commercial loans and 397% of related nonperform- ing loans. Commercial loans increased 11% from $14.4 billion at December 31, 1993, to $16.0 billion at December 31, 1994. The increase primarily reflects growth in the middle mar- ket portfolio. The commercial risk portfolio includes all domestic com- mercial credit exposure and all foreign exposure. Credit exposure includes the credit risks associated with both on- and off-balance-sheet financial instruments. Credit risks from off-balance-sheet instruments arise from credit- related and derivative financial instruments. See Note 15, on page 58, for information on the credit exposure associ- ated with these off-balance-sheet instruments. In the commercial portfolio, credit quality is rated accord- ing to nine defined levels of credit risk. The lower five categories of credit risk are equivalent to the four bank regulatory classifications: Special Mention, Substandard, Doubtful and Loss. These categories define levels of credit deterioration where it may be increasingly difficult for the Corporation to be fully repaid without restructuring the credit. Credits that are Doubtful are likely to result in some principal loss. Credits classified as Loss are charged off. Each quarter, the Corporation conducts an asset-by-asset review of significant lower-rated credit or country expo- sure. Potential losses are identified during this review, and reserves are established accordingly. Commercial Real Estate Commercial real estate consists primarily of loans secured by real estate as well as certain loans that are real estate- related. A loan is categorized as real estate-related when 80% or more of the borrower's revenues are derived from real estate activities and the loan is not collateralized by cash or marketable securities. At December 31, 1994, commercial real estate loans totaled $2.5 billion. During 1994, net charge-offs in the commer- cial real estate portfolio segment were $19 million. Non- performing commercial real estate assets, including other real estate, totaled $96 million, or 3.7% of related assets, at December 31, 1994.
- ------------------------------------------------------------------------------------------------- Commercial Real Estate Assets - ------------------------------------------------------------------------------------------------- December 31 (Dollars in millions) 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------------------- Commercial real estate loans.............. $2,544 $2,474 $2,795 $4,403 $4,927 Nonperforming loans....................... 68 108 93 309 274 Other real estate, net.................... 28 43 23 457 529 Nonperforming assets...................... 96 151 116 766 803 Net loan charge-offs...................... 19 51 127 183 79 Nonperforming assets/loans outstanding and other real estate, net.............. 3.7% 6.0% 4.1% 15.8% 14.7% - -------------------------------------------------------------------------------------------------
First Chicago Corporation 34 Annual Report 1994 - --------------------------------------------------------------- DERIVATIVE FINANCIAL INSTRUMENTS The Corporation enters into a variety of derivative finan- cial instruments in its trading, asset and liability manage- ment, and venture capital activities. These instruments include interest rate, currency, commodity and equity swaps, forwards, futures, options, caps, floors, forward rate agreements, and other conditional or exchange contracts, and include both exchange-traded and over-the-counter contracts. See Note 15, on page 58, for a discussion of the nature and terms of derivative financial instruments. Notional Principal or Contractual Amounts of Derivative Financial Instruments The following tables represent the gross notional princi- pal or contractual amounts of outstanding derivative finan- cial instruments used in the Corporation's trading, asset and liability management, and venture capital activities. They include swaps, forwards, futures, options, caps, floors, forward rate agreements, and other conditional or exchange contracts. These amounts do not represent the market or credit risk associated with these instruments but instead indicate the volume of the transactions. The amounts greatly exceed the credit risk associated with these instruments and do not reflect the netting of offsetting transactions. - ------------------------------------------------------------------------ Asset and December 31, 1994 Liability Venture (In billions) Trading Management Capital Total - ------------------------------------------------------------------------ Foreign exchange contracts.............. $291.7 $1.2 $ -- $292.9 Interest rate contracts.............. 317.6 8.5 -- 326.1 Commodity contracts...... 0.1 -- -- 0.1 Equity contracts......... 2.7 -- 0.3 3.0 ------ ---- ---- ------ Total................ $612.1 $9.7 $0.3 $622.1 ====== ==== ==== ====== - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ Asset and December 31, 1993 Liability Venture (In billions) Trading Management Capital Total - ------------------------------------------------------------------------ Foreign exchange contracts.............. $219.4 $1.1 $ -- $220.5 Interest rate contracts.............. 202.0 8.5 -- 210.5 Commodity contracts...... 0.2 -- -- 0.2 Equity contracts......... 0.1 -- 0.1 0.2 ------ ---- ---- ------ Total................ $421.7 $9.6 $0.1 $431.4 ====== ==== ==== ====== - ------------------------------------------------------------------------ Accounting for Derivative Financial Instruments Derivative financial instruments used in trading and ven- ture capital activities are valued at prevailing market rates on a present value basis. Realized and unrealized gains and losses are included in noninterest income as com- bined trading profits and equity securities gains. Where appropriate, compensation for credit risk and ongoing ser- vicing is deferred and taken into income over the term of the derivatives. Any gain or loss on the early termination of an interest rate swap used in trading activities is recog- nized currently in combined trading profits. Income or expense on most derivative financial instru- ments used to manage interest rate exposure is recorded on an accrual basis as an adjustment to the yield of the related interest rate exposures over the periods covered by the contracts. If an interest rate swap that is used to manage interest rate risk is terminated early, any resulting gain or loss is deferred and amortized as an adjustment to the yield of the underlying interest rate exposure position over the remaining periods originally covered by the ter- minated swap. In general, purchased option, cap and floor contracts are reported in derivative product assets, and written option, cap and floor contracts are reported in derivative product liabilities. For other derivative financial instruments, an unrealized gain is reported in derivative product assets and an unrealized loss is reported in derivative product liabilities. Derivative financial instruments executed with the same counterparty under a legally enforceable master netting arrangement are reported on a net basis as deriva- tive product assets or liabilities. First Chicago Corporation 35 Annual Report 1994 - --------------------------------------------------------------- Income Resulting from Derivative Financial Instruments A discussion of the Corporation's income from derivatives used in trading and venture capital activities, is presented on pages 20 and 30, respectively. The Corporation uses interest rate derivative financial instruments to reduce structural interest rate risk and the volatility of net interest margin. The consistency of the Corporation's net interest margin reflects the effective use of these derivatives. Without their use, net interest income would have been lower by $84 million in 1994, $169 mil- lion in 1993 and $149 million in 1992. The sale of fixed- and floating-rate credit card receivables as securities to investors subjects the Corporation's servic- ing revenue to interest rate risk. The Corporation uses interest rate derivatives to reduce the volatility of the serv- icing income on credit card securitizations. Without the use of these instruments, credit card fee revenue would have been reduced by $39 million in 1994, $67 million in 1993 and $57 million in 1992. The terms of these deriva- tives match the terms of the credit card securitizations. Deferred gains and losses on the early termination of inter- est rate swaps used to manage interest rate risk total a net deferred gain of $46 million as of December 31, 1994, and a net deferred gain of $93 million as of December 31, 1993. A significant portion of these deferred gains was related to securitized credit card receivables. The amount at Decem- ber 31, 1994, is scheduled to be amortized into income in the following periods: $28 million in 1995, $19 million in 1996, $1 million in 1997 and $(2) million thereafter. Credit Exposure Resulting from Derivative Financial Instruments The Corporation maintains risk management policies that monitor and limit exposure to credit risks. For a further discussion of credit risks, see the Credit Risk Management section, on page 31. The Corporation's credit exposure resulting from deriva- tive financial instruments is represented by their fair value amounts, increased by an estimate of maximum adverse position exposure. The incremental amount of credit exposure for potential adverse movement is calculated by using a statistical model that estimates changes over time in exchange rates, interest rates and other relevant factors. Credit exposure amounts fluctuate as a function of matu- rity, interest rates, foreign exchange rates, commodity prices and equity prices. Gross credit exposure may be overstated because it does not consider collateral and other security or the offsetting of losses with the same counterparties based on legally enforceable termination and netting rights. A reconciliation between gross credit exposure and balance sheet exposure is presented below.
- ------------------------------------------------------------ December 31, 1994 (In billions) - ------------------------------------------------------------ Gross credit exposure.............................. $12.3 Less additional exposure based on estimate of maximum adverse position exposure................ 5.4 ----- Gross fair value exposure.......................... $ 6.9 ===== Gross fair value exposure by type of contract Interest rate contracts.......................... $ 3.6 Foreign exchange contracts....................... 3.2 Equity contracts................................. 0.1 ----- Gross fair value exposure...................... $ 6.9 Less netting adjustments due to master netting agreements........................ 2.5 Add unrecognized net loss due to non-trading activities....................................... -- ----- Balance sheet exposure............................. $ 4.4 ===== - ------------------------------------------------------------
At December 31, 1993, the gross credit exposure and the gross fair value exposure resulting from derivative financial instruments were $10.6 billion and $6.5 billion, respectively. There were no net charge-offs in 1994 related to derivative financial instruments. First Chicago Corporation 36 Annual Report 1994
- ---------------------------------------------------------------------------------- CAPITAL MANAGEMENT Selected Capital Ratios - ---------------------------------------------------------------------------------- Corporate December 31 1994 1993 1992 1991 1990 Guideline - ---------------------------------------------------------------------------------- Common equity/total assets (1)..... 6.6% 7.2% 5.9% 5.1% 4.8% N/A Tangible common equity ratio (1)... 6.2 6.6 5.0 4.1 3.9 N/A Stockholders' equity/total assets.. 6.9 8.1 6.9 6.1 5.5 N/A Risk-based capital ratios (1)(2) Tier 1........................... 8.8 8.8 6.7 5.5 4.9 7-8% Total............................ 13.4 13.6 10.8 9.4 8.3 11-12 Leverage ratio (1)(2).............. 7.5 8.0 6.6 5.8 5.0 N/A Double leverage ratio.............. 117 110 114 116 119 115-125 Dividend payout ratio.............. 28 15 188 174 60 30-35 - ----------------------------------------------------------------------------------
(1) Net of investment in First Chicago Capital Markets, Inc. (2) Under 1992 risk-based capital rules. N/A--Not applicable. Introduction Capital represents the stockholders' investment on which the Corporation strives to generate attractive returns. It supports business growth and provides protection to depositors and creditors. Banking is a risk-taking activity, and management believes that capital is the foundation of a cohesive risk management framework in which the Cor- poration's risks and returns come together. Capital ade- quacy objectives have been developed for the Corporation and its principal banking subsidiaries to meet these needs and also maintain a well-capitalized regulatory position. Management believes that a strong capital base coupled with attractive earnings are instrumental in enhancing long- term stockholder value. To that end, the Corporation's key capital management objectives are to: o maintain a capital base commensurate with its overall risk profile; o maintain strong capital ratios relative to its peers; o meet or exceed all regulatory guidelines; and o generate attractive returns. To achieve these objectives, the Finance Committee, which oversees the Corporation's capital goals, annually estab- lishes a capital plan. This plan is intended to ensure that the Corporation and each of its subsidiaries have capital structures consistent with prudent management principles and regulatory requirements. Economic Capital In the normal course of business, the Corporation takes on several types of risk: credit, liquidity, structural interest rate, market and operating/fiduciary. As discussed in the Risk Management section, frameworks have been devel- oped to independently monitor and control many of these exposures. To integrate these processes, an economic cap- ital framework has been constructed to allocate capital to business segments, products and customers based on the amount and type of risk inherent in the activity. Once eco- nomic capital is allotted, returns can be computed to deter- mine if the activity earns an adequate return on risk. This process forms a key decision-making tool for managing risk-taking activities as well as ensuring that capital is profitably employed. A financial instrument or business activity attracts economic capital based on its potential for loss of value over a par- ticular time period. Losses result from adverse price move- ments for market and interest rate risk, failure of a counter- party to perform according to the terms of an agreement for credit risk, and operating errors and negligence for operating/fiduciary risk. Generally, statistical analysis of historical data provides the volatility estimates using a three-standard-deviation confidence interval in determin- ing the appropriate levels of economic capital. Capital is designed to cover most loss occurrences, but not the max- imum loss possible. Credit and operating loss experiences form the basis for assessing the volatility of these risks. Volatility of interest and exchange rates and commodity and equity prices is used to determine the capital for market risk. Although capital is allocated to specific activities and instruments, a diverse portfolio of activities requires less capital than the sum of the individual components because it is unlikely that all activities will experience large value declines at the same time. Consequently, the Corporation's total capital level will be less than the sum of the individual requirements. Total economic capital will vary proportionately with the level and riskiness of the Corporation's businesses and products. The Corporation's primary exposure is to credit risk, which during 1994 consumed the largest amount of economic capital. The Corporation intends to maintain capital commensurate with its risk profile and intermedi- ary requirements, and to deploy its capital resources in activities that earn attractive returns for stockholders. Because of dissimilar measurement techniques, book cap- ital, economic capital and intermediary capital differ, and the management of these differences is another task of the capital planning process. The Corporation has established a capital level that it believes is necessary to provide flexibility while maintain- ing an adequate base for its risk profile and in relation to its peers. This target, or intermediary capital, is expressed in terms of Tier 1 capital and ranges from 7% to 8%. First Chicago Corporation 37 Annual Report 1994 - --------------------------------------------------------------- As the following chart shows, the Corporation's average common equity during 1994 exceeded its economic capital--that needed for current business risks--and was more than sufficient to meet its intermediary capital goals. Excess capital above the intermediary capital target is available for investments and acquisitions; it averaged about $450 million during 1994. If attractive long-term opportunities are not available over time in the Corpora- tion's core businesses, any excess capital will be returned to stockholders, typically via stock repurchase programs and/or dividend increases. Inherent in capital management is the ability of the Cor- poration to generate acceptable returns on stockholders' capital. Even with excess capital, the Corporation has been able to earn attractive returns on equity. Over the past two years, the return on average common stockholders' equity has been greater than the Corporation's goal of consis- tently earning at least 15%. - ------------------------------------------------------------------------------ BAR CHART: Average Economic Capital (In billions) 1992* 1993 1994 ----- ----- ----- 2.9 3.1 3.8 *Economic capital and targeted intermediary capital exceeded actual common equity due largely to the effect of the accelerated asset disposition program - ------------------------------------------------------------------------------ Regulatory Capital The Corporation endeavors to maintain regulatory capital ratios, including those of its principal banking subsidiaries, in excess of the well-capitalized guidelines. To assure meet- ing this goal, the Corporation has established target ranges of 7% to 8% for Tier 1 capital and 11% to 12% for total risk-based capital. Both targets exceed the respective well- capitalized guidelines of 6% and 10%. As shown in the following chart, these ratios have improved over the past three years, with the 1993 and 1994 figures exceeding the upper end of the Corporation's target ranges. - --------------------------------------------------------------- BAR CHART: Tier 1 and Total Capital Ratios* 1992 1993 1994 ---- ---- ---- Tier 1 6.7% 8.8% 8.8% Total 10.8% 13.6% 13.4% *At year-end - --------------------------------------------------------------- The Corporation's principal banking subsidiaries--The First National Bank of Chicago (FNBC), FCC National Bank (FCCNB), and American National Bank and Trust Com- pany of Chicago (ANB)--have exceeded the regulatory well-capitalized guidelines for the past two years, as shown in the following table. It is important to note that by maintaining regulatory well- capitalized status, the subsidiary banks benefit from lower Federal Deposit Insurance Corporation deposit premiums. Principal Banking Subsidiaries Regulatory Capital Ratios
- -------------------------------------------------------------------------------------------------------------- December 31, 1994 December 31, 1993 December 31, 1992 ---------------------- ---------------------- ---------------------- FNBC FCCNB ANB FNBC FCCNB ANB FNBC FCCNB ANB - -------------------------------------------------------------------------------------------------------------- Risk-based capital ratios Tier 1 capital............ 8.1% 12.1% 9.5% 7.7% 10.0% 10.1% 5.5% 6.4% 9.4% Total capital............. 12.5 15.0 12.0 11.8 12.9 11.8 9.3 10.1 11.4 Leverage ratio................ 6.3 14.4 9.1 6.7 12.3 8.7 5.3 7.4 8.0 - --------------------------------------------------------------------------------------------------------------
First Chicago Corporation 38 Annual Report 1994 - --------------------------------------------------------------- Tier 1 capital expanded in 1994 due largely to earnings retained in common stockholders' equity, while Tier 2 cap- ital increased because of the issuance of qualifying long- term debt. The following tables show the components of the Corporation's regulatory risk-based capital and risk- weighted assets. Regulatory Capital
- ------------------------------------------------------------------------- December 31 (In millions) 1994 1993 1992 - ------------------------------------------------------------------------- Tier 1 capital Common stockholders' equity............ $3,922 $3,503 $2,732 Preferred stock........................ 611 761 669 Less 50% of investment in First Chicago Capital Markets, Inc......... (128) (69) (59) Less disallowed intangibles and other adjustments.................... (80) (97) (119) ------ ------ ------ Tier 1 capital....................... $4,325 $4,098 $3,223 Tier 2 capital Allowance for credit losses (1)........ 616 581 605 Qualifying long-term debt.............. 1,753 1,682 1,452 Less 50% of investment in First Chicago Capital Markets, Inc. ....... (128) (69) (59) ------ ------ ------ Tier 2 capital....................... 2,241 2,194 1,998 ------ ------ ------ Total capital...................... $6,566 $6,292 $5,221 ====== ====== ====== - ------------------------------------------------------------------------- (1) Limited to 1.25% of risk-weighted assets. Regulatory Risk-Weighted Assets* - ------------------------------------------------------------------------- December 31 (In billions) 1994 1993 1992 - ------------------------------------------------------------------------- Balance-sheet risk-weighted assets..... $33.0 $30.5 $30.1 Off-balance-sheet risk-weighted assets............................... 16.2 15.8 18.3 ----- ----- ----- Total risk-weighted assets............. $49.2 $46.3 $48.4 ===== ===== ===== - ------------------------------------------------------------------------- *Based on Federal Reserve Board definitions.
Dividends Dividends are an integral part of the capital management and stockholder value program. The Corporation's com- mon dividend policy reflects its earnings outlook, dividend payout ratios, peer comparisons, the need to maintain an adequate capital level and alternative investment oppor- tunities. Given these factors, the Corporation presently intends to maintain a common dividend payout ratio over time in the range of 30% to 35% of operating earnings. During 1994, the Corporation declared two increases in its quarterly common dividend. The $0.55 per share com- mon dividend declared on November 11, 1994, and paid on January 1, 1995, represents a 38% increase from the $0.40 per share common dividend paid on January 1, 1994, and an 83% increase from the $0.30 per share paid on October 1, 1993. Stock Repurchase Program and Other Capital Activities The repurchase of shares is another technique used to manage capital and enhance stockholder value. During 1994, the Corporation repurchased 4.6 million shares of common stock at an average price of $47.94 per share. This brings the total number of shares repurchased under the 7 million share buyback program to 4.8 million, and represents approximately 70% of the shares authorized under the program. The program is designed to meet pro- jected requirements of the Corporation's employee benefit plans and to manage the Corporation's overall capital position. On July 1, 1994, the Corporation redeemed its $150 mil- lion issue of Preferred Stock, Series D, reducing annual dividend requirements by $15 million. Regulatory total capital was increased in January 1994 through the issuance of $200 million of subordinated debt. Double Leverage Double leverage is the extent to which holding company debt is used to finance equity investments in subsidiaries. Presently, the Corporation intends to limit its double lev- erage ratio to no more than 125% at any time and 115% on average. On December 31, 1994, the Corporation's double leverage was 117%, compared with 110% at year- end 1993. First Chicago Corporation 39 Annual Report 1994
Consolidated Balance Sheet First Chicago Corporation and Subsidiaries - --------------------------------------------------------------------------------------------------------------- December 31 (Dollars in millions) 1994 1993 - --------------------------------------------------------------------------------------------------------------- Assets Cash and due from banks--noninterest-bearing.................................... $ 4,265 $ 3,916 Due from banks--interest-bearing................................................ 8,066 6,037 Federal funds sold and securities under resale agreements....................... 13,302 8,783 Trading account assets.......................................................... 4,967 4,536 Investment securities (fair values--$2,589 in 1994 and $2,264 in 1993).......... 2,592 2,256 Loans (net of unearned income--$297 in 1994 and $282 in 1993)................... 25,947 23,103 Less allowance for credit losses.............................................. 723 683 ------- ------- Total loans, net.............................................................. 25,224 22,420 Premises and equipment.......................................................... 665 635 Accrued income receivable....................................................... 485 407 Customers' acceptance liability................................................. 526 517 Derivative product assets....................................................... 4,389 -- Other assets.................................................................... 1,419 3,053 ------- ------- Total assets.......................................................... $65,900 $52,560 ======= ======= - --------------------------------------------------------------------------------------------------------------- Liabilities Deposits Demand........................................................................ $ 7,647 $ 8,184 Savings....................................................................... 7,448 7,541 Time.......................................................................... 5,149 4,925 Foreign offices............................................................... 11,422 7,536 ------- ------- Total deposits........................................................ 31,666 28,186 Federal funds purchased and securities under repurchase agreements.............. 13,026 8,255 Other funds borrowed............................................................ 7,665 6,007 Long-term debt.................................................................. 2,271 2,065 Acceptances outstanding......................................................... 526 517 Derivative product liabilities.................................................. 4,097 -- Other liabilities............................................................... 2,116 3,266 ------- ------- Total liabilities..................................................... 61,367 48,296 - --------------------------------------------------------------------------------------------------------------- Stockholders' Equity Preferred stock--without par value, authorized 15,000,000 shares Outstanding: - ---------------------------------------------------------------------------------- 1994 1993 - ---------------------------------------------------------------------------------- Series A ($ 50 stated value)....................... 2,410,000 2,410,000 121 121 Series B ($100 stated value)....................... 1,191,000 1,191,000 119 119 Series C ($100 stated value)....................... 713,800 713,800 71 71 Series D ($ 25 stated value)....................... -- 6,000,000 -- 150 Series E ($625 stated value)....................... 160,000 160,000 100 100 Convertible Series B ($5,000 stated value)......... 40,000 40,000 200 200 Common stock--$5 par value........................................................ 466 434 - ---------------------------------------------------------------------------------- 1994 1993 - ---------------------------------------------------------------------------------- Number of shares authorized.......................... 150,000,000 150,000,000 Number of shares issued.............................. 93,148,134 86,715,812 Number of shares outstanding......................... 89,859,798 86,398,605 Surplus........................................................................... 1,712 1,724 Retained earnings................................................................. 1,905 1,358 Other adjustments................................................................. (4) -- ------- ------- Total................................................................... 4,690 4,277 Less treasury stock at cost, 3,288,336 shares in 1994 and 317,207 shares in 1993.. 157 13 - --------------------------------------------------------------------------------------------------------------- Stockholders' equity.................................................... 4,533 4,264 ------- ------- Total liabilities and stockholders' equity.............................. $65,900 $52,560 ======= ======= - ---------------------------------------------------------------------------------------------------------------
The accompanying notes to consolidated financial statements are an integral part of this balance sheet. First Chicago Corporation 40 Annual Report 1994
Consolidated Income Statement First Chicago Corporation and Subsidiaries - --------------------------------------------------------------------------------------------------------------------------- For the Year (In millions, except per share data) 1994 1993 1992 - --------------------------------------------------------------------------------------------------------------------------- Interest Income Interest and fees on loans.......................................................... $1,897.2 $1,687.4 $1,894.4 Interest on bank balances........................................................... 361.7 298.0 358.0 Interest on federal funds sold and securities under resale agreements............... 615.2 344.8 284.8 Interest on trading account assets.................................................. 277.7 221.9 259.0 Interest on investment securities (including dividends)............................. 68.2 72.0 73.4 -------- -------- -------- Total..................................................................... 3,220.0 2,624.1 2,869.6 - --------------------------------------------------------------------------------------------------------------------------- Interest Expense Interest on deposits................................................................ 779.5 644.1 973.7 Interest on federal funds purchased and securities under repurchase agreements...... 526.2 308.1 345.3 Interest on other funds borrowed.................................................... 413.2 295.8 240.7 Interest on long-term debt.......................................................... 170.1 150.3 126.9 -------- -------- -------- Total..................................................................... 1,889.0 1,398.3 1,686.6 - --------------------------------------------------------------------------------------------------------------------------- Net Interest Income................................................................. 1,331.0 1,225.8 1,183.0 Provision for credit losses......................................................... 224.0 270.0 425.0 Provision for loans held for accelerated disposition................................ -- -- 491.0 -------- -------- -------- Net Interest Income After Provision for Credit Losses and Provision for Loans Held for Accelerated Disposition.............................. 1,107.0 955.8 267.0 - --------------------------------------------------------------------------------------------------------------------------- Noninterest Income Combined trading profits............................................................ 65.7 284.6 177.3 Equity securities gains............................................................. 228.6 480.2 204.6 Investment securities gains......................................................... 1.2 0.3 8.6 -------- -------- -------- Market-driven revenue............................................................. 295.5 765.1 390.5 Credit card fee revenue............................................................. 832.1 694.2 516.1 Service charges and commissions..................................................... 421.9 432.5 381.0 Fiduciary and investment management fees............................................ 199.2 200.7 189.8 Net gains from accelerated disposition portfolio activities......................... 45.9 60.0 -- Other income........................................................................ 80.0 49.9 10.8 -------- -------- -------- Total..................................................................... 1,874.6 2,202.4 1,488.2 - --------------------------------------------------------------------------------------------------------------------------- Noninterest Expense Salaries and employee benefits...................................................... 868.9 853.9 748.0 Occupancy expense of premises, net.................................................. 137.3 147.7 186.0 Equipment rentals, depreciation and maintenance..................................... 157.4 110.3 111.2 Other expense....................................................................... 753.3 742.0 719.2 -------- -------- -------- Subtotal.................................................................... 1,916.9 1,853.9 1,764.4 Provision for other real estate held for accelerated disposition.................... -- -- 134.0 Provision for other real estate..................................................... 1.7 4.2 56.9 -------- -------- -------- Total..................................................................... 1,918.6 1,858.1 1,955.3 - --------------------------------------------------------------------------------------------------------------------------- Income (Loss) Before Income Taxes................................................... 1,063.0 1,300.1 (200.1) Applicable income taxes (benefit)................................................... 373.3 495.6 (85.6) -------- -------- -------- Income (Loss) Before Cumulative Effect of Changes in Accounting Principles.......... 689.7 804.5 (114.5) Cumulative Effect of Changes in Accounting Principles-- Valuation of Venture Capital Investment Securities................................ -- -- 220.7 Recognition of Credit Card Solicitation Costs..................................... -- -- (12.7) -------- -------- -------- Net Income.......................................................................... $ 689.7 $ 804.5 $ 93.5 ======== ======== ======== Net Income Attributable to Common Stockholders' Equity.............................. $ 637.5 $ 747.5 $ 48.9 ======== ======== ======== - --------------------------------------------------------------------------------------------------------------------------- Common Share Data Primary Income (loss) before cumulative effect of changes in accounting principles........ $7.04 $8.78 $(2.08) Cumulative effect of changes in accounting principles-- Valuation of venture capital investment securities.............................. -- -- 2.89 Recognition of credit card solicitation costs................................... -- -- (0.17) ----- ----- ------ Net income.......................................................................... $7.04 $8.78 $ 0.64 ===== ===== ====== Fully Diluted Income (loss) before cumulative effect of changes in accounting principles........ $6.88 $8.43 $(2.08) Cumulative effect of changes in accounting principles-- Valuation of venture capital investment securities.............................. -- -- 2.89 Recognition of credit card solicitation costs................................... -- -- (0.17) ----- ----- ------ Net income.......................................................................... $6.88 $8.43 $ 0.64 ===== ===== ====== - ---------------------------------------------------------------------------------------------------------------------------
The accompanying notes to consolidated financial statements are an integral part of this statement. First Chicago Corporation 41 Annual Report 1994
Consolidated Statement of Changes in Stockholders' Equity First Chicago Corporation and Subsidiaries - -------------------------------------------------------------------------------------------------------------------------------- For the Three Years Ended Treasury December 31, 1994 Preferred Common Retained Other Stock (In millions) Stock Stock Surplus Earnings Adjustments (at Cost) Total - -------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1991................ $ 569 $345 $1,297 $ 760 $ 3 $ (4) $2,970 Net income.............................. -- -- -- 94 -- -- 94 Issuance of common stock................ -- 67 306 -- -- -- 373 Issuance of preferred stock............. 100 -- (4) -- -- -- 96 Cash dividends declared Preferred stock....................... -- -- -- (44) -- -- (44) Common stock.......................... -- -- -- (89) -- -- (89) Other................................... -- -- -- -- (2) 3 1 - -------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1992................ $ 669 $412 $1,599 $721 $ 1 $ (1) $3,401 Net income.............................. -- -- -- 804 -- -- 804 Issuance of common stock................ -- 7 37 -- -- -- 44 Issuance of preferred stock............. 200 -- (4) -- -- -- 196 Redemption of preferred stock........... (108) 15 92 -- -- -- (1) Cash dividends declared Preferred stock....................... -- -- -- (57) -- -- (57) Common stock.......................... -- -- -- (110) -- -- (110) Treasury stock purchases................ -- -- -- -- -- (12) (12) Other................................... -- -- -- -- (1) -- (1) - -------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1993................ $ 761 $434 1,724 $1,358 $-- $ (13) $4,264 Net income.............................. -- -- -- 690 -- -- 690 Issuance of common stock................ -- 1 12 -- -- -- 13 Issuance of treasury stock.............. -- -- (38) -- -- 87 49 Redemption of preferred stock........... (150) -- -- -- -- -- (150) Acquisition of Lake Shore Bancorp. .................... -- 31 18 78 (4) -- 123 Cash dividends declared Preferred stock....................... -- -- (4) (48) -- -- (52) Common stock.......................... -- -- -- (173) -- -- (173) Treasury stock purchases................ -- -- -- -- -- (231) (231) - -------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1994................ $ 611 $466 $1,712 $1,905 $(4) $(157) $4,533 ===== ==== ====== ====== === ===== ====== - --------------------------------------------------------------------------------------------------------------------------------
The accompanying notes to consolidated financial statements are an integral part of this statement. First Chicago Corporation 42 Annual Report 1994
Consolidated Statement of Cash Flows First Chicago Corporation and Subsidiaries - -------------------------------------------------------------------------------------------------------------------------------- For the Year (In millions) 1994 1993 1992 - -------------------------------------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities Net income.......................................................................... $ 690 $ 804 $ 94 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization..................................................... 175 188 173 Combined credit provisions (including accelerated disposition provision).......... 226 274 1,107 Equity securities gains........................................................... (229) (480) (205) Net (increase) in net derivative product balances................................. (57) -- -- Net gains from accelerated disposition portfolio activities....................... (46) (60) -- Cumulative effect of changes in accounting principles............................. -- -- (208) Net (increase) in trading account assets.......................................... (416) (1,224) (1,346) Net (increase) decrease in accrued income receivable.............................. (78) (51) 174 Net decrease in other assets...................................................... 51 76 678 Interest income from Brazilian debt restructuring................................. (17) -- -- Other noncash adjustments......................................................... 69 6 (87) --------- -------- --------- Total adjustments................................................................. (322) (1,271) 286 Net cash provided by (used in) operating activities................................. 368 (467) 380 - -------------------------------------------------------------------------------------------------------------------------------- Cash Flows from Investing Activities Net (increase) in federal funds sold and securities under resale agreements......... (4,506) (1,891) (1,684) Purchase of investment securities................................................... -- (3,068) (1,202) Purchase of investment securities--available for sale............................... (1,287) -- -- Purchase of debt investment securities--held to maturity............................ (289) -- -- Purchase of venture capital investments............................................. (181) -- -- Proceeds from maturities of debt securities......................................... -- 3,047 703 Proceeds from maturities of debt securities--available for sale..................... 982 -- -- Proceeds from maturities of debt securities--held to maturity....................... 299 -- -- Proceeds from sales of debt securities.............................................. -- -- 366 Proceeds from sales of debt securities--available for sale.......................... 191 -- -- Proceeds from sales of equity securities............................................ -- 598 244 Proceeds from sales of equity securities--available for sale........................ 54 -- -- Proceeds from sales of venture capital investments.................................. 333 -- -- Net (increase) in credit card receivables........................................... (2,880) (3,493) (1,515) Credit card receivables securitized................................................. 2,000 1,700 1,000 Net (increase) decrease in loans of bank subsidiaries............................... (1,480) 973 1,186 Loans made to customers and purchased from others by nonbank subsidiaries........... (499) (142) (181) Principal collected on and proceeds from sale of loans by nonbank subsidiaries...... 506 302 377 Loan recoveries..................................................................... 74 97 88 Net proceeds from sales of assets held for accelerated disposition.................. 112 829 174 Purchases of premises and equipment................................................. (170) (213) (151) Proceeds from sales of premises and equipment....................................... 38 71 63 Net cash and cash equivalents due to mergers and acquisitions....................... 44 -- -- --------- -------- --------- Net cash (used in) investing activities............................................. (6,659) (1,190) (532) - -------------------------------------------------------------------------------------------------------------------------------- Cash Flows from Financing Activities Net increase (decrease) in demand and savings deposits.............................. (934) 525 1,934 Net (decrease) in time deposits..................................................... (470) (1,342) (3,269) Deposits acquired................................................................... -- 12 -- Net increase (decrease) in deposits in foreign offices.............................. 3,799 (687) (978) Net increase in federal funds purchased and securities under repurchase agreements....................................................... 4,722 1,293 1,817 Net (decrease) in commercial paper.................................................. (17) (8) (54) Proceeds from other funds borrowed.................................................. 249,952 80,869 110,418 Repayment of other funds borrowed................................................... (248,139) (79,024) (109,134) Proceeds from issuance of long-term debt............................................ 204 826 234 Repayment of long-term debt......................................................... (10) (471) (257) Net increase (decrease) in other liabilities........................................ 2 285 (1,102) Dividends paid...................................................................... (211) (158) (145) Proceeds from issuance of common stock.............................................. 12 41 375 Proceeds from reissuance of treasury stock.......................................... 39 4 6 Purchase of treasury stock.......................................................... (231) (13) (1) Proceeds from issuance of preferred stock........................................... -- 196 96 Payment for redemption of preferred stock........................................... (150) (1) -- --------- -------- --------- Net cash provided by (used in) financing activities................................. 8,568 2,347 (60) - -------------------------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents........................ 101 (75) (45) - -------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents................................ 2,378 615 (257) Cash and cash equivalents at beginning of year...................................... 9,953 9,338 9,595 --------- -------- --------- Cash and cash equivalents at end of year............................................ $ 12,331 $ 9,953 $ 9,338 ========= ======== ========= - --------------------------------------------------------------------------------------------------------------------------------
Interest paid in cash by the Corporation totaled $1.8 billion in 1994, $1.4 billion in 1993 and $1.9 billion in 1992. Income taxes paid in cash by the Corporation totaled $355 million in 1994, $175 million in 1993 and $50 million in 1992. The Corporation financed the sale of other real estate in the amount of $2 million, $2 million and $135 million in 1994, 1993 and 1992, respectively. Loans transferred to other real estate were $20 million, $51 million and $192 million in 1994, 1993 and 1992, respectively. The accompanying notes to consolidated financial statements are an integral part of this statement. First Chicago Corporation 43 Annual Report 1994 Notes to Consolidated Financial Statements First Chicago Corporation and Subsidiaries - ------------------------------------------------------------------------------- N O T E 1--Summary of Significant Accounting Policies The consolidated financial statements for First Chicago Corporation (the Corporation) and subsidiaries have been prepared in conformity with generally accepted account- ing principles. A description of those accounting policies of particular significance follows. (a) Principles of Consolidation The Corporation's consolidated financial statements in- clude the accounts of all subsidiaries more than 50% owned. All significant intercompany accounts and trans- actions have been eliminated in consolidation. (b) Intangible Assets Goodwill, representing the cost of investments in subsid- iaries and affiliated companies in excess of the fair value of net assets acquired, is amortized on a straight-line basis over periods ranging from 10 to 25 years. Other intangible assets, such as the value of acquired cus- tomer lists, core deposits and credit card relationships, are amortized using various methods over the periods bene- fited, ranging from 5 to 17 years. (c) Investment Securities In 1993, the Corporation adopted Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities, for debt and equity securities except those held by its venture capital subsidiaries. This adoption did not have a material impact on the Corporation's financial statements. Under SFAS No. 115, debt investment securities are desig- nated as either held to maturity or available for sale at the time of acquisition and are reevaluated to determine appropriate classification in subsequent reporting periods. Debt securities that the Corporation has the positive intent and ability to hold to maturity are carried at historical cost, adjusted for amortization of premiums and accretion of discounts. Previously, such accounting treatment was applied to debt securities that were intended to be held as long-term investments. All other debt and equity invest- ment securities covered by SFAS No. 115 are classified as available for sale and are carried at fair value, with unrealized gains and losses and applicable income taxes reported in other adjustments in stockholders' equity. Previously, these securities were carried at the lower of cost or fair value. Realized gains and losses and other than temporary im- pairments related to debt and equity securities, are deter- mined using the specific identification method and are reported in noninterest income as investment securities gains for debt securities and as equity securities gains for equity securities. The Corporation adopted fair value accounting for invest- ments of its venture capital subsidiaries on January 1, 1992. Changes in the fair value of such investments are recog- nized in noninterest income as equity securities gains. Previously, such investments were carried at the lower of aggregate cost or fair value. The fair value of publicly traded investments takes into account their quoted market prices with adjustments made for market liquidity or sale restrictions. For investments that are not publicly traded, estimates of fair value have been made by management that consider the investees' financial results, conditions and prospects, and the values of comparable public companies. Because of the nature of these investments, the equity method of accounting is not used in situations where the Corporation has a greater than 20% ownership interest. (d) Trading Account Activities Trading account assets are stated at fair value. Realized and unrealized gains and losses on trading account activ- ities are reflected in noninterest income as combined trad- ing profits. Combined trading profits include interest rate, exchange rate, commodity price, and equity price trading results from both cash and derivative financial instruments, ex- cluding equity securities and related hedges. Cash financial instruments include U.S. government and agency obliga- tions, municipal obligations, asset-backed securities, and other types of securities, loans and deposits. Derivative financial instruments include swaps, forwards, futures, options, caps, floors, forward rate agreements, and other conditional or exchange contracts. The table on page 20 reports the Corporation's net trading revenue by activity, including both combined trading profits and related net interest income. (e) Derivative Financial Instruments For a discussion of the Corporation's accounting policies for derivative financial instruments, see the Derivative Financial Instruments section, on page 35. (f) Nonperforming Loans Loans, including lease-financing receivables, are consid- ered nonperforming when placed on nonaccrual status, or when a loan is renegotiated and the renegotiated terms represent an economic concession to the borrower. A loan, excluding a credit card loan, is placed on non- accrual status when the collection of contractual principal or interest is deemed doubtful by management or becomes 90 days or more past due, and the loan is not well secured or in the process of collection. Accrued but uncollected interest on a loan is reversed and charged against interest income when the loan is placed on nonaccrual status. Accrued but uncollected interest on a credit card loan is charged against interest income when the loan becomes 180 days past due. Interest payments received on nonaccrual loans are re- corded as reductions of principal if the collection of the remaining carrying amount is doubtful; otherwise, such payments are recorded as interest income. An economic concession on a renegotiated loan is made when the yield under the renegotiated terms is reduced below current market rates by an agreement with the bor- rower. Generally, this occurs when the borrower's cash flow First Chicago Corporation 44 Annual Report 1994 - ------------------------------------------------------------------------------ is insufficient to service the loan under its original terms. Subject to the above nonaccrual policy, interest on these loans is accrued at the reduced rates. (g) Credit Card Securitization The Corporation actively packages and sells credit card receivables as securities to investors. Since the receivables are sold at par value, no gains or losses are recorded at the time of sale. The amount of credit card interest income and fee rev- enue in excess of interest paid to certificate holders, credit losses and other trust expenses is recognized monthly as servicing fees in credit card fee revenue over the term of the transaction. Other transaction costs are deferred and amortized ratably as a reduction of servicing fees over the terms of the related securitizations. (h) Other Real Estate Other real estate includes assets that have been either acquired in satisfaction of debt (assets owned) or substan- tively repossessed (in-substance foreclosures). In-substance foreclosures occur when the market value of the collateral is less than the legal obligation of the borrower and the Corporation expects repayment of the loan to come only from collateral. Other real estate is recorded at fair value at the date of transfer. Any valuation adjustments required at the date of transfer are charged to the allowance for credit losses. Subsequent to acquisition, other real estate is carried at the lower of cost or fair value, based on periodic evaluations that consider changes in market con- ditions, development and disposition costs, and estimated holding periods. Operating results from assets acquired in satisfaction of debt, including rental income less oper- ating costs and depreciation, are recorded in other non- interest income. (i) Allowance for Credit Losses The allowance for credit losses is maintained at a level that in management's judgment is adequate to provide for estimated probable credit losses resulting from on-balance- sheet credit exposure for items such as loans and deriv- ative financial instruments, and off-balance-sheet credit exposure for credit-related and derivative financial instru- ments. The amount of the allowance is based on manage- ment's formal review and analysis of potential credit losses, as well as prevailing economic conditions. The allowance is increased by provisions for credit losses, which are charged to earnings, and is reduced by charge-offs net of recoveries. (j) Assets Held for Accelerated Disposition In 1992, the Corporation segregated certain commercial real estate assets and related commitments in an acceler- ated disposition portfolio. The Corporation transferred assets to this portfolio at their estimated disposition val- ues. The assets in this portfolio are carried at the lower of the initially established carrying values or newly estimated disposition values. The credit and valuation process related to this portfolio is performed quarterly to assess the on- going condition of each individual credit, to determine any change in credit risk classification, and to determine the need, if any, for additional valuation adjustments. Income recognition is based on the credit characteristics of the individual assets in the disposition portfolio. Net gains as a result of transaction activity related to disposition port- folio assets are included in noninterest income. (k) Premises and Equipment Premises and equipment are stated at cost less accumu- lated depreciation and amortization, which are computed principally on the straight-line method over the estimated useful lives of the related assets. Gains and losses on dis- positions are reflected in other noninterest income. Main- tenance and repairs are charged to noninterest expense as incurred. (l) Foreign Currency Translation The Corporation's translation policies are based on a determination of the primary operating currency (func- tional currency) for each foreign installation. If a foreign installation's functional currency is the U.S. dollar, assets and liabilities carried in local currency are translated to U.S. dollars at current exchange rates except for premises and equipment, which are translated at historic rates. Translation effects and results of related hedging trans- actions, neither of which is material, are included in other noninterest income. If the foreign installation's functional currency is its local currency, all assets and liabilities are translated at current exchange rates. Translation adjustments, related hedging results and applicable income taxes are included in other adjustments within stockholders' equity. If a foreign instal- lation is to be sold or liquidated, the related accumulated other adjustments balance is reversed and recognized as part of the gain or loss on disposition. Operating results of foreign installations are translated at averages of exchange rates prevailing during the year. The interest element of hedging transactions is included in interest expense. (m) Income Taxes The Corporation's accounting for income taxes is based on an asset and liability approach. The Corporation rec- ognizes the amount of taxes payable or refundable for the current year, and deferred tax assets and liabilities for the future tax consequences that have been recognized in its financial statements or tax returns. The measurement of tax assets and liabilities is based on the provisions of en- acted tax laws. (n) Fees Related to Lending Activities Lending origination fees, net of costs, and loan commit- ment fees, in general, are deferred and amortized as inter- est income over the life of the related loan. The deferred fees and costs are netted against outstanding loan balances. Certain credit-related fees, such as syndication manage- ment fees, commercial letters of credit fees, and fees on unused, available lines of credit, are recorded as service charges and commissions in noninterest income when earned. Fees on standby letters of credit and guarantees are recorded as service charges and commissions on a straight-line basis over the term of the related agreements. (o) Pension, Other Postretirement and Postemployment Plans The Corporation maintains a noncontributory defined benefit plan covering all eligible, salaried domestic em- ployees. Retirement benefits are primarily a function of both an employee's years of service and final levels of com- pensation. The Corporation's funding policy is to contrib- ute an amount equal to the net periodic pension cost for First Chicago Corporation 45 Annual Report 1994 - -------------------------------------------------------------------------------- the year, but not less than the minimum required by ERISA or more than the maximum tax deductible amount based on IRS limits. For 1994, no contribution was required. Net experience gains and losses are amortized over three years. Settlement gains, which occur when vested former employees elect to receive lump sum cash payments, are recorded as net periodic pension credits. Such gains repre- sent the accelerated recognition of the transition asset and net experience gains and losses. Employees in foreign offices participate to varying degrees in local pension plans, the forms of which are often pre- scribed by local laws and customs. These plans in the aggregate are not significant. The Corporation has no material other postretirement or postemployment obligations. (p) Offsetting of Amounts Related to Certain Contracts In 1994, the Corporation prospectively adopted Financial Accounting Standards Board (FASB) Interpretation No. 39, Offsetting of Amounts Related to Certain Contracts. This interpretation is applicable to the balance sheet presenta- tion of derivative financial instruments. These derivatives include interest rate, currency, commodity and equity swaps, forwards, options, caps, floors, forward rate agree- ments, and other conditional or exchange contracts, and include both exchange-traded and over-the-counter contracts. In general, purchased option, cap and floor contracts are reported in derivative product assets, and written option, cap and floor contracts are reported in derivative product liabilities. For other derivative financial instruments, an unrealized gain is reported in derivative product assets and an unrealized loss is reported in derivative product liabilities. Previously, the Corporation reported certain unrealized gains and unrealized losses on a net basis. Derivative financial instruments executed with the same counterparty under a legally enforceable master netting arrangement are reported on a net basis as derivative prod- uct assets or liabilities. At December 31, 1993, the fair value of currency options purchased totaled $536 million, while the fair value of currency options written totaled $501 million. These amounts are recorded in other assets and other liabilities, respectively. FASB Interpretation No. 41, Offsetting of Amounts Related to Certain Repurchase and Reverse Repurchase Agree- ments, was issued in December 1994. This interpretation is effective for 1994 financial statements. It modifies FASB Interpretation No. 39 to permit but not require offsetting in the balance sheet of securities under repurchase agree- ments and securities under resale agreements that meet certain conditions. Net receivable positions may not be offset against net payable positions. The Corporation has not adopted this interpretation in 1994; however, it may be adopted in a subsequent reporting period pending a review of its potential effect on the Corporation. (q) Accounting for Credit Card Solicitation Costs The Corporation changed its accounting policy in 1992 to expense certain credit card solicitation costs. Previously, these costs were deferred and amortized over the esti- mated life of the account. The Corporation made this change to reflect the more prevalent industry practice. (r) Cash Flow Reporting The Corporation uses the indirect method to report cash flows from operating activities. Under this method, net income is adjusted to reconcile it to net cash flow from operating activities. Net reporting of cash transactions has been used when the balance sheet items consist predom- inantly of maturities of three months or less, or where otherwise permitted. Other items are reported on a gross basis. Cash flows related to sales of debt investment secu- rities within three months of the maturity date are classi- fied as maturities in the consolidated statement of cash flows. Cash and cash equivalents consist of cash and due from banks, whether interest-bearing or not. Cash flows from derivative financial instruments are reported net as operating activities. Upon adopting FASB Interpretation No. 39 on January 1, 1994, a noncash trans- fer of balances attributable to derivative financial instru- ments on December 31, 1993, was made from other assets ($573 million), accrued income receivable ($941 million) and other liabilities ($1.3 billion) to net derivative product balances for purposes of reporting the Consolidated State- ment of Cash Flows. (s) Accounting for Loan Impairment In May 1993, the FASB issued SFAS No. 114, Accounting by Creditors for Impairment of a Loan. This standard was recently amended by SFAS No. 118, Accounting by Credi- tors for Impairment of a Loan--Income Recognition and Disclosure. SFAS No. 114 addresses the accounting for loans when it is probable that all principal and interest amounts due will not be collected in accordance with its contractual terms (i.e. ``impaired loans''). Pursuant to SFAS No. 114, to the extent the recorded investment of an im- paired loan exceeds the present value of the loan's ex- pected future cash flows or other measures of value, a valuation allowance is established for the difference. The corresponding allocation or charge will be to either the allowance for credit losses or to the provision for credit losses, respectively, depending on the adequacy of the overall allowance for credit losses. SFAS No. 114 also changes the definition of In-Substance Foreclosures (ISFs), which will result in currently reported ISFs being reclas- sified as nonaccrual loans. SFAS No. 118 allows for existing income recognition practices to continue. The Corporation has adopted SFAS No. 114 and SFAS No. 118 as of January 1, 1995. It is expected that the adop- tion of these standards will not have a material effect on the Corporation's net income. The allowance for credit losses allocated to impaired loans is estimated at $26 million. The January 1, 1995, aggregate recorded investment of loans that will be reclassified from ISFs to nonaccrual loans is approximately $15 million. In general, the Corporation will retain its existing income recognition practices as described in Note 1(f), on page 44. First Chicago Corporation 46 Annual Report 1994 - -------------------------------------------------------------------------------- - ------------------------------------------------------------ N O T E 2--Earnings per Share The Corporation presents earnings per share on both a primary and a fully diluted basis. Primary earnings per share were computed by dividing net income, after deduct- ing dividends on preferred stock, by the average number of common and common-equivalent shares outstanding during the period. Common-equivalent shares consist of shares issuable under the Employee Stock Purchase and Savings Plan and outstanding stock options. Fully diluted shares also include the common shares that would result from the conversion of convertible preferred stock. To compute fully diluted earnings per share, net income was reduced by preferred stock dividend requirements, except those related to convertible stock. The net income, preferred stock dividends and shares used to compute primary and fully diluted earnings per share are presented in the following table. - ------------------------------------------------------------------------- (In millions) 1994 1993 1992 - ------------------------------------------------------------------------- Primary Net income.......................... $689.7 $804.5 $93.5 Preferred stock dividends (1)....... 52.2 57.0 44.6 ------ ------ ----- Net income attributable to common stockholders' equity....... $637.5 $747.5 $48.9 ====== ====== ===== Average number of common and common-equivalent shares.......... 90.5 85.2 76.5 Fully Diluted Net income.......................... $689.7 $804.5 N/M Preferred stock dividends, excluding convertible Series A and B, where applicable (1)..... 40.7 43.7 N/M ------ ------ ----- Fully diluted net income............ $649.0 $760.8 N/M ====== ====== ===== Average number of shares, assuming full dilution............ 94.2 90.3 N/M - ------------------------------------------------------------------------- (1) 1994 preferred dividends include a 3% premium, totaling $4.5 mil- lion, paid on the redemption of the Corporation's Cumulative Preferred Stock, Series D, par value $150 million. N/M--Not meaningful. For 1992, the calculation of fully diluted earnings per share would have produced an anti-dilutive result and, there- fore, is not shown in the preceding table. - ------------------------------------------------------------ N O T E 3--Business Acquisitions In November 1993, the Corporation and Lake Shore Bancorp., Inc. (Lake Shore) signed a definitive agreement providing for the merger of Lake Shore into the Corpora- tion. Lake Shore, with approximately $1.2 billion in assets and capital of approximately $123 million as of July 8, 1994, had seven locations in the Chicago metropolitan area. It was the holding company for Lake Shore National Bank, Chicago, Illinois, and Bank of Hinsdale, Hinsdale, Illinois. The combination was consummated on July 8, 1994. Con- sideration tendered for Lake Shore shares and stock options was approximately $323 million, which consisted of approximately 6.4 million common shares and share equivalents of the Corporation. The agreement provided that each share or share equivalent of Lake Shore com- mon stock be exchanged for the Corporation's common stock valued at $31.08. The exchange ratio was based on the average closing price of the Corporation's common stock during a 20-day trading period beginning on June 7, 1994, and ending on July 5, 1994, with a minimum price of $37 and a maximum of $53 per share. The average closing price of the Corporation's common stock during the 20-day trading period was $50.406 per share. The combination was accounted for on a pooling-of- interest basis; however, because the transaction was not considered significant from an accounting perspective, the Corporation did not restate either 1994 or prior-year finan- cial data. - ------------------------------------------------------------ N O T E 4--Business Segments An analysis of the Corporation's results on a line-of-business basis is shown in the table on page 19. The following table further details results for other corporate activities that are not specifically allocated to a business segment. - ------------------------------------------------------------------ Venture Capital Other Activities Activities (1) (Dollars in millions, ------------------ ----------------- except where noted) 1994 1993 1992 1994 1993 1992 - ------------------------------------------------------------------ Net interest income-- tax-equivalent basis.... $(37) $(30) $(37) $ 24 $ 20 $ 11 Combined credit provisions.............. -- -- (1) -- -- 625 Noninterest income........ 189 371 179 89 58 -- Noninterest expense....... 1 4 12 46 18 92 Net income (loss)......... 95 204 80 56 51 (235) Return on equity.......... 26% 37% 14% N/M N/M N/M Average assets (in billions)........... $1.3 $1.3 $1.3 $0.1 $0.5 $ 0.3 Average loans (in billions)........... -- -- -- -- $0.5 $ 0.4 Average common equity (in billions)........... $0.3 $0.5 $0.5 $0.5 $0.2 $ 0.3 - ------------------------------------------------------------------ (1) Includes disposition portfolio activities since initiated in Septem- ber 1992, other special corporate items, and the cumulative effect of changes in accounting principles. N/M--Not meaningful. The Corporation is primarily engaged in the banking busi- ness, and with the continuing globalization of financial markets, the distinction between international and domes- tic activities has become less important. The following table shows approximate consolidated financial data for the three years ended December 31, 1994, attributable to domestic and foreign operations by geographic area in accordance with current regulatory reporting requirements. First Chicago Corporation 47 Annual Report 1994
- ----------------------------------------------------------------------------------------------------------- Income (Loss) Before Net Income Income Total (In millions) Revenues(1) Expenses(2) Taxes (Loss) Assets - ----------------------------------------------------------------------------------------------------------- 1994 Domestic operations........................ $4,445 $3,411 $1,034 $676 $52,815 Foreign operations Europe-Middle East-Africa................ 387 376 11 6 8,084 Asia-Pacific............................. 122 135 (13) (12) 3,826 Other.................................... 141 110 31 20 1,175 ------ ------ ------ ---- ------- Total foreign operations................. 650 621 29 14 13,085 ------ ------ ------ ---- ------- Consolidated............................... $5,095 $4,032 $1,063 $690 $65,900 ====== ====== ====== ==== ======= - ----------------------------------------------------------------------------------------------------------- 1993 Domestic operations........................ $4,130 $2,966 $1,164 $712 $44,301 Foreign operations Europe-Middle East-Africa................ 399 348 51 32 3,937 Asia-Pacific............................. 149 156 (7) (5) 2,921 Other.................................... 148 56 92 65 1,401 ------ ------ ------ ---- ------- Total foreign operations................. 696 560 136 92 8,259 ------ ------ ------ ---- ------- Consolidated............................... $4,826 $3,526 $1,300 $804 $52,560 ====== ====== ====== ==== ======= - ----------------------------------------------------------------------------------------------------------- 1992 Domestic operations........................ $3,620 $3,963 $ (343) $(12) $40,163 Foreign operations Europe-Middle East-Africa................ 439 387 52 41 4,496 Asia-Pacific............................. 160 149 11 7 2,887 Other.................................... 139 59 80 58 1,735 ------ ------ ------ ---- ------- Total foreign operations................. 738 595 143 106 9,118 ------ ------ ------ ---- ------- Consolidated............................... $4,358 $4,558 $ (200) $ 94 $49,281 ====== ====== ====== ==== ======= - -----------------------------------------------------------------------------------------------------------
(1) Includes interest income and noninterest income. (2) Includes interest expense, provision for credit losses and noninterest expense. The 1992 results from domestic operations include $611.3 million of provisions for assets held for accelerated disposition and $208.0 million related to the cumulative effect of changes in accounting principles. Results from foreign operations include provisions for credit losses of $(52) million in 1994, $13 million in 1993 and $(3) million in 1992. Brazilian bonds received as part of a debt restructuring, which were treated as loan loss recoveries, and other recoveries related to foreign loans were the primary reasons for the negative provision in 1994. Because many of the resources employed by the Corpora- tion are common to both its foreign and domestic activ- ities, it is difficult to segregate assets, related revenues and expenses into their foreign and domestic components. The amounts in the preceding table are estimated on the basis of internally developed assignment and allocation proce- dures, which to some extent are subjective. The principal internal allocations used to prepare this information are described in the following text. The allocation of corporate overhead expense is based on allocations appropriate to individual activities. Expenses incurred for the benefit of another geographic area, in- cluding certain domestic administrative expenses, are allo- cated to the area benefited. Total assets and revenues reflect the allocation of loans and related interest income among geographic areas based on the domicile of the customer. Deposit placements and related revenues are allocated geographically based on the domicile of the depository institution. Differences between contractual spreads and actual funding results are reflected in the earnings of the areas providing the funding. Distribution of certain fee income among geo- graphic areas is reflected on the basis of services rendered. Capital, with the exception of capital at foreign subsidiar- ies, has been allocated to domestic operations. First Chicago Corporation 48 Annual Report 1994 - ----------------------------------------------------------------------------------------------------------------------------------- N O T E 5--Investment Securities Investment securities in the consolidated balance sheet at December 31, 1994 and 1993, are summarized as follows. - ------------------------------------------------------------------------------------------------------------------------------------ Book Cost Unrealized Unrealized Fair December 31, 1994 (In millions) Value Basis Gains Losses Value - ------------------------------------------------------------------------------------------------------------------------------------ U.S. government and federal agency Held to maturity............................ $ 276 $ 276 $ -- $ 8 $ 268 Available for sale.......................... 465 472 -- 7 465 ------ ------ ---- ---- ------ Total................................. 741 748 -- 15 733 States and political subdivisions Held to maturity............................ 176 176 7 2 181 Available for sale.......................... -- -- -- -- -- ------ ------ ---- ---- ------ Total................................. 176 176 7 2 181 Other bonds, notes and debentures Held to maturity............................ 4 4 -- -- 4 Available for sale.......................... 51 51 -- -- 51 ------ ------ ---- ---- ------ Total................................. 55 55 -- -- 55 Equity securities (1) Venture capital............................. 1,406 974 525 93 1,406 Available for sale (2)...................... 214 213 1 -- 214 ------ ------ ---- ---- ------ Total................................. 1,620 1,187 526 93 1,620 Total investment securities........... $2,592 $2,166 $533 $110 $2,589 ====== ====== ==== ==== ====== - ------------------------------------------------------------------------------------------------------------------------------------ Book Cost Unrealized Unrealized Fair December 31, 1993 (In millions) Value Basis Gains Losses Value - ------------------------------------------------------------------------------------------------------------------------------------ U.S. government and federal agency Held to maturity........................... $ 245 $ 245 $ 2 $ 1 $ 246 Available for sale......................... 243 243 -- -- 243 ------ ------ ---- ---- ------ Total................................ 488 488 2 1 489 States and political subdivisions Held to maturity........................... 162 162 7 -- 169 Available for sale......................... -- -- -- -- -- ------ ------ ---- ---- ------ Total................................ 162 162 7 -- 169 Other bonds, notes and debentures Held to maturity........................... 4 4 -- -- 4 Available for sale......................... 15 15 -- -- 15 ------ ------ ---- ---- ------ Total................................ 19 19 -- -- 19 Equity securities (1) Venture capital............................ 1,465 955 627 117 1,465 Available for sale (2)..................... 122 121 1 -- 122 ------ ------ ---- ---- ------ Total................................ 1,587 1,076 628 117 1,587 Total investment securities.......... $2,256 $1,745 $637 $118 $2,264 ====== ====== ==== ==== ====== - -----------------------------------------------------------------------------------------------------------------------------------
(1) The fair values of certain securities for which market quotations were not available were estimated. In addition, the fair values reflect liquidity and other market-related factors. (2) Includes Federal Reserve stock. Gross proceeds from the sale of available for sale invest- ment securities were $245 million for the year ended December 31, 1994, reflecting gross realized gains of $6.5 million and gross realized losses of $5.3 million. Gross proceeds from the sale of debt investment securities were $0.2 million and $366 million for the two years ended December 31, 1993 and 1992, respectively. For 1993 and 1992, gross debt investment securities gains were $1.5 million and $8.6 million, respectively, and gross debt investment securities losses were $1.2 million and $17 thousand, respectively. The applicable income taxes were $0.1 million and $3.2 million, respectively. The pretax change in net unrealized gain (loss) on avail- able for sale securities included in other adjustments in stockholders' equity was $(7.5) million in 1994. First Chicago Corporation 49 Annual Report 1994 - ------------------------------------------------------------------------------------------------------------------------------- As of December 31, 1994, debt investment securities--held to maturity and available for sale--had the following maturity characteristics. - ------------------------------------------------------------------------------------------------------------------------------- Held to Maturity Available for Sale ------------------------ ------------------------ Cost Fair Cost Fair (In millions) Basis Value Basis Value - ------------------------------------------------------------------------------------------------------------------------------- U.S. Government and Federal Agency Maturing within one year............................ $ 84 $ 83 $369 $368 Maturing after one but within five years............ 191 184 97 92 Maturing after five but within ten years............ -- -- 4 3 Maturing after ten years............................ 1 1 2 2 ---- ---- ---- ---- $276 $268 $472 $465 ==== ==== ==== ==== - ------------------------------------------------------------------------------------------------------------------------------- States and Political Subdivisions Maturing within one year............................ $ 20 $ 21 $ -- $ -- Maturing after one but within five years............ 74 78 -- -- Maturing after five but within ten years............ 51 52 -- -- Maturing after ten years............................ 31 30 -- -- ---- ---- ---- ---- $176 $181 $ -- $ -- ==== ==== ==== ==== - ------------------------------------------------------------------------------------------------------------------------------- Other Bonds, Notes and Debentures Maturing within one year............................ $ 1 $ 1 $ 2 $ 2 Maturing after one but within five years............ 1 1 2 2 Maturing after five but within ten years............ 1 1 -- -- Maturing after ten years............................ 1 1 47 47 ---- ---- ---- ---- $ 4 $ 4 $ 51 $ 51 ==== ==== ==== ==== - -------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------ N O T E 6--Loans Following is a breakdown of loans included in the consol- idated balance sheet as of December 31, 1994 and 1993. - --------------------------------------------------------------- (In millions) 1994 1993 - --------------------------------------------------------------- Commercial Risk Domestic Commercial........................ $ 7,806 $ 6,007 Real estate Construction.................... 256 315 Other........................... 2,240 2,094 Financial institutions............ 1,027 1,292 Other............................. 2,869 2,746 Foreign............................. 1,832 1,975 ------- ------- Subtotal...................... 16,030 14,429 - --------------------------------------------------------------- Consumer Risk Credit cards........................ 6,337 5,778 Secured by real estate Mortgage.......................... 1,581 1,469 Home equity lines................. 832 780 Other............................... 1,167 647 ------- ------- Subtotal...................... 9,917 8,674 ------- ------- Total......................... $25,947 $23,103 ======= ======= - ---------------------------------------------------------------
The amount of interest shortfall (the difference between contractual interest due and interest actually recorded) related to nonperforming loans at year-end was $6 million in 1994 and $14 million in 1993. Credit card receivables are available for sale through the Corporation's credit card securitization program. Since these receivables are sold at face value, their sale would have no impact on the Corporation's financial results. The Corporation has loans outstanding to certain of its directors and executive officers and to partnerships or companies in which a director or executive officer has at least a 10% beneficial interest. At December 31, 1994 and 1993, $180 million and $295 million, respectively, of such loans to related parties were outstanding. An analysis of the activity during 1994 with respect to such loans includes additions of $123 million and reductions of $238 million. First Chicago Corporation 50 Annual Report 1994 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------- NOTE 7--Allowance for Credit Losses Changes in the allowance for credit losses for the three years ended December 31, 1994, were as follows. - --------------------------------------------------------------------------- (In millions) 1994 1993 1992 - --------------------------------------------------------------------------- Balance, beginning of year................ $ 683 $ 624 $ 759 Additions (deductions) Charge-offs............................. (242) (279) (461) Recoveries.............................. 91 97 88 ----- ----- ----- Net charge-offs......................... (151) (182) (373) Provision for credit losses............. 224 270 425 Provision for loans held for accelerated disposition............... -- -- 491 Charge-offs of loans upon transfer to accelerated disposition portfolio............... -- -- (636) Other: Mergers and acquisitions................ 16 -- -- Transfers related to securitized receivables............... (49) (29) (42) ----- ----- ----- Balance, end of year...................... $ 723 $ 683 $ 624 ----- ----- ----- ----- ----- ----- - --------------------------------------------------------------------------- - ------------------------------------------------------------ NOTE 8--Pledged and Restricted Assets Assets carried at $16.5 billion in the consolidated balance sheet at December 31, 1994, were pledged as collateral for borrowings, to secure government and trust deposits, and for other purposes as required by law. Based on the types and amounts of deposits received, banks must maintain noninterest-bearing cash balances in accordance with Federal Reserve Bank reserve require- ments. The average noninterest-bearing cash balance maintained to meet reserve requirements was $598 million in 1994 and $574 million in 1993. - ------------------------------------------------------------ NOTE 9--Lease Commitments The Corporation has entered into a number of operating and capitalized lease agreements for premises and equip- ment. The minimum annual rental commitments under these leases are shown below. - ------------------------------------------------------------ (In millions) - ------------------------------------------------------------ 1995............................................ $ 61 1996............................................ 57 1997............................................ 55 1998............................................ 50 1999............................................ 49 2000 and beyond................................. 304 ---- Total................................... $576 ---- ---- - ------------------------------------------------------------ Occupancy expense has been reduced by rental income from premises leased to others in the amount of $27.1 mil- lion in 1994, $28.1 million in 1993 and $25.0 million in 1992. - ------------------------------------------------------------ NOTE 10--Long-Term Debt Long-term debt consists of borrowings having an original maturity of seven years or more. Long-term debt at Decem- ber 31, 1994 and 1993, was as follows. - -------------------------------------------------------------------- (In millions) 1994 1993 - -------------------------------------------------------------------- 8-1/2% notes due 1998......................... $ 100 $ 99 Subordinated 9% notes due 1999................ 199 199 Subordinated 9-7/8% notes due 2000............ 99 99 Subordinated 9-1/5% notes due 2001............ 5 5 Subordinated 9-1/4% notes due 2001............ 100 100 Subordinated 10-1/4% notes due 2001........... 100 100 Subordinated 11-1/4% notes due 2001........... 96 96 Subordinated 8-7/8% notes due 2002............ 100 100 Subordinated 8-1/4% notes due 2002............ 100 100 Subordinated 7-5/8% notes due 2003............ 199 199 Subordinated 6-7/8% notes due 2003............ 200 200 Subordinated floating rate notes due 2003..... 149 149 Subordinated 6-3/8% notes due 2009............ 198 -- Equity commitment notes Subordinated 9-7/8% notes due 1999.......... 200 200 Equity contract notes Subordinated floating rate capital notes due 1996............................ 125 125 Other long-term debt.......................... 301 294 ------ ------ Total................................. $2,271 $2,065 ------ ------ ------ ------ - -------------------------------------------------------------------- 8-1/2% Notes These notes are direct, unsecured obligations of the Cor- poration and are not subordinated to any other indebted- ness of the Corporation. They may not be redeemed prior to their stated maturity. Subordinated Notes These notes are direct obligations of the Corporation and are subordinated to other indebtedness of the Corpora- tion. They may not be redeemed prior to their stated maturity. They have fixed interest rates that range from 6-3/8% to 11-1/4% and maturities that range from 1999 to 2009. The floating rate notes due in 2003 have an interest rate priced at the greater of 4-1/4% or the three-month London interbank offered rate plus 1/8%. During 1993, $3.4 million of the 11-1/4% subordinated notes were repurchased at a premium in open market transactions. A charge of $419,000 related to these transactions was included in other noninterest income. Equity Commitment Notes The subordinated notes maturing in 1999 are direct obli- gations of the Corporation and may not be redeemed prior to their stated maturity. Such notes are subordinated to other indebtedness of the Corporation. The agreements under which these notes were issued require the Corporation, prior to maturity, to issue com- mon stock, perpetual preferred stock or other forms of equity approved by the Federal Reserve Board in an amount equal to the original aggregate principal amount of the notes. As of December 31, 1994, the Corporation had issued all of the equity securities required by the agreements. First Chicago Corporation 51 Annual Report 1994 - -------------------------------------------------------------------------------- Equity Contract Notes The subordinated floating rate capital notes maturing in 1996 are a direct obligation of the Corporation and are subordinated to other indebtedness of the Corporation. The interest rate on these notes is reset quarterly at 3/16% over the average offered rate quoted in the London inter- bank market for three-month Eurodollar deposits. The effective interest rate on this issue as of December 31, 1994, was 6.625%. Other Long-Term Debt Other long-term debt of $301 million includes various notes with maturities ranging from 1995 to 2026 and inter- est rates at December 31, 1994, ranging from 5.5% to 13%. Of this amount, $276 million relates to the sale and lease- back of certain bank properties. The effective interest rate related to this transaction is 8.7%, with expected maturity in 2018. Original issue discount and deferred issuance costs are amortized over the terms of the related notes. - ------------------------------------------------------------ N O T E 11--Preferred Stock The Corporation currently is authorized to issue 15,000,000 shares of preferred stock, without par value. The Board of Directors is authorized to fix the particular designa- tions, preferences, rights, qualifications and restrictions for each series of preferred stock issued. All preferred shares rank prior to common shares both as to dividends and liquidation, but have no general voting rights. The divi- dend rate on each of the cumulative adjustable rate series is based on stated value and adjusted quarterly, based on a formula that considers the interest rates for selected short- and long-term U.S. Treasury securities prevailing at the time the rate is set. The minimum, maximum and cur- rent dividend rates as of December 31, 1994, are presented in the following table.
- --------------------------------------------------------------------------------------------------------------------------- Annual Dividend Rate Preferred Shares Stated Value --------------------------- Earliest Redemption Stock Series Outstanding Per Share Maximum Minimum Current Redemption Date Price (1) - --------------------------------------------------------------------------------------------------------------------------- Cumulative Adjustable Rate: Series A......................... 2,410,000 $ 50.00 15.00% 7.00% 7.00% (2) $ 50.00 Series B......................... 1,191,000 100.00 12.00 6.00 6.00 (2) 100.00 Series C......................... 713,800 100.00 12.50 6.50 6.50 (2) 100.00 Cumulative Fixed Rate: Series E (3)..................... 160,000 625.00 8.45 8.45 8.45 11/16/97 (4) 625.00 Cumulative Convertible Fixed Rate: Series B (5)..................... 40,000 5,000.00 5.75 5.75 5.75 04/01/97 (6) 5,172.50 - ---------------------------------------------------------------------------------------------------------------------------
(1) Plus accrued and unpaid dividends. (2) Currently redeemable. (3) Represented by 4,000,000 depositary shares, with a corresponding annual dividend rate of $2.11 each and a $25 stated value. (4) The preferred shares are redeemable on or after November 16, 1997, at $625 per share (equivalent to $25 per depositary share). (5) Represented by 4,000,000 depositary shares, with a corresponding annual dividend rate of $2.875 each and a $50 stated value. (6) The preferred shares may be converted into shares of the Corporation's common stock at the option of the stockholders at any time at the conversion price of $53.625 per common share, subject to adjustment under certain conditions. Shares are redeemable beginning April 1, 1997, at the option of the Corporation, at a price of $5,172.50 ($51.725 per depositary share), with the redemption price decreasing annually until the shares are redeemable on or after April 1, 2003, at their stated value of $5,000 per share ($50 per depositary share). All shares of the Corporation's 10% Cumulative Preferred Stock, Series D, were called for redemption on July 1, 1994. The redemption price of $25.75 per share plus accrued and unpaid dividends incorporates a 3% premium, total- ing $4.5 million. All shares of the Corporation's Cumulative Convertible Preferred Stock, Series A, were called for redemption on September 2, 1993. Each Series A share was convertible into 1.391 shares of the Corporation's common stock at the option of the stockholder, and approximately 2,100,000 shares of the stock were converted into approximately 3,000,000 shares of common stock. Resultant fractional shares were paid in cash. On September 2, 1993, the Corpo- ration redeemed the remaining shares of the Cumulative Convertible Preferred, Series A, at the redemption price of $51.50 per share plus accrued and unpaid dividends. In December 1988, the Corporation paid a dividend of one Preferred Share Purchase Right (a Right) for each outstand- ing share of common stock of the Corporation. Similar Rights are issued by the Corporation with each share of the Corporation's common stock issued after December 2, 1988, subject to adjustment. Until a person or group acquires beneficial ownership of, or begins a tender or exchange offer for, 20% or more of the Corporation's com- mon stock, the Rights will not be exercisable and will be transferred upon the transfer of shares of the Corporation's common stock. Upon the occurrence of certain events, each Right entitles the holder to purchase one one-hundredth of a share of the Corporation's Series A Junior Participating Preferred Stock, without par value, at a price of $130. Under certain other circumstances, the holder of a Right may have the right to receive upon payment of the Right's $130 exercise price: 1) common stock of a company acquir- ing control of the Corporation that has a market value of two times the exercise price of the Right, or 2) common stock of the Corporation having a market value of two times the exercise price of the Right. The Rights, which expire December 2, 1998, are redeem- able in whole, but not in part, at the Corporation's option prior to the time they are exercisable, for a price of $.01 per Right. First Chicago Corporation 52 Annual Report 1994 - -------------------------------------------------------------------------------- NOTE 12--Income Taxes The components of total applicable income taxes (bene- fits) reported in the consolidated income statement for the years ended December 31, 1994, 1993 and 1992, are as follows. - --------------------------------------------------------------------- (In millions) 1994 1993 1992 - --------------------------------------------------------------------- Current tax expense (benefit) Federal........................... $202.1 $177.3 $ (1.9) Foreign........................... 7.4 29.1 20.5 State............................. 45.8 42.6 4.9 ------ ------ ------- Total....................... 255.3 249.0 23.5 Deferred tax expense (benefit) Federal........................... 115.8 230.0 (101.3) State............................. 2.2 16.6 (7.8) ------ ------ ------- Total....................... 118.0 246.6 (109.1) ------ ------ ------- Applicable income taxes (benefit)... $373.3 $495.6 $ (85.6) ------ ------ ------- ------ ------ ------- - --------------------------------------------------------------------- The preceding table excludes the tax expense (benefit) recorded directly in stockholders' equity of $0.7 million, $(4.7) million and $(0.4) million in 1994, 1993 and 1992, respectively. The table also excludes $122.6 million of 1992 taxes related to the cumulative effect of changes in accounting principles. A net deferred tax liability is included in other liabilities in the consolidated balance sheet as a result of temporary differences between the carrying amounts of assets and lia- bilities in the financial statements and their related tax bases. The components of the net deferred tax liability as of December 31, 1994 and 1993, are as follows. - --------------------------------------------------------------------- (In millions) 1994 1993 - --------------------------------------------------------------------- Deferred Tax Liabilities Deferred income on lease financing........... $ 762.9 $ 745.3 Appreciation of venture capital investments................................ 219.0 181.9 Prepaid pension asset........................ 135.1 133.1 Other........................................ 145.2 145.6 -------- -------- Gross deferred tax liabilities............... 1,262.2 1,205.9 -------- -------- Deferred Tax Assets Allowance for credit losses.................. 286.9 292.5 Securitization of credit card receivables.... 86.0 65.5 Alternative minimum tax credit carryforward............................... -- 115.9 Other........................................ 250.2 255.9 -------- -------- Gross deferred tax assets.................... 623.1 729.8 Valuation allowance.......................... -- -- -------- -------- Gross deferred tax assets, net of valuation allowance................. 623.1 729.8 -------- -------- Net deferred tax liability................... $ 639.1 $ 476.1 -------- -------- -------- -------- - --------------------------------------------------------------------- The reasons for the differences between applicable income taxes and the amounts computed at the applicable regular federal tax rates of 35% in 1994, 35% in 1993 and 34% in 1992 were as follows. - --------------------------------------------------------------------- (In millions) 1994 1993 1992 - --------------------------------------------------------------------- Taxes at statutory federal income tax rate........................... $372.1 $455.0 $(68.0) Increase (decrease) in taxes resulting from Tax-exempt income (net)............ (10.3) (12.0) (13.8) State income taxes, net of federal income taxes............. 31.6 31.8 (1.9) Goodwill........................... 2.8 7.5 3.4 Other.............................. (22.9) 13.3 (5.3) ------ ------ ------ Applicable income taxes (benefit).... $373.3 $495.6 $(85.6) ------ ------ ------ ------ ------ ------ - --------------------------------------------------------------------- The Corporation had no alternative minimum tax credit carryforward for tax purposes at December 31, 1994. The Corporation had an alternative minimum tax credit carry- forward for tax purposes of $109.2 million at December 31, 1993, and $41.3 million at December 31, 1992. The Corporation had a foreign tax credit carryforward of $42.9 million at December 31, 1992, that was fully utilized in 1993. The Corporation also had a federal tax return net- operating loss carryforward of $644.4 million at Decem- ber 31, 1992, which was also fully utilized in 1993. First Chicago Corporation 53 Annual Report 1994 - ------------------------------------------------------------------------------ N O T E 13--Employee Benefit and Incentive Plans (a) Pension Plans Net periodic pension credit was $7.3 million in 1994, $18 million in 1993 and $31.5 million in 1992. The assumptions used in determining the projected bene- fit obligation and the net periodic pension credit, as appro- priate, are shown below.
- ------------------------------------------------------------------------ 1994 1993 1992 - ------------------------------------------------------------------------ Discount rate................................ 9.0% 7.5% 8.5% Rate of increase in future salary levels..... 5.0 4.5 5.0 Expected long-term rate of return............ 9.5 9.5 9.5 - ------------------------------------------------------------------------
The following table reconciles the plans' funded status with the amounts recorded in the Corporation's consolidated balance sheet.
- -------------------------------------------------------------------- December 31 (In millions) 1994 1993 - -------------------------------------------------------------------- Projected benefit obligation: Vested benefits.......................... $(419.0) $(430.6) Nonvested benefits....................... (54.1) (60.9) ------- ------- Accumulated benefit obligation........... (473.1) (491.5) Effect of projected future compensation levels................................. (91.1) (99.3) ------- ------- Projected benefit obligation............... (564.2) (590.8) Plans' assets at fair value (1)............ 931.0 968.4 ------- ------- Plans' assets in excess of projected benefit obligation....................... 366.8 377.6 Unrecognized net gain due to experience different from assumptions............... (31.1) (37.4) Unrecognized net transition asset (2)...... (32.5) (37.2) Unrecognized prior service cost............ 87.0 74.6 ------- ------- Prepaid pension cost....................... $ 390.2 $ 377.6 ======= ======= - --------------------------------------------------------------------
(1) Includes shares of the Corporation's common stock with a market value of $20.1 million in 1994 and $17.9 million in 1993. (2) The unrecognized net transition asset will be amortized over approximately 6.5 years. The components of the net periodic pension credit for each of the last three years are as follows.
- ---------------------------------------------------------------------- (In millions) 1994 1993 1992 - ---------------------------------------------------------------------- Service costs--benefits earned during period........................ $ 29.2 $ 22.3 $ 20.9 Interest cost on projected benefit obligation........................... 49.6 43.8 41.5 Return on plan assets.................. (0.6) (109.6) (80.1) Net amortization, deferral and other............................ (85.5) 25.5 (13.8) ------ ------- ------ Net periodic pension credit............ $ (7.3) $ (18.0) $(31.5) ====== ======= ====== - ----------------------------------------------------------------------
(b) Savings Incentive Plan The Corporation and its subsidiaries maintain the Savings Incentive Plan, a qualified 401(k) program. The plan is available to all U.S.-based salaried employees of The First National Bank of Chicago and certain other subsidiaries of the Corporation. Participation is completely voluntary, and participants may contribute from 1% to 6% of their salary on a pretax basis, and an additional 1% to 10% of salary on an after-tax basis. Beginning in 1994, the Corpo- ration's contribution to the plan was determined as 100% of the first $750 of pretax contributions made by partici- pants and 50% of any pretax contributions in excess of $750. The plan was amended in 1993 to allow the Board of Directors to make a supplemental profit-based contri- bution to the plan. For 1994, that contribution was $250 for each eligible salaried employee and $125 for each eli- gible hourly employee. All participants are 100% vested in their account balances and are able to direct the invest- ment of their savings into several investment options. Expense under this plan, included in noninterest expense as employee benefits expense, was $21.4 million in 1994, $19.6 million in 1993 and $13.0 million in 1992. (c) Employee Stock Purchase and Savings Plan The Employee Stock Purchase and Savings Plan allows eligible employees to authorize payroll deductions for deposit in interest-bearing savings accounts for up to two years. Employees then have the option to either withdraw their savings balance in cash or purchase shares of the Corporation's common stock at a price fixed under the plan. The Corporation recognizes no expense in connec- tion with such stock purchases. The plan authorizes a max- imum of 6,000,000 shares, of which 4,407,130 shares have been issued. During 1994, 743,885 shares of common stock were pur- chased by 4,143 employees under the 1992 offering and subsequent quarterly offerings for newly eligible employ- ees, at prices ranging from $32.54 to $45.84 per share. Eligible employees also were offered an opportunity to enroll in a new offering in August 1994 at a stock pur- chase price of $47.98. Employees participating in the plan numbered 7,539 as of December 31, 1994. Projected con- tributions and interest represent a potential future pur- chase of approximately 887,829 shares of common stock. (d) Other Incentive Plans The Corporation maintains various cash incentive, stock incentive and stock option plans. Cash incentive plans, including certain specialized busi- ness unit incentives, are based on attainment of certain financial goals and a combination of business unit and corporate objectives. First Chicago Corporation 54 Annual Report 1994 - -------------------------------------------------------------------------------- The 1983 Strategic Stock Option Plan and the Strategic Stock Incentive Plan were both terminated in 1991; however, options and shares from those programs are still outstanding and are included, where appropriate, in the discussion below. The Stock Incentive Plan allows the Corporation to grant stock options, restricted shares or other stock-based awards to eligible employees. Restricted shares granted to key offi- cers require them to continue employment from one to seven years beginning on the original grant date before they can sell those shares. The market value of the re- stricted shares as of the date of grant is amortized to sala- ries expense over the restriction period. In 1994, the Board approved a performance-based restricted stock program under the terms of the Stock Incentive Plan. The shares issued under this program become unrestricted only if performance criteria are met. The ultimate expense attrib- utable to this program will be based on the market value of the shares on the date they become unrestricted. As of December 31, 1994, the Stock Incentive Plan had 1,224,781 restricted shares outstanding. The maximum number of shares of the Corporation's common stock that may be granted annually pursuant to the Stock Incentive Plan is 2% of the shares outstanding; however, any portion of the 2% limit not granted in a previous year may be awarded prospectively. In 1994, the Board approved a new ``restorative'' stock option program under the terms of the Stock Incentive Plan. Under the program, optionees are granted a ``restor- ative'' stock option when: 1) they exercise an option by exchanging shares owned for at least six months to pay both the purchase price and related tax withholding obli- gation, and 2) the current market price of First Chicago common stock is at least 25% higher than the original stock option exercise price. The restorative stock option pro- vides optionees with a replacement stock option for the number of shares exchanged, has a purchase price set at the market price on date of grant, becomes exercisable six months from date of grant, and expires at the end of the term set for the original stock option. The following table summarizes 1994 activity and the December 31, 1994, status of the Stock Incentive Plan and the 1983 Stock Option Plan, inclusive of restorative stock options granted.
- ------------------------------------------------------------------------------------------------------------- Outstanding Options Exercisable Options -------------------------------- ----------------------------- Option Option (Shares in thousands) Shares Price Shares Price - ------------------------------------------------------------------------------------------------------------- Balance, December 31, 1993.............. 4,739 $18-1/2 - $49-1/8 3,228 $18-1/2 - $43-5/8 Granted................................. 2,361 $41-3/4 - $49-7/16 -- -- Became exercisable...................... -- -- 979 $24 - $49-1/8 Exercised............................... 1,464 $18-1/2 - $36-13/16 1,464 $18-1/2 - $36-13/16 Expired or canceled..................... 9 $24 - $31-7/8 9 $24 - $31-7/8 Forfeited (unvested).................... 51 $27-11/16 - $47-7/16 -- -- - ------------------------------------------------------------------------------------------------------------- Balance, December 31, 1994............ 5,576 $18-7/8 - $49-7/16 2,734 $18-7/8 - $49-7/16 - -------------------------------------------------------------------------------------------------------------
First Chicago Corporation 55 Annual Report 1994
- ------------------------------------------------------------------------------------------------------------------------------- NOTE 14--First Chicago Corporation (Parent Company Only) Condensed Financial Statements Condensed Balance Sheet - ------------------------------------------------------------------------------------------------------------------------------- December 31 (In millions) 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------- Assets Cash and due from banks Bank subsidiaries--noninterest-bearing.................................................... $ 2 $ 21 Bank subsidiaries--interest-bearing....................................................... 161 156 Other interest-bearing.................................................................... 396 348 Investment securities....................................................................... 75 14 Loans....................................................................................... -- 1 Investment in and advances to subsidiaries Bank subsidiaries......................................................................... 5,829 5,278 Nonbank subsidiaries...................................................................... 1,857 1,728 Other assets................................................................................ 106 124 ------ ------ Total assets........................................................................ $8,426 $7,670 ------ ------ ------ ------ - ------------------------------------------------------------------------------------------------------------------------------- Liabilities Commercial paper and other notes payable Nonbank subsidiaries...................................................................... $ 83 $ 29 Other..................................................................................... 1,492 1,378 Long-term debt.............................................................................. 1,993 1,796 Other liabilities........................................................................... 325 203 ------ ------ Total liabilities................................................................... 3,893 3,406 - ------------------------------------------------------------------------------------------------------------------------------- Stockholders' Equity........................................................................ 4,533 4,264 ------ ------ Total liabilities and stockholders' equity.......................................... $8,426 $7,670 ------ ------ ------ ------ - ------------------------------------------------------------------------------------------------------------------------------- Condensed Income Statement - ------------------------------------------------------------------------------------------------------------------------------- For the Year (In millions) 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------------- Operating Income Dividends Bank subsidiaries............................................................... $259.5 $129.0 $ 89.7 Nonbank subsidiaries............................................................ 106.7 68.9 197.2 Interest income Bank subsidiaries............................................................... 113.3 110.8 104.2 Nonbank subsidiaries............................................................ 59.1 76.7 96.4 Other........................................................................... 28.1 13.9 15.8 Other income (loss)............................................................... 37.9 (2.4) 1.9 ------ ------ ------ Total..................................................................... 604.6 396.9 505.2 - ------------------------------------------------------------------------------------------------------------------------------- Operating Expense Interest expense Nonbank subsidiaries............................................................ 1.3 3.8 5.6 Other........................................................................... 246.9 233.7 250.0 Other expense..................................................................... 6.9 6.4 23.7 ------ ------ ------ Total..................................................................... 255.1 243.9 279.3 - ------------------------------------------------------------------------------------------------------------------------------- Income Before Income Taxes and Equity in Undistributed Net Income of Subsidiaries........................................................ 349.5 153.0 225.9 Applicable income tax benefit................................................... (11.4) (18.6) (22.8) - ------------------------------------------------------------------------------------------------------------------------------- Income Before Equity in Undistributed Net Income of Subsidiaries........................................................ 360.9 171.6 248.7 Equity in undistributed net income (loss) of subsidiaries before cumulative effect of changes in accounting principles Bank subsidiaries............................................................. 311.0 471.7 (230.0) Nonbank subsidiaries.......................................................... 17.8 161.2 (133.2) ------ ------ ------ Income (loss) before cumulative effect of changes in accounting principles........ 689.7 804.5 (114.5) Equity in cumulative effect of changes in accounting principles................... -- -- 208.0 ------ ------ ------ Net Income........................................................................ $689.7 $804.5 $ 93.5 ------ ------ ------ ------ ------ ------ - -------------------------------------------------------------------------------------------------------------------------------
The Parent Company Only Statement of Changes in Stockholders' Equity is the same as the Consolidated Statement of Changes in Stockholders' Equity (see page 42). First Chicago Corporation 56 Annual Report 1994
- -------------------------------------------------------------------------------------------------------------------------- Condensed Statement of Cash Flows - -------------------------------------------------------------------------------------------------------------------------- For the Year (In millions) 1994 1993 1992 - -------------------------------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities Net income......................................................................... $ 690 $ 804 $ 94 Adjustments to reconcile net income to net cash provided by operating activities: Equity in net income (loss) of subsidiaries before cumulative effect of changes in accounting principles..................................... (695) (831) 76 Equity in cumulative effect of changes in accounting principles.................. -- -- (208) Net decrease in net derivative product balances.................................. 3 -- -- (Increase) decrease in accrued income receivable................................. (3) 7 (1) (Decrease) in accrued interest payable........................................... (2) (3) (4) Dividends received from subsidiaries............................................. 366 195 288 Net decrease in other assets..................................................... 14 31 15 Other noncash adjustments........................................................ 7 (26) (5) ------- ------- ------- Total adjustments................................................................ (310) (627) 161 ------- ------- ------- Net cash provided by operating activities.......................................... 380 177 255 - -------------------------------------------------------------------------------------------------------------------------- Cash Flows from Investing Activities Principal collected on loans to subsidiaries....................................... 1,262 2,410 4,179 Loans made to subsidiaries......................................................... (1,355) (2,172) (4,443) Capital investments in subsidiaries................................................ (141) (161) (571) Purchase of investment securities--available for sale.............................. (214) (13) (24) Proceeds from maturities of investment securities--available for sale.............. 42 8 22 Proceeds from sales of investment securities--available for sale................... 107 2 2 ------- ------- ------- Net cash provided by (used in) investing activities................................ (299) 74 (835) - -------------------------------------------------------------------------------------------------------------------------- Cash Flows from Financing Activities Net increase (decrease) in commercial paper........................................ (34) 5 (67) Proceeds from other funds borrowed................................................. 785 20 533 Repayment of other funds borrowed.................................................. (422) (374) (560) Proceeds from issuance of long-term debt........................................... 204 557 234 Repayment of long-term debt........................................................ (10) (344) (248) Net increase (decrease) in other liabilities....................................... (29) 48 (23) Dividends paid..................................................................... (211) (158) (145) Proceeds from issuance of common stock............................................. 12 41 375 Proceeds from reissuance of treasury stock......................................... 39 4 6 Purchase of treasury stock......................................................... (231) (13) (1) Proceeds from issuance of preferred stock.......................................... -- 196 96 Payment for redemption of preferred stock.......................................... (150) (1) -- ------- ------- ------- Net cash provided by (used in) financing activities................................ (47) (19) 200 - -------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents............................... 34 232 (380) Cash and cash equivalents at beginning of year..................................... 525 293 673 ------- ------- ------- Cash and cash equivalents at end of year........................................... $ 559 $ 525 $ 293 ======= ======= ======= - --------------------------------------------------------------------------------------------------------------------------
Dividends that may be paid by national bank subsidiaries are subject to two statutory limitations. Under the first, dividends cannot exceed the level of "undivided profits then on hand" less the amount of bad debts, as defined, in excess of the allowance for credit losses. In addition, a national bank cannot declare a dividend, without regula- tory approval, in an amount in excess of its net profits, as defined, for the current year combined with the retained net profits for the preceding two years. Based on these statutory requirements, the Corporation's bank subsidiaries could, in the aggregate, have declared additional dividends of up to approximately $664 million without regulatory approval at December 31, 1994. The payment of dividends by any bank may also be affected by other factors, such as the maintenance of adequate capi- tal. As of December 31, 1994, all of the Corporation's banking subsidiaries significantly exceeded the regulatory guidelines for "well-capitalized" status. Federal banking law also restricts each bank subsidiary from extending credit to First Chicago Corporation as the parent bank holding company (the Parent Company) in excess of 10% of the subsidiary's capital stock and surplus, as defined. Any such extensions of credit are subject to strict collateral requirements. First Chicago Corporation 57 Annual Report 1994 - -------------------------------------------------------------------------------- In connection with issuances of commercial paper, the Corporation has agreements providing future credit availability (back-up lines of credit) with various banks. The agreements with nonaffiliated banks aggregated $100 million at December 31, 1994 and 1993. The Cor- poration also had agreements for back-up lines of credit with The First National Bank of Chicago aggregating $100 million at December 31, 1994, and $150 million at December 31, 1993. In 1994, the Corporation had agree- ments to pay between 0.125% and 0.150% in annual com- mitment fees on any unused lines. The back-up lines of credit, together with overnight money market loans, short- term investments and other sources of liquid assets, exceeded the amount of commercial paper issued at December 31, 1994. The Parent Company paid interest of $267 million in 1994, $262 million in 1993 and $272 million in 1992. The Parent Company made income tax payments to its subsidiaries that exceeded its total income tax payments by $19 mil- lion in 1994 and $20 million in 1992. The Parent Company received income tax payments from its subsidiaries that exceeded its total income tax payments by $82 million in 1993. - ------------------------------------------------------------ N O T E 15--Financial Instruments With Off-Balance-Sheet Risk In the normal course of business, the Corporation is a party to financial instruments containing credit and/or market risks that are not required to be reflected in a bal- ance sheet. These financial instruments include credit- related as well as certain derivative and cash instruments. The Corporation maintains risk management policies that monitor and limit exposure to credit, liquidity and market risks. (a) Credit Risk The following disclosures represent the Corporation's credit exposure, assuming that every counterparty to finan- cial instruments with off-balance-sheet credit risk fails to perform completely according to the terms of the con- tracts, and that the collateral and other security, if any, proves to be of no value to the Corporation. (b) Market Risk This note does not address the amount of market losses the Corporation would incur if future changes in market prices make financial instruments with off-balance-sheet market risk less valuable or more onerous. The measure- ment of market risk associated with financial instruments is meaningful only when all related and offsetting on- and off-balance-sheet transactions are aggregated, and the resulting net positions are identified. (c) Collateral and Other Security Arrangements The credit risk of both on- and off-balance-sheet financial instruments varies based on many factors, including the value of collateral held and other security arrangements. To mitigate credit risk, the Corporation generally deter- mines the need for specific covenant, guarantee and col- lateral requirements on a case-by-case basis, depending on the nature of the financial instrument and the custom- er's creditworthiness. The Corporation may also receive comfort letters and oral assurances. The amount and type of collateral held to reduce credit risk varies but may include real estate, machinery, equipment, inventory and accounts receivable, as well as cash on deposit, stocks, bonds and other marketable securities that are generally held in the Corporation's possession or at another appro- priate custodian or depository. This collateral is valued and inspected on a regular basis to ensure both its exist- ence and adequacy. The Corporation requests additional collateral when appropriate. (d) Credit-Related Financial Instruments The table below summarizes the Corporation's credit- related financial instruments, including both commitments to extend credit and letters of credit. - ------------------------------------------------------------ Commitments and Letters of Credit December 31 (In billions) 1994 1993 - ------------------------------------------------------------ Unused loan commitments............... $31.3 $28.4 Unused credit card lines.............. 61.4 46.3 Unused home equity lines.............. 0.8 0.7 Commercial letters of credit.......... 0.8 0.7 Standby letters of credit and foreign office guarantees........... 4.1 4.7 - ------------------------------------------------------------ Since many of the Corporation's unused commitments are expected to expire unused or be only partially used, the total amount of unused commitments in the preceding table does not necessarily represent future cash requirements. Loan commitments are agreements to make or acquire a loan or lease as long as the agreed-upon terms (e.g., expiry, covenants or notice) are met. The Corporation's commit- ments to purchase or extend loans help its customers meet their liquidity needs. Credit card lines allow customers to use a credit card to buy goods or services and to obtain cash advances. However, the Corporation has the right to change or terminate any terms or conditions of the credit card account. Extensions of credit under home equity lines are secured by residential real estate. Commercial letters of credit are issued or confirmed by the Corporation to ensure payment of its customers' payables or receivables in short-term international trade transac- tions. Generally, drafts will be drawn when the underlying transaction is consummated as intended. However, the short-term nature of this instrument serves to mitigate the Corporation's risk associated with these contracts. First Chicago Corporation 58 Annual Report 1994 - -------------------------------------------------------------------------------- Standby letters of credit and foreign office guarantees are issued in connection with agreements made by the Cor- poration's customers to counterparties. If the customer fails to comply with the agreement, the counterparty may enforce the standby letter of credit or foreign office guar- antee as a remedy. Credit risk arises from the possibility that the customer may not be able to repay the Corpora- tion for standby letters of credit or foreign office guaran- tees drawn upon. At December 31, 1994 and 1993, the Corporation had issued standby letters of credit and for- eign office guarantees for the following purposes. - ------------------------------------------------------------ Standby Letters of Credit and Foreign Office Guarantees December 31 (In millions) 1994 1993 - ------------------------------------------------------------ Commercial paper.................... $ 360 $ 815 Tax-exempt securities............... 1,108 1,130 Bid or performance guarantees....... 663 534 Commodity/margin support............ 504 570 Insurance-related................... 796 765 Other............................... 681 857 ------ ------ Total............................... 4,112 4,671 Less: Cash collateral deposits...... 108 109 Participations to other financial institutions........ 400 359 ------ ------ Total, net.......................... $3,604 $4,203 ====== ====== - ------------------------------------------------------------ At December 31, 1994, standby letters of credit and guar- antees issued to back commercial paper and tax-exempt securities had a weighted-average original maturity of approximately six years and a weighted-average remain- ing maturity of approximately two years. All other standby letters of credit generally expire within three years. (e) Derivative Financial Instruments The Corporation enters into a variety of derivative finan- cial instruments in its trading, asset and liability manage- ment, and venture capital activities. These instruments offer customers protection from rising or falling interest rates, exchange rates, commodity prices and equity prices. They can either reduce or increase the Corporation's exposure to such changing rates or prices. The Corporation's objectives and strategies for using deriv- ative financial instruments for structural interest rate risk management, foreign exchange risk management, and venture capital activities are discussed on pages 27 to 30, along with various numerical analyses, which are not included as part of these audited financial statements. The Corporation's balance sheet exposure for derivative financial instruments includes the amount of recognized gains in the market valuation of those contracts. Those amounts fluctuate as a function of maturity, interest rates, foreign exchange rates, commodity prices and equity prices. The credit risk associated with exchange-traded derivative financial instruments is limited to the relevant clearing- house. Options written do not expose the Corporation to credit risk, except to the extent of the underlying risk in a financial instrument that the Corporation may be obligated to acquire under certain written put options. Caps and floors written do not expose the Corporation to credit risk. The table on page 36, which is not included as part of these audited financial statements, presents a reconcilia- tion between the Corporation's gross credit exposure and its balance sheet exposure for derivative financial instru- ments as of December 31, 1994. Gross balance sheet expo- sure as of December 31, 1993, was $3.6 billion for interest rate contracts and $2.6 billion for foreign exchange con- tracts. These amounts are overstated because they do not reflect the offsetting of losses with the same counterparties based on legally enforceable termination and netting rights. On some derivative financial instruments, the Corpora- tion may have additional risk. This is due to the underly- ing risk in the financial instruments that the Corporation is or may be obligated to acquire, and/or is due to settle- ment exposure, i.e. the risk that the Corporation will deliver under a contract but the customer will fail to deliver the countervailing amount. The Corporation believes its credit and settlement procedures minimize these risks. Not all derivative financial instruments have off-balance- sheet market risk. Market risk associated with options pur- chased and caps and floors purchased is recorded in the balance sheet. The tables on page 35 report the Corporation's gross no- tional principal or contractual amounts of derivative finan- cial instruments as of December 31, 1994, and December 31, 1993. These instruments include swaps, forwards, futures, options, caps, floors, forward rate agreements and other conditional or exchange contracts. The amounts do not represent the market or credit risk associated with these contracts but rather give an indication of the volume of the transactions. The amounts exceed the credit risk asso- ciated with these contracts and do not reflect the netting of offsetting transactions. Interest rate forward and futures contracts represent com- mitments to either purchase or sell a financial instrument at a specified future date for a specified price, and may be settled in cash or through delivery. An interest rate swap is an agreement in which two parties agree to exchange, at specified intervals, interest payment streams calculated on an agreed-upon notional principal amount with at least one stream based on a specified float- ing rate index. Certain agreements are combined interest rate and foreign currency swap transactions. First Chicago Corporation 59 Annual Report 1994 - -------------------------------------------------------------------------------- Interest rate options are contracts that grant the purchaser, for a premium payment, the right to either purchase or sell a financial instrument at a specified price within a specified period of time or on a specified date from the writer of the option. Interest rate caps and floors are contracts with notional principal amounts that require the seller, in exchange for a fee, to make payments to the purchaser if a specified market interest rate exceeds the fixed cap rate or falls below the fixed floor rate on specified future dates. Forward rate agreements are contracts with notional prin- cipal amounts that settle in cash at a specified future date based on the differential between a specified market inter- est rate and a fixed interest rate. Foreign exchange contracts represent spot, forward, futures and option contracts to exchange currencies. Commodity price contracts represent swap, futures, cap, floor and option contracts that derive their value from underlying commodity prices. Equity price contracts represent futures, cap, floor and option contracts that derive their value from underlying equity prices. (f) Cash Financial Instruments Securities sold not yet purchased are obligations to deliver securities sold but not yet purchased. The face amount of such securities totaled $1.036 billion at December 31, 1994, and $776 million at December 31, 1993. The fair value of these obligations is reflected in the balance sheet in other funds borrowed. The fair value of such securities totaled $972 million at December 31, 1994, and $757 million at December 31, 1993. - ------------------------------------------------------------- N O T E 16--Concentrations of Credit Risk The Corporation's credit policies and processes empha- size diversification of risk among industries, geographic areas and borrowers. The following table shows the credit risk associated with products described elsewhere in the financial statements and footnotes, broken out by concen- trations across all financial instruments. The amounts do not consider the value of collateral held. Concentrations of credit risk in excess of the Corporation's stockholders' equity for each year-end are presented below. - ------------------------------------------------------------ December 31 (In billions) 1994 1993 - ------------------------------------------------------------ Consumer................................ $73.4 $56.8 U.S. government......................... 14.0 9.6 Japanese banks.......................... 6.0 5.8 - ------------------------------------------------------------ Consumer risk results principally from credit cards. Other major components include home mortgage, home equity and other installment credit. U.S. government risk consists primarily of U.S. government securities and balances due from the Federal Reserve. Credit exposure to Japanese banks is primarily short-term deposit placements. Geo- graphic concentrations of credit risk are presented below. - ------------------------------------------------------------ December 31 (Dollars in billions) 1994 1993 - ------------------------------------------------------------ U.S. .......................... $138 87% $118 87% Foreign........................ 21 13 17 13 - ------------------------------------------------------------ First Chicago Corporation 60 Annual Report 1994 - -------------------------------------------------------------------------------- N O T E 17--Estimated Fair Value of Financial Instruments This disclosure focuses primarily on the estimated fair values of the Corporation's financial instruments. It does not attempt to estimate or represent an estimate of the Corporation's fair value as a whole. The only fair value disclosure provided in addition to those made for the Cor- poration's financial instruments pertains to credit card securitizations; this disclosure is provided because the interest rate risk exposure related to such securitizations is reduced by financial instruments. The Corporation does not plan to dispose of, either through sale or settlement, the majority of its financial instruments at these estimated fair values. The fair values disclosed represent point-in- time estimates that may change in subsequent reporting periods due to market conditions or other factors. In general, a financial instrument's fair value is the amount at which it could be exchanged in a current transaction between willing parties, other than in a forced or liquida- tion sale. Specific fair value measurement methodologies used for each financial instrument category are discussed beginning on page 62. The following table summarizes the carrying amounts and estimated fair values of financial instruments as of Decem- ber 31, 1994 and 1993.
- ----------------------------------------------------------------------------------------------------------------------------------- 1994 1993 ------------------------- ------------------------- Carrying Estimated Carrying Estimated (In millions) Amount Fair Value Amount Fair Value - ----------------------------------------------------------------------------------------------------------------------------------- Assets Cash and short-term financial instruments......................... $25,633 $25,633 $18,736 $18,736 Trading account assets............................................ 4,967 4,967 4,536 4,536 Investment securities............................................. 2,592 2,589 2,256 2,264 Total loans, net.................................................. 25,224 25,275 22,420 22,673 Other financial instruments....................................... 1,024 1,024 960 960 Currency options purchased........................................ -- -- 536 536 Derivative product assets: Trading purposes (1)............................................ 4,351 4,351 -- -- Other than trading purposes..................................... 38 29 -- -- Total derivative product assets............................... 4,389 4,380 -- -- Off-balance-sheet derivative financial instruments, net........... -- -- 380 586 Liabilities Deposits: No stated maturity and foreign time............................. 26,517 26,517 23,261 23,261 Stated maturity--domestic time only............................. 5,149 5,065 4,925 4,984 Total deposits................................................ 31,666 31,582 28,186 28,245 Securities sold not yet purchased................................. 972 972 757 757 Other short-term financial instruments............................ 13,699 13,699 8,936 8,936 Other funds borrowed.............................................. 6,546 6,532 5,086 5,129 Long-term debt.................................................... 2,271 2,232 2,065 2,296 Currency options written.......................................... -- -- 501 501 Derivative product liabilities: Trading purposes (1)............................................ 4,073 4,073 -- -- Other than trading purposes..................................... 24 277 -- -- Total derivative product liabilities.......................... 4,097 4,350 -- -- Off-balance-sheet exposure--nonfinancial instruments: Credit card securitizations, net................................ 265 (60) 242 191 - ------------------------------------------------------------------------------------------------------------------------------------
(1) The estimated average fair values of derivative financial instruments used in trading activities during 1994 were $5.2 billion classified as assets and $4.8 billion classified as liabilities. First Chicago Corporation 61 Annual Report 1994 - -------------------------------------------------------------------------------- (a) Financial Instruments Where Carrying Value Approximates Fair Value A financial instrument's carrying value approximates its fair value in cases where the financial instrument is either short-term in nature, has no stated maturity, is payable on demand, or is carried at fair value. Additionally, the carry- ing value of financial instruments that reprice frequently, such as floating rate loans or debt, represents fair value provided there has been no significant change in credit quality or there is no embedded financial instrument with significant value. The following financial instruments use their carrying value to approximate fair value: . Cash and short-term investments--includes cash and due from banks--noninterest-bearing, due from banks-- interest-bearing, and federal funds sold and securities under resale agreements . Trading account assets . Other financial instruments--includes assets held for accelerated disposition, accrued interest receivable, and customers' acceptance liability . Currency options purchased . Derivative product assets and liabilities--held for trad- ing purposes . Demand, savings and foreign office deposits . Securities sold not yet purchased . Other short-term financial instruments--includes federal funds purchased and securities under repurchase agree- ments, commercial paper and acceptances outstanding . Currency options written . Commitments to extend credit and letters of credit The estimated fair values of trading account securities and securities sold not yet purchased were generally based on quoted market prices or dealer quotes. The estimated fair values of derivative product assets and liabilities were based on quoted market prices or pricing and valuation models on a present value basis using current market information. The carrying amount of commitments to extend credit and letters of credit is equal to their related fee receivable and/or fees collected but not yet earned. The carrying value of commercial real estate loans held for accelerated disposition is based on their estimated liquidation value. (b) Investment Securities The estimated fair values of debt investment securities were generally based on quoted market prices or dealer quotes. See Notes 1 and 5 for information on methods for estimating the fair value of equity investment securities, including those held by venture capital subsidiaries. (c) Loans The discounted cash flow method was used to estimate the fair value of commercial and consumer loans, except for consumer mortgage loans that had fixed rates, medium- or long-term maturity, and good credit quality. Discount rates were selected corresponding to the nature of the loan from either the commercial or consumer interest rates offered or estimated market interest rates that reflect the credit rate and interest rate risk inherent in the loans. Con- tractual cash flows were used as the estimate of cash flows. Commercial loans that have significantly deteriorated in credit quality were separately valued. Estimated fair values were based on a combination of quoted market prices for distressed debt and troubled-country debtor loans, a dis- counted cash flow method based on anticipated cash flows and risk-adjusted interest rates, and estimated fair values of loans with similar credit quality characteristics. The estimated fair value of credit card receivables is face value since the receivables are sold at their face amount. The estimated fair values of consumer mortgage loans were based on committed sales prices and a valuation model using current market information. The estimated fair value of leases, which are classified as loans, is their carrying amount since a fair value estimate is not a required disclosure. (d) Deposits with Stated Maturities The discounted cash flow method was used to estimate the fair value of domestic medium- and long-term fixed rate time deposits. Cash flows were estimated based on underlying terms. The Corporation's current applicable retail or wholesale interest rates that would be offered for similar deposits with the same remaining maturities were used as discount rates. The carrying value of foreign medium- and long-term fixed rate time deposits was used to approximate fair value, and is included in deposits with no stated maturity since amounts involved were not material. First Chicago Corporation 62 Annual Report 1994 - -------------------------------------------------------------------------------- (e) Other Funds Borrowed and Long-Term Debt Commercial paper is included in other short-term finan- cial instruments while securities sold not yet purchased is separately reported since it is a trading activity (see (a) above for fair value measurement methodology). The discounted cash flow method was used to estimate the fair value of fixed rate medium-term other funds bor- rowed and long-term debt. Cash flows were based on the contractual terms. The current applicable bank or corpo- rate senior or subordinated interest rates that would be offered for similar debt instruments with the same remain- ing maturities were used as the discount rates. The discounted cash flow method also was used to esti- mate the fair value of floating rate long-term debt. Esti- mated fair value was calculated by adjusting the carrying value for the change in value attributable to the differ- ence between the current market and contractual fixed spreads to be added to the floating base rate upon each rate setting and adding the value of an embedded interest rate floor, if any. The current interest rates that would be offered on the Corporation's subordinated fixed rate debt were used as discount rates. An option pricing model, using current market information, was used to calculate the value of any embedded interest rate floors. (f) Derivative Product Assets and Liabilities-- Other Than Trading Purposes The estimated fair values of derivative product assets and liabilities used for risk management purposes, primarily interest rate swaps used by the Corporation to manage its interest rate exposure, were based on quoted market prices or pricing and valuation models on a present value basis using current market information. (g) Credit Card Securitizations (Off-Balance-Sheet Exposure) Floating and fixed rate credit card receivables sold as securities to investors through a separate trust are not finan- cial instruments of the Corporation. However, the Corpo- ration uses financial instruments (see (f) above) to reduce interest rate risk exposure attributable to these securitiza- tions. Interest rate risk exposure exists with respect to the amount of anticipated excess servicing fee income, which fluctuates with interest rate movements. Accordingly, the carrying value and the interest rate effect on estimated servicing fee income are disclosed. The carrying value rep- resents the reserve for credit losses related to securitized credit card receivables and net deferred income. The inter- est rate effect on excess servicing fee income represents the difference between the par value and the quoted mar- ket price of the securitized credit card receivables held by investors. Certain limitations are inherent to the above methodol- ogies. As a result, disclosed fair values may not be the amount realized in a current transaction between willing parties. Specifically, quoted market prices may not be real- ized because the financial instrument is traded in a mar- ket that lacks liquidity; or a fair value derived using a discounted cash flow approach may not be the amount realized because of the subjectivity involved in selecting underlying assumptions, such as projecting cash flows or selecting a discount rate. The fair value amount also may not be realized because it ignores transaction costs and does not include potential tax effects. Additionally, esti- mated fair values of certain financial instruments ignore intangible value associated with the financial instrument; for example, significant unrecognized value exists that is attributable to the Corporation's credit card relationships and core deposits. - ------------------------------------------------------------ N O T E 18--Contingencies The Corporation and certain of its subsidiaries are defend- ants in various lawsuits, including certain class actions, aris- ing out of normal corporate activities, and the Corporation has received certain tax deficiency assessments. Since the Corporation and certain of its subsidiaries, which are reg- ulated by one or more federal and state regulatory author- ities, also are the subject of numerous examinations and reviews by such authorities, the Corporation is and will, from time to time, normally be engaged in various dis- agreements with regulators, related primarily to banking matters. In the opinion of management and the Corpora- tion's general counsel, the ultimate resolution of the mat- ters referred to in this note will not have a material effect on the Corporation's consolidated financial statements. First Chicago Corporation 63 Annual Report 1994 Report of Management on Responsibility for Financial Reporting First Chicago Corporation and Subsidiaries - -------------------------------------------------------------------------------- To the Stockholders of First Chicago Corporation: Financial Statements The Management of First Chicago Corporation and its subsidiaries is responsible for the preparation, integrity and objectivity of the financial statements and footnotes contained in this Annual Report. The financial statements have been prepared in accordance with generally accepted accounting principles and are free from material fraud or error. The other financial information in the Annual Report is consistent with the financial statements. Where financial information must of necessity be based upon esti- mates and judgments, they represent the best estimates and judgments of Management. The Corporation's financial statements have been audited by Arthur Andersen LLP, independent public accountants, whose appointment is ratified by the stockholders. The independent public accountants' responsibility is to express an opinion on the Corporation's financial statements. As described further in the report that follows, their opin- ion is based on their audit, which was conducted in accor- dance with generally accepted auditing standards and is believed by them to provide a reasonable basis for their opinion. Management has made available to Arthur Andersen LLP all of the Corporation's financial records and related data. Furthermore, Management believes that all representations made to Arthur Andersen LLP during their audit were valid and appropriate. Internal Control Structure Over Financial Reporting Management is also responsible for establishing and main- taining the Corporation's internal control structure that provides reasonable, but not absolute, assurance as to the integrity and reliability of the financial statements. Man- agement continually monitors the internal control struc- ture for compliance with established policies and proce- dures. The Corporation maintains a strong internal audit- ing program that independently assesses the effectiveness of the internal control structure. The Audit Committee of the Board of Directors, composed entirely of outside Directors, oversees the Corporation's financial reporting process on behalf of the Board of Directors and has responsibility for recommending the independent public accountants for the Corporation who are appointed by the Board of Directors. The Audit Committee reviews with the independent public accountants the scope of their audit and audit reports and meets with them on a sched- uled basis to review their findings and any action to be taken thereon. In addition, the Committee meets with the internal auditors and with Management to review the scope and findings of the internal audit program and any actions to be taken by Management. The independent public accountants and the internal auditors meet peri- odically with the Committee without Management being present. Management also recognizes its responsibility for fostering a strong ethical climate so that its affairs are conducted according to the highest standards of personal and cor- porate conduct. This responsibility is characterized and reflected in the Corporation's integrity policy, which is publicized throughout the Corporation. The policy addresses, among other things, the necessity of ensuring open communication within the Corporation; potential conflicts of interest; compliance with all domestic and foreign laws, including those relating to financial disclo- sure; and the confidentiality of proprietary information. The Corporation maintains a systematic program to assess compliance with these policies. There are inherent limitations in the effectiveness of any internal control structure, including the possibility of human error or the circumvention or overriding of con- trols. Accordingly, even an effective internal control struc- ture can provide only reasonable assurance with respect to reliability of financial statements, and safeguarding of assets. Furthermore, because of changes in conditions, internal control structure effectiveness may vary over time. The Corporation assessed its internal control structure over financial reporting as of December 31, 1994, in rela- tion to the criteria described in the ``Internal Control-- Integrated Framework'' issued by the Committee of Spon- soring Organizations of the Treadway Commission. Based on this assessment, the Corporation believes that as of December 31, 1994, in all material respects, the Corpora- tion maintained an effective internal control structure over financial reporting. /s/ R. L. Thomas Richard L. Thomas Chairman and Chief Executive Officer /s/ Robert A. Rosholt Robert A. Rosholt Executive Vice President and Chief Financial Officer First Chicago Corporation 64 Annual Report 1994 Report of Independent Public Accountants - -------------------------------------------------------------------------------- To the Stockholders and the Board of Directors of First Chicago Corporation: We have audited the accompanying consolidated balance sheet of First Chicago Corporation (a Delaware corpora- tion) and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assur- ance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclo- sures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial posi- tion of First Chicago Corporation and subsidiaries as of December 31, 1994 and 1993, and the results of their oper- ations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. As explained in Note 1(c) and 1(q) to the consolidated financial statements, effective January 1, 1992, the Corpo- ration changed its methods of accounting for the valuation of venture capital investment securities and recognition of certain credit card solicitation costs. Chicago, Illinois /s/ Arthur Andersen LLP January 17, 1995 First Chicago Corporation 65 Annual Report 1994 Selected Statistical Information First Chicago Corporation and Subsidiaries - -------------------------------------------------------------------------------- Securitization of Credit Card Receivables Since 1987, the Corporation has actively packaged and sold credit card assets as securities to investors. The securitiza- tion of credit card receivables is an effective balance sheet management tool since capital is freed for other uses. In addition, while such securitizations affect net interest income, the provision for credit losses and noninterest income, the Corporation's net income is essentially unaffected. The Corporation's First Card unit continues to service credit card accounts even after receivables are securitized. The Corporation no longer recognizes net interest income and certain fee revenue on the securitized portfolio; how- ever, this is offset by servicing fees as well as by lower provisions for credit losses. At year-end 1994, $6.1 billion in credit card receivables was securitized, compared with $5.0 billion at year-end 1993. For analytical purposes only, the following table shows in- come statement line items for the Corporation adjusted for the net impact of securitization of credit card receivables.
- ---------------------------------------------------------------------------------------------------------------------------- 1994 1993 Credit Card Credit Card (In millions) Reported Securitizations Adjusted Reported Securitizations Adjusted - ---------------------------------------------------------------------------------------------------------------------------- Net interest income-- tax-equivalent basis................. $ 1,355 $ 550 $ 1,905 $ 1,264 $ 471 $ 1,735 Provision for credit losses............ 224 253 477 270 234 504 Noninterest income..................... 1,875 (297) 1,578 2,202 (237) 1,965 Noninterest expense.................... 1,919 -- 1,919 1,858 -- 1,858 Net income............................. 690 -- 690 804 -- 804 Assets--year-end....................... $65,900 $6,117 $72,017 $52,560 $4,958 $57,518 --average........................ 64,138 5,538 69,676 56,854 4,839 61,693 - ----------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------- Common Stock and Stockholder Data 1994 1993 1992 1991 1990 - ---------------------------------------------------------------------------------------------------------------------------- Market price High for the year................................. $55-1/2 $50-5/8 $37-3/4 $28-3/4 $38-1/4 Low for the year.................................. 41-1/8 35-1/2 22-7/8 15-5/8 13-1/8 At year-end....................................... 47-3/4 43-1/4 36-3/4 24-5/8 16-1/2 Dividend payout ratio............................... 28% 15% 188% 174% 60% Price/earnings multiple (year-end market)........... 6.8 4.9 57.4 21.4 4.9 Book value (at year-end)............................ $43.65 $40.55 $33.19 $34.90 $36.27 Market price/book value (at year-end)............... 109% 107% 111% 71% 45% Number of common stockholders of record............. 14,773 15,034 15,995 13,089 12,445 - ----------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------- Record Cents Common Dividends Declared Date Payable Per Share - ---------------------------------------------------------------------- 2/10/95 3/3/95 4/1/95 55 11/11/94 12/2/94 1/1/95 55 7/8/94 9/2/94 10/1/94 50 5/13/94 6/3/94 7/1/94 50 2/11/94 3/4/94 4/1/94 40 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- Record Cents Common Dividends Declared Date Payable Per Share - ---------------------------------------------------------------------- 11/12/93 12/3/93 1/1/94 40 7/9/93 9/3/93 10/1/93 30 5/14/93 6/4/93 7/1/93 30 2/12/93 3/5/93 4/1/93 30 11/13/92 12/11/92 1/1/93 30 - ---------------------------------------------------------------------- First Chicago Corporation 66 Annual Report 1994
- ------------------------------------------------------------------------------------------------------------------------------------ Quarterly Data Quarterly Earnings and Market Price Summary - ------------------------------------------------------------------------------------------------------------------------------------ Stock Market Price/Earnings Net Income Price Range (1) Multiple Range (2) - ------------------------------------------------------------------------------------------------------------------------------------ Amount Per (In millions) Share Low High Low High - ------------------------------------------------------------------------------------------------------------------------------------ 1994 First quarter............................... $ 193.8 $2.05 $41-1/8 $52-3/8 4.7 5.9 Second quarter.............................. 168.7 1.71 46-5/8 55-1/2 5.4 6.4 Third quarter............................... 153.8 1.54 45-1/2 52-1/4 6.4 7.3 Fourth quarter.............................. 173.4 1.76 42-5/8 50-1/4 6.1 7.1 Year................................ 689.7 7.04 41-1/8 55-1/2 5.8 7.9 - ------------------------------------------------------------------------------------------------------------------------------------ 1993 First quarter............................... $179.1 $1.97 $36 $44-3/4 N/M N/M Second quarter.............................. 168.5 1.81 35-1/2 45-3/8 62.3 79.6 Third quarter............................... 284.1 3.14 40-7/8 49-1/4 4.8 5.8 Fourth quarter.............................. 172.8 1.81 40-7/8 50-5/8 4.7 5.8 Year................................ 804.5 8.78 35-1/2 50-5/8 4.0 5.8 - ------------------------------------------------------------------------------------------------------------------------------------
(1) The principal market for First Chicago Corporation common stock is the New York Stock Exchange. (2) Computation made by dividing market prices by primary per share earnings for the latest 12-month period ending with the current quarter. N/M--Not meaningful.
Consolidated Summary of Quarterly Financial Information - ------------------------------------------------------------------------------------------------------------------------------------ 1994 (In millions, except per share data) December 31 September 30 June 30 March 31 - ------------------------------------------------------------------------------------------------------------------------------------ Interest income............................................. $939.4 $844.2 $757.8 $678.6 Net interest income......................................... 333.2 334.4 332.8 330.6 Combined credit provisions.................................. 76.7 56.0 42.8 50.2 Noninterest income (1)...................................... 486.5 457.3 428.2 501.4 Investment securities gains (losses)........................ 2.3 (2.2) 0.6 0.5 Noninterest expense (2)..................................... 481.4 490.4 460.8 484.3 Net income.................................................. 173.4 153.8 168.7 193.8 Earnings per share Primary..................................................... $1.76 $1.54 $1.71 $2.05 Fully diluted............................................... 1.72 1.51 1.67 2.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1993 (In millions, except per share data) December 31 September 30 June 30 March 31 - ------------------------------------------------------------------------------------------------------------------------------------ Interest income............................................. $647.7 $668.7 $648.5 $659.2 Net interest income......................................... 300.7 323.1 303.2 298.8 Combined credit provisions.................................. 71.2 66.5 71.0 65.5 Noninterest income (1)...................................... 522.1 686.2 503.3 490.5 Investment securities gains (losses)........................ 0.9 (0.8) 0.2 -- Noninterest expense (2)..................................... 480.7 474.0 465.6 433.6 Net income.................................................. 172.8 284.1 168.5 179.1 Earnings per share Primary..................................................... $1.81 $3.14 $1.81 $1.97 Fully diluted............................................... 1.77 2.97 1.72 1.91 - ------------------------------------------------------------------------------------------------------------------------------------
(1) Excludes investment securities gains (losses). (2) Excludes provision for other real estate. First Chicago Corporation 67 Annual Report 1994
- -------------------------------------------------------------------------------------------------------------------------------- Average Balances/Net Interest Margin/Rates - -------------------------------------------------------------------------------------------------------------------------------- Year Ended December 31 1994 1993 - -------------------------------------------------------------------------------------------------------------------------------- (Income and rates on tax-equivalent basis) Average Average Average Average (Dollars in millions) Balance Interest Rate Balance Interest Rate - -------------------------------------------------------------------------------------------------------------------------------- Assets Due from banks--interest-bearing (1).............. $ 7,845 $ 361.7 4.61% $ 7,441 $ 298.0 4.00% Federal funds sold and securities under resale agreements............................... 14,148 615.2 4.35 11,589 344.8 2.98 Trading account assets............................ 4,785 279.5 5.84 4,729 223.7 4.73 Investment securities U.S. government and federal agency.............. 727 32.7 4.50 725 29.7 4.10 States and political subdivisions............... 167 14.9 8.92 216 19.7 9.12 Other........................................... 1,643 29.7 1.81 1,537 33.8 2.20 ------- -------- ----- ------- -------- ---- Total investment securities............... 2,537 77.3 3.05 2,478 83.2 3.36 Loans (2)(3) Domestic offices................................ 21,545 1,785.0 8.57 19,935 1,539.5 7.95 Foreign offices................................. 1,748 123.0 7.04 2,062 145.3 7.05 ------- -------- ----- ------- -------- ---- Total loans............................... 23,293 1,908.0 8.45 21,997 1,684.8 7.86 Assets held for accelerated disposition (4)....... 19 2.5 13.16 283 27.8 9.82 ------- -------- ----- ------- -------- ---- Total earning assets (5).......................... 52,627 3,244.2 6.17 48,517 2,662.3 5.49 Cash and due from banks--noninterest-bearing...... 4,181 3,812 Allowance for credit losses....................... (698) (628) Other assets...................................... 8,028 5,153 ------- ------- Total assets.............................. $64,138 $56,854 ======= ======= Liabilities and Stockholders' Equity Deposits--interest-bearing Savings......................................... $ 8,022 $ 188.6 2.35% $ 8,093 $ 162.8 2.01% Time............................................ 4,688 167.8 3.58 5,401 143.9 2.66 Foreign offices (6)............................. 9,648 423.1 4.39 9,203 337.4 3.67 ------- -------- ----- ------- -------- ---- Total deposits--interest-bearing.......... 22,358 779.5 3.49 22,697 644.1 2.84 Federal funds purchased and securities under repurchase agreements..................... 12,290 526.2 4.28 10,112 308.1 3.05 Commercial paper.................................. 175 7.7 4.40 194 6.1 3.14 Other funds borrowed.............................. 8,321 405.5 4.87 6,849 289.7 4.23 Long-term debt.................................... 2,255 170.1 7.54 2,057 150.3 7.31 ------- -------- ----- ------- -------- ---- Total interest-bearing liabilities........ 45,399 1,889.0 4.16 41,909 1,398.3 3.34 Demand deposits................................... 7,072 6,980 Other liabilities................................. 7,224 4,079 Preferred stock................................... 686 794 Common stockholders' equity....................... 3,757 3,092 ------- ------- Total liabilities and stockholders' equity.................... $64,138 $56,854 ======= ======= Interest income/earning assets (5)................ $3,244.2 6.17 $2,662.3 5.49 Interest expense/earning assets................... 1,889.0 3.59 1,398.3 2.88 -------- ----- -------- ---- Net interest margin............................... $1,355.2 2.58% $1,264.0 2.61% ======== ===== ======== ==== - --------------------------------------------------------------------------------------------------------------------------------
(1) Principally balances in overseas offices. (2) Rates are calculated on average lease-financing receivable balances reduced by deferred liability for taxes. (3) Nonperforming loans are included in average balances used to determine rates. First Chicago Corporation 68 Annual Report 1994
- ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- 1992 1991 1990 - ----------------------------------------------------------------------------------------------------------------------------------- Average Average Average Average Average Average Balance Interest Rate Balance Interest Rate Balance Interest Rate - ----------------------------------------------------------------------------------------------------------------------------------- $ 7,376 $ 358.0 4.85% $ 6,543 $ 476.2 7.28% $ 5,988 $ 524.4 8.76% 8,202 284.8 3.47 5,683 329.3 5.79 4,531 368.6 8.14 4,339 260.2 6.00 3,159 230.9 7.31 2,261 188.3 8.33 521 30.4 5.83 447 34.1 7.63 552 44.3 8.03 270 25.0 9.26 324 30.2 9.32 529 50.0 9.45 1,452 31.1 2.14 1,075 44.3 4.12 1,032 37.5 3.63 ------- -------- ---- ------- -------- ---- ------- -------- ----- 2,243 86.5 3.86 1,846 108.6 5.88 2,113 131.8 6.24 21,735 1,689.4 7.95 24,027 2,202.1 9.38 26,522 2,868.2 11.04 2,612 207.2 7.93 3,254 295.4 9.08 4,087 435.9 10.67 ------- -------- ---- ------- -------- ---- ------- -------- ----- 24,347 1,896.6 7.95 27,281 2,497.5 9.35 30,609 3,304.1 10.99 199 17.5 8.79 -- -- -- -- -- -- ------- -------- ---- ------- -------- ---- ------- -------- ----- 46,706 2,903.6 6.22 44,512 3,642.5 8.18 45,502 4,517.2 9.93 3,338 2,961 2,787 (709) (836) (962) 5,433 6,018 5,770 ------- ------- ------- $54,768 $52,655 $53,097 ======= ======= ======= $ 7,634 $ 202.2 2.65% $ 6,005 $ 265.3 4.42% $ 4,902 $ 277.1 5.65% 7,567 307.0 4.06 10,164 678.6 6.68 9,563 763.5 7.98 10,357 464.5 4.48 11,415 770.0 6.75 14,567 1,251.4 8.59 ------- -------- ---- ------- -------- ---- ------- -------- ----- 25,558 973.7 3.81 27,584 1,713.9 6.21 29,032 2,292.0 7.89 9,905 345.3 3.49 7,438 428.2 5.76 7,240 593.2 8.19 231 8.8 3.81 210 13.8 6.57 719 59.7 8.30 4,041 231.9 5.74 3,310 240.4 7.26 2,565 207.3 8.08 1,735 126.9 7.31 1,589 128.3 8.07 1,380 123.2 8.93 ------- -------- ---- ------- -------- ---- ------- -------- ----- 41,470 1,686.6 4.07 40,131 2,524.6 6.29 40,936 3,275.4 8.00 6,136 5,235 5,181 3,848 4,351 4,218 581 507 419 2,733 2,431 2,343 ------- ------- ------- $54,768 $52,655 $53,097 ======= ======= ======= $2,903.6 6.22 $3,642.5 8.18 $4,517.2 9.93 1,686.6 3.61 2,524.6 5.67 3,275.4 7.20 -------- ---- -------- ---- -------- ----- $1,217.0 2.61% $1,117.9 2.51% $1,241.8 2.73% ======== ==== ======== ==== ======== ==== - -----------------------------------------------------------------------------------------------------------------------------------
(4) Excludes other real estate held for accelerated disposition. (5) Includes tax-equivalent adjustments based on 35% federal income tax rate of $24.2 million for 1994, $38.2 million for 1993, and tax-equivalent adjustments based on 34% federal income tax rate of $34.0 million for 1992, $37.9 million for 1991, and $44.2 million for 1990. (6) Includes International Banking Facilities' deposit balances in domestic offices and balances of Edge Act and overseas offices. First Chicago Corporation 69 Annual Report 1994 Executive Officers of the Corporation Richard L. Thomas Chairman of the Board and Chief Executive Officer Leo F. Mullin President and Chief Operating Officer David J. Vitale Vice Chairman of the Board and Senior Risk Management Officer Marvin James Alef, Jr. Executive Vice President Human Resources and Administration John W. Ballantine Executive Vice President Corporate and Institutional Banking Sherman I. Goldberg Executive Vice President, General Counsel and Secretary Thomas H. Hodges Executive Vice President Corporate and Institutional Banking Donald R. Hollis Executive Vice President Corporate and Institutional Banking W.G. Jurgensen Executive Vice President Community Banking Scott P. Marks, Jr. Executive Vice President First Card Robert A. Rosholt Executive Vice President and Chief Financial Officer First Chicago Corporation 70 Annual Report 1994 U.S. Offices and International Facilities Community Banking Group The First National Bank of Chicago Locations Antioch Glen Ellyn Oak Park Arlington Heights Glendale Heights Orland Park Aurora Glenview Palatine Batavia Highland Park Park Ridge Berwyn Hinsdale River Forest Bloomingdale Hoffman Estates River Grove Bolingbrook Joliet Romeoville Carol Stream Lake Forest Schiller Park Chicago Lake Zurich St. Charles Deerfield Lansing Warrenville Downers Grove Mount Prospect Wheaton Elgin Naperville Willowbrook Elk Grove Village Niles Wilmette Elmhurst Northbrook Winnetka Elmwood Park Oak Brook Woodridge Evanston Oak Lawn Worth Mortgage Servicing Oakbrook Terrace, Ill. American National Corporation Banking Subsidiaries American National Bank and Trust Company of Chicago American National Bank and Trust Company of Wisconsin Locations Arlington Heights Libertyville Genoa City, Wis. Bensenville Lisle Milwaukee, Wis. Chicago Matteson Pell Lake, Wis. Deerfield Melrose Park Grand Cayman Des Plaines Skokie Elgin Willowbrook First Card FCC National Bank Operations Centers Elgin, Ill. Uniondale, N.Y. Wilmington, Del. - ---------------------------------------------------------------- Corporate Trust and Security Services Offices Chicago London New York Edison, N.J. Newport, N.J. Debt Trading Offices Buenos Aires London New York Edge Act Offices Chicago Los Angeles New York International Banking Offices Beijing London Sydney Cayman Islands New York Taipei Chicago Seoul Tokyo Hong Kong Singapore Leasing Office Chicago National Processing Centers Charlotte, N.C. Dallas Secaucus, N.J. Chicago Pasadena Valley Forge, Pa. Regional Offices Atlanta Houston Washington, D.C. Boston Los Angeles Cleveland New York First Chicago Corporation 71 Annual Report 1994 Corporate Information First Chicago Corporation, a multibank holding company, provides a broad range of banking, fidu- ciary, financial and other services domestically and overseas. Its principal subsidiary, The First National Bank of Chicago, was founded in 1863 and is the oldest, largest national bank still operating under its original name and charter. With pride in this historic base, First Chicago is committed to understanding and satisfying the financial needs of its various customers, thereby extending its position as: . The leading bank for consumers and for small and medium-sized businesses in the Chicago metro- politan area. . A leading competitor in serving consumers nation- ally through credit cards and other direct delivery systems. . A leading provider of sophisticated financial services to large corporate and institutional cus- tomers in the United States and in selected inter- national markets. Headquarters One First National Plaza, Chicago, IL 60670. (312) 732-4000. Annual Meeting The Annual Meeting of Stockholders of First Chicago Corporation will be held on Friday, April 21, 1995, at 9:30 a.m. (Chicago time) in the First Chicago Center, One First National Plaza. Stock Listing First Chicago Corporation common stock is listed on the Chicago, New York, Pacific and London stock exchanges. Symbol: FNB. Stock Transfer Agent and Registrar First Chicago Trust Company of New York, P.O. Box 2500, Jersey City, NJ 07303-2500. 1-800-446-2617. Internet: FCTC @ Delphi.com Stockholder Inquiries Stockholders who have questions about stock trans- fers, changes of address, dividend payments or lost certificates should contact First Chicago Trust Company of New York. Dividend Direct Deposit First Chicago offers common stockholders the convenience of having dividends electronically deposited without charge into their checking, savings or money market account at most U.S. financial institutions. To obtain an enrollment card, contact First Chicago Trust Company of New York. Dividend Reinvestment and Stock Purchase Plan Stockholders can increase their ownership in the Corporation without brokerage commissions or service fees through the Dividend Reinvestment and Stock Purchase Plan. For a prospectus and an enrollment card, contact First Chicago Trust Company of New York. Form 10-K and Other Financial Reports Single copies of this Annual Report, the Corpo- ration's Annual Report on Form 10-K as filed with the Securities and Exchange Commission, and Quarterly Earnings Releases may be obtained from Corporate Communications, First Chicago Corpora- tion, Mail Suite 0358, Chicago, IL 60670-0358. (312) 732-6204. Investor Relations Analysts and investors seeking additional financial information should contact Investor Relations, First Chicago Corporation, Mail Suite 0460, Chicago, IL 60670-0460. (312) 732-8013 or (312) 732-4812. Independent Accountants Arthur Andersen LLP, 33 W. Monroe St., Chicago, IL 60603-5385. (C) 1995 First Chicago Corporation Printed in the U.S.A. on recycled paper (recycle symbol here) First Chicago Corporation 72 Annual Report 1994 [LOGO OF FIRST CHICAGO CORPORATION] FIRST CHICAGO CORPORATION One First National Plaza Chicago, Illinois 60670 Appendix to First Chicago Corporation 1994 Annual Report to Stockholders (Electronic Format) Descriptions of Photographs Page 5--Photograph of the Corporation's Inside Directors (left to right): President Leo F. Mullin, Chairman Richard L. Thomas, Vice Chairman David J. Vitale. Page 6, lower left--Photograph of doctor checking pregnant woman's blood pressure. Page 6, upper right--Photograph of man standing behind computer monitor at which woman is seated, back to camera. Page 7--Photograph of woman working at desk. Page 8--Photograph of three people in balloon and party goods store. Page 9--Photograph of man and woman with three children in playroom of social services agency. Page 10--Photograph of man handing creditcard to store owner. Page 13--Photograph of woman and man in book-lined office. Page 14, lower left--Photograph of three foreign exchange traders on trading floor. Page 14, upper right--Photograph of man and woman looking at catalog. Page 15--Photograph of two men on loading dock. EX-21 9 LIST OF SUBSIDIARIES EXHIBIT 21. SUBSIDIARIES As of December 31, 1994, the Corporation had the subsidiaries listed below, all of which were wholly owned except for directors' qualifying shares or as otherwise indicated below. The consolidated financial statements of the Corporation include the accounts of all such subsidiaries.
JURISDICTION OF NAMES OF CORPORATION AND SUBSIDIARIES INCORPORATION - ------------------------------------- --------------- First Chicago Corporation Delaware Subsidiaries: FCC National Bank United States First Capital Corporation of Chicago Illinois First Chicago Financial Corporation Delaware Subsidiaries: First Chicago Capital Markets, Inc. Delaware First Chicago Investment Corporation Delaware First Chicago Leasing Corporation Delaware First Chicago Trust Company of New York New York The First National Bank of Chicago United States Subsidiaries: First Chicago Building Corporation Illinois First Chicago Futures, Inc. Delaware First Chicago Investment Management Company Delaware Subsidiary: ANB Investment Management and Trust Company Illinois First Chicago Investment Services, Inc. Delaware First Chicago National Processing Corporation Delaware First Chicago International United States First Chicago International Finance Corporation United States American National Corporation Delaware Subsidiaries: American National Bank and Trust Company United States of Chicago ANB Mezzanine Corporation Delaware
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. EX-23 10 CONSENT OF ART ANDERSEN EXHIBIT 23. CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS To First Chicago Corporation: As independent public accountants, we hereby consent to the incorporation of our report dated January 17, 1995, incorporated by reference in the Form 10-K, into the Corporation's previously filed Form S-8 Registration Statement No. 2- 83105, Form S-8 Registration Statement No. 2-68153, Form S-3 Registration Statement No. 2-76715, Form S-3 Registration Statement No. 2-77079, Form S-3 Registration Statement No. 2-92143, Form S-3 Registration Statement No. 33- 4681, Form S-8 Registration Statement No. 33-15779, Form S-3 Registration Statement No. 33-16843, Form S-8 Registration Statement No. 33-26788, Form S-8 Registration Statement No. 33-22583, Form S-3 Registration Statement No. 33- 27403, Form S-8 Registration Statement No. 33-34292, Form S-3 Registration Statement No. 33-34988, Form S-3 Registration Statement No. 33-37717, Form S-8 Registration Statement No. 33-41272, Form S-3 Registration Statement No. 33- 42031, Form S-8 Registration Statement No. 33-50574, Form S-3 Registration Statement No. 33-51408, Form S-3 Registration Statement No. 33-65904, Form S-8 Registration Statement No. 33-51713 and Form S-8 Registration Statement No. 33- 52259. /s/ Arthur Andersen LLP Chicago, Illinois, March 17, 1995 EX-27 11 FIN DATA SCH
9 1,000,000 12-MOS DEC-31-1994 JAN-01-1994 DEC-31-1994 4,265 8,066 13,302 4,967 730 456 453 25,947 (723) 65,900 31,666 20,691 2,116 2,271 466 0 611 3,456 65,900 1,897 68 977 3,220 780 1,889 1,331 224 1 1,919 1,063 690 0 0 690 7.04 6.88 2.58 126 89 4 0 683 242 91 723 668 55 0 In addition to the investment securities disclosed in this Financial Data Schedule, the Corporation has investment securities in its venture capital business. These securities had a carrying value of $1.4 billion as of December 31, 1994. Treasury stock of $157 million is included as a reduction of other stockholders' equity. Investment securities gains/losses do not include the Corporation's equity securities gains which totalled $229 million. Other expenses includes: Salaries and Employee benefit expense of $869 million, Occupancy expense of $137 million, Equipment rentals, depreciation and maintenance expense of $157 million and other expenses which totalled $756 million. Allowance-Unallocated is included in Allowance-Domestic and Allowance-Foreign.
-----END PRIVACY-ENHANCED MESSAGE-----