-----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, syiHFPWY1eDRrffiWGUJv03XyqKp8SUN8xhUh3mTFeCuxzU7vxC0lZ7RAza8roWE gQXql32w1J3jWEihftnz0Q== 0000950152-95-000069.txt : 19950608 0000950152-95-000069.hdr.sgml : 19950608 ACCESSION NUMBER: 0000950152-95-000069 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950131 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL CITY CORP CENTRAL INDEX KEY: 0000069970 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 341111088 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10074 FILM NUMBER: 95504037 BUSINESS ADDRESS: STREET 1: 1900 E NINTH ST CITY: CLEVELAND STATE: OH ZIP: 44114 BUSINESS PHONE: 2165752000 10-K 1 NATIONAL CITY CORP 10-K 1 [NATIONAL CITY LOGO] 1994 ANNUAL REPORT PROUD OF OUR PAST * PREPARED FOR OUR FUTURE 2 CONTENTS Financial Highlights 1 Letter to Stockholders 2 Financial Review 5 Statistical Data 19 Quarterly Data 22 Financial Statements 24 Notes to Financial Statements 28 Form 10-K 39 Corporate Directory 44 Board of Directors/Officers 46
ANNUAL MEETING The Annual Meeting of Stockholders will be on Monday, April 24, 1995, at 10:00 a.m.: National City Corporation 1900 East Ninth Street, 4th Floor Cleveland, Ohio 44114 Although it was National City Bank in Cleveland that was officially chartered on May 17, 1845, all of National City's member banks and companies have contributed to the rich history of our Corporation. NATIONAL CITY FOUNDING DATES National City Bank - Cleveland May 17, 1845 National City Bank, Columbus September 19, 1929 National City Bank, Northeast - Akron August 1, 1933 National City Bank, Dayton January 20, 1871 National City Bank, Northwest - Toledo March 28, 1932 National City Bank, Ashland January 4, 1864 National City Bank, Kentucky October 22, 1863 National City Bank, Lexington March 15, 1883 National City Bank, Indiana March 9, 1865 National City Bank, Southern Indiana - New Albany April 20, 1904 Madison Bank & Trust Company July 10, 1833
The combined family of banks and financial service companies form our singular, unified vision: National City Corporation will be the premier diversified financial services company in the Midwest by providing our customers with advice, information and services to meet their financial needs. By doing so, we will achieve superior levels of financial performance as compared to our peers and will provide stockholders with an attractive return on their investment over time. 3 FINANCIAL HIGHLIGHTS
(Dollars in Thousands Except Per Share Amounts) 1994 1993 Percent Change - ------------------------------------------------------------------------------------------------------------------------------------ FOR THE YEAR: Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 429,434 $ 403,997 6% Preferred Dividend Requirements . . . . . . . . . . . . . . . . 15,200 15,966 (5) Net Income Applicable to Common Stock . . . . . . . . . . . . . 414,234 388,031 7 Net Income Per Common Share . . . . . . . . . . . . . . . . . . 2.70 2.41 12 Dividends Paid Per Common Share . . . . . . . . . . . . . . . . 1.18 1.06 11 Return on Average Common Equity . . . . . . . . . . . . . . . . 17.06% 16.12% Return on Average Assets . . . . . . . . . . . . . . . . . . . . 1.40 1.40 Net Interest Margin . . . . . . . . . . . . . . . . . . . . . . 4.65% 4.80% Efficiency Ratio . . . . . . . . . . . . . . . . . . . . . . . . 66.21 66.21 Overhead Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 43.46 44.34 AT YEAR END: Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,114,008 $ 31,067,709 3% Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,034,775 21,286,141 8 Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,395,055 5,166,226 (15) Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,471,920 23,063,021 6 Common Stockholders' Equity . . . . . . . . . . . . . . . . . . . 2,413,514 2,564,957 (6) Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . 2,601,054 2,763,267 (6) Equity to Assets Ratio . . . . . . . . . . . . . . . . . . . . . 8.10% 8.89% Tier 1 Capital Ratio . . . . . . . . . . . . . . . . . . . . . . 8.45 8.94 Total Risk-Based Capital Ratio . . . . . . . . . . . . . . . . . 11.68 11.62 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 7.82 8.18 Book Value Per Common Share . . . . . . . . . . . . . . . . . . . $ 16.36 $ 16.15 1% Market Value Per Common Share . . . . . . . . . . . . . . . . . . 25.88 24.50 6 Common Shares Outstanding . . . . . . . . . . . . . . . . . . . . 147,555,632 158,779,611 (7) Common Stockholders of Record . . . . . . . . . . . . . . . . . . 21,739 20,842 4 Full-Time Equivalent Employees . . . . . . . . . . . . . . . . . 20,306 19,960 2 - ------------------------------------------------------------------------------------------------------------------------------------ CORPORATE PROFILE National City Corporation is a $32 billion bank holding company headquartered in Cleveland, Ohio. The Corporation's principal banking subsidiaries are located in Cleveland, Columbus, Indianapolis, and Louisville. The Corporation also has a major banking presence in Akron, Dayton, Lexington, Toledo and Youngstown. National City subsidiaries and divisions offer a wide range of other financial services, such as credit card, retail payment and airline ticket processing, brokerage services, trust and investment management, leasing, merchant banking, mortgage banking, public finance, venture capital, small business and community investment, and credit life insurance.
1 4 TO OUR STOCKHOLDERS We are pleased to report that National City once again had record earnings in 1994. Net income was $429.4 million, or $2.70 per common share in 1994 compared with $404.0 million, or $2.41 per common share in 1993, an increase of 12 percent per share. Return on average assets was 1.40 percent, unchanged from 1993, and return on common equity rose to 17.06 percent, compared with 16.12 percent a year ago. The higher earnings and returns were a direct result of excellent asset quality, loan growth, active capital management, proper management of interest rate risk and tight control of overhead expenses. Pictures from left EDWARD B. BRANDON Chairman and Chief Executive Officer DAVID A. DABERKO President and Chief Operating Officer WILLIAM R. ROBERTSON Deputy Chairman CAPITAL MANAGEMENT National City is committed to enhancing stockholder value through effective capital management. The efforts we have made in this regard have been applauded by the market and have placed National City at the forefront of the banking industry. This strategy is particularly important in an environment where internal capital generation exceeds balance sheet growth. The combination of a solid capital base and strong earnings has enabled National City to conduct a number of successful stock repurchase programs in 1993 and 1994. These programs have the effect of increasing earnings per share and returns on equity, as net income is distributed over a smaller number of shares outstanding. In 1994 alone, 12.4 million common shares were repurchased, representing almost 8 percent of year-end 1993 outstanding shares. We have also increased the quarterly dividend, most recently in January 1995, to $.32 per share, following two dividend increases each in 1993 and 1994. The new quarterly dividend indicates an annual rate of $1.28 per share, over 10 percent higher than a year ago. National City's total return, assuming reinvestment of dividends, has significantly outperformed the Standard & Poor's 500 Index over the past 20 years - an average of 17.1% per year, versus 14.5% for the S&P 500. INTEREST RATE RISK MANAGEMENT A great deal of attention has been focused recently on rising interest rates and their impact on profitability. While an in-depth discussion of interest rate risk management, including derivatives, can be found in the financial review section of this report, we would like to provide you with a brief overview of this important issue. National City operates within conservative parameters on the amount of interest rate risk taken, with the goal of avoiding volatility in net interest income and net income. Interest rate risk exposure is centrally managed at National City and takes into account the inherent interest rate risk assumed in our customer-oriented lending and deposit-gathering businesses. The positive results of a conservative management approach are borne out by the consistency of the company's net interest margin over the past 10 years. Although the margin will likely experience pressure in 1995 due to higher funding costs and tighter loan pricing, we have consciously avoided large bets on the direction of interest rates and will continue to do so. 2 5 OUTLOOK FOR 1995 AND BEYOND Over the last few years, National City has focused its efforts on internal improvement, including the standardization and consolidation of back-office operations, cost redesign, and the assimilation of acquisitions. We have captured significant savings from streamlining operations and are now able to fully leverage a more efficient operating base. Going forward, we will build on and around National City's traditional banking franchise through product enhancement and improved marketing efforts. We will focus our attention on cross-selling more effectively across business lines. We have a number of revenue enhancement initiatives currently underway at National City, and we would like to discuss their impact on three major businesses: corporate banking, trust, and retail banking. CORPORATE BANKING: FOCUS ON ENHANCED PRODUCTS AND CROSS-SELLING Corporate banking at National City emphasizes lending to small- and middle-market businesses located in our three-state region. The loan mix among these customers is diverse and historically has been of high quality. We hold a leading market share position in this area in each of the major cities where we operate, the result of excellent and experienced staffs serving these customers. Corporate banking has been particularly successful at utilizing a team approach when meeting with current and prospective customers to take full advantage of cross-selling opportunities. Asset quality is excellent, and we will not compromise credit standards for the sake of volume. We expect traditional corporate lending to continue to grow at a moderate pace, in line with the economic growth of the Midwest. However, certain product areas within corporate banking should grow significantly faster due to customer demand and greater marketing emphasis. They include asset-based lending, commercial leasing, international banking services, and cash management services. National City consistently ranks among the top five banks in the U.S. in the quality of its cash management services. TRUST: PRODUCT IMPROVEMENTS AND CONSISTENT INVESTMENT RETURNS The trust division was reorganized in 1994 as part of a transition from traditional fiduciary services to an investment management orientation. We believe that the reorganization augurs well for future rates of growth and profitability. A renewed emphasis on sales, marketing and improved customer service within the trust division includes linking the customer contact and new business development activities more closely with the local banks. An effort is underway to improve the investment product package by diversifying product offerings and delivering more consistent investment returns through a centralized group of equity and fixed income teams. The continued development and enhancement of a more competitive 401(k) employee benefit product for our corporate customer base is scheduled for implementation in the first half of 1995. RETAIL BANKING: IMPROVED DISTRIBUTION National City is well positioned in terms of deposits and branch locations in the tri-state area of Ohio, Kentucky and Indiana. As consumer banking preferences change, National City will develop alternatives to the traditional branch system to meet consumer needs while maintaining the efficiency and effectiveness of the retail banking operation. Investments in enhanced telephone banking capabilities, supermarket branches, and marketing programs 3 6 targeted to meeting specific customer needs will be priorities in 1995. Indirect auto leases, credit cards, and residential mortgages will be marketed aggressively, primarily to National City's existing customer base. MANAGEMENT COMMITMENT AND MARKETPLACE STRENGTH The progress we are making is already apparent in our financial performance. We will continue to build on these positive results due to the inherent strength of the markets we serve and management's commitment to the success of our efforts. We are fortunate to operate in one of the best regions in the U.S. Ohio, Kentucky, and Indiana are experiencing steady economic growth, as indicated by unemployment rates below the national average and ongoing investment in manufacturing in all three states. A 1993 study ranked Ohio first in the U.S. in terms of new manufacturing facilities and plant expansion; Kentucky and Indiana ranked among the top 10. We expect the Midwest to be a focus for competitive activity when the interstate banking and branching legislation, enacted earlier this year, allows banks to branch across state lines. From National City's perspective, this is an evolutionary as opposed to a revolutionary event, since we already operate and compete on an interstate basis. More critical to the ongoing success of the company is the eventual expansion of banking powers that will allow us to offer other financial services and compete more effectively with non-bank financial service companies. We announced in late 1994 the proposed acquisition of Raffensperger, Hughes & Co., a full-service investment banking/brokerage firm headquartered in Indianapolis. Once regulatory approval is received, we will merge Raffensperger with National City Investments Capital, Inc. In addition to retail brokerage services, the merged company will have the authority to underwrite and make markets in corporate debt and corporate equity. In January 1995, we completed the acquisition of Central Indiana Bancorp, Kokomo, Indiana, and announced a definitive agreement to acquire United Bancorp of Kentucky, Inc., Lexington. This latter acquisition will increase our share of the fast-growing Lexington market from 10% to 15%. Nineteen ninety-five will mark National City's 150th year in business. We have grown from a small bank in 1845 serving the needs of Cleveland, Ohio, to a financial services company serving companies and individuals throughout a tri-state region. Our commitment to the region is a primary focus of our 150th anniversary celebration. The degree of that commitment is evidenced by the fact that each of our subsidiary banks has received the highest rating possible under the Community Reinvestment Act. We are confident that we can fulfill our mission of being the premier financial services provider in the Midwest because we have the people, programs, and policies in place to ensure success. We are especially proud of the extraordinary efforts our employees have put forward to accomplish ambitious long-term improvement programs. We are blessed with a management team that has the level of experience and commitment necessary to create long-term sustainable value for stockholders. As we celebrate our 150th year, we want to thank you, our stockholders, for your support. We hope you share our pride in our past and our belief that we are uniquely prepared for the challenges that lie ahead. JANUARY 20, 1995 /s/ EDWARD B. BRANDON EDWARD B. BRANDON CHAIRMAN & CHIEF EXECUTIVE OFFICER 4 7 FINANCIAL REVIEW EARNINGS SUMMARY National City Corporation's consolidated net income was $429.4 million in 1994, compared with $404.0 million in 1993 and $346.9 million in 1992. Net income per common share, after dividend requirements on preferred stock, increased 12% in 1994 to $2.70, compared with $2.41 in 1993 and $2.09 in 1992. Both net income and per share earnings were record results for the Corporation. Return on average common equity, a key performance measure, was 17.06% in 1994, compared with 16.12% in 1993 and 15.31% in 1992 (Chart 3). Return on average assets was 1.40% in 1994 compared with 1.40% in 1993 and 1.21% in 1992 (Chart 4). The following table reconciles the major changes in net income per share:
1994 1993 VS vs 1993 1992 - ---------------------------------------------------------------- Net income per common share, prior year..... $2.41 $2.09 Increase (decrease) from changes in: Net interest income....................... .23 .30 Provision for loan losses................. .08 .23 Fee income................................ .33 .47 Noninterest expense....................... (.34) (.23) Income taxes.............................. (.14) (.34) After-tax security gains.................. (.01) (.06) Average shares outstanding................ .14 (.05) ----- ----- Net income per common share................. $2.70 $2.41 ===== =====
UNIT PROFITABILITY The contribution of the Corporation's major units to consolidated results for the past two years is summarized in Tables 1 and 2. The units shown are reflective of how management operates and monitors these businesses internally. Cost allocations for centrally provided services are included in the reported amounts approximating the pro-rata cost to the units for the use of those services. Equity has been allocated among the business units to reflect well-capitalized levels as defined by bank regulatory agencies. Corporate and retail banking net income results include actual interest earned and paid on transactions with customers, with adjustments for matched maturity, internal funds transfer charges and credits for loans and deposits. Income on investment securities and all gains and losses associated with maturity mismatches and interest rate risk are reported in the investment/funding unit. The corporate and retail banking businesses' earnings improved in 1994 from 1993 due primarily to higher net interest income that resulted from loan growth and the continuing decline in the provision for loan losses. Also contributing to the improvement were lower expense levels. The national credit card unit includes national Mastercard/Visa credit card outstandings as well as private label volume. This unit earns interest income on outstanding balances, as well as fees for servicing credit cards and for processing monthly activity for its customers. The decline in national credit card net income is due to the settlement of litigation in the second quarter 1994, the loss of a major private label customer in the fourth quarter 1993, and increased marketing expenses in 1994 directed at replacing the lost business. The interest rate risk for the Corporation is managed within, and reflected in the profitability of, the investment/funding group. The decline in the earnings of the investment/funding group in 1994 was due primarily to the adverse effect of rising interest rates. Trust net income declined slightly in 1994 compared with 1993. The Corporation's banks administered a total of $55 billion in fiduciary assets at year-end 1994, down from $56 billion in 1993. Assets under management totalled $28 billion at year-end 1994 versus $29 billion in 1993. Assets in the Corporation's mutual funds increased 20% through new sales and collective fund conversions in 1994 to $3 billion. Increased competition from nonbanks in investment management services and products caused a decline in new business sales in 1994. In 1995, the Corporation plans to expand its investment products and services through the introduction of new asset allocation products and broaden existing products to be more competitively priced. Chart 1. Net income and dividends per common share (as originally reported)
74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 - ------------------------------------------------------------------------------------------------------------------------------- NET INCOME PER SHARE .55 .63 .75 .81 .84 .91 .89 .76 .84 .95 1.21 1.52 1.72 1.17 1.92 2.18 1.93 1.81 2.09 2.41 2.70 DIVIDENDS PER SHARE .23 .24 .26 .29 .33 .37 .41 .41 .41 .41 .42 .44 .50 .60 .72 .84 .94 .94 .94 1.06 1.18
5 8 FINANCIAL REVIEW (continued) Item processing comprises a number of business lines including: merchant credit card processing, airline ticket processing, check guarantee services, and receivables and payables processing. The merchant credit card business processes and clears bankcard deposits for retail merchants and also offers optional bankcard authorization services to its customer base through a third party service provider. The airline ticket processing business is responsible for settling travel agent generated airline ticket sales. This business unit collects the related funds from travel agents and disburses them to the appropriate airline. The check guarantee business specializes in the collection of bad checks for retail merchants. The lower return on equity in the item processing business relative to the other functional units reflects the premiums paid for recently acquired businesses which are included in the equity allocated to this unit. The decline in return on equity in 1994 reflects one-time charges in the check processing business. The mortgage banking business originates mortgages through retail offices and broker networks and services a mortgage portfolio. At December 31, 1994, the servicing portfolio totalled $12.5 billion. The increase in mortgage banking net income was due to the sales of mortgage servicing in the second and fourth quarters of 1994 and lower amortization of purchased mortgage servicing rights from the unusually high levels recorded in 1993. The corporate unit reflects holding company expenses not allocated to the business units, unallocated capital and interest expense on parent company debt. The decrease in the corporate contribution is due primarily to interest expense associated with the $250 million subordinated debt issued in the first quarter 1994 and higher interest expense on the Corporation's variable rate long-term debt. EARNING ASSETS Average earning assets for 1994 were $27,261 million compared with $25,745 million in 1993 and $25,681 million in 1992 (Chart 5). Average earning assets in 1994 increased 6% due to higher loan balances and the acquisition of Ohio Bancorp in the fourth quarter of 1993, offset somewhat by a decline in the securities portfolio. Average earning assets in 1993 were fairly stable compared with 1992 due to a combination of growth in loans and securities, offset by a decline in short-term money market assets. LOANS: At year-end 1994, loans were $23,035 million, representing an increase of 8% from year-end 1993. Average loans are shown in Chart 6. Ending loan balances are summarized in the table below:
(Dollars in Millions) 1994 1993 1992 1991 1990 - ---------------------------------------------------------------------------- Commercial and industrial........ $ 8,414 $ 8,168 $ 7,801 $ 7,967 $ 8,138 Nontaxable......... 254 262 310 391 486 International...... 52 70 50 52 50 Real estate construction...... 422 439 533 814 1,157 Leasing............ 216 228 225 240 298 Commercial mortgage.......... 2,473 2,328 1,928 1,938 1,548 Residential mortgage.......... 4,165 4,033 2,699 2,543 2,454 Consumer........... 4,782 4,241 3,727 3,733 3,896 Home equity........ 919 798 739 690 568 Credit card........ 1,338 719 726 803 992 ------- -------- -------- -------- -------- Total loans........ $23,035 $ 21,286 $ 18,738 $ 19,171 $ 19,587 ======= ======== ======== ======== ========
The acquisition of Ohio Bancorp in 1993 added $809 million to year-end 1993 loan balances, including $254 million to commercial, $320 million to residential mortgage and $200 million to consumer. COMMERCIAL: More than 75% of the Corporation's commercial loan portfolio consists of loans made to middle-market customers in the Corporation's market area. The loan mix is diverse, covering a broad range of borrowers characteristic of the Midwest economy. As a matter of policy, concentrations within a particular industry or segment are continually monitored and controlled. The commercial loan portfolio remained fairly stable for most of 1994, the result of growth in middle-market commercial and industrial loans offset by a substantial decline in loans to mortgage bankers. Activity increased Table 1. Unit Profitability
1994 1993 ---------------------------------------- ------------------------------------------ RETURN ON RETURN ON Return On Return On NET INCOME ASSETS(1) EQUITY Net Income Assets(1) Equity ---------------------------------------- ------------------------------------------ Corporate banking .................... $186.6 1.79% 16.89% $166.6 1.64% 16.80% Retail banking........................ 174.6 .91 18.22 139.0 .76 16.47 National credit card.................. 9.4 1.50 10.20 17.2 2.78 18.18 Investment/funding.................... 40.1 .46 9.59 55.5 .67 17.65 Trust................................. 31.0 21.32 22.36 32.4 24.22 28.21 Item processing....................... 15.0 4.76 10.96 17.2 6.33 14.81 Mortgage banking...................... 5.7 7.21 20.68 (13.4) (15.72) (34.20) Corporate............................. (33.0) -- -- (10.5) -- -- ------ ------ Consolidated total.................. $429.4 1.40% 17.06% $404.0 1.40% 16.12% ====== ====== (1) Return on revenue in the case of the fee-based businesses.
Table 2. Geographic Unit Performance
1994 1993 -------------------------------------------- --------------------------------------------------- CORPORATE BANKING RETAIL BANKING Corporate Banking Retail Banking --------------------- --------------------- ------------------------ ------------------------- NET RETURN ON NET RETURN ON Net Return on Net Return on (Dollars in Millions) INCOME ASSETS INCOME ASSETS Income Assets Income Assets - -------------------------------------------------------------------- --------------------------------------------------- Cleveland............. $ 67.7 1.97% $ 46.3 1.12% $ 58.5 1.79% $ 34.1 .83% Columbus.............. 34.8 1.97 30.8 .82 30.0 1.74 27.4 .73 Indiana............... 15.1 1.58 38.0 1.06 15.5 1.47 26.7 .73 Kentucky.............. 34.8 1.51 24.0 .79 35.4 1.43 21.1 .77 Akron................. 12.7 1.65 16.4 .64 9.7 1.76 11.0 .69 Dayton................ 11.9 1.73 12.7 .93 10.2 1.56 13.7 .95 Toledo................ 9.6 1.91 6.4 .82 7.3 1.61 5.0 .65 ------ ------ ------ ------ Total............... $186.6 1.79% $174.6 .91% $166.6 1.64% $139.0 .76% ====== ====== ====== ======
9 during the fourth quarter and the growth is expected to continue in 1995. An analysis of the maturity and interest rate sensitivity of commercial loans at the end of 1994 follows:
One One to Over Year Five Five (Dollars in Millions) Or Less Years Years Total - ---------------------------------------------------------------------- Domestic commercial......... $4,850 $2,663 $1,371 $8,884 Real estate construction.... 126 190 106 422 International............... 34 8 10 52 ------ ------ ------ ------ Total....................... $5,010 $2,861 $1,487 $9,358 ====== ====== ====== ====== Total variable rate......... $3,690 $1,630 $ 852 $6,172 Total fixed rate............ 1,320 1,231 635 3,186
COMMERCIAL REAL ESTATE: Commercial mortgages included $1,912 million of loans secured by income-producing real estate in 1994, compared with $1,777 million in 1993 and $1,643 million in 1992. The remainder consists of owner-occupied loans. Commercial real estate lending includes real estate construction and permanent loans secured by income-producing investment real estate. The following table shows outstanding balances and unfunded commitments at year-end:
Total (Dollars Commercial in Millions) Construction Permanent Real Estate - --------------------------------------------------------------- Outstanding: 1994.......... $ 422 $ 1,912 $2,334 1993.......... 439 1,777 2,216 1992.......... 533 1,643 2,176 Unfunded commitments: 1994.......... $ 225 $ 117 $ 342 1993.......... 206 137 343 1992.......... 198 90 288
The Corporation's activities in commercial real estate are based primarily on relationships with developers who are active in local markets. More than 85% of outstandings are in the Corporation's primary markets of Ohio, Kentucky and Indiana. The portfolio consists predominantly of relatively small-scale office, retail and apartment buildings. Total commercial real estate loans made up 10% of the total loan portfolio at December 31, 1994, compared with 10% at year-end 1993 and 12% at year-end 1992. The following table shows commercial real estate loans at year-end 1994 by state and by project:
(Dollars in Millions) - ------------------------------------------------------------- By State: By Project: Ohio........... $1,448 Retail............. $ 566 Kentucky....... 294 Apartments......... 497 Indiana........ 252 Office............. 429 Florida........ 72 Hotel/Motel........ 165 Michigan....... 38 Industrial......... 136 Other.......... 230 Other.............. 541 ------ ------ Total.......... $2,334 Total.............. $2,334 ====== ======
At year-end, there were no concentrations of real estate loans in any deteriorating economic areas. RESIDENTIAL MORTGAGE: Residential mortgage loans increased in 1994 due to new loan origination activity offset somewhat by a dramatic decline in refinancing activity. Loan originations totalled approximately $2.4 billion in 1994, compared with $5.0 billion in 1993. Of the 1994 originations, $1.7 billion were sold in the secondary market. CONSUMER: During 1994, consumer spending patterns remained robust. Year-end consumer loans increased 13% from year-end 1993. More than 75% of consumer loans are installment loans, and of these more than 70% are indirect, with the majority being fixed rate. The remainder of the consumer portfolio is largely student loans. CHART 2. BOOK VALUE AND STOCK PRICE HISTORY
HIGH LOW YEAR-END BOOK STOCK STOCK STOCK VALUE PRICE PRICE PRICE - -------------------------------------------------------------------------------- 74 3.93 4.41 2.45 3.28 75 4.32 4.82 3.23 4.35 76 4.80 6.76 4.26 6.76 77 5.31 6.67 6.08 6.13 78 5.81 7.19 5.71 5.95 79 6.34 6.82 5.89 6.39 80 6.83 6.41 4.41 5.08 81 7.18 5.56 4.26 4.52 82 7.69 5.41 3.45 4.78 83 8.24 6.89 4.49 6.89 84 8.65 8.61 5.78 8.47 85 9.59 11.28 8.39 10.97 86 10.40 16.46 10.95 15.29 87 10.58 19.13 11.94 14.56 88 10.92 16.82 13.88 16.44 89 12.43 20.75 15.38 19.56 90 13.39 19.94 11.32 15.63 91 14.24 21.13 14.07 18.63 92 14.54 24.82 17.94 24.81 93 16.15 28.06 23.13 24.50 94 16.36 29.00 23.75 25.88 National City's common stock price at December 30, 1994 was $25.88. Over the past 20 years, the total return on an annualized basis of an investment in National City common stock, assuming reinvestment of dividends, was 17.1%, compared with 14.5% for the S&P 500.
7 10 FINANCIAL REVIEW (continued) CREDIT CARD AND HOME EQUITY: Year-end credit card and home equity balances are summarized below:
(Dollars in Millions) 1994 1993 1992 1991 1990 - ----------------------------------------------------------------------- Local market credit card... $ 506 $ 331 $ 268 $ 347 $ 410 National market............ 475 258 206 266 305 Private label.............. 357 130 252 190 277 Home equity................ 919 798 739 690 568 ------ ------ ------ ------ ------ Total credit card and home equity............... $2,257 $1,517 $1,465 $1,493 $1,560 ====== ====== ====== ====== ======
The growth in credit card and home equity outstandings was due to purchases of small card portfolios as well as the completion of the amortization of a $350 million credit card securitization back onto the balance sheet. At year-end, credit card securitizations outstanding were $70 million, compared with $363 million a year ago, and these remaining securitized assets will return to the balance sheet in 1995. SECURITIES: On December 31, 1993, the Corporation adopted SFAS 115 "Accounting for Certain Investments in Debt and Equity Securities". The adoption did not have a material effect on results of operations and prior year financial statements were not restated. Under these ac- counting rules, securities available for sale are recorded at market value. At December 31, 1994, the net unrealized loss of $53 million, net of tax, was included in stockholders' equity, as compared to a net unrealized gain of $35 million, net of tax, at December 31, 1993. Securities in the held to maturity portfolio are purchased with the intent and ability to hold them to maturity and are, therefore, carried at amortized cost. Securities in this portfolio tend to be higher yielding and somewhat less liquid. Securities in the available for sale category are those which may be sold prior to their maturity for purposes of asset allocation, interest rate sensitivity, liquidity or relative value reasons and, hence, tend to be more liquid investments. On a cost basis, the portfolio decreased from $5.1 billion in 1993 to $4.5 billion at December 31, 1994. The reduction in the portfolio was in response to an anticipated rise in interest rates throughout 1994. The decline was characterized by mortgage prepayments and maturities of $860 million and $365 million, respectively. Net purchases of securities which totalled $587 million were about evenly split between adjustable rate mortgage-backed securities and short-term fixed rate obligations. Summary information with respect to the securities portfolio at December 31 follows:
1994 COST ----------------------- 1993 1992 (Dollars in HELD TO AVAILABLE 1994 Carrying Carrying Millions) MATURITY FOR SALE YIELD Value Value - ---------------------------------------------------------------------------- U.S. Treasury and Federal agency debentures: Under 1 year..... $ -- $ 126 3.82% $ 200 $ 154 1 to 5 years..... 34 1,183 5.66 1,047 1,043 5 to 10 years.... -- 25 5.85 53 -- Over 10 years.... -- -- -- -- 1 ------ ------ ------ ------ Total............ 34 1,334 5.49 1,300 1,198 Mortgage-backed securities: Under 1 year..... 2 11 6.66 374 391 1 to 5 years..... 539 1,162 6.88 2,226 2,440 5 to 10 years.... 90 443 7.29 273 229 Over 10 years.... -- 84 8.08 2 3 ------ ------ ------ ------ Total............ 631 1,700 7.01 2,875 3,063 States and political subdivisions: Under 1 year..... 113 4 10.98 125 120 1 to 5 years..... 186 3 11.16 314 415 5 to 10 years.... 73 5 11.45 92 130 Over 10 years.... 78 19 9.88 106 130 ------ ------ ------ ------ Total............ 450 31 10.89 637 795 Other securities: Under 1 year..... 8 7 5.26 119 183 1 to 5 years..... 17 1 8.38 4 119 5 to 10 years.... -- 22 5.73 -- 1 Over 10 years.... 36 205 6.32 177 140 ------ ------ ------ ------ Total............ 61 235 6.41 300 443 ------ ------ ------ ------ $1,176 $3,300 6.94% $5,112 $5,499 ====== ====== ====== ======
CHART 3. RETURN ON AVERAGE COMMON EQUITY (net income after preferred dividends, divided by average common equity) - ------------------------------------------------------------------------------- 89 17.18 90 12.97 91 11.20 92 15.31 93 16.12 94 17.06 Return on average common equity rose to 17.06% in 1994 due both to improved net income and the repurchase of 12.4 million shares during the year. National City seeks to produce a return which is higher than its peers over time while maintaining superior capital ratios.
CHART 4. RETURN ON AVERAGE ASSETS (net income divided by average assets) - -------------------------------------------------------------------------------- 89 1.16 90 0.87 91 0.81 92 1.21 93 1.40 94 1.40 Return on average assets was 1.40% in 1994 and in 1993. Historically high profitability was maintained on an asset base that grew by 6%.
8 11 The yield at December 31, 1994 was the combined rate for the held to maturity and available for sale securities portfolios. Yields on tax-exempt securities are calculated on a fully taxable equivalent basis using the marginal Federal income tax rate of 35%. Mortgage-backed securities are assigned to maturity categories based on their estimated average lives. Investments in collateralized mortgage obligations totalled $1,074 million and $1,659 million at December 31, 1994 and 1993, respectively. These investments are continually monitored and subjected to stress tests. At December 31, 1994, none of these investments were considered "high risk" under regulatory definitions. The amount of mortgage-backed securities that are either variable or adjustable rate totalled $1,417 million at December 31, 1994, or 61% of total mortgage-backed securities. INTEREST-BEARING LIABILITIES Average balances in transaction accounts, which include demand deposits, savings, and interest-bearing checking, increased by 3% in 1994, while time deposits of individuals increased by 2%. Overall, average core deposits increased less than earning assets. On average, use of purchased funds increased by $934 million in 1994. Purchased funds primarily include domestic certificates of deposit over $100,000, Eurodollar deposits, and short-term borrowings. The increase in 1994 was due to the Corporation's efforts to obtain cost-effective funding in the existing interest rate environment to support the growth in assets. A maturity distribution of certificates of deposit of $100,000 or more follows:
December 31 -------------------- (Dollars in Millions) 1994 1993 - --------------------------------------------------------------- Due in: 3 months or less...................... $ 453 $ 463 3 to 6 months......................... 112 83 6 to 12 months........................ 161 63 Over 1 year........................... 641 93 ------ ----- $1,367 $ 702 ====== =====
Federal funds borrowed and security repurchase agreements represent borrowings with overnight to 30-day maturities. Information for these borrowings follows:
(Dollars in Millions) 1994 1993 1992 - --------------------------------------------------------------- Balance at December 31................ $2,609 $3,083 $1,819 Maximum outstanding at any month-end............................ 2,689 3,083 2,417 Daily average amount outstanding...... 2,539 2,518 2,178 Weighted daily average interest rate................................. 3.99% 2.91% 3.27% Weighted daily interest rate for amounts outstanding at December 31... 5.18% 2.87% 2.79%
CHART 5. AVERAGE EARNING ASSETS
Money market Loans Securities instruments - -------------------------------------------------------- 89 17,801 4,768 1,273 90 19,456 5,087 1,120 91 19,581 4,896 1,802 92 18,671 5,385 1,625 93 19,454 5,498 793 94 21,713 4,757 789 Average earning assets grew by 6% in 1994. The loan portfolio grew by 12% and was offset slightly by a decline in the securities portfolio. The acquisition of Ohio Bancorp in the fourth quarter of 1993 contributed to the growth.
9 12 FINANCIAL REVIEW (continued) CAPITAL The following table reflects various measures of capital at year-end:
1994 1993 --------------- --------------- (Dollars in Millions) AMOUNT RATIO Amount Ratio - ----------------------------------------------------------------- Total equity(1)................ $2,601.1 8.10% $2,763.3 8.89% Common equity(1)............... 2,413.5 7.52 2,565.0 8.26 Tangible common equity(2)...... 2,026.4 6.39 2,185.2 7.12 Tier 1 capital(3).............. 2,442.2 8.45 2,468.9 8.94 Total risk-based capital(4).... 3,374.8 11.68 3,206.8 11.62 Leverage(5).................... 2,442.2 7.82 2,468.9 8.18 (1) Computed in accordance with generally accepted accounting principles, including the unrealized market value adjustment of securities available for sale. (2) Common equity less all intangible assets; computed as a ratio to total assets less intangible assets. (3) Stockholders' equity less certain intangibles and the unrealized market value adjustment of securities available for sale; computed as a ratio to risk-adjusted assets, as defined. (4) Tier 1 capital plus qualifying loan loss allowance and subordinated debt; computed as a ratio to risk-adjusted assets. (5) Tier 1 capital; computed as a ratio to average total assets less certain intangibles.
Total stockholders' equity at year-end 1994 included $187.5 million of 8% Cumulative Convertible Preferred Stock, compared with $198.3 million at year-end 1993. The Corporation's Tier 1, total risk-based capital and leverage ratios are well above the required minimum levels of 4.00%, 8.00% and 4.00%, respectively. At December 31, 1994, all of National City's member banks were well-capitalized under the capital definitions prescribed in the FDIC Improvement Act of 1991. Intangible asset totals at year-end are summarized in the following table:
(Dollars in Millions) 1994 1993 1992 - ------------------------------------------------------------------ Goodwill............................ $246.6 $257.0 $156.6 Core deposit intangibles............ 19.2 25.9 34.8 Purchased mortgage servicing rights............................. 67.5 63.3 79.9 Purchased credit cards.............. 52.7 31.1 34.1 Other intangibles................... 1.1 2.5 4.3 ------ ------ ------ Total intangible assets......... $387.1 $379.8 $309.7 ====== ====== ======
National City Corporation's common stock trades on the New York Stock Exchange under the symbol NCC. As of December 31, 1994, there were 21,739 common stockholders of record. Quarterly dividends paid and common stock prices rounded to the nearest cent follow:
NYSE:NCC First Second Third Fourth Year - ------------------------------------------------------------------------- 1994 Dividends paid.... $ .29 $ .29 $ .30 $ .30 $ 1.18 High.............. 28.38 29.00 28.38 28.13 29.00 Low............... 24.00 25.63 26.00 23.75 23.75 Close............. 26.63 27.38 28.13 25.88 25.88 1993 Dividends paid... $ .26 $ .26 $ .27 $ .27 $ 1.06 High............. 27.44 28.06 27.25 27.00 28.06 Low.............. 24.31 23.38 24.00 23.13 23.13 Close............ 26.13 25.19 26.75 24.50 24.50
Cash dividend payout is continually reviewed by management and the Board of Directors. For the past three-and five-year periods, the dividend payout has averaged 44.2% and 46.6%, respectively (Chart 8). In January 1995, the Board of Directors declared a first quarter dividend of $.32 per common share, representing a 7% increase from the next preceding quarterly dividend of $.30 per share. The dividend is payable February 1 to stockholders of record on January 13, 1995. This follows two dividend increases in 1994 and two in 1993. At December 31, 1994, the total market capitalization of the Corporation was approximately $3.8 billion. CHART 6. AVERAGE LOANS
CORPORATE BANKING CONSUMER BANKING COMM'L RESIDENTIAL CREDIT COMMERCIAL REAL ESTATE INSTALLMENT REAL ESTATE CARD - -------------------------------------------------------------------------------------------- 89 8,352 2,754 89 3,592 1,736 1,367 90 8,884 2,816 90 3,872 2,514 1,370 91 8,819 2,764 91 3,738 2,721 1,539 92 8,352 2,479 92 3,675 2,723 1,412 93 8,314 2,668 93 3,893 3,131 1,448 94 9,132 2,432 94 4,441 3,914 1,794 The Corporation's loan portfolio mix is approximately 53% corporate and 47% consumer loans. The loan mix has become more balanced as the consumer loan portfolio, which includes residential mortgages, has grown at a faster rate in recent years.
10 13 Book value per common share at December 31, 1994 was $16.36 compared with $16.15 at December 31, 1993 (Chart 2). The 1994 book value includes $.34 of market depreciation in the securities available for sale portfolio compared with $.22 of market appreciation at year-end 1993. During the year, 12.4 million common shares were repurchased in the open market. Of those shares, 4.3 million were purchased under a program announced in December, 1993. The remaining 8.1 million shares were purchased under programs announced in March and July, 1994. At December 31, 1994 the Corporation had remaining authorization to purchase up to 6.9 million common shares. LIQUIDITY MANAGEMENT Effective liquidity management ensures that the cash flow requirements of depositors and borrowers, as well as the operating cash needs of the Corporation, are met. Funds are available from a number of sources, including the securities portfolio, the extensive core deposit base, the ability to acquire large deposits in the local and national markets, and the capability to securitize or package loans for sale. The parent company has four major sources of funding to meet its liquidity requirements: dividends from its subsidiaries, the commercial paper market, a revolving credit agreement, and access to the capital markets. The main source for parent company cash requirements has been dividends from its subsidiaries. At January 1, 1995, $77 million was available within the bank subsidiaries to pay the parent company in dividends without prior regulatory approval, compared with $96 million at January 1, 1994. During 1994, subsidiary banks declared $250 million in dividends to the parent company. As discussed in Item 1 of Form 10-K (page 40), subsidiary banks are subject to regulation and, among other things, may be limited in their ability to pay dividends or transfer funds to the holding company. Accordingly, consolidated cash flows as presented in the Consolidated Statements of Cash Flows on page 26 may not represent cash available to the Corporation's stockholders. Funds raised in the commercial paper market through the Corporation's subsidiary, National City Credit Corporation, are primarily used to support the activities of National City Mortgage Co., the Corporation's mortgage banking subsidiary, as well as other occasional short-term cash needs. Commercial paper outstandings at December 31, 1994 were $379 million, compared with $399 million at year-end 1993. The Corporation has a $300 million revolving credit agreement with a group of unaffiliated banks which serves as a back-up liquidity facility. The agreement expires June 30, 1997, with a provision to extend the expiration date under certain circumstances. No borrowings have occurred under this facility. The parent company also has in place a $500 million shelf registration with the Securities and Exchange Commission permitting ready access to the public debt and preferred stock markets. In March 1994, the Corporation issued $250 million principal amount of 6 5/8% Subordinated Notes due 2004. The notes qualify as Tier 2 capital for regulatory purposes. ASSET/LIABILITY MANAGEMENT The primary goal of the asset/liability management function is to maximize net interest income within the interest rate risk limits set by the Corporate Asset/Liability Committee. Interest rate risk is monitored and controlled through the use of three different measures: static gap analysis, earnings simulation, and duration modeling. The most useful of these measures is earnings simulation. The model forecasts earnings under a variety of scenarios that incorporate changes in the absolute level of interest rates, the shape of the yield curve, prepayments, interest rate relationships, and changes in the volumes and rates of various loan and deposit categories. The model also incorporates all off-balance sheet commitments, as well as assumptions about reinvestment and the repricing characteristics of certain non-contractual assets and liabilities. While each of the interest rate risk measurements has limitations, taken together they represent a reasonably CHART 7. EQUITY TO ASSETS
Tangible Total Equity to Equity to Assets Assets - -------------------------------------------------------------------------------- 89 5.97 6.57 90 5.75 6.58 91 6.60 7.53 92 7.49 8.63 93 7.77 8.89 94 6.98 8.10 Total equity as a percentage of total assets was 8.10% at year-end 1994 compared with 8.89% a year ago. Tangible equity to assets was 6.98% at December 31, 1994, National City ranks among the best of the top 50 U.S. banks in terms of capital levels.
11 14 FINANCIAL REVIEW (continued) comprehensive view of the magnitude of interest rate risk in the Corporation, the distribution of risk along the yield curve, the level of risk through time and the amount of exposure to certain interest rate relationships. The Corporation uses a variety of financial instruments to manage its interest rate sensitivity. These include the securities in its investment portfolio, interest rate swaps, interest rate caps and floors, and, to a lesser extent, exchange-traded futures and options contracts. Interest rate swaps, caps and floors, frequently called interest rate derivatives, have similar characteristics to securities but possess the advantages of customization of the risk-reward profile of the instrument, minimization of balance sheet leverage and improvement of the liquidity position of the Corporation. STATIC GAP: As illustrated in the following table, at year-end, the amount of interest earning assets, adjusted for off-balance sheet instruments, less interest bearing liabilities which reprice within a given period was (1.4)% of adjusted total earning assets within six months, and (1.5)% within one year. However, the ongoing management of the gap incorporates noninterest earning assets, noninterest bearing liabilities and equity. These items, which include accounts such as cash, mortgage servicing rights and noninterest bearing demand deposits, are included in the periods in which they are likely to affect the Corporation's interest rate sensitivity. At year-end, the amount of total assets, adjusted for off-balance sheet instruments, less total liabilities which reprice within a given period was (4.2)% of adjusted total earning assets within six months, and (7.4)% within one year. The policy limit for the one-year gap is plus or minus 12% of adjusted total earning assets, including the effect of noninterest earning assets, noninterest bearing liabilities and equity.
Within Six to One to Three Over Six Twelve Three to Five Five (Dollars in Millions) Months Months Years Years Years - --------------------------------------------------------------------------- Loans.................. $13,873 $ 2,085 $ 4,031 $ 1,578 $ 1,467 Securities............. 1,621 526 1,490 362 396 Money market assets.... 627 66 84 -- -- ------- ------- ------- ------- ------- Total interest earning assets.... 16,121 2,677 5,605 1,940 1,863 Interest bearing liabilities........... 14,419 3,654 4,032 739 754 ------- ------- ------- ------- ------- Gap between interest earning assets and interest bearing liabilities before swaps and options..... 1,702 (977) 1,573 1,201 1,109 Net swaps and options.. (2,173) 929 375 529 341 ------- ------- ------- ------- ------- Gap between interest earning assets and interest bearing liabilities, adjusted for swaps and options............... $ (471) $ (48) $ 1,948 $ 1,730 $ 1,450 ======= ======= ======= ======= ======= Cumulative gap between interest earning assets and interest bearing liabilities, adjusted for swaps and options............... $ (471) $ (519) $ 1,429 $ 3,159 $ 4,609 ======= ======= ======= ======= ======= Gap between interest earning assets and interest bearing liabilities, adjusted for swaps and options............... (471) (48) 1,948 1,730 1,450 Nonearning assets...... 3,129 216 158 100 304 Noninterest bearing liabilities, demand deposits and equity... 4,066 1,251 501 232 2,466 ------- ------- ------- ------- ------- Gap adjusted for swaps, options, nonearning assets, noninterest bearing liabilities, demand deposits and equity................ $(1,408) $(1,083) $ 1,605 $ 1,598 $ (712) ======= ======= ======= ======= ======= Cumulative gap adjusted for swaps, options, nonearning assets, noninterest bearing liabilities, demand deposits and equity... $(1,408) $(2,491) $ (886) $ 712 $ -- ======= ======= ======= ======= =======
Core deposits and loans with non-contractual maturities are distributed or spread among the various repricing CHART 8. CASH DIVIDEND PAYOUT (dividends per share dividend by orginally reported earnings per share)
Dividend 3 yr 5yr Payout Avg Avg - ------------------------------------------------------------------------------ 89 38.6 42.5 37.0 90 48.7 41.6 41.0 91 51.9 46.4 45.6 92 44.9 48.5 44.3 93 44.0 46.9 45.6 94 43.7 44.2 46.6 The Corporation's dividend policy is to pay out approximately 40% of earnings over time. Despite a somewhat higher payout ratio in recent years, internal capital generation continues to exceed asset growth.
12 15 categories based upon historical patterns of repricing which are reviewed at least annually. Management constructs rolling portfolios of fixed rate certificates of deposit whose interest cash flows over historical time periods most closely replicate the current portfolio of non-contractual assets and liabilities. It is the maturity or repricing distribution of this replicating portfolio which appears in the gap table as a surrogate for the particular non-contractual asset or liability. The gap table presented includes the following loans and core deposits that reprice on average in the noted time frames: fixed rate credit card loans (13 months), demand deposits (7 months), savings accounts (15 months), and money market and NOW accounts (5 months). The assumptions regarding these repricing characteristics greatly influence conclusions regarding interest sensitivity. Management believes its assumptions regarding these assets and liabilities are conservative. EARNINGS SIMULATION: Management evaluates the effects on income of alternative interest rate scenarios against earnings in a stable interest rate environment. The most recent earnings simulation model projects net income would increase by approximately 1.0% if rates fell gradually by two percentage points over the next year. It projects an increase of approximately .8% if rates rose gradually by two percentage points, well within the (5.0)% policy limit. Management believes this reflects an essentially neutral interest rate sensitivity position. The Corporation's earnings are also affected by changes in spread relationships. For example, a 50 basis point contraction in the relationship between the prime rate and Federal funds rate is currently estimated to cause a 3.7% reduction in net income over a 12-month period. DURATION: The Corporation's duration model analyzes the impacts of changes in interest rates on expected asset and liability cash flows, including those maturing in time periods greater than one year. At year-end, a two percentage point immediate increase in rates was estimated to cause a reduction in the present value of these cash flows by an amount equal to 1.0% of total assets. Policy limits restrict this amount to 1.5% of total assets. The value of these cash flows was projected to increase by 1.2% of total assets for an immediate decrease in rates of two percentage points. Due to borrowers' preferences for floating-rate loans and depositors' preferences for fixed-rate deposits, the Corporation's balance sheet moves toward higher levels of asset sensitivity with the passage of time. In fact, if all prepayments, calls and maturities of the securities and derivative portfolios were to remain uninvested, then the Corporation's asset sensitivity in a 200 basis point rising interest rate environment would result in an increase in net income of 2.5% compared with a stable rate environment. Purchases of fixed-rate securities or interest rate derivative instruments were required in 1994 to offset the natural asset-sensitive interest rate risk position. Using a one-year static gap measure, the Corporation would be 3.1% asset sensitive without securities and interest rate derivatives. Management expects interest rates to rise next year with short-term rates rising significantly more than long-term rates. Management believes the Corporation's neutral interest sensitivity position is appropriate given the current level of market interest rates. Management does not at this time expect to alter, to any significant degree, its interest rate sensitivity position during 1995. NET INTEREST INCOME On a fully taxable equivalent basis, net interest income was $1,266.3 million in 1994 compared with $1,235.8 million in 1993 and $1,195.3 million in 1992 (Chart 10). CHART 9. AVERAGE FUNDING SOURCES
CORE OTHER PURCHASED DEPOSITS DEPOSITS FUNDS - -------------------------------------------------------------------------------- 89 16,510 3,634 4,005 90 18,839 2,918 4,396 91 20,190 2,284 4,221 92 20,780 1,187 3,866 93 20,831 815 4,164 94 21,327 1,506 4,666 Core deposits grew at a slower pace than loans. As a result, purchased funds and other deposit balances increased from a year ago.
13 16 FINANCIAL REVIEW (continued) The following table reconciles net interest income as shown in the financial statements to tax equivalent net interest income:
(Dollars in Millions) 1994 1993 1992 - ------------------------------------------------------------------ Net interest income - per financial statements........... $1,236.8 $1,200.0 $1,152.7 Tax equivalent adjustment........ 29.5 35.8 42.6 -------- -------- -------- Net interest income - tax equivalent..................... $1,266.3 $1,235.8 $1,195.3 ======== ======== ======== Average earning assets........... $ 27,261 $ 25,745 $ 25,681 ======== ======== ======== Net interest margin - tax equivalent..................... 4.65% 4.80% 4.65% ======== ======== ========
To compare non-taxable asset yields to taxable yields on a similar basis, amounts are adjusted to their pre-tax equivalents, based on the marginal corporate tax rate of 35% in 1994 and 1993 and 34% in 1992. The margin decline in 1994 was due mainly to the loss of a large credit card customer in the fourth quarter 1993. The following table summarizes the contributions of derivatives to net interest income (Note: Amounts in brackets represent reductions of the related interest income or expense line, as applicable):
(Dollars in Millions) 1994 1993 1992 - ---------------------------------------------------------------- INTEREST ADJUSTMENT TO: Loans.............................. $36.4 $72.1 $43.3 Securities......................... (16.3) (27.2) (26.7) ----- ----- ----- Assets............................. 20.1 44.9 16.6 Deposits........................... (9.6) (21.1) (22.9) ----- ----- ----- Effect on net interest income...... $29.7 $66.0 $39.5 ===== ====== =====
The future net interest income contribution of the derivative portfolio is not significant relative to the Corporation's net earnings at current interest rates. The effects of changing interest rates on the Corporation are more fully discussed in the Asset/Liability Management discussion on pages 11 to 13. The following table shows changes in interest income, expense and net interest income due to volume and rate variances for major categories of assets and liabilities:
1994 VS. 1993 1993 vs. 1992 -------------------------- -------------------------- DUE TO Due to CHANGE IN Change in (Dollars in ----------------- NET ---------------- Net Millions) VOLUME RATE* CHANGE Volume Rate* Change - ----------------------------------------------------------------------------- Increase (decrease) in tax equivalent interest income -- Loans............... $ 183.8 $ -- $183.8 $68.6 $(111.6) $ (43.0) Securities.......... (40.8) 2.8 (38.0) 7.8 (78.4) (70.6) Money market assets............ (.2) (.2) (.4) (34.3 ) (1.0) (35.3) ------- ------- ------ ----- ------- ------- Total............... $ 142.8 $ 2.6 $145.4 $42.1 $(191.0) $(148.9) ======= ======= ====== ===== ======= ======= (Increase) decrease in interest expense-- Savings and NOW accounts.......... $ (11.4) $ 5.4 $ (6.0) $(18.1) $ 23.6 $ 5.5 Insured money market accounts.......... 4.7 (5.4) (.7) (4.6 ) 34.6 30.0 Time deposits....... (5.0) (2.5) (7.5) 53.3 69.9 123.2 Purchased funds..... (30.0) (49.9) (79.9) 7.5 26.8 34.3 Corporate debt...... (16.3) (4.5) (20.8) (9.3 ) 5.7 (3.6) ------- ------- ------ ------ ------- ------- Total............... $ (58.0) $ (56.9) $(114.9) $28.8 $ 160.6 $ 189.4 ======= ======= ======= ====== ======= ======= Increase in tax equivalent net interest income..... $ 30.5 $ 40.5 ======= ======= * Changes in interest income and interest expense not arising solely from rate or volume variances are included in rate variances.
CHART 10. NET INTEREST INCOME AND NET INTEREST MARGIN
NET INTEREST NET INTEREST INCOME MARGIN - -------------------------------------------------------------------------------- 89 1,118 4.69 90 1,156 4.50 91 1,185 4.51 92 1,195 4.65 93 1,236 4.80 94 1,266 4.65 Tax equivalent net interest income increased in 1994 due to a larger earning asset base offset somewhat by a narrower net interest margin.
14 17 FEES AND OTHER INCOME An analysis of fees and other income for the last three years follows:
(Dollars in Thousands) 1994 1993 1992 - ------------------------------------------------------------------- Item processing revenues......... $312,358 $ 267,962 $ 194,166 Deposit service charges.......... 153,870 152,609 143,909 Trust fees....................... 125,668 122,597 118,350 Credit card fees................. 85,308 92,966 101,898 Mortgage banking revenues........ 67,406 58,678 59,958 Service fees -- other............ 37,897 38,153 38,001 Brokerage revenues............... 18,790 9,013 -- Other real estate owned income... 13,696 12,332 9,820 Trading account profits (losses)....................... (861) 9,161 6,546 Other............................ 38,706 36,344 53,012 -------- --------- --------- $852,838 $ 799,815 $ 725,660 ======== ========= =========
Fees and other income increased 7% in 1994 from 1993 due primarily to growth in item processing, mortgage banking and brokerage revenues. Item processing revenues grew in both 1994 and 1993 due to growth in the existing airline and bankcard processing businesses, as well as acquisitions. Credit card fees declined in 1994 due mainly to the loss of a large customer in the fourth quarter 1993 and the unwinding of a credit card securitization. The fees associated with the credit card securitization were replaced with net interest income as the related loan balances were returned to the balance sheet. Mortgage banking revenues increased due to $14 million of gains on the sale of mortgage servicing rights. Also contributing to the improved mortgage banking revenue was lower amortization of capitalized excess service fees, which is recorded as an adjustment to revenue. The 1994 amortization was lower by $11 million as compared to 1993. Offsetting these increases were reduced loan origination fees that resulted mainly from the decline in refinancing activity in 1994. There was no other significant nonrecurring income in 1994 or 1993. Nonrecurring pre-tax gains in 1992 included a $5.7 million gain on the sale of Mexican debt, a $4.2 million gain on the sale of mortgage loans and student loans, and a $1.2 million gain on miscellaneous asset sales. NONINTEREST EXPENSE The following table shows noninterest expenses for the last three years:
(Dollars in Thousands) 1994 1993 1992 - ------------------------------------------------------------------ Salaries.................... $ 517,981 $ 499,879 $ 495,232 Benefits.................... 135,909 123,593 121,783 Equipment................... 93,345 89,005 90,768 Net occupancy............... 89,994 89,729 85,620 Third party services........ 80,604 77,368 87,438 Processing assessments...... 91,598 81,822 68,651 Postage and supplies........ 68,218 67,842 65,859 FDIC assessments............ 48,709 50,157 50,169 Other real estate owned expense................... 10,403 26,177 46,847 Amortization of intangibles............... 44,903 61,721 37,459 State and local taxes....... 30,160 30,297 26,610 Marketing and public relations................. 35,677 28,581 21,319 Transportation.............. 23,200 21,978 18,477 Telephone................... 24,057 21,862 17,562 Other....................... 108,375 77,729 76,654 ---------- ---------- ---------- $1,403,133 $1,347,740 $1,310,448 ========== ========== ==========
Noninterest expense rose 4% in 1994 compared with 1993. Excluding the impact of acquired companies, total expenses were unchanged from 1993 levels. Nonrecurring expenses recorded in 1994 included $8.7 million related to the settlement of litigation and a $4.5 million write-off in the item processing subsidiary. Amortization of intangibles included the amortization of purchased mortgage servicing rights, which totalled $14.5 million in 1994 and $34.5 million in 1993. The increase in processing assessments in 1994 and 1993 was due to increased volume in the item processing subsidiary. There were no significant nonrecurring expenses in 1993. Nonrecurring expenses in 1992 included $16.8 million in severance costs related to both the Indiana acquisition and the Corporation's cost redesign program. In addition, CHART 11. FEE INCOME AS A PERCENTAGE OF TOTAL REVENUE
FEE INCOME AS % OF TOTAL REVENUE - -------------------------------------------------------------------------------- 84 28% 85 29% 86 29% 87 30% 88 31% 89 31% 90 33% 91 35% 92 38% 93 39% 94 40% Fee income as a percentage of total revenue increased to 40% in 1994. Contributing to the growth in fee income were increased item processing revenue and service charges on deposits. Management's goal is to increase the fee income contribution to total revenue over time.
15 18 FINANCIAL REVIEW (continued) there were $12.6 million in one-time merger-related costs and $9.3 million of costs in the settlement of litigation. The full-time equivalent (FTE) staff for the Corporation, shown in Table 3, increased in 1994 due to increases at the item processing subsidiary which were volume related. The overhead ratio (noninterest expense less fee income as a percentage of fully taxable net interest income) was 43.46% in 1994 compared with 44.34% in 1993 and 48.93% in 1992 (Chart 12). The efficiency ratio (noninterest expense as a percentage of fee income plus fully taxable net interest income) was 66.21% in 1994 and 1993, down from 68.22% in 1992. The fee-based businesses have lower gross margins than traditional banking, and, therefore, growth in these businesses penalizes the efficiency ratio as shown in Table 3. By contrast, strong fee income benefits the overhead ratio. SECURITY GAINS AND LOSSES Net realized security gains and losses are summarized as follows:
(Dollars in Thousands) 1994 1993 1992 - ------------------------------------------------------------------- Net gain (loss) on sales of debt securities.......................... $ (287) $8,462 $ 12,345 Tax expense (benefit)............... (100) 2,962 4,256 ------- ------ -------- After tax.......................... $ (187) $5,500 $ 8,089 ======= ====== ======== Net gains on sales of equity securities.......................... $10,817 $3,460 $ 13,352 Tax expense......................... 3,848 1,211 4,541 ------- ------ -------- After tax.......................... $ 6,969 $2,249 $ 8,811 ======= ====== ======== Effect on net income................. $ 6,782 $7,749 $ 16,900 ======= ====== ======== Effect on earnings per share......... $ .04 $ .05 $ .11 ======= ====== ========
INCOME TAXES The consolidated income tax provision was $188.3 million in 1994 compared with $167.0 million in 1993 and $117.4 million in 1992. The effective tax rate of the Corporation was 30.5% in 1994, 29.2% in 1993, and 25.3% in 1992. The increasing effective rate over the past three years reflects the higher Federal statutory rate, the declining levels of tax-exempt income, and a greater portion of income subject to state income taxation. ASSET QUALITY NONPERFORMING ASSETS: A summary of nonaccrual, reduced rate and renegotiated loans and other nonperforming assets at December 31 follows:
(Dollars in Millions) 1994 1993 1992 1991 1990 - ------------------------------------------------------------------- Commercial: Nonaccrual............. $ 58.8 $ 79.4 $135.4 $191.8 $100.7 Restructured........... -- 1.1 2.5 5.3 3.2 ------ ------ ------ ------ ------ Total commercial...... 58.8 80.5 137.9 197.1 103.9 Real estate related: Nonaccrual............. 48.8 64.4 81.5 129.7 205.3 Restructured........... 4.4 6.5 4.3 15.7 14.2 ------ ------ ------ ------ ------ Total real estate related............. 53.2 70.9 85.8 145.4 219.5 ------ ------ ------ ------ ------ Total nonperforming loans............... 112.0 151.4 223.7 342.5 323.4 Other real estate owned (OREO)................. 16.5 57.8 143.7 196.8 158.8 ------ ------ ------ ------ ------ Nonperforming assets.............. $128.5 $209.2 $367.4 $539.3 $482.2 ====== ====== ====== ====== ====== Loans 90 days past due accruing interest...... $ 27.9 $ 42.2 $ 41.5 $ 65.9 $ 98.7 ====== ====== ====== ====== ====== Nonperforming loans and OREO as a percent of: Loans and OREO........ .6% 1.0% 1.9% 2.8% 2.4% Assets................ .4 .7 1.3 1.8 1.6 Equity................ 4.9 7.6 14.7 23.9 24.8 Loan loss allowance to nonperforming loans.... 418.8% 292.9% 171.6% 112.7% 101.2%
TABLE 3. FULL-TIME EQUIVALENT STAFF AND OVERHEAD PERFORMANCE MEASURES
1994 1993 ------------------------------------ --------------------------------------- FULL-TIME Full-Time EQUIVALENT OVERHEAD EFFICIENCY Equivalent Overhead Efficiency STAFF RATIO RATIO Staff Ratio Ratio Corporate and retail banking . . 11,576 48.06% 58.61% 11,943 50.33% 60.67% National credit card . . . . . . 577 57.25 63.48 516 51.40 43.97 Investment/funding . . . . . . . 277 (31.47) 46.28 254 (23.66) 31.51 Trust . . . . . . . . . . . . . 975 -- 65.72 951 -- 62.86 Item processing . . . . . . . . 5,549 -- 91.93 4,598 -- 90.52 Mortgage banking . . . . . . . . 731 -- 83.37 889 -- 127.00 Corporate . . . . . . . . . . . 621 -- -- 809 -- -- ------ ------ Total . . . . . . . . . . . 20,306 43.46% 66.21% 19,960 44.34% 66.21% ====== ======
CHART 12. OVERHEAD RATIO (non-interest expenses less fee income divided by net interest income) - -------------------------------------------------------------------------------- 89 43.68 90 46.33 91 49.93 92 48.93 93 44.34 94 43.46 The overhead ratio improved in 1994 for the third consecutive year. The improvement was due to the benefits of the Corporation's cost redesign program, the successful integration of acquisitions and reduced expenses related to foreclosed property.
16 19 Commercial and residential real estate loans and securities are designated as nonperforming when payments are 90 or more days past due, when credit terms are renegotiated below market levels, or when individual analysis of a borrower's creditworthiness indicates that a credit should be placed on nonaccrual status, unless the loan is adequately collateralized and in the process of collection. Consumer loans are reported as "90 days past due accruing interest" once the 90 day criterion has been met, and are charged off when they become 119 days past due. Generally, when loans are classified as nonperforming, unpaid accrued interest is written off, and future income may be recorded only as cash payments are received. Nonperforming assets declined in 1994 due to payoffs and recoveries in nonaccrual commercial and real estate loans, as well as the liquidation of foreclosed real estate. Although loans may be classified as nonperforming, many continue to pay interest irregularly or at less than original contractual rates. A summary of actual income booked on nonperforming loans versus their full contractual yields for each of the past five years follows:
(Dollars in Millions) 1994 1993 1992 1991 1990 - ---------------------------------------------------------------------------- Income potential based on original contract....... $16.5 $16.0 $21.4 $36.3 $32.2 Actual income............ 8.2 5.5 4.6 5.7 6.6
ALLOWANCE FOR LOAN LOSSES: The following table presents the reconciliation of the allowance for loan losses:
(Dollars in Millions) 1994 1993 1992 1991 1990 - ---------------------------------------------------------------------------- Balance at beginning of year.................... $443.4 $383.9 $385.9 $327.3 $311.2 Provision................ 79.4 93.1 129.4 251.1 231.4 Net acquired allowance... 9.7 50.7 2.5 17.7 9.6 Loans charged off: Commercial.............. 34.6 55.0 78.4 124.8 111.9 International........... -- 1.9 -- .1 46.1 Real estate mortgage.... 11.5 14.9 18.7 21.0 14.6 Consumer................ 33.0 35.0 45.6 57.5 60.6 Revolving credit........ 41.1 37.7 43.8 56.5 46.2 ------ ------ ------ ------ ------ Total charge-offs.... 120.2 144.5 186.5 259.9 279.4 Recoveries: Commercial.............. 18.6 26.1 14.9 12.5 15.5 International........... -- -- .2 2.0 8.1 Real estate mortgage.... 4.3 2.3 3.8 2.7 .9 Consumer................ 22.8 21.6 23.0 21.3 18.1 Revolving credit........ 11.0 10.2 10.7 11.2 11.9 ------ ------ ------ ------ ------ Total recoveries..... 56.7 60.2 52.6 49.7 54.5 ------ ------ ------ ------ ------ Net charged-off loans.... 63.5 84.3 133.9 210.2 224.9 ------ ------ ------ ------ ------ Balance at end of year... $469.0 $443.4 $383.9 $385.9 $327.3 ====== ====== ====== ====== ====== Ratio of ending allowance to ending loans......... 2.04% 2.08% 2.05% 2.01% 1.67%
CHART 13. NONPERFORMING ASSETS AND THE ALLOWANCE FOR LOAN LOSSES
NONPERFORMING ALLOWANCE FOR ASSETS LOAN LOSSES - -------------------------------------------------------------------------------- 89 303 311 90 482 327 91 539 386 92 367 384 93 209 443 94 129 469 Nonperforming assets at December 31, 1994 totalled $129 million and represented a decline of 38% from a year ago. At December 31, 1994, the allowance for loan losses represented 2.04% of total loans and 364% of nonperforming assets.
17 20 FINANCIAL REVIEW (continued) The commercial category included real estate construction net charge-offs/(recoveries) of $(1.8) million in 1994, $4.9 million in 1993, and $12.3 million in 1992. Real estate mortgage loans included commercial real estate net charge-offs of $5.3 million in 1994, $10.3 million in 1993, and $11.7 million in 1992. Net charge-offs (recoveries) as a percentage of average loans by portfolio type are shown in the following table:
1994 1993 1992 1991 1990 - --------------------------------------------------------------------- Commercial.............. .18% .33% .71% 1.14% .95% International........... -- 3.78 (.52) (3.96) 41.20 Real estate mortgage.... .11 .24 .32 .41 .34 Consumer................ .23 .34 .61 .97 1.10 Revolving credit........ 1.68 1.90 2.34 2.94 2.50 Total net charge-offs to average loans.......... .29% .43% .72% 1.07% 1.16%
Net charge-offs as a percentage of loans declined 14 basis points in 1994 following a 29 basis point decline in 1993 (Chart 14). Both the provision and the allowance are based on an analysis of individual credits, prior and current loss experience, overall growth in the portfolio, current economic conditions, and other factors. Consumer and credit card loans are charged off within industry norms, while commercial loans are evaluated individually. An allocation of the ending allowance for loan losses by major loan type follows:
(Dollars in Millions) 1994 1993 1992 1991 1990 - --------------------------------------------------------------------- Commercial and commercial mortgage.... $ 161.2 $174.5 $192.6 $210.9 $179.6 International........... .3 .4 .6 .5 1.4 Consumer and residential mortgage............... 32.2 29.7 30.6 53.3 50.2 Revolving credit........ 42.8 22.1 30.1 28.7 31.2 Unallocated............. 232.5 216.7 130.0 92.5 64.9 ------- ------ ------ ------ ------ $ 469.0 $443.4 $383.9 $385.9 $327.3 ======= ====== ====== ====== ======
This allocation is made for analytical purposes. The total allowance is available to absorb losses from any segment of the portfolio. The changes in the allocated and unallocated categories reflect credit quality that has improved at a rapid rate. The 1994 provision for loan losses exceeded net charge-offs for the year by $15.9 million. The following table shows the percentage of loans in each category to total loans at year-end:
1994 1993 1992 1991 1990 - -------------------------------------------------------------------- Commercial and commercial mortgage.... 51.2 % 53.7% 57.6 % 59.2 % 59.3 % International........... .2 .3 .3 .3 .3 Consumer and residential mortgage............... 38.8 38.9 34.3 32.7 32.4 Revolving credit........ 9.8 7.1 7.8 7.8 8.0 ------ ------ ------ ------ ------ 100.0 % 100.0% 100.0 % 100.0 % 100.0 % ===== ====== ====== ====== ======
The adoption of SFAS 114 "Accounting By Creditors For Impairment of a Loan" in 1995 will not have a material impact on financial position or results of operations. CHART 14. NET CHARGE-OFFS AS A PERCENTAGE OF AVERAGE LOANS
Net C/O Ratio - ------------------------------------------------------------------------------- 89 .96% 90 1.16% 91 1.07% 92 .72% 93 .43% 94 .29% Net charge-offs as a percentage of average loans was .29% in 1994 compared with .43% in 1993 and .72% in 1992. The improvement was due to lower charge-off rates in both the commercial and consumer loan portfolios.
18 21 STATISTICAL DATA CONSOLIDATED SUMMARY OF OPERATIONS AND SELECTED FINANCIAL DATA
(In Millions Except Per Share FOR THE CALENDAR YEAR Amounts and --------------------------------------------------------------------------------------------------------------------- Ratios) 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 - --------------------------------------------------------------------------------------------------------------------------------- INTEREST INCOME Loans...................... $ 1,766 $ 1,582 $ 1,624 $ 1,974 $ 2,162 $ 2,094 $ 1,750 $ 1,521 $ 1,410 $ 1,349 $ 957 Securities................. 246 276 341 389 442 407 373 345 318 288 240 Other interest income...... 30 32 67 112 91 111 77 76 99 175 200 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Total interest income.... 2,042 1,890 2,032 2,475 2,695 2,612 2,200 1,942 1,827 1,812 1,397 INTEREST EXPENSE Deposits.................... 593 542 723 1,093 1,252 1,206 957 806 821 878 689 Other interest expense..... 212 148 157 251 349 353 276 268 224 252 250 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Total interest expense... 805 690 880 1,344 1,601 1,559 1,233 1,074 1,045 1,130 939 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Net interest income...... 1,237 1,200 1,152 1,131 1,094 1,053 967 868 782 682 458 PROVISION FOR LOAN LOSSES.... 79 93 129 251 231 157 168 279 108 67 43 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Net interest income after provision for loan losses.. 1,158 1,107 1,023 880 863 896 799 589 674 615 415 Fees and other income....... 853 800 726 650 580 493 471 419 364 318 206 Security gains (losses)..... 10 12 26 26 3 3 11 11 21 9 (2) ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Total noninterest income.. 863 812 752 676 583 496 482 430 385 327 204 Noninterest expense......... 1,403 1,348 1,311 1,242 1,115 981 913 857 797 709 467 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Income before income taxes.. 618 571 464 314 331 411 368 162 262 233 152 Income taxes................ 188 167 117 77 82 106 91 18 44 52 28 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- NET INCOME................... $ 430 $ 404 $ 347 $ 237 $ 249 $ 305 $ 277 $ 144 $ 218 $ 181 $ 124 ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= NET INCOME PER COMMON SHARE: Primary..................... $ 2.70 $ 2.41 $ 2.09 $ 1.46 $ 1.62 $ 1.98 $ 1.80 $ .93 $ 1.47 $ 1.39 $ 1.05 Assuming full dilution...... 2.64 2.37 2.06 1.45 1.61 1.98 1.80 .92 1.40 1.21 1.01 Dividends paid per common share...................... 1.18 1.06 .94 .94 .94 .84 .72 .60 .50 .44 .42 Average shares outstanding.. 153.35 161.16 158.01 154.43 153.84 154.04 153.85 154.38 148.00 130.49 117.76 FINANCIAL RATIOS: Return on average common equity..................... 17.06% 16.12% 15.31% 11.20% 12.97% 17.18% 17.47% 9.51% 15.97% 15.87% 13.87% Return on average assets.... 1.40 1.40 1.21 .81 .87 1.16 1.14 .63 1.05 .95 .90 Average equity to average assets..................... 8.55 9.04 8.25 7.35 6.73 6.73 6.55 6.67 6.68 6.18 6.54 Dividends paid to net income....................... 43.70 43.98 44.98 64.38 58.02 42.42 40.00 64.52 34.01 31.65 40.00 Net interest margin......... 4.65 4.80 4.65 4.51 4.50 4.69 4.73 4.93 4.68 4.43 4.13 Overhead ratio.............. 43.46 44.34 48.93 49.93 46.33 43.68 42.66 45.63 47.95 50.12 49.45 Efficiency ratio............ 66.21 66.21 68.22 67.67 64.27 60.90 60.61 62.14 62.92 64.56 63.60 AT YEAR-END: Assets...................... $32,114 $31,068 $28,963 $29,976 $29,561 $28,549 $26,879 $24,242 $23,495 $20,637 $19,560 Loans....................... 23,035 21,286 18,738 19,171 19,587 18,741 17,314 15,525 14,362 12,462 11,181 Securities.................. 4,395 5,166 5,499 5,370 5,020 5,045 5,126 4,620 4,305 3,319 3,018 Deposits.................... 24,472 23,063 22,585 22,758 22,730 21,386 20,676 18,368 17,350 15,532 14,626 Corporate long-term debt.... 744 510 328 330 308 310 264 294 277 254 198 Common equity............... 2,414 2,565 2,300 2,058 1,946 1,877 1,664 1,502 1,468 1,142 985 Total equity................ 2,601 2,763 2,500 2,258 1,946 1,877 1,664 1,507 1,498 1,265 1,109 Common shares outstanding... 147.56 158.78 158.17 154.63 153.11 154.20 153.87 154.19 154.04 133.39 127.65
19 22 STATISTICAL DATA (continued) DAILY AVERAGE BALANCE SHEETS/NET INTEREST INCOME/RATES
DAILY AVERAGE BALANCE ------------------------------------------------------------------- (Dollars in Millions) 1994 1993 1992 1991 1990 1989 - --------------------------------------------------------------------------------------------------------------------- ASSETS Earning Assets: Loans: Commercial................................ $ 9,133 $ 8,816 $ 8,977 $ 9,885 $10,227 $ 9,788 Real estate mortgage...................... 6,346 5,297 4,607 4,419 3,987 3,054 Consumer.................................. 4,441 3,893 3,675 3,738 3,872 3,592 Revolving credit.......................... 1,795 1,448 1,412 1,539 1,370 1,367 ------- ------- ------- ------- ------- ------- Total loans............................ 21,715 19,454 18,671 19,581 19,456 17,801 Securities: Taxable................................... 3,999 4,637 4,361 3,722 3,813 3,437 Tax-exempt................................ 758 861 1,024 1,174 1,274 1,329 ------- ------- ------- ------- ------- ------- Total securities....................... 4,757 5,498 5,385 4,896 5,087 4,766 Federal funds sold.......................... 65 77 315 296 247 121 Security resale agreements.................. 470 274 706 870 275 127 Eurodollar time deposits in banks........... 107 278 417 417 298 655 Other short-term money market investments............................... 147 164 187 219 300 372 ------- ------- ------- ------- ------- ------- Total earning assets/ Total interest income/Rates............ 27,261 25,745 25,681 26,279 25,663 23,842 Allowance for loan losses..................... (462) (409) (393) (367) (315) (339) Market value (depreciation) of securities available for sale.......................... (5) -- -- -- -- -- Cash and demand balances due from banks....... 2,052 1,959 1,827 1,855 1,789 1,675 Properties and equipment...................... 390 367 383 410 414 385 Customers' acceptance liability............... 69 51 78 75 96 62 Accrued income and other assets............... 1,309 1,121 1,059 1,091 917 732 ------- ------- ------- ------- ------- ------- Total assets........................... $30,614 $28,834 $28,635 $29,343 $28,564 $26,357 ======= ======= ======= ======= ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Savings and NOW accounts.................... $ 4,966 $ 4,543 $ 3,981 $ 3,371 $ 3,138 $ 2,796 Insured money market accounts............... 5,184 5,401 5,236 4,519 3,767 3,238 Time deposits of individuals................ 6,380 6,268 7,230 8,430 8,112 6,736 Other time deposits......................... 481 552 936 1,777 2,495 3,000 Deposits in overseas offices................ 1,026 263 251 367 315 629 Federal funds borrowed...................... 1,358 1,439 995 1,056 1,289 1,395 Security repurchase agreements.............. 1,181 1,080 1,183 1,141 1,374 1,383 Borrowed funds.............................. 1,415 1,193 1,359 1,706 1,424 954 Corporate long-term debt.................... 712 452 329 318 309 273 ------- ------- ------- ------- ------- ------- Total interest bearing liabilities/ Total interest expense/Rates........... 22,703 21,191 21,500 22,685 22,223 20,404 Noninterest bearing deposits................ 4,798 4,619 4,333 4,010 3,930 3,745 Acceptances outstanding..................... 69 51 78 75 96 62 Accrued expenses and other liabilities...... 425 367 362 417 393 372 ------- ------- ------- ------- ------- ------- Total liabilities...................... 27,995 26,228 26,273 27,187 26,642 24,583 Preferred stock............................... 191 200 200 141 -- -- Common stock.................................. 2,428 2,406 2,162 2,015 1,922 1,774 ------- ------- ------- ------- ------- ------- Total stockholders' equity............. 2,619 2,606 2,362 2,156 1,922 1,774 ------- ------- ------- ------- ------- ------- Total liabilities and stockholders' equity............................... $30,614 $28,834 $28,635 $29,343 $28,564 $26,357 ======= ======= ======= ======= ======= ======= Net interest income......................................................................................... Interest spread............................................................................................. Contribution of noninterest bearing sources of funds........................................................ Net interest margin......................................................................................... Fully taxable equivalent basis computed at 35% in 1994 and 1993, and 34% in 1992 through 1989. Average loan balances include nonperforming loans.
20 23
INTEREST DAILY AVERAGE RATE - ------------------------------------------------------------------------- ----------------------------------------------------- 1994 1993 1992 1991 1990 1989 1994 1993 1992 1991 1990 1989 - ------------------------------------------------------------------------- ----------------------------------------------------- $ 708.5 $ 648.7 $ 679.7 $ 904.8 $1,073.6 $1,102.9 7.76% 7.36% 7.57% 9.15% 10.50% 11.27% 490.5 421.4 409.8 448.0 424.8 331.2 7.73 7.96 8.90 10.14 10.65 10.84 356.8 338.8 358.9 408.7 453.3 436.4 8.03 8.70 9.77 10.93 11.71 12.15 219.8 182.9 186.4 227.5 229.7 241.5 12.25 12.63 13.20 14.78 16.77 17.67 - -------- -------- -------- -------- -------- -------- 1,775.6 1,591.8 1,634.8 1,989.0 2,181.4 2,112.0 8.18 8.18 8.76 10.16 11.21 11.86 204.5 229.0 277.6 308.7 347.7 305.3 5.11 4.94 6.37 8.29 9.12 8.88 59.8 73.3 95.3 119.4 135.8 147.6 7.89 8.51 9.31 10.17 10.66 11.11 - -------- -------- -------- -------- -------- -------- 264.3 302.3 372.9 428.1 483.5 452.9 5.56 5.50 6.92 8.74 9.50 9.50 2.9 4.5 11.1 17.3 20.3 10.9 4.46 5.84 3.52 5.84 8.22 9.01 20.0 8.8 26.9 49.7 22.1 11.7 4.25 3.21 3.81 5.71 8.04 9.21 3.0 9.6 16.4 27.3 25.8 60.2 2.80 3.45 3.93 6.55 8.66 9.19 5.5 8.9 12.7 17.4 23.5 29.7 3.74 5.43 6.74 7.95 7.83 7.98 - -------- -------- -------- -------- -------- -------- $2,071.3 $1,925.9 $2,074.8 $2,528.8 $2,756.6 $2,677.4 7.60% 7.48% 8.08% 9.62% 10.74% 11.23% $ 128.8 $ 122.8 $ 128.3 $ 155.0 $ 157.0 $ 136.9 2.59% 2.70% 3.22% 4.60% 5.00% 4.90% 117.0 116.3 146.3 211.3 216.2 180.7 2.26 2.15 2.79 4.68 5.74 5.58 284.6 277.1 400.3 592.2 654.9 557.8 4.46 4.42 5.54 7.02 8.07 8.28 18.4 19.1 39.5 112.2 200.3 273.8 3.83 3.46 4.22 6.31 8.03 9.13 44.1 6.9 8.3 21.6 23.7 56.8 4.30 2.62 3.31 5.89 7.52 9.03 57.5 45.5 34.4 60.2 104.0 127.9 4.23 3.16 3.46 5.70 8.07 9.17 43.7 27.6 36.7 58.5 103.9 118.0 3.70 2.56 3.09 5.13 7.56 8.53 61.7 46.4 60.9 106.8 112.9 80.3 4.36 3.89 4.49 6.26 7.93 8.42 49.2 28.4 24.8 26.0 28.1 26.8 6.92 6.28 7.54 8.18 9.09 9.82 - -------- -------- -------- -------- -------- -------- $ 805.0 $ 690.1 $ 879.5 $1,343.8 $1,601.0 $1,559.0 3.55% 3.26% 4.09% 5.92% 7.20% 7.64% - -------- -------- -------- -------- -------- -------- $1,266.3 $1,235.8 $1,195.3 $1,185.0 $1,155.6 $1,118.4 ======== ======== ======== ======== ======== ======== .................................................................... 4.05% 4.22% 3.99% 3.70% 3.54% 3.59% .................................................................... .60 .58 .66 .81 .96 1.10 ----- ----- ----- ----- ----- ----- .................................................................... 4.65% 4.80% 4.65% 4.51% 4.50% 4.69% ===== ===== ===== ===== ===== =====
21 24 QUARTERLY DATA FOURTH QUARTER RESULTS Net income for the fourth quarter of 1994 was $111.4 million, or $.71 per common share, compared with $103.5 million, or $.62 per share, for the same period last year. The increase in earnings was due predominantly to higher net interest income that resulted from loan growth. Annualized return on average common equity for the fourth quarter was 17.64%, compared with 15.74% for the fourth quarter 1993. Annualized return on average assets was 1.40% in 1994 versus 1.35% in 1993. Average earning assets and average deposits for the quarter increased 3.0% and 2.7%, respectively, from the fourth quarter last year, primarily due to growth in business. Net interest income on a fully taxable equivalent basis for the quarter was $325.5 million, which reflects a 3.1% increase over $315.7 million for the same period last year. Fees and other income increased 7.4% to $230.1 million over the prior year fourth quarter due mainly to higher item processing revenue that was the result of business growth and acquisitions, gains on the sale of mortgage servicing, and a final income adjustment related to the unwinding of a credit card securitization. Noninterest expenses increased to $370.5 million, compared with $359.5 million a year ago. The increase was due to litigation settlements and higher expenses related to increased volume and acquisitions in the item processing subsidiary. - -------------------------------------------------------------------------------- QUARTERLY FINANCIAL INFORMATION The following is a summary of unaudited quarterly results of operations for the years 1994, 1993, and 1992:
(Dollars in Thousands Except Per Share Amounts) First Second Third Fourth Full Year - --------------------------------------------------------------------------------------------------------------------------- 1994 Interest income................................. $473,873 $494,462 $517,754 $555,775 $2,041,864 Interest expense................................ 171,728 188,275 207,607 237,445 805,055 Net interest income............................. 302,145 306,187 310,147 318,330 1,236,809 Provision for loan losses....................... 20,442 20,071 19,235 19,608 79,356 Security gains.................................. 5,893 799 2,772 1,066 10,530 Net overhead.................................... 137,130 135,208 137,632 140,325 550,295 Income before income taxes...................... 150,466 151,707 156,052 159,463 617,688 Net income...................................... 103,807 105,841 108,411 111,375 429,434 Net income applicable to common stock........... 99,930 102,055 104,625 107,624 414,234 Net income per common share..................... .63 .67 .69 .71 2.70 Fully diluted net income per common share....... .62 .66 .67 .69 2.64 Dividends paid per common share................. .29 .29 .30 .30 1.18 1993 Interest income................................. $467,716 $467,138 $469,156 $486,154 $1,890,164 Interest expense................................ 173,716 170,095 167,652 178,647 690,110 Net interest income............................. 294,000 297,043 301,504 307,507 1,200,054 Provision for loan losses....................... 25,382 23,896 23,861 19,950 93,089 Security gains.................................. 2,509 3,195 2,851 3,367 11,922 Net overhead.................................... 136,841 131,905 133,925 145,254 547,925 Income before income taxes...................... 134,286 144,437 146,569 145,670 570,962 Net income...................................... 95,322 102,454 102,676 103,545 403,997 Net income applicable to common stock........... 91,322 98,454 98,676 99,579 388,031 Net income per common share..................... .57 .61 .61 .62 2.41 Fully diluted net income per common share....... .56 .60 .60 .61 2.37 Dividends paid per common share................. .26 .26 .27 .27 1.06 1992 Net income...................................... $ 82,105 $ 85,145 $ 89,623 $ 90,050 $ 346,923 Net income per common share..................... .50 .51 .54 .54 2.09 Fully diluted net income per common share....... .50 .50 .53 .53 2.06 Dividends paid per common share................. .235 .235 .235 .235 .94
22 25 REPORT OF MANAGEMENT The management of National City Corporation has prepared the accompanying financial statements and is responsible for their integrity and objectivity. The statements have been prepared in conformity with generally accepted accounting principles and necessarily include amounts that are based on management's best estimates and judgments. Management also prepared the other information in the annual report and is responsible for its accuracy and consistency with the financial statements. National City Corporation maintains a system of internal control over financial reporting designed to produce reliable financial statements. The system contains self-monitoring mechanisms, and compliance is tested and evaluated through an extensive program of internal audits. Actions are taken to correct potential deficiencies as they are identified. Any internal control system has inherent limitations, including the possibility that controls can be circumvented or overridden. Further, because of changes in conditions, internal control system effectiveness may vary over time. The Audit Committee, consisting entirely of outside directors, meets regularly with management, internal auditors and independent auditors, and reviews audit plans and results as well as management's actions taken in discharging responsibilities for accounting, financial reporting and internal controls. Ernst & Young LLP, independent auditors, and the internal auditors have direct and confidential access to the Audit Committee at all times to discuss the results of their examinations. National City Corporation assessed its internal control system as of December 31, 1994 in relation to criteria for effective internal control over financial reporting described in "Internal Control -- Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of December 31, 1994, its system of internal control met those criteria. Cleveland, Ohio January 20, 1995 /s/ EDWARD B. BRANDON /s/ ROBERT G. SIEFERS EDWARD B. BRANDON ROBERT G. SIEFERS Chairman and Chief Executive Officer Executive Vice President and Chief Financial Officer REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Stockholders National City Corporation Cleveland, Ohio We have audited the accompanying consolidated balance sheets of National City Corporation and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of National City Corporation and subsidiaries at December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. Ernst & Young LLP Cleveland, Ohio January 20, 1995 23 26 FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME
FOR THE CALENDAR YEAR -------------------------------------------- (Dollars in Thousands Except Per Share Amounts) 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------ INTEREST INCOME Loans: Taxable............................................................ $1,749,726 $1,565,636 $1,602,508 Exempt from Federal income taxes................................... 16,172 16,470 21,593 Securities: Taxable............................................................ 204,463 229,007 277,635 Exempt from Federal income taxes................................... 40,085 47,279 63,442 Federal funds sold and security resale agreements.................... 22,897 13,254 37,981 Eurodollar time deposits in banks.................................... 3,044 9,630 16,360 Other short-term investments......................................... 5,477 8,888 12,807 ---------- ---------- ---------- Total interest income......................................... 2,041,864 1,890,164 2,032,326 INTEREST EXPENSE Deposits............................................................. 592,870 542,165 722,657 Federal funds borrowed and security repurchase agreements............ 101,249 73,151 71,146 Borrowed funds....................................................... 61,698 46,417 60,988 Corporate long-term debt............................................. 49,238 28,377 24,790 ---------- ---------- ---------- Total interest expense........................................ 805,055 690,110 879,581 ---------- ---------- ---------- Net interest income........................................... 1,236,809 1,200,054 1,152,745 PROVISION FOR LOAN LOSSES.............................................. 79,356 93,089 129,361 ---------- ---------- ---------- Net interest income after provision for loan losses........... 1,157,453 1,106,965 1,023,384 NONINTEREST INCOME Item processing revenues............................................. 312,358 267,962 194,166 Service charges on deposit accounts.................................. 153,870 152,609 143,909 Trust fees........................................................... 125,668 122,597 118,350 Credit card fees..................................................... 85,308 92,966 101,898 Mortgage banking revenues............................................ 67,406 58,678 59,958 Other................................................................ 108,228 105,003 107,379 ---------- ---------- ---------- Total fees and other income................................... 852,838 799,815 725,660 Security gains....................................................... 10,530 11,922 25,697 ---------- ---------- ---------- Total noninterest income...................................... 863,368 811,737 751,357 NONINTEREST EXPENSE Salaries and employee benefits....................................... 653,890 623,472 617,015 Equipment............................................................ 93,345 89,005 90,768 Net occupancy........................................................ 89,994 89,729 85,620 Assessments and taxes................................................ 78,869 80,454 76,779 Other................................................................ 487,035 465,080 440,266 ---------- ---------- ---------- Total noninterest expense..................................... 1,403,133 1,347,740 1,310,448 ---------- ---------- ---------- Income before income taxes............................................. 617,688 570,962 464,293 Income tax expense..................................................... 188,254 166,965 117,370 ---------- ---------- ---------- NET INCOME............................................................. $ 429,434 $ 403,997 $ 346,923 ========= =========== =========== NET INCOME APPLICABLE TO COMMON STOCK.................................. $ 414,234 $ 388,031 $ 330,923 ========= =========== =========== NET INCOME PER COMMON SHARE............................................ $2.70 $2.41 $2.09 Average Common Shares Outstanding...................................... 153,353,555 161,163,816 158,011,980
See notes to financial statements. 24 27 CONSOLIDATED BALANCE SHEETS
DECEMBER 31 ---------------------------- (Dollars in Thousands) 1994 1993 - ----------------------------------------------------------------------------------------------------------------------- ASSETS Loans: Commercial........................................................................... $ 8,667,539 $ 8,429,119 International........................................................................ 52,356 69,776 Real estate construction............................................................. 421,505 439,406 Lease financing...................................................................... 216,499 228,352 Real estate mortgage - nonresidential................................................ 2,473,329 2,328,228 Real estate mortgage - residential................................................... 4,123,084 3,523,836 Mortgage loans held for sale......................................................... 42,064 509,187 Consumer............................................................................. 4,781,759 4,241,461 Revolving credit..................................................................... 2,256,640 1,516,776 ----------- ------------ Total loans........................................................................ 23,034,775 21,286,141 Allowance for loan losses.......................................................... 469,019 443,412 ----------- ------------ Net loans.......................................................................... 22,565,756 20,842,729 Securities held to maturity (market value $1,156,811 and $1,824,855, respectively)..... 1,176,115 1,763,025 Securities available for sale.......................................................... 3,218,940 3,403,201 Federal funds sold and security resale agreements...................................... 672,945 611,743 Trading account assets................................................................. 7,940 150,296 Eurodollar time deposits in banks...................................................... -- 457,000 Other short-term money market investments.............................................. 96,615 85,677 Cash and demand balances due from banks................................................ 2,401,728 1,933,888 Properties and equipment............................................................... 389,980 386,219 Customers' acceptance liability........................................................ 102,005 68,148 Accrued income and other assets........................................................ 1,481,984 1,365,783 ----------- ----------- TOTAL ASSETS.................................................................... $32,114,008 $31,067,709 =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Demand deposits (noninterest bearing)................................................ $ 5,331,789 $ 5,214,560 Savings and NOW accounts............................................................. 4,599,988 5,161,593 Insured money market accounts........................................................ 4,964,741 5,489,785 Time deposits of individuals......................................................... 7,298,056 6,224,231 Other time deposits.................................................................. 472,023 500,421 Deposits in overseas offices......................................................... 1,805,323 472,431 ----------- ------------ Total deposits.................................................................. 24,471,920 23,063,021 Federal funds borrowed and security repurchase agreements............................ 2,608,801 3,082,821 Borrowed funds....................................................................... 1,104,989 1,201,011 Acceptances outstanding.............................................................. 102,005 68,148 Accrued expenses and other liabilities............................................... 481,570 379,268 Corporate long-term debt............................................................. 743,669 510,173 ----------- ------------ TOTAL LIABILITIES............................................................... 29,512,954 28,304,442 Stockholders' Equity: Preferred stock, without par value, authorized 5,000,000 shares, outstanding 750,160 and 793,240 shares (3,750,800 and 3,966,200 depositary shares) of 8% Cumulative Convertible Preferred Stock ($250 liquidation preference per share) in 1994 and 1993................................................................................ 187,540 198,310 Common stock, par value $4 per share, authorized 350,000,000 shares, outstanding 147,555,632 shares in 1994 and 158,779,611 shares in 1993.............. 590,223 635,119 Capital surplus...................................................................... 100,051 105,140 Retained earnings.................................................................... 1,732,258 1,841,144 Unallocated shares held by Employee Stock Ownership Plan (ESOP) trust................ (9,018) (16,446) ----------- ------------ TOTAL STOCKHOLDERS' EQUITY...................................................... 2,601,054 2,763,267 ----------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................................... $32,114,008 $31,067,709 =========== ============
See notes to financial statements. 25 28 FINANCIAL STATEMENTS (continued) CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE CALENDAR YEAR ------------------------------------------- (Dollars in Thousands) 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------ OPERATING ACTIVITIES Net income.............................................................. $ 429,434 $ 403,997 $ 346,923 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses............................................. 79,356 93,089 129,361 Depreciation and amortization......................................... 57,390 56,610 59,314 Amortization of goodwill and intangibles.............................. 44,903 61,721 37,459 Amortization of securities discount and premium....................... 8,833 6,488 (4,643) Security gains........................................................ (10,530) (11,922) (25,697) Other gains, net...................................................... (22,712) -- (4,352) Net decrease (increase) in trading account securities................. 142,356 (137,252) 19,978 Originations and purchases of mortgage loans held for sale............ (1,117,702) (3,635,705) (2,967,585) Proceeds from sales of mortgage loans held for sale................... 1,587,421 3,496,154 2,756,320 Deferred income taxes (benefit)....................................... 3,104 21,563 (22,089) (Increase) decrease in interest receivable............................ (51,305) (22,698) 87,037 Increase (decrease) in interest payable............................... 41,187 24,319 (97,418) (Increase) decrease in other assets................................... (41,943) (279,286) 40,999 Increase (decrease) in other liabilities.............................. 61,115 46,041 (22,416) ---------- ---------- ---------- Net cash provided (used) by operating activities................. 1,210,907 123,119 333,191 LENDING AND INVESTING ACTIVITIES Net change in short-term investments.................................... 384,860 633,588 375,201 Purchases of securities................................................. (2,185,267) (4,036,281) (3,391,162) Proceeds from sales of securities....................................... 1,598,514 2,594,509 1,253,787 Proceeds from maturities and prepayments of securities.................. 1,225,333 2,368,065 2,041,828 Net change in loans..................................................... (2,272,102) (1,870,528) 357,484 Proceeds from sales of loans............................................ -- 207,156 160,214 Net increase in properties and equipment................................ (61,151) (55,348) (38,337) Acquisitions............................................................ -- (43,490) (17,000) ---------- ---------- ---------- Net cash provided (used) by lending and investing activities........ (1,309,813) (202,329) 742,015 DEPOSIT AND FINANCING ACTIVITIES Net change in Federal funds borrowed and security repurchase agreements............................................................ (474,020) 1,179,308 (585,919) Net change in borrowed funds............................................ (96,022) (217,410) (322,283) Net change in demand, savings, NOW, insured money market accounts, and deposits in overseas offices.......................................... 363,472 212,946 1,843,412 Net change in time deposits............................................. 1,045,427 (1,093,817) (2,015,913) Repayment of long-term debt............................................. (15,362) (20,660) (2,812) Proceeds from issuance of long-term debt................................ 247,080 197,950 -- Dividends paid, net of tax benefit of ESOP shares....................... (194,425) (184,516) (155,718) Issuance of common stock................................................ 23,221 28,469 47,378 Repurchase of common and preferred stock................................ (340,053) (168,920) (1,118) ESOP trust repayment.................................................... 7,428 8,816 4,759 ---------- ---------- ---------- Net cash provided (used) by deposit and financing activities........ 566,746 (57,834) (1,188,214) ---------- ---------- ---------- Net increase (decrease) in cash and demand balances due from banks...... 467,840 (137,044) (113,008) Cash and demand balances due from banks, January 1...................... 1,933,888 2,070,932 2,183,940 ---------- ---------- ---------- Cash and demand balances due from banks, December 31.................... $2,401,728 $1,933,888 $2,070,932 ========== =========== =========== SUPPLEMENTAL DISCLOSURES Interest paid........................................................... $ 764,000 $ 662,000 $ 977,000 Income taxes paid....................................................... 199,000 147,000 140,000 Common stock issued in purchase acquisitions............................ -- 140,568 --
See notes to financial statements. 26 29 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Unallocated Shares (Dollars in Thousands Preferred Common Capital Retained Held by Except Per Share Amounts) Stock Stock Surplus Earnings ESOP Trust Total - ------------------------------------------------------------------------------------------------------------------------------- Balance January 1, 1992..................... $200,000 $309,253 $261,129 $1,517,301 $ (30,021) $2,257,662 Net income................................ 346,923 346,923 Common dividends, $.94 per share.......... (130,881) (130,881) Common dividends of pooled company........ (9,155) (9,155) Preferred dividends, $4.00 per depositary share................................... (16,000) (16,000) Issuance of 3,621,216 common shares under corporate stock and dividend reinvestment plans...................... 7,243 40,135 47,378 Purchase of 80,400 common shares.......... (161 ) (957) (1,118) Shares distributed by ESOP trust and tax benefit on dividends.................... 318 4,759 5,077 --------- -------- -------- ---------- ----------- ---------- Balance December 31, 1992................... 200,000 316,335 300,307 1,708,506 (25,262) 2,499,886 Net income................................ 403,997 403,997 Common dividends, $1.06 per share......... (169,391) (169,391) Preferred dividends, $4.00 per depositary share................................... (16,000) (16,000) Issuance of 1,530,479 common shares under corporate stock and dividend reinvestment plans...................... 3,972 24,497 28,469 Purchase of 6,724,600 common shares and 33,800 depositary shares of preferred stock................................... (1,690 ) (21,469 ) (23,951) (121,810) (168,920) Issuance of 5,806,552 common shares pursuant to acquisitions................ 20,174 120,394 140,568 Two-for-one stock split................... 316,107 (316,107) -- Shares distributed by ESOP trust and tax benefit on dividends.................... 875 8,816 9,691 Accounting change adjustment for unrealized gains on securities available for sale................................ 34,967 34,967 --------- -------- -------- ---------- ----------- ---------- Balance December 31, 1993................... 198,310 635,119 105,140 1,841,144 (16,446) 2,763,267 Net Income................................ 429,434 429,434 Common dividends paid, $1.18 per share.... (179,675) (179,675) Preferred dividends paid, $4.00 per depositary share........................ (15,415) (15,415) Issuance of 1,190,121 common shares under corporate stock and dividend reinvestment plans...................... 4,760 18,461 23,221 Purchase of 12,414,100 common shares and 215,400 depositary shares of preferred stock................................... (10,770 ) (49,656 ) (23,550) (256,077) (340,053) Shares distributed by ESOP trust and tax benefit on dividends.................... 665 7,428 8,093 Change in unrealized market value adjustment on securities available for sale, net of tax........................ (87,818) (87,818) --------- -------- -------- ---------- ----------- ---------- Balance December 31, 1994................... $187,540 $590,223 $100,051 $1,732,258 $ (9,018) $2,601,054 ========== ========= ========= =========== ============ ===========
See notes to financial statements. 27 30 NOTES TO FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES CONSOLIDATION: The consolidated financial statements include the accounts of National City Corporation (the "Corporation") and all of its subsidiaries. The Corporation's primary business is banking. ACQUISITIONS AND AMORTIZATION OF INTANGIBLES: Operations of companies acquired in purchase transactions are included in the statements of income from the respective dates of acquisition. The excess of the purchase price over net identifiable assets acquired (goodwill) is included in other assets and is being amortized over varying remaining lives not exceeding 24 years. Core deposit intangibles are amortized on a straight-line basis over varying remaining lives not exceeding 4 years. CASH FLOWS: The Corporation has defined cash and cash equivalents as those amounts included in the balance sheet caption "Cash and demand balances due from banks." MORTGAGE LOANS HELD FOR SALE: Mortgage loans held for sale are valued at the lower of cost or market, as calculated on an aggregate loan basis. ALLOWANCE FOR LOAN LOSSES: The provision for loan losses and the adequacy of the allowance for loan losses are based upon a continuing evaluation of the loan portfolio, current economic conditions, prior loss experience, and other pertinent factors. SECURITIES AND TRADING ACCOUNT: As further discussed in Note 4, the Corporation adopted SFAS 115 "Accounting For Certain Investments in Debt and Equity Securities" on December 31, 1993. As required by SFAS 115, management determines the appropriate classification of debt securities at the time of purchase. Trading account assets are held for resale in anticipation of short-term market movements and are carried at market value. Gains and losses, both realized and unrealized, are included in other income. Debt securities are classified as held to maturity when the Corporation has the positive intent and ability to hold the securities to maturity. Securities held to maturity are carried at amortized cost. Debt securities not classified as held to maturity or trading account and marketable equity securities not classified as trading are classified as available for sale. Securities available for sale are carried at fair value with unrealized gains and losses reported separately through retained earnings, net of tax. Amortization of premiums and accretion of discounts are recorded as interest income from investments. Realized gains and losses are recorded as net security gains (losses). The adjusted cost of specific securities sold is used to compute gain or loss on sales. Other income also includes gains and losses and adjustments to market on interest rate futures and forward contracts related to trading account assets and liabilities. OTHER TIME DEPOSITS: Other time deposits include time certificates of deposit of $100,000 or more and totalled approximately $1,367,000,000 and $702,000,000, respectively, at December 31, 1994 and 1993. OFF-BALANCE SHEET FINANCIAL AGREEMENTS: The Corporation utilizes a variety of off-balance sheet financial instruments to manage various financial risks. These instruments include interest rate swaps, interest rate caps and floors, futures, forwards, and option contracts. Interest rate swaps are used to synthetically alter the price risk or cash flow characteristics of various on-balance sheet assets and liabilities. The net interest income or expense on interest rate swaps is accrued and recognized as an adjustment to the interest income or expense of the associated on-balance-sheet asset or liability. The Corporation purchases interest rate caps and floors to reduce the cash flow risk of various on-balance sheet variable rate assets and liabilities. The cost or premium paid for purchased interest rate caps and floors is capitalized and charged to income based on the economic value at the time of purchase. The unamortized cost of caps or floors purchased is carried in other assets. Interest payments received on interest rate caps and floors are recorded as an interest income or expense adjustment to the related assets and liabilities. Futures, forwards and options are also utilized to manage exposures to changes in interest rates. Futures, forwards and options that are used for risk management are carried at cost and realized gains and losses are amortized into interest income or interest expense over the life of the instrument. Realized gains and losses on all off-balance sheet transactions used to manage risk that are terminated prior to maturity are deferred and amortized as a yield adjustment over the remaining original life of the agreement. Unrealized gains or losses on interest rate swaps or purchased interest rate caps and floors are deferred. Deferred gains and losses are recorded in other assets and other liabilities, as applicable. Unrealized gains or losses on any interest rate caps or floors sold and foreign exchange positions are marked to market and included in other income. PURCHASED MORTGAGE SERVICING RIGHTS: Purchased mortgage servicing rights are initially recorded at the lower of cost or estimated present value of the future net servicing income. The capitalized amount is amortized in proportion to, and over the period of, estimated net positive cash flows. The Corporation evaluates the recoverability of purchased mortgage servicing rights in relation to the impact of actual and anticipated loan portfolio prepayment, foreclosure and delinquency experience. DEPRECIABLE ASSETS: Properties and equipment are stated at cost less accumulated depreciation and amortization. Buildings and equipment are depreciated on a straight-line basis over their useful lives. Leasehold improvements are amortized over the lives of the leases. Maintenance and repairs are charged to expense as incurred, while improvements which extend the useful life are capitalized and depreciated over the remaining life. Upon the sale or disposal of property, the cost and accumulated depreciation are removed from the accounts and the resulting gain or loss is included in current income. INCOME: Interest and other income are recorded as earned. Loans are classified as nonaccrual, reduced rate or renegotiated based on management's judgment and requirements established by bank regulatory agencies. Subsequent receipts on nonaccrual loans are recorded as a 28 31 reduction of principal, and interest income is only recorded once principal recovery is reasonably assured. Loan origination fees and other direct costs are amortized into interest or other income using a method which approximates the interest method over the estimated life of the related loan. INCOME TAXES: Deferred income taxes reflect the temporary tax consequences in future years of differences between the tax and financial statement basis of assets and liabilities. TREASURY STOCK: Acquisitions of treasury stock are recorded on the par value method, which requires the cash paid to be allocated to common or preferred stock, surplus and retained earnings. RECLASSIFICATION: Certain prior year amounts have been reclassified to conform with the current year presentation. 2. ACQUISITIONS In October 1993, the Corporation acquired Ohio Bancorp, a $1.6 billion assets bank holding company headquartered in Youngstown, Ohio. Ohio Bancorp shareholders received approximately $104 million in cash and were issued approximately 4.3 million shares of the Corporation's common stock, for a total transaction value of approximately $215 million. The transaction was accounted for as a purchase. Total goodwill recorded was $67 million and is being amortized over 20 years. In February 1993, the Corporation acquired JBS Associates, Inc. (JBS), a check authorization business, and accounted for the acquisition as a purchase. JBS stockholders received cash of $24.3 million and were issued approximately 1.5 million shares of the Corporation's common stock. A provision in the purchase agreement guarantees the total value of the consideration received by the JBS stockholders to be not less than $56.6 million as of February 1, 1998. Total goodwill recorded was $51.5 million and is being amortized over 20 years. In May 1992, Merchants National Corporation (MCHN), a $5.4 billion assets bank holding company located in Indianapolis, Indiana, was merged into and became a wholly-owned subsidiary of the Corporation. Each share of MCHN common stock outstanding on May 2, 1992, was converted into 2.24 shares of the Corporation's common stock. The Corporation issued approximately 34.2 million shares of common stock and cash in lieu of fractional shares for all of the outstanding shares of MCHN. The acquisition was accounted for as a pooling-of-interests. 3. LOANS Total loans outstanding were recorded net of unearned income of $99,887,000 in 1994 and $85,685,000 in 1993. Activity in the allowance for loan losses follows:
FOR THE CALENDAR YEAR -------------------------------- (In Thousands) 1994 1993 1992 - ------------------------------------------------------------------ Balance at beginning of year....................... $443,412 $383,849 $385,866 Acquired allowance............ 9,729 50,756 2,479 Provision..................... 79,356 93,089 129,361 Loans charged-off............. (120,234) (144,490) (186,528) Recoveries.................... 56,756 60,208 52,671 -------- -------- -------- Net charge-offs............. (63,478) (84,282) (133,857) -------- -------- -------- Balance at end of year.......... $469,019 $443,412 $383,849 ======== ======== ========
At December 31, 1994, nonaccrual, reduced-rate, and renegotiated loans were $111,981,000, and other real estate owned was $16,547,000. At December 31, 1993, the corresponding amounts were $151,343,000 and $57,807,000, respectively. The Corporation plans to adopt SFAS No. 114 "Accounting By Creditors For Impairment of a Loan," and SFAS No. 118 "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures," on January 1, 1995, and does not expect the adoption to have a material impact on financial position or results of operations. 4. SECURITIES On December 31, 1993, the Corporation adopted the requirements of SFAS 115. The adoption did not have a material effect on financial position or results of operations. The following is a summary of securities held to maturity and available for sale:
DECEMBER 31, 1994 ----------------------------------------------- UNREALIZED UNREALIZED MARKET (In Thousands) COST GAINS LOSSES VALUE - ------------------------------------------------------------------- Held to maturity: U.S. Treas. and Fed. agency debentures...... $ 34,258 $ -- $ (1,474) $ 32,784 Mortgage-backed securities...... 630,610 749 (37,218) 594,141 States and political subdivisions.... 450,461 23,562 (4,736) 469,287 Other............. 60,786 36 (223) 60,599 --------- -------- --------- ---------- Total held to maturity....... 1,176,115 24,347 (43,651) 1,156,811 Available for sale: U.S. Treas. and Fed. agency debentures...... 1,333,809 18,438 (53,463) 1,298,784 Mortgage-backed securities...... 1,700,228 584 (58,252) 1,642,560 States and political subdivisions.... 30,944 163 (152) 30,955 Other............. 235,268 26,232 (14,859) 246,641 --------- -------- --------- ---------- Total available for sale....... 3,300,249 45,417 (126,726) 3,218,940 --------- -------- --------- ---------- Total securities..... $4,476,364 $69,764 $(170,377) $4,375,751 ========== ======= ========= ==========
29 32 NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 1993 ------------------------------------------------ Unrealized Unrealized Market (In Thousands) Cost Gains Losses Value - --------------------------------------------------------------------- Held to maturity: U.S. Treas. and Fed. agency debentures..... $ 205,411 $ 1,682 $ -- $ 207,093 Mortgage-backed securities..... 804,830 8,260 (4,214) 808,876 States and political subdivisions... 604,916 58,770 (3,735) 659,951 Other............ 147,868 1,092 (25) 148,935 ---------- -------- -------- ---------- Total held to maturity..... 1,763,025 69,804 (7,974) 1,824,855 Available for sale: U.S. Treas. and Fed. agency debentures..... 1,094,907 24,699 (3,771) 1,115,835 Mortgage-backed securities..... 2,070,502 11,667 (2,789) 2,079,380 States and political subdivisions... 31,973 854 -- 32,827 Other............ 152,015 27,693 (4,549) 175,159 ---------- -------- -------- ---------- Total available for sale..... 3,349,397 64,913 (11,109) 3,403,201 ---------- -------- -------- ---------- Total securities... $5,112,422 $134,717 $(19,083) $5,228,056 ========== ======== ======== ==========
At December 31, 1994, the unrealized losses in securities available for sale included in retained earnings totalled $53 million, net of tax. The Corporation's securities portfolio consists mainly of financial instruments that pay back par value upon maturity. Market value fluctuations occur over the lives of the instruments due to changes in market interest rates. Management has concluded that current declines in value are temporary and accordingly, no valuation adjustments have been included as a charge to income. The following table shows the carrying value and market value of securities at December 31, 1994 by maturity:
Available Held to Maturity for Sale ----------------------- ----------------------- Market Market (In Thousands) Cost value Cost Value - ------------------------------------------------------------------- Due in 1 year or less.......... $ 122,852 $ 123,657 $ 148,422 $ 145,457 Due in 1 to 5 years......... 775,620 756,197 2,349,056 2,272,225 Due in 5 to 10 years......... 163,064 158,680 493,723 480,954 Due after 10 years......... 114,579 118,277 309,048 320,304 ---------- ---------- ---------- ---------- $1,176,115 $1,156,811 $3,300,249 $3,218,940 ========== ========== ========== ==========
Mortgage-backed securities and other securities which may have prepayment provisions are assigned to a maturity category based on estimated average lives. At December 31, 1994, the carrying value of securities pledged to secure public and trust deposits, trading account liabilities, U.S. Treasury demand notes, and security repurchase agreements totalled $3,044,058,000. At December 31, 1994, there were no securities of a single issuer, other than U.S. Treasury securities and other U.S. government agencies, which exceeded 10% of stockholders' equity. For the year ended December 31, 1994, the following represents the segregation of cash flows between securities available for sale and securities held to maturity:
Available Held to (In Thousands) for Sale Maturity Total - ------------------------------------------------------------------ Purchases of securities...... $2,068,654 $116,613 $2,185,267 Proceeds from sales of securities................. 1,598,514 -- 1,598,514 Proceeds from maturities and prepayments of securities................. 509,779 715,554 1,225,333
In 1994, 1993, and 1992, gross gains of $16.6 million, $16.3 million, and $28.6 million and gross losses of $6.1 million, $4.4 million, and $2.9 million were realized, respectively. 5. FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value disclosures of financial instruments are made to comply with the requirements of SFAS 107 "Disclosures About Fair Value of Financial Instruments". The market value of securities is based primarily upon quoted market prices. For substantially all other financial instruments, the fair values are management's estimates of the values at which the instruments could be exchanged in a transaction between willing parties. Fair values are based on estimates using present value and other valuation techniques in instances where quoted market prices are not available. These techniques are significantly affected by the assumptions used, including discount rates and estimates of future cash flows. As such, the derived fair value estimates cannot be substantiated by comparison to independent markets and, further, may not be realizable in an immediate settlement of the instruments. SFAS 107 also excludes certain items from its disclosure requirements. These items include non-financial assets, intangibles and future business growth, as well as certain liabilities such as pension and other post-retirement benefits, deferred compensation arrangements and leases. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Corporation. Portions of the unrealized gains and losses inherent in the valuation are a result of management's program to manage overall interest rate risk and represent a point in time valuation. It is not management's intention to immediately dispose of a significant portion of its financial instruments and, thus, the unrealized gains or losses should not be interpreted as a forecast of future earnings and cash flows. The following table presents the estimates of fair value of financial instruments at December 31, 1994 and 1993. Bracketed amounts in the carrying value columns represent either reduction of asset accounts, liabilities, or commitments representing potential cash outflows. Bracketed amounts in the fair value columns represent estimated cash outflows required to currently settle the obligations at current market rates. 30 33
1994 1993 ---------------- ---------------- CARRYING FAIR Carrying Fair (In Millions) VALUE VALUE Value Value - ----------------------------------------------------------------- Assets: Cash and cash equivalents.............. $ 3,559 $ 3,559 $ 3,391 $ 3,391 Loans held for sale........ 42 42 509 509 Loans receivable........... 22,993 22,822 20,777 20,990 Allowance for loan losses................... (469) -- (443) -- Securities................. 4,395 4,376 5,112 5,228 Trading account assets..... 8 8 150 150 Liabilities: Demand deposits............ $(5,332) $(5,332) $(5,215) $(5,215) Time deposits.............. (19,140) (19,157) (17,848) (17,916) Short-term borrowings...... (3,816) (3,816) (4,352) (4,352) Long-term debt............. (744) (720) (510) (538) Other liabilities.......... (161) (161) (119) (119) Off-Balance Sheet Instruments: Interest rate swaps: Receive fixed rates...... $ -- $(212) $ -- $ 34 Pay fixed rates.......... -- 16 -- (23) Basis swaps.............. -- (1) -- -- Interest rate caps and floors............... 23 22 13 46 Futures, forwards and options.................. -- -- 1 1 Commitments to extend credit................... (10) (10) (9) (9) Standby letters of credit................... (1) (1) (1) (1)
The following methods and assumptions were used to estimate the fair value of each class of financial instrument: CASH AND CASH EQUIVALENTS: The carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets' fair values. For purposes of this disclosure only, cash equivalents include Federal funds sold, security resale agreements, Eurodollar time deposits, customers' acceptance liability, accrued interest receivable, and other short-term money market investments. LOANS RECEIVABLE AND LOANS HELD FOR SALE: For performing variable rate loans that reprice frequently and loans held for sale, estimated fair values are based on carrying values. The fair values for loans are estimated using a discounted cash flow calculation that applies interest rates used to price new, similar loans to a schedule of aggregated expected monthly maturities, adjusted for market and credit risks. SECURITIES: The market values of securities are based upon quoted market prices, where available, and on quoted market prices of comparable instruments when specific quoted prices are not available. DEPOSIT LIABILITIES: The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amounts payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts for variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits. SHORT-TERM BORROWINGS: The carrying amounts of Federal funds purchased, borrowings under repurchase agreements, commercial paper, and other short-term borrowings approximate their fair values. LONG-TERM DEBT: The fair values of the Corporation's long-term borrowings (other than deposits) and certain other borrowings are estimated using discounted cash flow analyses based on the Corporation's current incremental borrowing rates for similar types of borrowing arrangements. OFF-BALANCE SHEET INSTRUMENTS: The amounts shown under carrying value represent accruals or deferred income (fees) arising from the related unrecognized financial instruments. Fair values for the Corporation's off-balance sheet instruments (futures, swaps, forwards, options, guarantees, and lending commitments) are based on quoted market prices (futures); current settlement values (financial forwards); quoted market prices of comparable instruments; fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing (guarantees, loan commitments); or, if there are no relevant comparables, on pricing models or formulas using current assumptions (interest rate swaps and options). 6. CASH AND DEMAND BALANCES DUE FROM BANKS The Corporation's subsidiary banks are required to maintain noninterest bearing reserve balances with the Federal Reserve Bank. The consolidated average reserve balance was $339 million for 1994. 7. PROPERTIES AND EQUIPMENT A summary of properties and equipment follows:
DECEMBER 31 ------------------------- (In Thousands) 1994 1993 - ------------------------------------------------------------------- Land................................... $ 64,036 $ 66,424 Buildings and leasehold improvements... 383,906 370,591 Equipment.............................. 428,685 402,749 --------- --------- 876,627 839,764 Less accumulated depreciation and amortization......................... 486,647 453,545 --------- --------- Net properties and equipment........... $389,980 $ 386,219 ======= ========
The Corporation and certain of its subsidiary banks occupy their respective headquarters offices under long-term operating leases and, in addition, lease certain data processing equipment. The aggregate minimum annual rental commitments under these leases is approximately $39.1 million in 1995, $38.1 million in 1996, $34.5 million in 1997, $33.1 million in 1998, $30.8 million in 1999, and $209.8 million thereafter. Total expense recorded under all operating leases in 1994, 1993 and 1992 was $61,757,000, $59,960,000, and $57,356,000, respectively. 31 34 NOTES TO FINANCIAL STATEMENTS (continued) 8. BORROWED FUNDS The composition of borrowed funds follows:
DECEMBER 31 -------------------------- (In Thousands) 1994 1993 - ----------------------------------------------------------------- U.S. Treasury demand notes and Federal funds borrowed-term....... $ 159,949 $ 309,832 Notes payable to Student Loan Marketing Association............. 300,000 243,400 Military banking liabilities........ 215,951 185,493 Other............................... 49,754 63,437 ---------- ---------- Bank subsidiaries............... 725,654 802,162 Commercial paper.................... 379,276 398,790 Other............................... 59 59 ---------- ---------- Other subsidiaries.............. 379,335 398,849 ---------- ---------- Total........................... $1,104,989 $1,201,011 ========== ==========
The $300,000,000 floating rate notes payable to Student Loan Marketing Association are due in June 1996. The notes are secured by and provide funding for student loan receivables. Pursuant to the terms of a contract with the U.S. Department of Defense, National City Bank, Indiana, a principal banking subsidiary of the Corporation, manages a military banking network which provides retail banking services to U.S. military personnel and certain related parties. Total assets under fiduciary management approximated $832 million at year-end. In conjunction with the contract, certain funds relating to the military banking network are placed with National City Bank, Indiana and are included in borrowed funds as military banking liabilities. The current contract extends through March 31, 1995. 9. CORPORATE LONG-TERM DEBT The composition of corporate long-term debt follows:
DECEMBER 31 ------------------------ (In Thousands) 1994 1993 - ------------------------------------------------------------------- 6 5/8% Subordinated Notes due 2004...... $250,000 $ -- Less discount......................... (1,187) -- 8 3/8% Notes due 1996................... 100,000 100,000 Less discount......................... (94) (174) Floating Rate Subordinated Notes due 1997.............................. 75,000 75,000 Less discount......................... (39) (58) 9 7/8% Subordinated Notes due 1999...... 65,000 65,000 Less discount......................... (222) (268) Floating Rate Notes due 1997............ 50,000 50,000 Less discount......................... (59) (80) Floating Rate Notes due 1994............ -- 5,000 Medium-Term Notes....................... -- 6,000 Less discount......................... -- (9) Other................................... 3,377 7,609 --------- --------- Total parent company................ 541,776 308,020 6 1/2% Subordinated Notes due 2003...... 200,000 200,000 Less discount......................... (624) (699) Other................................... 2,517 2,852 --------- --------- Total subsidiaries.................. 201,893 202,153 --------- --------- Total............................... $743,669 $ 510,173 ========= =========
In March 1994, the Corporation issued $250 million principal amount of 6 5/8% Subordinated Notes due 2004. Interest on the notes is payable semiannually. The notes are not redeemable prior to their maturity and qualify as Tier 2 capital for regulatory purposes. The 8 3/8% Notes pay interest semiannually and may not be redeemed prior to maturity. The $75 million Floating Rate Subordinated Notes bear quarterly interest payments at a rate of 12.5 basis points over the three-month Eurodollar deposit rate, subject to a floor of 5.25%. The actual borrowing rate at December 31, 1994, was 5.81%. The interest rate on the $50 million Floating Rate Notes is 12.5 basis points over the three-month Eurodollar deposit rate (5.75% at December 31, 1994), adjusted quarterly. Both floating rate note issues may be redeemed at the option of the Corporation, in whole or in part, at their principal amount. The 9 7/8% Subordinated Notes pay interest semiannually and may not be redeemed prior to maturity. The 6 1/2% Subordinated Notes pay interest semiannually and may not be redeemed prior to maturity. A credit agreement with a group of banks allows the Corporation to borrow up to $300 million until June 30, 1997, with a provision to extend the expiration date under certain circumstances. The Corporation pays an annual facility fee of 1/8 percent on the amount of the line. There were no borrowings outstanding under this agreement at December 31, 1994. Corporate long-term debt maturities for the next five years are as follows: $227,000 in 1995; $100,228,000 in 1996; $125,245,000 in 1997; $2,255,000 in 1998; and $65,260,000 in 1999. 10. PREFERRED STOCK At December 31, 1994 and 1993, the Corporation had outstanding 750,160 and 793,240 shares, respectively, of 8% Cumulative Convertible Preferred Stock in the form of 3,750,800 and 3,966,200 depositary shares, respectively, at a stated value of $50.00 per depositary share. Each depositary share represents a one-fifth interest in a preferred share. The preferred stock is convertible at the option of the holder into 2.384 common shares per depositary share. Accordingly, 8,941,907 shares of common stock were reserved at December 31, 1994 for conversion of the preferred stock. The preferred stock is redeemable at the option of the Corporation, in whole or in part, on or after May 1, 1996 and for each 12-month period thereafter through the year 2000, at redemption prices of $52.00, $51.60, $51.20, $50.80 and $50.40, respectively, and thereafter, at $50.00 per depositary share plus, in each case, dividends accrued and unpaid to the redemption date. The shares have a liquidation value of $250.00 per share ($50.00 per depositary share), or $187,540,000 in aggregate, plus accrued and unpaid dividends to date of liquidation. 32 35 11. EMPLOYEE STOCK OWNERSHIP PLAN As a result of a past merger, the Corporation assumed the obligations and benefits of an Employee Stock Ownership Plan (ESOP). On July 1, 1992, the ESOP was merged into the National City Savings and Investment Plan (a contributory benefit plan offered to substantially all employees). The original ESOP was established through the purchase of stock on the open market. The Corporation provided a loan to the ESOP Trust for the purpose of acquiring the shares. The shares presently held by the ESOP (totalling 1,504,560 of the Corporation's common shares) will be used to fulfill the Corporation's future commitment to participants in the Corporation's benefit plans. During 1994, the Corporation allocated 688,811 shares to the benefit plan participants. Company contributions plus dividends earned on the unallocated shares are used to service the loan and acquire additional shares, which are allocated to benefit plan participants. Company contributions totaled $8,529,977 and $8,181,022 in 1994 and 1993, respectively. Dividends earned by the ESOP in 1994 and 1993 were $2,219,654 and $2,737,768, respectively. The tax benefit for dividends paid on shares held by the ESOP is recorded directly to retained earnings. 12. NET INCOME PER COMMON SHARE Net income per common share is based upon net income after preferred dividend requirements and the average number of common shares outstanding, adjusted for the dilutive effect of outstanding stock options. Fully diluted earnings per share is based upon net income and the average number of shares outstanding, adjusted for the dilutive effect of outstanding stock options and the assumed conversion of preferred stock. The calculation of net income per common share follows:
FOR THE CALENDAR YEAR (In Thousands Except --------------------------------------- Per Share Amounts) 1994 1993 1992 - ----------------------------------------------------------------- PRIMARY: Net income............ $429,434 $403,997 $346,923 Less preferred dividends........... 15,200 15,966 16,000 ----------- ----------- ----------- Net income applicable to common stock..... $414,234 $388,031 $330,923 =========== =========== =========== Average common shares outstanding......... 153,353,555 161,163,816 158,011,980 =========== =========== =========== Net income per common share............... $2.70 $2.41 $2.09 =========== =========== =========== ASSUMING FULL DILUTION: Net income............ $429,434 $403,997 $346,923 =========== =========== =========== Pro forma fully diluted average common shares outstanding......... 162,375,500 170,683,512 168,065,372 =========== =========== =========== Pro forma fully diluted net income per share........... $2.64 $2.37 $2.06 =========== =========== ===========
13. PARENT COMPANY AND REGULATORY RESTRICTIONS At December 31, 1994, retained earnings of the parent company included $1,548 million of equity in undistributed earnings of subsidiaries. Dividends paid by the parent company's subsidiary banks are subject to various legal and regulatory restrictions. In 1994, subsidiary banks declared $250 million in dividends to the parent company. In 1995, bank subsidiaries may pay the parent company, without prior regulatory approval, approximately $77 million of dividends. Under Section 23A of the Federal Reserve Act, as amended, loans from subsidiary banks to nonbank affiliates, including the parent company, are required to be collateralized. Commercial paper of $379 million outstanding at December 31, 1994 is guaranteed by the parent company. Condensed parent company financial statements, which include transactions with subsidiaries, follow: BALANCE SHEETS
DECEMBER 31 ------------------------- (In Thousands) 1994 1993 - ---------------------------------------------------------------- ASSETS Cash and demand balances due from banks.............................. $ 8,229 $ 2,733 Loans to and accounts receivable from subsidiaries....................... 356,420 301,211 Securities........................... 154,127 116,404 Investments in: Subsidiary banks................... 2,355,857 2,407,320 Nonbank subsidiaries............... 237,797 206,902 Goodwill, net of accumulated amortization of $29,857 and $27,559, respectively.............. 52,420 52,116 Other assets......................... 54,629 56,465 ---------- ---------- Total assets....................... $3,219,479 $3,143,151 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Corporate long-term debt............. $ 541,776 $ 308,020 Accrued expenses and other liabilities........................ 76,649 71,864 ---------- ---------- Total liabilities.................. 618,425 379,884 Stockholders' equity................. 2,601,054 2,763,267 ---------- ---------- Total liabilities and stockholders' equity........................... $3,219,479 $3,143,151 ========== ==========
33 36 NOTES TO FINANCIAL STATEMENTS (continued) STATEMENTS OF INCOME
FOR THE CALENDAR YEAR ------------------------------------ (In Thousands) 1994 1993 1992 - --------------------------------------------------------------------- INCOME Dividends from: Subsidiary banks............ $230,378 $ 715,869 $ 100,000 Nonbank subsidiaries........ 14,129 4,448 1,000 Interest on loans to subsidiaries............... 5,250 4,431 2,788 Interest and dividends on securities.................. 3,774 2,396 2,986 Security gains............... 1,995 970 5,657 Other income................. 3,462 7,969 -- --------- --------- --------- Total income............... 258,988 736,083 112,431 EXPENSE Interest on corporate long- term debt................... 37,217 23,821 13,241 Goodwill amortization........ 2,298 2,138 2,081 Other expense................ 52,381 43,197 52,434 --------- --------- --------- Total expense.............. 91,896 69,156 67,756 --------- --------- --------- Income before taxes and equity in undistributed income of subsidiaries...... 167,092 666,927 44,675 Income tax (benefit)......... (44,513) (32,148) (20,207) --------- --------- --------- Income before equity in undistributed net income of subsidiaries................ 211,605 699,075 64,882 Equity in undistributed (distributed) net income of subsidiaries................ 217,829 (295,078) 282,041 --------- --------- --------- Net income................. $429,434 $ 403,997 $ 346,923 ========= ========= =========
STATEMENTS OF CASH FLOWS
FOR THE CALENDAR YEAR ------------------------------------ (In Thousands) 1994 1993 1992 - --------------------------------------------------------------------- OPERATING ACTIVITIES Net income................... $ 429,434 $ 403,997 $ 346,923 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed net income of subsidiaries...... (217,829) 295,078 (282,041) Amortization of goodwill..... 2,298 2,138 2,081 Decrease (increase) in dividends receivable from subsidiaries................ 55,669 (126,169) 45,500 Security gains............... (1,995) (970) (5,657) Other, net................... (117,529) (13,294) 19,709 --------- --------- --------- Net cash provided (used) by operating activities...... 150,048 560,780 126,515 INVESTING ACTIVITIES Net change in short-term money market investments.... (26,750) (27,900) 70,000 Purchases of securities...... (65,508) (126,641) (41,983) Sales and maturities of securities.................. 39,518 69,833 41,164 Principal collected on loans to subsidiaries............. 50,850 283,107 16,275 Loans to subsidiaries........ (25,805) (306,507) (21,925) Investment in subsidiaries... (14,784) (119,006) (78,836) Return of investment from subsidiaries................ 168,000 -- -- --------- --------- --------- Net cash provided (used) by investing activities...... 125,521 (227,114) (15,305) FINANCING ACTIVITIES Repayment of corporate long- term debt................... (13,324) (19,236) (513) Proceeds from issuance of long-term debt.............. 247,080 -- -- Common and preferred dividends................... (195,090) (185,391) (146,881) Issuance of common stock..... 23,221 28,469 36,211 Repurchase of stock.......... (340,053) (168,920) (1,118) Shares distributed by ESOP... 8,093 9,691 4,835 --------- --------- --------- Net cash provided (used) by financing activities...... (270,073) (335,387) (107,466) --------- --------- --------- Increase (decrease) in cash and demand balances due from banks....................... 5,496 (1,721) 3,744 Cash and demand balances due from banks, January 1....... 2,733 4,454 710 --------- --------- --------- Cash and demand balances due from banks, December 31................. $ 8,229 $ 2,733 $ 4,454 ========= ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION Interest paid................. $ 30,000 $ 24,000 $ 13,000 Long-term debt assumed in merger of subsidiaries...... -- 151,000 -- Shares issued in purchase acquisitions and additional investment in subsidiaries................ -- 141,000 --
34 37 14. STOCK OPTIONS AND AWARDS The Corporation was authorized in 1993 to grant options up to 10,000,000 shares of common stock under an employee stock option plan. The Corporation's stock option plans authorize the issuance of options to purchase common stock to officers and key employees at the market price of the shares at the date of grant. Options generally become exercisable to the extent of either 25% or 50% annually beginning one year from the date of grant. The Corporation was authorized in 1991 to grant 1,000,000 shares of common stock under a Restricted Stock Plan. These shares are issued to key employees and directors of the Corporation. In general, the restrictions on directors' shares granted after 1992 expire after nine months and restrictions on grants to key employees expire over a four-year period. The Corporation generally recognizes additional compensation expense over the restricted period. A summary of the stock options and award activity follows:
Shares -------------------------------------- Available for Grant ---------- Outstanding Range of Awards & ----------------------- Option Price Options Awards Options per Share - -------------------------------------------------------------------------------- January 1, 1992.... 3,644,656 168,900 8,438,732 $3.69 - $18.06 Cancelled........ 41,200 (2,800) (41,174) MCHN shares expired (282,240) Exercised........ (4,600) (3,036,954) 3.69 - 18.06 Granted.......... (1,479,500) 8,900 1,470,600 22.00 ---------- -------- ---------- December 31, 1992.. 1,924,116 170,400 6,831,204 6.08 - 22.00 Authorized....... 10,000,000 Cancelled........ 75,642 (4,008) (71,634) Exercised........ (25,992) (1,017,321) 6.08 - 22.00 Granted.......... (1,685,950) 103,350 1,582,600 24.88 ---------- -------- ---------- December 31, 1993.. 10,313,808 243,750 7,324,849 6.31 - 24.88 Cancelled........ 97,800 (4,350) (93,450) Exercised........ (4,400) (846,648) 6.31 - 24.88 Granted.......... (1,791,600) 92,800 1,698,800 26.50 - 26.88 ---------- -------- ---------- December 31, 1994.. 8,620,008 327,800 8,083,551 $7.55 - $26.88 ========== ======= ==========
At December 31, 1994 and 1993, options for 5,669,645 and 5,033,577 shares, respectively, were exercisable at a price range of $7.55 to $24.88 and $6.31 to $24.88 per share, respectively. 15. PENSION PLANS The Corporation has a noncontributory, defined benefit retirement plan covering substantially all employees. Retirement benefits are based upon the employees' length of service and salary levels. Actuarially determined pension costs are charged to current operations. The funding policy is to pay at least the minimum amount required by the Employee Retirement Income Security Act of 1974. The Corporation also sponsors supplemental retirement plans for certain key employees. The defined benefit pension plan's funded status (at its year-end September 30) and the status of the supplemental retirement plans follow:
(In Thousands) 1994 1993 - ------------------------------------------------------------------ Projected benefit obligation: Vested benefits.................... $ 263,515 $260,779 Nonvested benefits................. 10,983 14,237 ---------- --------- Accumulated benefit obligation..... 274,498 275,016 Effect of projected future compensation levels.............. 68,910 73,199 ---------- --------- Projected benefit obligation......... 343,408 348,215 Plan's assets at fair value, primarily stocks and bonds, including $15.2 million and $14.4 million in the common stock of the Corporation for 1994 and 1993, respectively....................... 302,071 305,216 ---------- --------- Funded status - plan assets (less than) projected benefit obligation......................... $ (41,337) $(42,999) ========== ======== Comprised of: Unrecognized net (losses).......... $ (24,803) $(28,327) Unrecognized net assets being recognized over 15 years......... 20,180 25,792 Less accrued pension liability on balance sheet.................... 36,714 40,464 ---------- --------- $ (41,337) $(42,999) ========== =========
Assumptions used in the valuation of the defined benefit pension plan at its year end (September 30) and the supplemental retirement plans follow:
1994 1993 1992 - -------------------------------------------------------------------- Weighted average discount rate...... 8.25% 7.25% 8.25% Average assumed rate of compensation increase.......................... 5.50 5.00 5.25 Long-term rate of return on assets............................ 9.50 10.00 9.50
Net defined benefit pension plan costs include the following components:
FOR THE CALENDAR YEAR -------------------------------- (In Thousands) 1994 1993 1992 - --------------------------------------------------------------------- Service cost - benefits earned during year...................... $ 17,681 $ 15,066 $ 14,344 Interest cost on projected benefit obligation....................... 27,457 23,966 20,656 Actual (return) on plan assets..... (7,746) (25,072) (33,950) Net amortization and deferral...... (23,209) (2,128) 9,417 -------- -------- -------- Net periodic pension cost.......... $ 14,183 $ 11,832 $ 10,467 ======== ======== ========
The Corporation also sponsors a defined contribution plan for substantially all employees. The Corporation may make contributions to the plan in varying amounts depending on the level of employee contributions. For the years ended 1994, 1993, and 1992, the expenses related to this plan were $8,613,000, $8,347,000, and $3,275,000, respectively. 35 38 NOTES TO FINANCIAL STATEMENTS (continued) 16. OTHER POSTRETIREMENT BENEFIT PLANS The Corporation has a benefit plan which offers postretirement medical and life insurance benefits to all employees who have attained the age of 55 and have at least 10 years of service (five years of service if age 65 or older.) The medical portion is contributory and the life insurance coverage is noncontributory to the participants. For any employee who retired on or after April 1, 1989, the Corporation's medical contribution is fixed, based on years of service and age at retirement. The accounting for the medical portion anticipates contributions for retirees prior to April 1, 1989, to continue to increase as a proportion of the total costs of the plan. The Corporation reserves the right to terminate or make plan changes at any time. The Corporation has no plan assets attributable to the postretirement benefit plan. The following table presents the plan's status at December 31, reconciled with amounts recognized in the Corporation's balance sheet:
(In Thousands) 1994 1993 - ------------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees............................... $ 29,406 $ 31,221 Fully eligible active plan participants......................... 6,938 8,401 Other active plan participants......... 10,153 12,873 -------- -------- Accumulated postretirement benefit obligation............................. 46,497 52,495 Unrecognized net gain (loss)............. 1,018 (7,072) Unrecognized transition obligation....... (31,057) (32,980) -------- -------- Accrued postretirement benefit cost...... $ 16,458 $ 12,443 ======== ========
Net periodic postretirement benefit costs include the following components:
FOR THE CALENDAR YEAR -------------------------------- (In Thousands) 1994 1993 1992 - -------------------------------------------------------------------- Service cost..................... $ 1,194 $1,067 $ 969 Interest cost.................... 3,933 3,622 3,534 Net amortization and deferral.... 2,172 1,981 1,923 ------- ------ ------ Net periodic postretirement benefit cost................... $ 7,299 $6,670 $6,426 ======= ====== ======
Assumptions used in the valuation of the accumulated postretirement benefit obligation at December 31 follow:
1994 1993 1992 - -------------------------------------------------------------------- Weighted average discount rate..... 8.50% 7.50% 8.50% Average salary scale............... 5.50 5.00 5.25
The health care trend rate assumption only affects those participants retired under the plan prior to April 1, 1989. The 1995 health care trend rate is projected to be 12.0 percent for participants under 65 and 9.5 percent for participants over 65. These rates are assumed to decrease incrementally by .5 percent per year until they reach 6 percent and remain at that level thereafter. The health care trend rate assumption does not have a significant effect on the medical plan, therefore, a 1 percent change in the trend rate is not material in the determination of the accumulated postretirement benefit obligation or the ongoing expense. 17. INCOME TAXES In 1992, the Corporation adopted SFAS 109 "Accounting for Income Taxes". The cumulative effect of adopting SFAS 109 did not have a significant effect on net income. The composition of income tax expense (benefit) follows:
FOR THE CALENDAR YEAR ------------------------------------- (In Thousands) 1994 1993 1992 - ------------------------------------------------------------- Current: Federal.............. $ 172,394 $ 135,598 $ 137,603 State................ 12,756 9,804 1,856 --------- --------- --------- Total current....... 185,150 145,402 139,459 --------- --------- --------- Deferred: Federal.............. 1,343 23,140 (13,571) State................ 1,761 (1,577) (8,518) --------- --------- --------- Total deferred...... 3,104 21,563 (22,089) --------- --------- --------- Tax expense........... $ 188,254 $ 166,965 $ 117,370 ========= ========= ========= Tax expense applicable to security transactions......... $ 3,748 $ 4,173 $ 8,797 ========= ========= =========
The effective tax rate differs from the statutory rate applicable to corporations as a result of permanent differences between accounting and taxable income as shown below:
FOR THE CALENDAR YEAR ----------------------- 1994 1993 1992 - ------------------------------------------------------ Statutory rate.............. 35.0% 35.0% 34.0% Life insurance.............. (3.0) (2.6) (2.1) Tax-exempt income........... (2.9) (3.8) (5.5) Other....................... 1.4 .6 (1.1) ----- ---- ---- Effective tax rate......... 30.5% 29.2% 25.3% ===== ==== =====
Significant components of the Corporation's deferred tax liabilities and assets as of December 31 are as follows:
(In Thousands) 1994 1993 - --------------------------------------------------------------- Deferred tax liabilities: Lease accounting.................... $ 74,232 $ 68,984 Depreciation........................ 18,145 17,109 Other - net......................... 50,071 35,649 --------- -------- Total deferred tax liabilities..... 142,448 121,742 Deferred tax assets (liabilities): Provision for losses................ 164,157 155,697 Mark to market adjustments.......... 28,458 (27,054) Pension............................. 12,708 23,520 Other - net......................... 46,002 34,273 --------- -------- Total deferred tax assets.......... 251,325 186,436 --------- -------- Net deferred tax assets.............. $ 108,877 $ 64,694 ========= ========
36 39 18. OFF-BALANCE SHEET FINANCIAL AGREEMENTS The Corporation uses a variety of off-balance sheet financial instruments such as interest rate swaps, futures, options, forwards, and cap and floor contracts. These financial agreements, frequently called interest rate derivatives, enable the Corporation to efficiently manage its exposure to changes in interest rates. The Corporation also enters into derivative contracts on behalf of customers, however, such activity was not significant in 1994 and 1993. As with any financial instrument, derivatives have inherent risks. Market risk represents the risk of gains and losses that result from changes in interest rates. These gains and losses may be offset by other on- or off-balance sheet transactions. Credit risk is the risk that a counterparty to a derivative contract with an unrealized gain fails to perform according to the terms of the agreement. Credit risk can be measured as the cost of acquiring a new derivative agreement with cash flows identical to those of a defaulted agreement in the current interest rate environment. The Corporation manages the credit exposure to counterparties by limiting the amount of net unrealized gains in agreements outstanding, monitoring the size and the maturity structure of the derivative portfolio, applying uniform credit standards maintained for all activities with credit risk and by collateralizing unrealized gains. The Corporation has established bilateral collateral agreements with its major off-balance sheet counterparties that provide for exchanges of marketable securities to collateralize either party's unrealized gains. On December 31, 1994, these collateral agreements covered 93% of the notional amount of the derivative portfolio and the Corporation had delivered U.S. government and agency securities with market value of $141 million to various counterparties to collateralize unrealized losses. The Corporation has never experienced, nor does it have any reason to expect, a credit loss associated with any interest rate derivative. On December 31, 1994 the total notional amount of the Corporation's interest rate swap portfolio used to manage its interest rate sensitivity was $6.2 billion, which is an increase of $406.5 million from December 31, 1993. The Corporation uses receive fixed interest rate swaps to convert variable rate loans and securities into synthetic fixed rate instruments and to convert fixed rate funding sources into synthetic variable rate funding instruments. The Corporation decreased its use of receive fixed rate interest rate swaps during the year in anticipation of higher interest rates across the entire yield curve. During 1994, the Corporation entered into $1.5 billion of receive fixed interest rate swaps with a weighted initial expected maturity of 2.1 years. During 1994, $2.3 billion of receive fixed interest rate swaps matured or amortized. The Corporation uses pay fixed interest rate swaps to convert fixed rate loans and securities into synthetic variable rate instruments and to convert variable rate funding sources into synthetic fixed rate funding instruments. The Corporation increased its use of these swaps during the year in anticipation of higher interest rates across the entire yield curve. During 1994, the Corporation entered into $873 million of pay fixed interest rate swaps, with weighted initial expected maturity of 2.5 years. During 1994, $201 million of pay fixed interest rate swaps matured and $250 million of pay fixed interest rate swaps were terminated prior to maturity. These terminations generated pre-tax gains of $2.2 million which have been deferred and will be amortized into income over the next 26 months. The Corporation uses interest rate floors to help protect its interest margin in periods of low interest rates and a flattening yield curve. The Corporation's interest rate floor portfolio on December 31, 1994 was $1.3 billion in notional amount with an average maturity of 5.4 years and $3.3 million of net unrealized losses. During 1994, the Corporation purchased $2 billion of interest rate cap corridors to help protect its net interest margin in the event of an increase in short term interest rates. These cap contracts will pay the Corporation 1.0% per annum over their life when three month Eurodollar rates are between 6.13% and 7.50%. As of December 31, 1994, these interest rate cap corridors had an average maturity of 1.6 years and $1.9 million in net unrealized gains. As of December 31, 1994 the Corporation had no derivative contracts outstanding that were hedging anticipated transactions. Summary information with respect to the Corporation's interest rate derivative portfolio used for risk management purposes follows: 37 40 NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 1994 ------------------------------------------------------------------------------------------------ DECEMBER 31, WEIGHTED AVERAGE 1993 ---------------------------------------------------- ------------- NOTIONAL UNREALIZED UNREALIZED RECEIVE PAY STRIKE LIFE NOTIONAL (In Thousands) AMOUNT GROSS GAINS GROSS LOSSES RATE RATE RATE (YEARS) AMOUNT - --------------------------------------------------------------------------------------------------------------------------------- INTEREST RATE SWAPS: Receive fixed indexed amortizing swaps......... $2,879,798 $ -- $(172,435) 5.23% 5.75% N/A 2.1 $ 4,304,800 Receive fixed swaps......... 1,515,000 2,409 (42,309) 7.06 6.25 N/A 2.7 905,027 Pay fixed swaps......... 787,200 18,430 (2,236) 6.15 7.00 N/A 1.8 365,700 Basis swaps..... 1,000,000 215 (1,669) 6.35 5.76 N/A 1.3 200,000 ---------- ------------ ------------- ------------- Total interest rate swaps....... 6,181,998 21,054 (218,649) 5.98 6.03 5,775,527 INTEREST RATE CAPS AND FLOORS: Interest rate floors purchased..... 1,281,253 60 (3,323) N/A N/A 5.68% 5.4 850,000 Interest rate cap corridors purchased..... 2,000,000 2,127 (256) N/A N/A 6.13% to 7.50% 1.6 -- Forward interest rate cap corridors purchased..... 300,000 -- (62) N/A N/A 8.50% to 9.75% 1.3 -- Interest rate caps sold..... 171,000 -- (43) N/A N/A 12.00% 2.3 190,000 ---------- ------------ ------------- ------------- Total interest rate caps & floors...... 3,752,253 2,187 (3,684) 1,040,000 ---------- ------------ ------------- ------------- Total interest rate swaps, caps & floors...... $9,934,251 $ 23,241 $(222,333) $ 6,815,527 ========== ============ ============= ===============
The variable rates in the Corporation's interest rate swap contracts are primarily based on the three month Eurodollar rate. The average variable rates included in the table above are those in effect in the specific contracts at December 31, 1994. The following table details the expected notional maturities of the Corporation's portfolio of off-balance sheet instruments at December 31, 1994:
GREATER LESS THAN 1 TO 3 3 TO 5 THAN 5 (In Thousands) 1 YEAR YEARS YEARS YEARS - --------------------------------------------------------------------------------------------------------------------------------- Receive fixed indexed amortizing swaps.............................. $ 411,311 $1,269,222 $1,199,265 $ -- Receive fixed swaps................................................. 590,000 540,000 145,000 240,000 Pay fixed swaps..................................................... 82,200 682,000 23,000 -- Basis swaps......................................................... -- 1,000,000 -- -- Interest rate floors purchased...................................... -- 250,000 231,253 800,000 Interest rate cap corridors purchased............................... -- 2,000,000 -- -- Forward interest rate cap corridors purchased....................... -- 300,000 -- -- Interest rate caps sold............................................. -- 171,000 -- -- ---------- ---------- ---------- ---------- Total............................................................. $1,083,511 $6,212,222 $1,598,518 $1,040,000 =========== ========== ========== ==========
The Corporation also enters into forward contracts related to its mortgage banking business. At December 31, 1994 and 1993, the Corporation had commitments to sell mortgages totalling $42.4 million and $836.8 million, respectively. These contracts mature in less than one year. In the normal course of business, the Corporation makes various commitments to extend credit which are not reflected in the balance sheet. A summary of these commitments follows:
DECEMBER 31 -------------------- (In Millions) 1994 1993 - --------------------------------------------------------- Commitments to extend credit..... $ 7,411 $ 6,567 Standby letters of credit........ 861 1,242
The credit risk associated with loan commitments and standby letters of credit is essentially the same as that involved in extending loans to customers and is subject to the Corporation's normal credit policies. Collateral is obtained based on management's credit assessment of the customer. 19. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Quarterly financial information is contained on page 22. 38 41 FORM 10-K The Annual Report includes the materials required in Form 10-K filed with the Securities and Exchange Commission. The integration of the two documents gives stockholders and other interested parties timely, efficient and comprehensive information on 1994 results. Portions of the Annual Report are not required by the Form 10-K report and are not filed as part of the Corporation's Form 10-K. Only those portions of the Annual Report referenced in the cross-reference index are incorporated in the Form 10-K. The report has not been approved or disapproved by the Securities and Exchange Commission, nor has the Commission passed upon its accuracy or adequacy. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Fee Required) For the fiscal year ended December 31, 1994 Commission file number 1-10074 NATIONAL CITY CORPORATION (Exact name of registrant as specified in its charter) Delaware (State or Other Jurisdiction of Incorporation or Organization) 34-1111088 (I.R.S. Employer Identification No.) 1900 East Ninth Street, Cleveland, Ohio (Address of principal executive offices) 44114-3484 (Zip Code) Registrant's telephone number, including area code, 216-575-2000 Securities registered pursuant to Section 12(b) of the Act: Depositary Shares each representing a one-fifth interest in a share of National City Corporation 8% Cumulative Convertible Preferred Stock, without par value, registered on New York Stock Exchange (Title of Class and name of Exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: National City Corporation Common Stock, $4.00 Per Share (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- ---- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. --- State the aggregate market value of the voting stocks held by nonaffiliates of the registrant as of December 31, 1994-$3,750,882,000 Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of December 31, 1994. Common Stock, $4.00 Per Share -- 147,555,632 Documents Incorporated By Reference: Portions of the registrant's Proxy Statement (to be dated approximately March 6, 1995) are incorporated by reference into Item 10. Directors and Executive Officers of the Registrant; Item 11. Executive Compensation; Item 12. Security Ownership of Certain Beneficial Owners and Management; and Item 13. Certain Relationships and Related Transactions, of Part III. 39 42 FORM 10-K (continued) FORM 10-K CROSS REFERENCE INDEX
Pages --------- PART I Item 1 -- Business Description of Business................... 40 Average Balance Sheets/Interest/Rates..... 20-21 Volume and Rate Variance Analysis......... 14 Securities................................ 8-9 Loans..................................... 6-8 Risk Elements of Loan Portfolio........... 16-18 Loan Loss Experience...................... 16-18 Allocation of Allowance for Loan Losses... 16-18 Deposits.................................. 9, 20-21 Financial Ratios.......................... 19 Short-Term Borrowings..................... 9, 32 Item 2 -- Properties....................... 41 Item 3 -- Legal Proceedings................ 41 Item 4 -- Submission of Matters to a Vote of Security Holders - None PART II Item 5 -- Market for the Registrant's Common Equity and Related Stockholder Matters............ 10 Item 6 -- Selected Financial Data.......... 19 Item 7 -- Management's Discussion and Analysis of Financial Condition and Results of Operations...... 5-18 Item 8 -- Financial Statements and Supplementary Data............. 24-38 Item 9 -- Changes in and Disagreements with Accountants on Accounting and Financial Disclosure - None PART III Item 10 -- Directors and Executive Officers of the Registrant - Note (1) Executive Officers............... 41 Compliance with Section 16(a) of the Securities Exchange Act - Note (1) Item 11 -- Executive Compensation - Note (1) Item 12 -- Security Ownership of Certain Beneficial Owners and Management - Note (1) Item 13 -- Certain Relationships and Related Transactions - Note (1) PART IV Item 14 -- Exhibits, Financial Statement Schedules and Reports on Form 8-K Report of Ernst & Young LLP, Independent Auditors........... 23 Financial Statements: Consolidated Statements of Income - Calendar Years 1994, 1993 and 1992........................... 24 Consolidated Balance Sheets - December 31, 1994 and 1993..... 25 Consolidated Statements of Cash Flows - Calendar Years 1994, 1993 and 1992.................. 26 Consolidated Statements of Changes in Stockholders' Equity - Calendar Years 1994, 1993, and 1992....................... 27 Notes to Financial Statements................. 28-38 Signatures.................................... 42
Reports on Form 8-K filed in the fourth quarter of 1994: Form 8-K dated December 29, 1994 announcing the acquisition of Central Indiana Bancorp effective January 1, 1995. Exhibits -- The index of exhibits has been filed as separate pages of the 1994 Form 10-K and is available to stockholders on request from the Secretary of the Corporation at the principal executive offices. Copies of exhibits may be obtained at a cost of 30 cents per page. Financial Statement Schedules -- Omitted due to inapplicability or because required information is shown in the Financial Statements or the Notes thereto. - ------------------------------------------------------------------------------- Note (1) -- Incorporated by reference from the Corporation's Proxy Statement to be dated approximately March 6, 1995. - ------------------------------------------------------------------------------- BUSINESS At December 31, 1994, National City Corporation ("National City" or "the Corporation") was the third largest bank holding company headquartered in the State of Ohio and approximately the 28th largest in the United States on the basis of total assets. National City owns and operates 10 commercial banks having a total of 614 banking offices in Ohio, Kentucky and Indiana. The four largest such subsidiary banks (and only significant subsidiaries) are National City Bank (Cleveland), National City Bank, Columbus; National City Bank, Indiana; and National City Bank, Kentucky. The banks and other subsidiaries and divisions (listed on pages 44 and 45) conduct a variety of financial services businesses. In addition to a general commercial banking business, National City or its subsidiaries are engaged in trust, mortgage banking, merchant banking, leasing, item processing, venture capital, insurance, and other financially related businesses. National City and its subsidiaries had 20,306 full-time equivalent employees at December 31, 1994. COMPETITION The banking business is highly competitive. The banking subsidiaries of National City compete actively with national and state banks, savings and loan associations, securities dealers, mortgage bankers, finance companies, insurance companies and other financial service entities. SUPERVISION AND REGULATION National City is subject to regulation under the Bank Holding Company Act of 1956, as amended (the "Act"). The Act requires the prior approval of the Federal Reserve Board for a bank holding company to acquire or hold more than a 5% voting interest in any bank, and restricts interstate banking activities. On September 29, 1994, the Act was amended by The Interstate Banking and Branch Efficiency Act of 1994 which authorizes interstate bank acquisitions anywhere in the country, effective one year after the date of enactment and interstate branching by acquisition and consolidation, effective June 1, 1997 in those states that have not opted out by that date. The impact of this amendment on the Corporation cannot be measured at this time. The Act restricts National City's nonbanking activities to those which are determined by the Federal Reserve 40 43 Board to be closely related to banking. The Act does not place territorial restrictions on the activities of nonbank subsidiaries of bank holding companies. National City's banking subsidiaries are subject to limitations with respect to intercompany loans and investments. A substantial portion of National City's cash revenues is derived from dividends paid by its subsidiary banks. These dividends are subject to various legal and regulatory restrictions as summarized in Note 13 on page 33. The subsidiary banks are subject to the provisions of the National Bank Act or the banking laws of their respective states, are under the supervision of, and are subject to periodic examination by, the Comptroller of the Currency or the respective state banking department, and are subject to the rules and regulations of the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (FDIC). National City's subsidiary banks are also subject to certain state laws of each state in which such a bank is located. Such state laws may restrict branching of banks within the state and acquisition or merger involving banks and bank holding companies located in other states. Ohio, Kentucky and Indiana have all adopted nationwide reciprocal interstate banking. The Financial Reform, Recovery and Enforcement Act of 1989 (FIRREA) provides that a holding company's controlled insured depository institutions are liable for any loss incurred by the Federal Deposit Insurance Corporation in connection with the default of or any FDIC-assisted transaction involving an affiliated insured bank or savings association. The Federal Deposit Insurance Corporation Improvement Act of 1991 (the "FDIC Improvement Act") covers a wide expanse of banking regulatory issues. The FDIC Improvement Act deals with the recapitalization of the Bank Insurance Fund, with deposit insurance reform, including requiring the FDIC to establish a risk-based premium assessment system, and with a number of other regulatory and supervisory matters. Regulations have been proposed to implement this Act, but the full effects of the FDIC Improvement Act generally on the financial services industry, and specifically on the Corporation, cannot now be measured. The monetary policies of regulatory authorities, including the Federal Reserve Board, have a significant effect on the operating results of banks and bank holding companies. The nature of future monetary policies and the effect of such policies on the future business and earnings of National City and its subsidiary banks cannot be predicted. PROPERTIES National City and its significant subsidiaries occupy their headquarters' offices under long-term leases, and also own freestanding operations centers in Columbus and Cleveland. Branch office locations are variously owned or leased. LEGAL PROCEEDINGS National City and its subsidiaries are parties (either as plaintiff or defendant) to a number of lawsuits incidental to their businesses and, in certain lawsuits, claims or counterclaims have been asserted. Although litigation is subject to many uncertainties and the ultimate exposure with respect to many of these matters cannot be ascertained, management does not believe the ultimate outcome of these matters will have a material adverse effect on the financial condition or results of operations of the Corporation. EXECUTIVE OFFICERS The Executive Officers of National City (as of January 20, 1995) are as follows:
Name Age Position - ---------------------------------------------------------- Edward B. Brandon 63 Chairman and Chief Executive Officer David A. Daberko 49 President and Chief Operating Officer William R. Robertson 53 Deputy Chairman Morton Boyd 58 Executive Vice President Vincent A. DiGirolamo 57 Executive Vice President Gary A. Glaser 50 Executive Vice President Jon L. Gorney 44 Executive Vice President Charles W. Hall 50 Executive Vice President Jeffrey D. Kelly 41 Executive Vice President William E. MacDonald III 48 Executive Vice President Robert J. Ondercik 48 Executive Vice President Robert G. Siefers 49 Executive Vice President and Chief Financial Officer Harold B. Todd, Jr. 53 Executive Vice President Thomas W. Owen 63 Senior Vice President and General Auditor Thomas A. Richlovsky 43 Senior Vice President and Treasurer David L. Zoeller 45 Senior Vice President, General Counsel and Secretary
The term of office for executive officers is one year. There is no family relationship between any of the above executive officers. Mr. Kelly was appointed an executive vice president of the Corporation in 1994. Prior to that time he was a senior vice president of the Corporation since 1990 and a senior vice president of National City Bank in Cleveland from 1987 to 1990. Mr. Ondercik was appointed an executive vice president of the Corporation in 1994. Prior to that time he was a senior vice president of the Corporation since 1991 and a senior vice president of National City Bank in Cleveland from 1989-1991. Mr. Gorney was appointed an executive vice president of the Corporation in 1993. Prior to that time he was a senior vice president of the Corporation since 1991 and senior vice president of National City Bank in Cleveland from 1988 to 1991. Each of the remaining officers listed above has been an executive officer of the Corporation or one of its subsidiaries during the past five years. 41 44 SIGNATURES Pursuant to the Requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on January 20, 1995. NATIONAL CITY CORPORATION /S/ Edward B. Brandon - --------------------------------------- Edward B. Brandon Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated, on January 20, 1995. /S/ Edward B. Brandon - --------------------------------------- Edward B. Brandon Chairman and Chief Executive Officer /S/ David A. Daberko /S/ William R. Robertson - -------------------------- -------------------------- David A. Daberko William R. Robertson President and Chief Deputy Chairman Operating Officer /S/ Robert G. Siefers /S/ Thomas A. Richlovsky - -------------------------- -------------------------- Robert G. Siefers Thomas A. Richlovsky Executive Vice President Senior Vice President and Chief Financial and Treasurer Officer The Directors of National City Corporation (listed below) executed a power of attorney appointing David L. Zoeller their attorney-in-fact, empowering him to sign this report on their behalf. Sandra H. Austin Otto N. Frenzel III Charles H. Bowman Joseph H. Lemieux Edward B. Brandon A. Stevens Miles John G. Breen Burnell R. Roberts David A. Daberko William R. Robertson Daniel E. Evans Morry Weiss /S/ David L. Zoeller -------------------------------------- By David L. Zoeller Attorney-in-fact 42 45 MAJOR BANKING MARKETS [MAP] TOLEDO CLEVELAND AKRON YOUNGSTOWN INDIANAPOLIS COLUMBUS DAYTON LOUISVILLE LEXINGTON 43 46 CORPORATE DIRECTORY MEMBER BANKS (Number of Banking Offices) OHIO National City Banks CLEVELAND (97) National City Bank William E. MacDonald, III President & CEO 1900 East Ninth Street Cleveland, Ohio 44114-3484 (216) 575-2000 COLUMBUS (125) National City Bank, Columbus Gary A. Glaser President & CEO 155 East Broad Street Columbus, Ohio 43251 (614) 463-7100 AKRON/YOUNGSTOWN (82) National City Bank, Northeast J. Christopher Graffeo President & CEO One Cascade Plaza Akron, Ohio 44308-1198 (216) 375-8450 DAYTON (38) National City Bank, Dayton Frederick W. Schantz President & CEO 6 North Main Street Dayton, Ohio 45412-2790 (513) 226-2000 TOLEDO (30) National City Bank, Northwest Robert E. Showalter President & CEO 405 Madison Avenue Toledo, Ohio 43603-1263 (419) 259-7700 ASHLAND (8) National City Bank, Ashland Harvey N. Young Chairman & CEO 10 West Second Street Ashland, Ohio 44805-0218 (419) 289-2112 KENTUCKY National City Bank, Kentucky LOUISVILLE (76) Morton Boyd Chairman & CEO Leonard V. Hardin President 101 South Fifth Street Louisville, Kentucky 40202-3101 (502) 581-4200 LEXINGTON (14) Roger M. Dalton President 301 East Main Street Lexington, Kentucky 40507-4400 (606) 281-5100 INDIANA National City Bank, Indiana INDIANAPOLIS (125) Vincent A. DiGirolamo President & CEO 101 West Washington Street, Suite 400E Indianapolis, Indiana 46255 (317) 267-7000 NATIONAL CITY BANK, SOUTHERN INDIANA NEW ALBANY (14) David W. Fennell Chairman, President & CEO 320 Pearl Street P.O. Box 1247 New Albany, Indiana 47150-1247 (812) 948-4400 MADISON BANK AND TRUST COMPANY MADISON (5) Madison Bank and Trust Company Raymond J. Bartnick President & CEO 213-215 East Main Street Madison, Indiana 47250 (812) 265-5121 OTHER UNITS BROKERAGE AND INVESTMENT SERVICES NATIONAL CITY INVESTMENTS CAPITAL, INC. William H. Schecter Chairman 1965 East Sixth Street Cleveland, Ohio 44114 (216) 575-9590 OFFICES: Cleveland, Columbus, Indianapolis, Louisville NATIONAL CITY CAPITAL CORPORATION NATIONAL CITY VENTURE CORPORATION William H. Schecter President 1965 East Sixth Street Cleveland, Ohio 44114 (216) 575-3340 NATIONAL CITY INVESTMENTS CORPORATION David W. Dunning Managing Director 1900 East Ninth Street Cleveland, Ohio 44114 (216) 575-3495 1-800-624-6450 OFFICES: Akron, Cleveland, Columbus, Dayton, Indianapolis, Louisville, Toledo 44 47 OTHER UNITS (Continued) NATIONAL ASSET MANAGEMENT CORPORATION Irvin W. Quesenberry, Jr. Managing Director & Principal WILLIAM F. CHANDLER, JR. Managing Director & Principal P.O. Box 36010 Louisville, Kentucky 40233 (502) 581-7668 MERCHANTS CAPITAL MANAGEMENT INCORPORATED William H. Olds Chairman 101 West Washington Street, Suite 635E Indianapolis, Indiana 46255 (317) 267-3880 COMMUNITY DEVELOPMENT NATIONAL CITY COMMUNITY DEVELOPMENT CORPORATION Danny H. Cameron President 1900 East Ninth Street Cleveland, Ohio 44114-3484 (216) 575-2293 OFFICES: Akron, Cleveland, Columbus, Dayton, Indianapolis, Lexington, Louisville, Toledo, Youngstown CREDIT CARD SERVICES NATIONAL CITY CARD SERVICES G. Brent Bostick President 4661 East Main Street Columbus, Ohio 43213 (614) 863-8046 FUNDING NATIONAL CITY CREDIT CORPORATION Jeffrey D. Kelly Executive Vice President 1900 East Ninth Street Cleveland, Ohio 44114-3484 (216) 575-2268 INSURANCE NATIONAL CITY LIFE INSURANCE COMPANY Anthony N. McEwen President 1900 East Ninth Street Cleveland, Ohio 44114-3484 (216) 575-2946 NATIONAL CITY INSURANCE AGENCY, INC. Anne E. Lazarz President 101 West Washington, Suite 305E Indianapolis, Indiana 46255 (317) 267-7033 ITEM PROCESSING NATIONAL CITY PROCESSING COMPANY Delroy R. Hayunga Chairman & CEO Tony G. Holcombe President 1231 Durrett Lane Louisville, Kentucky 40285-0001 (502) 364-2000 LEASING NATIONAL CITY LEASING CORPORATION J. Edward Vittitow Senior Vice President 101 South Fifth Street Louisville, Kentucky 40202-3101 (502) 581-7679 MORTGAGE BANKING NATIONAL CITY MORTGAGE CO. Leo E. Knight, Jr. President & CEO 3232 Newmark Drive Miamisburg, Ohio 45342 (513) 436-3025 OFFICES: Agawam (MA), Akron, Annapolis, Atlanta, Birmingham, Cary (NC), Charlotte, Cincinnati, Columbia (SC), Columbus, Dayton, Detroit, Falls Church (MD), Frederick (MD), Greensboro (NC), Greenville (SC), Greenwood (IN), Indianapolis, Knoxville (TN), Lexington, Raleigh, Richmond, Roanoke, Springfield (OH), Toledo, Towson (MD), Troy (OH), Virginia Beach, Wethersfield (CT), Wheaton (MD), Wilmington (NC), York (PA) MERCHANTS MORTGAGE CORPORATION David H. Mills President 201 South Capitol, Suite 800 Indianapolis, Indiana 46255 (317) 237-5415 MORTGAGE COMPANY OF INDIANA R. Thomas Gracey President 201 South Capitol, Suite 900 Indianapolis, Indiana 46225 (317) 237-5378 TRUST SERVICES Charles W. Hall Senior Trust Executive 1900 East Ninth Street Cleveland, Ohio 44114 (216) 575-2262 Offices: All National City Banks NATIONAL CITY TRUST COMPANY (FLORIDA) Ellen J. Abrams President & CEO 1401 Forum Way, Suite 503 West Palm Beach, Florida 33401-2324 (407) 697-2424 1-800-826-9095 Offices: Naples, Vero Beach, West Palm Beach 45 48 BOARD OF DIRECTORS/OFFICERS BOARD OF DIRECTORS EDWARD B. BRANDON (2, 3, 4) Chairman & CEO National City Corporation DAVID A. DABERKO President & COO National City Corporation WILLIAM R. ROBERTSON Deputy Chairman National City Corporation SANDRA H. AUSTIN (4, 6) President Healthcare Services Division Caremark Inc. JAMES M. BIGGAR (1, 2, 3) Chairman & CEO Glencairn Corporation CHARLES H. BOWMAN (6) Chief Executive Officer BP America Inc. JOHN G. BREEN (3, 4, 5) Chairman & CEO The Sherwin-Williams Company RICHARD E. DISBROW (1, 3, 6) Retired Chairman & CEO American Electric Power Service Corporation DANIEL E. EVANS (1, 6) Chairman & CEO Bob Evans Farms, Inc. OTTO N. FRENZEL III Chairman National City Bank, Indiana COMMITTEES (1) Audit Committee (2) Dividend Committee (3) Executive Committee (4) Nominating Committee (5) Organization & Compensation Committee (6) Public Policy Committee 46 49 JOSEPH H. LEMIEUX (3,5) Chairman & CEO Owens-Illinois, Inc. A. STEVENS MILES (4) Retired President National City Corporation BURNELL R. ROBERTS (2,3,5) Retired Chairman & CEO The Mead Corporation STEPHEN A. STITLE (3,4,5) Vice President Eli Lilly and Company MORRY WEISS (1,4) Chairman & CEO American Greetings Corporation HONORARY DIRECTORS CLAUDE M. BLAIR Retired Chairman National City Corporation JULIEN L. MCCALL Retired Chairman National City Corporation OFFICERS OFFICE OF THE CHAIRMAN EDWARD B. BRANDON Chairman & CEO DAVID A. DABERKO President & COO WILLIAM R. ROBERTSON Deputy Chairman EXECUTIVE VICE PRESIDENTS MORTON BOYD Kentucky Banking VINCENT A. DIGIROLAMO Indiana Banking GARY A. GLASER Columbus Banking JOHN L. GORNEY Information Services & Operations CHARLES W. HALL Trust JEFFREY D. KELLY Investments WILLIAM E. MACDONALD III Cleveland Banking ROBERT J. ONDERCIK Credit Administration ROBERT G. SIEFERS Chief Financial Officer HAROLD B. TODD, JR. Administration SENIOR VICE PRESIDENTS W. DOUGLAS BANNERMAN Corporate Banking MARY H. GRIFFITH Marketing Communications JOSEPH J. HERR Loan Review ANTHONY N. MCEWEN Retail Product Management GARY P. OBERS Corporate Services THOMAS W. OWEN General Auditor DONNA M. PACCHIONI Corporate Accounting A. JOSEPH PARKER Retail Business Line Management J. ARMANDO RAMIREZ Mergers & Acquisitions PHILIP L. RICE Strategic Planning THOMAS A. RICHLOVSKY Treasurer WILLIAM H. SCHECTER Investment Banking SHELLEY J. SEIFERT Human Resources THEODORE H. TUNG Economist ALLEN C. WADDLE Public Affairs PATRICK D. WALSH Information Systems DAVID L. ZOELLER General Counsel & Secretary 47 50 INVESTOR INFORMATION CORPORATE HEADQUARTERS NATIONAL CITY CENTER 1900 EAST NINTH STREET CLEVELAND, OHIO 44114-3484 (216) 575-2000 TRANSFER AGENT AND REGISTRAR NATIONAL CITY BANK CORPORATE TRUST OPERATIONS DEPARTMENT 5352 4100 WEST 150TH STREET CLEVELAND, OHIO 44135-1385 1-800-622-6757 INVESTOR INFORMATION JANIS E. LYONS, VICE PRESIDENT INVESTOR RELATIONS DEPARTMENT 2145 P.O. BOX 5756 CLEVELAND, OHIO 44101-0756 1-800-622-4204 COMMON STOCK LISTING National City Corporation common stock is traded on the New York Stock Exchange under the symbol NCC. The stock is abbreviated in financial publications as NTLCITY. PREFERRRED STOCK LISTING National City Corporation 8% Cumulative Convertible Preferred Stock Depositary shares are traded on the New York Stock Exchange under the symbol NCC PR. The preferred stock is abbreviated as NTLCITY PF in financial publications. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN Common stockholders participating in the Plan receive a three percent discount from market price when they reinvest their National City dividends in additional shares. Participants may also make optional cash purchases of common stock at a three percent discount from market price and pay no brokerage commissions. To obtain our Plan prospectus and authorization card, call 1-800-622-6757. DIRECT DEPOSIT OF DIVIDENDS A program for direct deposit of dividends is available to stockholders of the Corporation. This program which is offered at no charge, provides for the deposit of quarterly dividends directly to a checking or savings account. For information regarding this program, call 1-800-622-6757.
DEBT RATINGS MOODY'S STANDARD & POOR'S DUFF & PHELPS THOMSON BANKWATCH National City Corporation A/B Commercial paper (short-term debt) P-1 A-1 D-1+ TBW1 Senior debt A1 A AA- Subordinated debt A2 A- A+ Preferred stock "a1" BBB+ A Certificates of Deposit: National City Bank - Cleveland Aa3 A+ AA National City Bank, Columbus Aa3 A+ AA National City Bank, Kentucky Aa3 A+ AA National City Bank, Indiana Aa3 A+ AA Subordinated Bank Notes: National City Bank - Cleveland A1 A AA- National City Bank, Columbus A1 A AA-
51 [Back Cover Blank] 52 NATIONAL CITY Corporation First Class 1900 East Ninth Street U.S. Postage Cleveland, Ohio 44114-3484 P A I D National City Corporation 53 NATIONAL CITY CORPORATION PART IV, ITEM 14: EXHIBIT INDEX (2.1) Agreement and Plan of Merger dated as of July 25, 1994 by and between Registrant and Central Indiana Bancorp (filed as Appendix A to the Prospectus and Proxy Statement filed as a part of Registration Statement No. 33-56539 dated November 18, 1994 and incorporated herein by reference). (3.1) The Restated Certificate of Incorporation of the Registrant as amended (filed as Exhibit 3.1 to Registration Statement No. 33-49823 and incorporated herein by reference). (3.2) Registrant's First Restatement of By-laws adopted April 27, 1987 As Amended through October 24, 1994 (filed as Exhibit 3.2 to Registrant's Form S-4 Registration Statement #33-56539 dated November 18, 1994 and incorporated herein by reference). (4.1) Credit Agreement, dated as of December 31, 1988, between Registrant and the banks named therein (filed as Exhibit 4.1 to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, and incorporated herein by reference). (4.2) Instruments defining the rights of holders of certain long-term debt of the Registrant and its consolidated subsidiaries are not filed as exhibits because the amount of debt under such instruments is less than 10% of the consolidated total assets of the Registrant. Registrant undertakes to file these instruments with the Commission upon request. (4.3) Certificate of Stock Designation, dated April 18, 1991, designating the Corporation's 8% Cumulative Convertible Preferred Stock, without par value, and fixing the powers, preferences, rights, qualifications, limitations and restrictions thereof in addition to those set forth in the Corporation's Restated Certificate of Incorporation, as amended, (filed as Exhibit 4.4 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1991 and incorporated herein by reference). (10.1) National City Corporation Short-Term Incentive Compensation Plan for Senior Officers, As Amended and Restated Effective January 1, 1995. (10.2) National City Corporation Long-Term Incentive Compensation Plan for Senior Officers, As Amended and Restated Effective January 1, 1995. (10.3) National City Corporation's Amended and Restated 1973 Stock Option Plan, as amended (filed as Exhibit 10.4 to Registration Statement No. 2-91434) and amended 1984 Stock Option Plan (filed as Exhibit 10.2 to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987; both incorporated herein by reference). 54 (10.4) National City Corporation Plan for Deferred Payment of Directors' Fees, as amended (filed as Exhibit 10.5 to Registration Statement No. 2-914334 and incorporated herein by reference). (10.5) National City Corporation Supplemental Executive Retirement Plan, As Amended and Restated Effective January 1, 1995. (10.6) National City Corporation 1989 Stock Option Plan (filed as Exhibit 10.7 to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated herein by reference). (10.7) National City Corporation 1993 Stock Option Plan (filed as Exhibit 10.5 to Registration Statement No. 33-49823 and incorporated herein by reference). (10.8) First Kentucky National Corporation 1985 Stock Option Plan (filed as Exhibit 10.2 to First Kentucky National Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated herein by reference). (10.9) National City Corporation Executive Savings Plan, As Amended and Restated Effective January 1, 1995. (10.10) First Kentucky National Corporation 1982 Stock Option Plan (filed as Exhibit 10.3 to First Kentucky National Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated herein by reference). (10.11) National City Corporation Amended and Restated 1991 Restricted Stock Plan (filed as Exhibit 10.5 to Registration Statement No. 33-49823 and incorporated herein by reference). (10.12) Form of grant made under National City Corporation 1991 Restricted Stock Plan made in connection with National City Corporation Supplemental Executive Retirement Plan as amended (filed as Exhibit 10.10 to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference). (10.13) Amended Employment Agreement dated July 21, 1989 by and between Merchants National Corporation or a subsidiary and Otto N. Frenzel, III (filed as Exhibit 10(21) to Merchants National Corporation Annual Report of Form 10-K for the fiscal year ended December 31, 1987 and incorporated herein by reference). -2- 55 (10.14) Split Dollar Insurance Agreement dated January 4, 1988 between Merchants National Corporation and Otto N. Frenzel, III Irrevocable Trust II (filed as Exhibit 10(26) to Merchants National Corporation Annual Report on Form 10-K the fiscal year ended December 31, 1989 and incorporated herein by reference). (10.15) Merchants National Corporation Director's Deferred Compensation Plan, as amended and restated August 16, 1983 (filed as Exhibit 10(3) to Merchants National Corporation Registration Statement as Form S-2 filed June 28, 1985 and incorporated herein by reference). (10.16) Merchants National Corporation Supplemental Pension Plan dated November 20, 1984; First Amendment to the Supplemental Pension Plans dated January 21, 1986; Second Amendment to the Supplemental Pension Plans dated July 3, 1989; and Third Amendment to the Supplemental Pension Plans dated November 21, 1990 (filed respectively as Exhibit 10(n) to Merchants National Corporation Annual Report on Form 10-K for the year ended December 31, 1984; as Exhibit 10(q) to the Merchants National Corporation Annual Report on Form 10-K for the year ended December 31, 1985; as Exhibit 10(49) to Merchants National Corporation Annual Report on Form 10-K for the year ended December 31, 1990; and as Exhibit 10(50) to the Merchants National Corporation Annual Report on Form 10-K for the year ended December 31, 1990; all incorporated herein by reference). (10.17) Merchants National Corporation Employee Benefit Trust Agreement, effective July 1, 1987 (filed as Exhibit 10(27) to Merchants National Corporation Annual Report on Form 10-K for the year ended December 31, 1987 and incorporated herein by reference). (10.18) Merchants National Corporation Non-qualified Stock Option Plan effective January 20, 1987, and the first Amendment to that Merchants National Non-qualified Stock Option Plan, effective October 16, 1990 (filed respectively as Exhibit 10(23) to Merchants National Corporation Annual Report on Form 10-K for the year ended December 31, 1986, and as Exhibit 10(55) to Merchants National Corporation Annual Report on Form 10-K for the year ended December 31, 1990, both of which are incorporated herein by reference). (10.19) Merchants National Corporation 1987 Non-qualified Stock Option Plan, effective November 17, 1987, and the First Amendment to Merchants National Corporation 1987 Non-qualified Stock Option Plan, effective October 16, 1990, (filed respectively as Exhibit 10(30) to Merchants National Corporation Annual Report on Form 10-K for the year ended December 31, 1987 and as Exhibit 10(61) to Merchants National Corporation Annual -3- 56 Report on Form 10-K for the year ended December 31, 1990, both of which are incorporated herein by reference). (10.20) Merchants National Corporation Directors Non-qualified Stock Option Plan and the First Amendment to Merchants National Corporation Directors Non-qualified Stock Option Plan effective October 16, 1990 (filed respectively as Exhibit 10(44) to Merchants National Corporation Annual Report on Form 10-K for the year ended December 31, 1988 and as Exhibit 10(68) to Merchants National Corporation Annual Report on Form 10-K for the year ended December 31, 1990, both of which are incorporated herein by reference). (10.21) National City Corporation Annual Corporate Performance Incentive Plan, Effective January 1, 1995. (10.22) Contracts with Edward B. Brandon, David A. Daberko, William R. Robertson, William E. MacDonald III, Charles W. Hall, Jon L. Gorney, Harold B. Todd, Jr., Robert G. Siefers, Robert J. Ondercik, Jeffrey D. Kelly, David L. Zoeller, Thomas A. Richlovsky, Thomas W. Owen, Gary A. Glaser, Vincent A. DiGirolamo and Morton Boyd in the form set forth in Exhibit 10.22. (10.23) Contracts with 31 key employees in the form set forth in Exhibit 10.23. (10.24) The National City Savings and Investment Plan, As Amended and Restated Effective July 1, 1992. (10.25) The National City Savings and Investment Plan No. 2, As Amended and Restated Effective January 1, 1992. (10.26) Central Indiana Bancorp Stock Option Plan effective March 15, 1991. (10.27) Central Indian Bancorp 1993 Stock Option Plan effective October 12, 1993. (10.28) Split Dollar Insurance Agreement effective January 1, 1994 between National City Corporation and those individuals listed in Exhibit 10.22 and other key employees. (11) Computation of Earnings Per Share. (21) Subsidiaries (23) Consent of Ernst & Young LLP Independent Auditors (24) Powers of Attorney (27.1) Financial Data Schedule -4- EX-10.1 2 NATIONAL CITY CORP 10-K EXHIBIT 10.1 1 EXHIBIT 10.1 NATIONAL CITY CORPORATION SHORT-TERM INCENTIVE COMPENSATION PLAN FOR SENIOR OFFICERS As Amended and Restated Effective January 1, 1995 ARTICLE 1. THE PLAN AND ITS PURPOSE 1.1 Amendment and Restatement of the Predecessor Plan. This National City Corporation Short-Term Incentive Compensation Plan for Senior Officers, effective January 1, 1995 (herein referred as the "Plan") is an amendment, restatement and continuation of the "National City Corporation Short-Term Incentive Compensation Plan for Senior Officers" in effect January 1, 1994 (herein referred to as the "Predecessor Plan"); the Predecessor Plan was, in turn, an amendment, restatement and continuation of prior plans entitled the "National City Corporation Incentive Compensation Plan for Senior Executive Officers" in effect prior to January 1, 1994 ("Prior Plans"). 1.2 Effectiveness. This Plan is effective on and after January 1, 1995, to provide for the operation of the Plan on and after such date and to govern the treatment, on and after such date, of all deferrals made under this Plan, the Predecessor Plan, and the Prior Plan. 1.3 Purpose. The purpose of the Plan is to maximize the Corporation's profitability and operating success by providing an incentive to Senior Officers to achieve superior results. The Plan is designed to promote teamwork to achieve overall corporate success and to motivate individual excellence. 1.4 Operation of the Plan. The Plan shall be administered by the Compensation and Organization Committee of the Board of Directors of the Corporation. The Plan operates on a calendar year basis and is subject to the review, interpretation, and alteration by such Committee. 2 The Plan is intended to serve only as a guide to the Corporation in determining eligibility for and amounts of incentive compensation to be awarded under the Plan. With respect to any award made under the Plan, however, the Plan shall serve as a non- qualified plan providing for and governing the treatment of deferred compensation at the election of the Participant and/or the Committee, or as required by the Plan, as provided herein. ARTICLE 2. DEFINITIONS 2.1 Definitions. Whenever used herein, the following terms shall have the meanings set forth below, unless otherwise expressly provided. When the defined meaning is intended, the term is capitalized. (a) "Award" shall mean the payment earned by a Participant based on an evaluation of the individual's achievements. As such, the amount of any Award under this Plan is determined by decision of and in the discretion of the Corporation acting through the Committee as hereinafter provided. (b) "Base Salary" shall mean the annual salary as of the close of the Plan Cycle, exclusive of any bonuses, incentive pay, special awards, or stock options. (c) "Board" shall mean the Board of Directors of the Corporation. (d) "Change in Control" see Section 11.3. (e) "Committee" shall mean the Compensation and Organization Committee of the Board, or another committee appointed by the Board to serve as the administering committee of the Plan. (f) "Corporation" shall mean National City Corporation, a Delaware corporation. (g) "Disability" shall mean permanent disability as defined in the provisions of the National City Corporation Long Term Disability Plan. (h) "Early Retirement" shall mean early retirement as defined in the provisions of the National City Corporation Non-Contributory Retirement Plan. (i) "Effective Date" see Section 11.4. -2- 3 (j) "Eligible Employee" shall mean an Employee who is employed in a position meeting the defined eligibility criteria for participation in the Plan, as set forth in Article 3. (k) "Employee" shall mean an individual employed by an Employer on a regular active and full-time salaried basis. (l) "Employer" shall mean the Corporation or any corporation, organization or entity controlled by the Corporation. (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (n) "Funds" shall mean the Funds provided for in Section 9.4 hereof. (o) "Implementation Date" see Section 11.5. (p) "Mandatory Deferrals" shall mean those deferrals required to be deferred pursuant to Section 9.3 of the Predecessor Plan. (q) "Normal Retirement" shall have the same meaning as in the National City Non-Contributory Retirement Plan. (r) "Parallel Funds" see Section 9.6. (s) "Participant" shall mean an Eligible Employee who is approved by the Committee for participation in the Plan. Such approval shall be on a Plan Cycle basis and shall be reviewed with respect to each new Plan Cycle. (t) "Plan" see Section 1.1. (u) "Plan Cycle" shall mean a period of a calendar year. (v) "Predecessor Plan" see Section 1.1. (w) "Prior Plan" see Section 1.1. (x) "SIP" shall mean the National City Savings and Investment Plan. (y) "Subsidiary" see Paragraph 11.3(e). (z) "Vesting Event" shall mean the earliest to occur of the following dates: (1) the date any benefit is payable under the Plan, (2) the Effective Date of a Change in Control, -3- 4 (3) the date a Participant is eligible to retire on a Normal Retirement (4) the date a Participant has a Disability, (5) the date of a Participant's death, or Each Participant and beneficiary with respect to whom a Vesting Event has occurred shall be 100% vested in his or her benefits or Awards earned or accrued hereunder as of the date of said Vesting Event, subject to the forfeiture provisions of Article 10. (aa) "Voting Stock" see Paragraph 11.3(c). 2.2 Gender and Number. Except when otherwise indicated by the context, any masculine terminology used herein also shall include the feminine, and the definition of any term in the singular shall include the plural. ARTICLE 3. ELIGIBILITY AND PARTICIPATION 3.1 Eligibility. Eligibility for participation in the Plan will be limited to those officers of the Corporation and its subsidiaries who, by the nature and scope of their position, play a key role in the management, growth and success of the Corporation, as determined by the Committee. 3.2 Participation. Participation in the Plan (including a Participant's Category) shall be determined by the Committee with respect to each Plan Cycle prior to the commencement of the Plan Cycle, except as otherwise provided herein. The Committee may base its approval upon the recommendation of the Chief Executive Officer of National City Corporation. The Committee may classify Senior Officers for the purposes of the Plan into the following categories: -4- 5 Category Persons Included -------- ---------------- Category I Chief executive officer of the Corporation Category II President and deputy chairmen of the Corporation, and similar officers Category III Executive vice presidents of the Corporation and the chief executive officers of major subsidiaries of the Corporation, and similar officers Category IV Senior officers of the corporation and executive officers of major subsidiaries, and similar officers Categories V & VI All other officers of the Corporation or its subsidiaries who are approved for participation in the Plan by the Committee Each Eligible Employee approved for participation shall be notified of the selection as soon after approval as is practicable and shall become a Participant upon acceptance by him or her of such selection. 3.3 Participation for part of a Plan Cycle. In the event an Employee is an Eligible Employee for only a portion of a Plan Cycle (Participation Portion) such Eligible Employee may, in the Committee's discretion, be a Participant for such portion of the Plan Cycle but his or her Award will be based upon his or her Base Salary at the end of such Participation Portion and such Award will normally be prorated to reflect the number of months in the Participation Portion of the Plan Cycle compared to the number of months in the total Plan Cycle. 3.4 Category Changes During a Plan Cycle. In the event a Participant is promoted or demoted from one Category to another during a Plan Cycle, the Committee may, in its discretion, (a) continue such Participant in the Category he or she was in prior to such promotion or demotion, (b) provide for participation from and after the promotion or demotion to the new Category, or (c) provide for a combination of (a) and (b). In the event of a Plan Cycle for which the Participant's participation is thus split between two Categories, the Award for such Plan Cycle will normally be prorated to reflect the -5- 6 portions of the Plan Cycle spent in each Category and each part of the Award will be based upon the Participant's Base Salary at the end of the appropriate portions of the Plan Cycle. 3.5 Portions of Plan Cycles-Setting of Individual Objectives. Notwithstanding Sections 3.3 and 3.4, except with respect to Category I employees, no portion of a Plan Cycle with respect to a Participant shall be considered to be a separate portion of participation for a Participant unless, prior thereto, individual achievement objectives are set for such Participant for such portion of a Plan Cycle pursuant to Article 4, or are waived by the Committee, in its discretion. 3.6 No Right to Participate. No Participant or Employee shall have a right at any time to be selected for current or future participation in the Plan. ARTICLE 4. PERFORMANCE MEASUREMENT 4.1 Performance Criteria. Performance, for purposes of this Plan, will be measured in terms of the participant's individual contribution. Individual contribution will be measured by comparing actual individual achievements during the Plan Cycle to established objectives for the Plan Cycle. Prior to the beginning of the Plan Cycle each Participant shall establish objectives for the Plan Cycle. Such objectives shall be broad in nature, may be quantitative or qualitative and will typically be five in number. The objectives for Senior Officers other than those in Category I shall be subject to the review, revision and approval of their superiors up to and including the Chief Executive Officer of National City Corporation. 4.2 Award Potential. The amount of incentive compensation that may be awarded to a Senior Officer under this Plan shall be expressed as a percentage of Base Salary. Such percentage shall normally fall within the range set forth in the following table: -6- 7
Percent of Base Compensation ---------------------------- Category Threshold Target Maximum -------- --------- ------ ------- I 0% 5.5% 8.5% II 0% 10% 15% III 0% 18% 28% IV 0% 21% 33% V 0% 20% 32% VI 0% 10% 20%
4.3 Award Calculation and Approval. An evaluation for each Participant for each Plan Cycle will be determined as of the December 31 on which the Plan Cycle ends by applying the foregoing provisions of this Article 4 to the Participant's Individual Contribution for such Plan Cycle. Based on the evaluation, the Chief Executive Officer of National City Corporation shall recommend to the Committee for approval an appropriate incentive compensation Award for each of the Senior Officers in Categories II and III. The Chief Executive Officer shall also determine the incentive compensation Award of each Senior Officer in Categories IV, V and VI which shall be deemed approved by the Committee upon (1) the completion by the Chief Executive Officer of a list of such Awards, and (2) the Committee's approval of the aggregate dollar amount of such Awards. The Committee shall determine an appropriate incentive compensation Award for the Chief Executive Officer of the Corporation. All such Awards may, for convenience purposes, be normally expressed as a percentage of Base Salary. Upon the approval of the Committee the amounts of Awards hereunder for a Plan Cycle shall be final. ARTICLE 5. PAYMENT OF AWARDS 5.1 Form and Timing of Payment of Awards. Within 90 days after the end of the Plan Cycle, the Participant shall be entitled to receive a cash payment equal to the entire amount of the Participant's Award. Except as otherwise provided for in Section 5.2, to receive an Award a -7- 8 Participant must be an Employee on the date on which the Plan Cycle ends. The Committee may terminate a Participant's Award prior to any Vesting Event if such Participant fails to continue to be an Employee. 5.2 Termination of Employment Due to Retirement, Disability or Death. In the event a Participant's employment is terminated during a Plan Cycle by reason of Normal Retirement, Disability or Death, the Participant shall be eligible to receive a prorated Award based on individual contribution during the Participant's participation in the Plan Cycle, provided however, that the Participant must have been a Participant in the Plan for at least three months of the Plan Cycle to be eligible to receive any Award hereunder. Such Awards will be paid within ninety (90) days following the end of the Plan Cycle. In the event of death, the Award will be paid to the Participant's estate. 5.3 Termination of Employment Due to Early Retirement. The Committee may elect, in its discretion, to pay a prorated Award to a Participant who terminates employment by means of an Early Retirement; in the absence of such favorable discretionary action by the Committee, no such pro-rated Award shall be paid. 5.4 Other Terminations of Employment. In the event a Participant's employment is terminated during a Plan Cycle prior to a Vesting Event, the Participant's participation in such Plan Cycle shall end and the Participant shall not be entitled to any Award for such Plan Cycle. 5.5 Request to Defer Payment; Deferred Payments. The Committee may determine that one or more Participants should be eligible to elect to request to have a portion or all of his or her Award for a Plan Cycle deferred and paid out at a future date. Such request by an eligible Participant shall be considered by the Committee. The Committee may determine that some, all, or none of the Awards, or parts thereof, shall be deferred, in its discretion. Deferred amounts are subject to the provisions of Article 9. -8- 9 ARTICLE 6. RIGHTS OF PARTICIPANTS 6.1 Employment. Nothing in this Plan shall interfere with or limit in any way the right of the Corporation to terminate a Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Employer. 6.2 Restrictions on Assignments. The interest of a Participant or his or her beneficiary under this Plan may not be sold, transferred, assigned, or encumbered in any manner, either voluntarily or involuntarily, and any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be null and void; neither shall the benefits hereunder be liable for or subject to the debts, contracts, liabilities, engagements, or torts of any person to whom such benefits or funds are payable, nor shall they be subject to garnishment, attachment, or other legal or equitable process, nor shall they be an asset in bankruptcy. ARTICLE 7. ADMINISTRATION 7.1 Administration. The Plan shall be administered by the Committee in accordance with any administrative guidelines and any rules that may be established from time to time by the Committee. The procedures, standards and provisions of this Plan for determining eligibility for and amounts of Awards are intended only as a guide and in themselves confer no rights, duties or privileges upon Participants nor place any obligation upon the Committee, the Board or the Corporation. Accordingly, the Committee may, in making its determinations hereunder, deviate from such procedures and standards in whatever manner that it, in its judgment, deems appropriate. The Committee shall have full power and authority to interpret, construe and administer the Plan and its interpretations and construction hereof, and actions hereunder, including the timing, form, amount or recipient of any payment to be made hereunder, and its decisions shall be binding and conclusive on all persons for all purposes. The Committee may name assistants who may be, but need not be, members of the Committee. Such assistants shall serve at the pleasure of the Committee, and shall perform such functions as may be assigned by the Committee. -9- 10 No member of the Committee or any assistant shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Plan unless attributable to his or her own willful misconduct or lack of good faith. ARTICLE 8. REQUIREMENTS OF LAW 8.1 Laws Governing. This Plan shall be construed in accordance with and governed by the laws of the State of Ohio. 8.2 Withholding Taxes. The Corporation shall have the right to deduct from all payments under this Plan any federal or state taxes required by the law to be withheld with respect to such payments. 8.3 Plan Binding on Corporation, Employees and Their Successors. This Plan shall be binding upon and inure to the benefit of the Corporation, its successors and assigns and each Participant and his or her beneficiaries, heirs, executors, administrators and legal representatives. ARTICLE 9. DEFERRAL OF AWARDS 9.1 Election to Request Deferral of Award; Deferral Percentage. Prior to each Plan Cycle, the Committee shall determine which Participants, if any, shall be eligible to make deferral elections under this Plan. Each Participant who is therefore eligible to elect to request deferral of a portion or all of his or her Award for such Plan Cycle, shall be given the opportunity prior to such Plan Cycle, to make such request. Such election and the percentage of Award requested to be deferred shall be irrevocable and fixed with respect to such Participant and such Plan Cycle from and after the December 31 of the year prior to the Plan Cycle. The request and determination of the portion of the Award to be deferred shall be made in terms of 10% increments of the Award. Participants becoming Participants during a Plan Cycle shall, if determined to be eligible to do so, make any such deferral request to defer prior to the commencement of their participation and the same shall become irrevocable and fixed as of the day prior to the commencement of their participation. -10- 11 Promotion or demotion during a Plan Cycle shall not affect the fixed and irrevocable nature of a deferral request made prior to such Plan Cycle for such Plan Cycle. 9.2 Deferral of Awards; Committee's Decision. Notwithstanding any request to defer none, a portion, or all of an Award hereunder submitted by a Participant pursuant to Section 9.1 above, and not withstanding the Committee's prior determination as to the eligibility of any Participant to defer a portion or all of any Award hereunder, the Committee shall make the decision, in the case of each Participant, whether or not to defer any portion or all of any Participant's Award with respect to any Plan Cycle. Such decision shall be made in the discretion of the Committee, which extends to the percentage of any Award to be deferred, except as otherwise provided in Section 9.3. The Committee's decision shall be final and binding on all parties. Any amount to be deferred shall not be paid to the Participant but shall be deferred as provided in this Article 9. 9.3 Required Deferral. If any Mandatory Deferrals were made, the amount deferred shall yield such return as the Funds to which the deferral is credited in accordance with this Section 9. Any Mandatory Deferrals as adjusted pursuant to Section 9.6 of this Plan shall be paid at the earliest possible time and to the maximum extent possible such that a deduction for such payment would not be disallowed pursuant to the Internal Revenue Code Section 162(m)(1). 9.4 Accounts. An account shall be established and maintained by the Corporation in the name of each Participant who has deferred compensation hereunder. Such accounts shall remain a part of the general liabilities of the Corporation and nothing in this Plan shall be deemed to create a trust or fund of any kind or any fiduciary relationship. Each Account shall be comprised of ten sub-accounts: (a) the "Savings Account Fund"; (b) the "NCC Stock Fund"; (c) the "Equity Fund"; (d) the "Fixed Income Fund"; (e) the "Money Market Fund"; (f) the "Capital Preservation Fund"; (g) the "Mid Cap Regional Equity Fund"; (h) the "Equity Income Fund"; (i) the "Equity Index Fund"; (j) the "Foreign Equity Fund"; such sub-accounts jointly are herein called the "Funds"." -11- 12 9.5 Crediting to Accounts. As of the dates of payment of cash Awards made under this Plan the amount of the Award to be deferred for each Participant under this Section 9 shall be credited to such Participant's Account, and shall correspondingly be credited to the Fund or Funds selected by the Participant. 9.6 Funds. The nine Funds hereunder other than the Savings Account Fund (such nine Funds being herein called "Parallel Funds") are designed to reflect investment funds maintained in the SIP. Accordingly, each such Parallel Fund and each Participant's Account therein shall be adjusted hereunder as of the end of each month to reflect the income, gain or loss of the corresponding SIP investment fund for such month, as calculated and published on a monthly basis by the Trustee of the SIP. In the event the SIP no longer offers a fund corresponding to one of the Parallel Funds, the amounts which would have been deemed invested in such Parallel Fund except for this provision shall be deemed to be invested in the Savings Account Fund. 9.7 Savings Account Fund. Amounts deferred to the Savings Account Fund shall be credited to the Participant's Account in such Fund as of the date that other Awards for such Plan Cycle are paid or would be paid, and interest shall be credited on amounts in the Participant's Account in such Fund at the end of each calendar quarter in amount equal to interest on the average credit balance in such Account during such calendar quarter, at the highest published rate being paid by National City Bank on savings or time deposits of less than $100,000 on the last day of such quarter, regardless of maturity. 9.8 Selection of Funds. Each Participant (and each Beneficiary of a deceased Participant) may select the Investment Fund or Funds he or she wishes to be used hereunder for his or her account. The selection of Funds shall be made in portions of the amount deferred equal to 5% of the total of such amounts. In the event no election is made by a Participant (or Beneficiary) his or her account shall be deemed invested in and credited to the Savings Account Fund. -12- 13 Selection of Funds by Participants shall be made no later than the December 1 of the Plan Cycle for which the Award is to be made in advance of the deferral or payment of the Award; provided however, that in the event a Participant who has not requested a deferral of any part of his or her Award nevertheless has a portion thereof deferred by decision of the Committee, or otherwise, then in such event, such Participant shall immediately be given an election period of 10 days to determine appropriate investments, such period running from the date of his or her notification of his or her right to make such selection. 9.9 No Change of Investment Fund Selection Permitted Except with Committee Approval. Each selection of a Fund hereunder shall be final and shall not thereafter be revised or changed, provided, however, that each Participant (or Beneficiary if the Participant is deceased) may request a change in his or her Investment Fund choice by filing such request with the Committee. Notwithstanding the foregoing, the consent of the Committee shall be necessary for any such change in investment fund choices; such consent is discretionary in the Committee and the Committee shall act upon such requests as are filed with it at the Committee's next regularly scheduled meeting. 9.10 Vesting of Deferred Amounts. Amounts of Awards made and deferred under the Plan, and earnings and gains thereon, are always 100% vested. 9.11 Manner of Distribution. Except as otherwise provided herein, distributions hereunder shall take place over a period of ten years commencing on the retirement, death or other termination of employment of the Participant. The first distribution shall take place on the February 1 of the calendar year following the calendar year in which such retirement, death or other termination occurs. Succeeding payments shall be made on succeeding February 1sts. The amount to be distributed shall be determined by multiplying (i) the dollar value of the Participant's entire interest hereunder on the date of such installment, by (ii) a fraction, the numerator of which is one, and the denominator of which is the number of distributions remaining unpaid at such time, or by such other method as may be adopted by the Committee. -13- 14 The balances of each Account and each Investment Fund shall be appropriately reduced to reflect the distribution payments made. Amounts held pending distribution pursuant to this Paragraph 9.11 shall continue to be credited with appropriate income, gains and losses as herein otherwise provided and shall be subject to investment changes as herein provided. Balances in more than one Fund shall be reduced pro-rata to reflect distributions on a pro-rata basis from each Fund. 9.12 Accelerated Payments; Revised Distributions. Notwithstanding the foregoing, the Committee may determine that a Participant's interest hereunder which equals $100,000 or less shall be paid out in a lump sum. Furthermore, the Committee may determine that a lump sum distribution should be made to a Participant who has terminated employment by means other than death, disability or retirement. In the event such determination is made, such lump sum distribution shall be made as of the next succeeding February 1, or at such other time as may be determined by the Committee. In the case of the first distribution after the death of a Participant, the Committee may, in its discretion, provide for payment of a portion or all of the distribution prior to the February 1 after such death. Notwithstanding any other provision hereof, the Committee, in its discretion, may provide that distributions may be made in a lesser number of installments, but not less than 5. 9.13 Beneficiary Designations. Each Participant, and each Beneficiary of a deceased Participant or Beneficiary hereunder, may designate, on a Beneficiary Designation form supplied by the Committee, any person or persons to whom payments are to be made if the Participant (or Beneficiary) dies before receiving payment of all amounts due hereunder. A beneficiary designation will be effective only after the signed Beneficiary Designation form is filed with an officer of the Corporation designated by the Committee for such purpose while the Participant (or Beneficiary) is alive, and will cancel all beneficiary designations signed and filed earlier. If the Participant (or Beneficiary) fails to designate a beneficiary as provided above, or if all -14- 15 designated beneficiaries die before the Participant or before complete payment of all amounts due hereunder, remaining unpaid distribution amounts shall be paid to the then surviving spouse of the Participant, if any, or, if there be none, in one lump sum to the estate of the last to die of the Participant or his or her designated beneficiaries, if any. In the event a Participant (or a Beneficiary of a deceased Participant) designates as a Beneficiary any so called "marital deduction trust" or any so called "qualified income trust", the Participant (or Beneficiary) may additionally indicate whether the dollar equivalent of the current income, during the distribution of an interest hereunder, should be distributed yearly to such Beneficiary. In the event of such an indication, such income shall be distributed at least annually. 9.14 Participants Rights; Beneficiaries Rights. Except as otherwise specifically provided, neither a Participant nor any of his or her Beneficiaries has rights under this Plan. The payment of deferred compensation shall be a general, unsecured obligation of the Corporation to be paid by the Corporation from its own funds, and such payments shall not impose any obligation upon any trust fund for any tax qualified plan, be paid from any such trust fund, or have any effect whatsoever upon the SIP or the payment of benefits from the Trust Fund under the SIP. No Participant or beneficiary shall have any title to or beneficial ownership in any assets which the Corporation may earmark to pay benefits hereunder. 9.15 Nature of deferred compensation. The election of deferred compensation under this Plan and any setting aside by the Corporation of amounts with which to discharge its deferred obligations hereunder in a trust fund, an insurance policy, or otherwise, shall not be deemed to create a right in any person; equitable title to any funds so set aside in a trust, an insurance policy, or otherwise shall remain in the Corporation, and any recipient of benefits hereunder shall have no security or other interest in such trust, policies or funds. Any and all funds so set aside in a trust, an insurance policy or otherwise shall remain subject to the claims of the general creditors of the Corporation, present and future. This provision shall not require the Corporation to set aside any funds, but the Corporation may set aside such funds if it chooses to -15- 16 do so. Any amount so set aside for th+6is Plan shall be accounted for separately and apart from any other plan of the Corporation. This Plan is intended to constitute an unfunded plan of deferred compensation described in Section 201(2) of the Employee Retirement Income Security Act of 1974. 9.16 Distributions in Cash. Notwithstanding any other provision of this Plan, distributions hereunder shall be made only in cash and shall be subject to withholding of applicable taxes. 9.17 Nature of Deferred Compensation Plan. The provisions of the Plan relating to deferred compensation are fixed and final unless and until amended, revised or terminated as herein provided. ARTICLE 10. FORFEITURES Notwithstanding any provision in this Plan to the contrary excepting only the provisions of Article 11, in the event the Committee finds (a) that an Employee or former Employee who has an interest under this Plan has been discharged by his or her Employer in the reasonable belief (and such reasonable belief is the reason or one of the reasons for such discharge) that the Employee or former Employee did engage in fraud against the Employer or anyone else, or (b) that an Employee or former Employee who has an interest under this Plan has been convicted of a crime as a result of which it becomes illegal for his or her Employer to employ him or her, then any amounts held under this Plan for the benefit of such Employee or former Employee or his or her beneficiaries shall be forfeited and no longer payable to such Employee or former Employee or to any person claiming by or through such Employee or former Employee. ARTICLE 11 CHANGE IN CONTROL 11.1 Treatment of Awards. In the event of a Change in Control, the Corporation shall pay to each Participant who is participating in a Plan Cycle on the Effective Date of such Change in Control, a lump sum cash payment equal to the amount hereinafter determined. Such payment -16- 17 shall be paid in cash to the Participant within five business days after the Implementation Date of such Change in Control and shall be payment in full to each Participant for the Plan Cycle, and such Plan Cycle shall be deemed terminated by operation of this Article 11. No further Plan Cycles shall commence thereafter under this Plan. Such cash payment shall be made without regard to any request to defer made with respect to any such Plan Cycle (which shall be inoperative) and without regard to any deferral action by the Committee. Amounts deferred under this Plan prior to the Effective Date (by request, as required, or as decided by the Committee) shall continue to be payable from time to time under this Plan as deferred payments hereunder. 11.2 Amount of Payment. The amount of the payment to be made as a consequence of a Change in Control shall, with respect to each Plan Cycle, be equal to the maximum Award which could be paid hereunder to each Participant pro-rated, however, to reflect late commencement of participation in a Plan Cycle and/or promotions or Category changes in a Plan Cycle, consistent with Sections 3.4 and 3.5 of the Plan. 11.3 Definition of Change in Control. "Change in Control" shall mean the occurrence of any of the following events: (a) The Corporation is merged, consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than sixty-five percent of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction are held in the aggregate by the holders of Voting Stock immediately prior to such transaction; (b) The Corporation sells or otherwise transfers all or substantially all of its assets to another corporation or other legal person, and as a result of such sale or transfer less than sixty-five percent of the combined voting power of the then- outstanding securities of such corporation or person immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock immediately prior to such sale or transfer; -17- 18 (c) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Exchange Act disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 15% or more of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of the Corporation ("Voting Stock"); (d) The Corporation files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Corporation has occurred or will occur in the future pursuant to any then-existing contract or transaction; or (e) If, during any period of two consecutive years, individuals who at the beginning of any such period constitute the Directors of the Corporation cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this clause (e) each Director who is first elected, or first nominated for election by the Corporation's stockholders, by a vote of at least two-thirds of the Directors of the Corporation (or a committee thereof) then still in office who were Directors of the Corporation at the beginning of any such period will be deemed to have been a Director of the Corporation at the beginning of such period. Notwithstanding the foregoing provisions of (c) or (d) above, unless otherwise determined in a specific case by majority vote of the Board, a "Change in Control" shall not be deemed to have occurred for purposes of paragraphs (c) or (d) above, solely because (1) the Corporation, (2) an entity in which the Corporation directly or indirectly beneficially owns 50% or more of the voting equity securities (a "Subsidiary"), or (3) any employee stock ownership plan or any other employee benefit plan of the Corporation or any Subsidiary either files or becomes obligated to file a report or proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item -18- 19 therein) under the Exchange Act disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 15% or otherwise, or because the Corporation reports that a change in control of the Corporation has occurred or will occur in the future by reason of such beneficial ownership. 11.4 Effective Date of Change in Control. Notwithstanding the foregoing, in the event a Change in Control ultimately results from discussions or negotiations involving the Corporation or any of its officers or directors, the "Effective Date" of such Change in Control shall be the date such discussions or negotiations commenced; otherwise, such Effective Date of a Change in Control shall be the Implementation Date of such Change in Control. 11.5 Implementation Date of Change in Control. The "Implementation Date" shall be the earliest to occur of the events specified in subsections (a), (b), (c), (d) or (e) of Section 11.3. As used herein, the Implementation Date of Change in Control shall be the last date of the then current Plan Cycle. 11.6 Effect of Change in Control. In addition to other vesting under the Plan, the opportunity of a Participant to participate to the end of the current Plan Cycle is vested in such Participant in the event of a Change in Control, as of the Effective Date of such Change in Control. ARTICLE 12. MISCELLANEOUS In the event of the liquidation of the Corporation the Committee may make any provisions for holding, handling and distributing the amounts standing to the credit of the Participants or beneficiaries hereunder which, in the discretion of the Committee which in the discretion of the Committee, are appropriate and equitable under all circumstances and which are consistent with the spirit and purposes of these provisions. ARTICLE 13. AMENDMENT AND DISCONTINUANCE The Corporation expects to continue this Plan indefinitely, but reserves the right, by action of the Committee, to amend it from time to time, or to discontinue it if such a change is deemed necessary or desirable. However, if the Committee should amend or discontinue this -19- 20 Plan, the Corporation shall remain obligated under the Plan with respect to (1) Awards made final (and thus payable) by decision by the Committee prior to the date of such amendment or discontinuance (2) Awards and rights of any Participant or beneficiary with respect to whom a Vesting Event has occurred, and (3) with respect to amounts deferred prior to date of such amendment or discontinuance. Executed this ____ day of _____________, 1994 at Cleveland, Ohio. NATIONAL CITY CORPORATION By: ----------------------------- -20- EX-10.2 3 NATIONAL CITY CORP 10-K EXHIBIT 10.2 1 EXHIBIT 10.2 NATIONAL CITY CORPORATION LONG-TERM INCENTIVE COMPENSATION PLAN FOR SENIOR OFFICERS As Amended and Restated Effective January 1, 1995 ARTICLE 1. ESTABLISHMENT AND PURPOSE OF PLAN 1.1 Establishment of the Plan. The following are the provisions of the National City Corporation Long-Term Incentive Compensation Plan for Senior Officers (herein referred to as the "Plan"), effective as of January 1, 1995, which is an amendment and restatement of the National City Corporation Long-Term Incentive Compensation Plan for Senior Officers effective January 1, 1994 ("Predecessor Plan"). The Predecessor Plan was, in turn, an amendment, restatement and continuation of prior plans entitled "National City Corporation Long-Term Incentive Compensation Plan for Senior Officers" in effect prior to January 1, 1994 ("Prior Plans"). The Plan shall be effective for all purposes with respect to Play Cycles commencing on or after January 1, 1995, and with respect to all determinations to be made (without regard to the date a Plan Cycle commenced) on or after such date (including but not limited to determinations of eligibility to participate, amounts of Awards, and entitlement to Awards). 1.2 Purpose. The purpose of the Plan is to maximize the returns to stockholders and to promote the long-term profitability and success of the Corporation by providing an incentive to those key executives of the Corporation who are primarily responsible for such profitability and success. 1.3 Operation of the Plan. The Plan shall be administered by the Compensation and Organization Committee of the Board of Directors of the Corporation. A Plan Cycle of three years will be established each year that the Plan is in operation. Once an Award is made under 2 the Plan the Plan shall serve as a non-qualified plan providing for deferred compensation at the election of the Participant and/or the Committee, as provided hereunder. ARTICLE 2. DEFINITIONS 2.1 Definitions. Whenever used herein, the following terms shall have the meanings set forth below, unless otherwise expressly provided. When the defined meaning is intended, the term is capitalized. (a) "Active Participant" shall mean an Eligible Employee who is approved by the Committee for participation in a Plan Cycle of the Plan. Such approval shall be determined with respect to each Plan Cycle prior to March 31 of the first year of that Plan Cycle, and shall be redetermined with respect to each new Plan Cycle. (b) "Average Stock Price" shall be determined with respect to each Plan Cycle for the month of December prior to such Plan Cycle (the Average Stock Price at the beginning of the Plan Cycle) and for the last full calendar month of the Plan Cycle (the Average Stock Price at the end of the Plan Cycle) and shall mean the arithmetic mean (the average) of the closing prices of a share of common stock of a company as reported on any national securities exchange (or by any national quotation system accepted by the Committee for this purpose) for each of the trading days (on which such shares were traded) in such calendar month. If the shares of common stock are not then so traded or regularly reported, the stock price shall be determined by such means as the Committee shall determine. Notwithstanding the foregoing, the Committee may determine prior to the start of a Plan Cycle that a different set of time periods are appropriate for measuring performance under the Plan, and such different time periods may be used to determine Average Stock Prices at the beginning and the end of such Plan Cycle. (c) "Award" shall mean the payment earned by a Participant based on comparison of the Corporation's actual results with the performance of a peer group of companies. -2- 3 (d) "Base Salary" shall mean the average annual salary of an employee during that portion, or all of the Plan Cycle for which he or she is an Active Participant, exclusive of any bonuses, incentive pay, special awards, or stock options. (e) "Board" shall mean the Board of Directors of the Corporation. (f) "Committee" shall mean the Compensation and Organization Committee of the Board, or another committee appointed by the Board to serve as the administering committee of the Plan. (g) "Corporation" shall mean National City Corporation, a Delaware corporation. (h) "Disability" shall have the same meaning as the term "Long Term Disability" has in the National City Corporation Long-Term Disability Plan as in existence at the commencement of the Plan Cycle with respect to which such definition is relevant. (i) "Early Retirement" shall have the same meaning as in the National City Corporation Non-Contributory Retirement Plan as in existence at the commencement of the Plan Cycle with respect to which such definition is relevant. (j) "Effective Date" see Section 12.4. (k) "Eligible Employee" shall mean an Employee who is employed in a position meeting the defined eligibility criteria for participation in the Plan, as set forth in Article 3. (l) "Employee" shall mean an individual employed by an Employer on a regular active and full-time salaried basis. (m) "Employer" shall mean the Corporation or any corporation, or ganization or entity controlled by the Corporation. (n) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (o) "Funds" shall mean the Funds provided for in Article 10 hereof. (p) "Implementation Date" see Section 12.4. -3- 4 (q) "Inactive Participant" shall mean an individual who was an Active Participant in the Plan for a Plan Cycle who is not currently an Active Participant for a Plan Cycle but who continues to have an interest under the Plan. (r) "Mandatory Deferrals" shall mean those deferrals required to be deferred pursuant to Section 10.3 of the Predecessor Plan. (s) "Normal Retirement" shall have the same meaning as in the National City Corporation Non-Contributory Retirement Plan as in existence at the commencement of the Plan Cycle with respect to which such definition is relevant. (t) "Parallel Funds" see Section 10.5. (u) "Participant" shall mean and include all Active Participants and all Inactive Participants. (v) "Peer Group" shall mean a group of comparable corporations used to measure relative performance. Such Peer Group shall be established by the Committee for each Plan Cycle prior to the commencement of the Plan Cycle, and shall not thereafter be changed with respect to such Plan Cycle, provided, however, that one or more members of a Peer Group shall be dropped therefrom in the event of the acquisition of the Peer Group Member, the acquisition of sixty-five percent or more of the gross assets of the Peer Group Member or the merger of the Peer Group Member with another company(ies) where the Peer Group Member is not the surviving corporation. (w) "Plan" shall mean this National City Corporation Long-Term Incentive Compensation Plan for Senior Officers Effective January 1, 1995, which is an amendment and restatement of the Predecessor Plan. (x) "Plan Cycle" shall mean a period of three consecutive fiscal years of the Corporation and shall be referred to by the fiscal year in which a particular Plan Cycle commences. -4- 5 (y) "Predecessor Plan" see Section 1.1. (z) "Prior Plan" see Section 1.1. (aa) "SIP" shall mean the National City Savings and Investment Plan. (bb) "Subsidiary" see paragraph 12.3(e) (cc) "Total Stockholder Return" with respect to a stock shall be calculated in the following manner: (i) Add the Average Stock Price at the end of the Plan Cycle for such stock to the dividends paid on the stock during the Plan Cycle, and then subtract the Average Stock Price at the beginning of the Plan Cycle for such stock. (ii) Divide the resulting sum of (i) above by the Average Stock Price at the beginning of the Plan Cycle for such stock. (iii) The result equals Total Stockholder Return with respect to such stock for the Plan Cycle. (dd) "Vesting Event" shall mean the earliest to occur of the following events: (1) the date any Award is payable hereunder, (2) the Effective Date of a Change in Control, (3) the date a Participant is eligible to retire on a Normal Retirement, (4) the date a Participant incurs a Disability, (5) the date of a Participant's death. Each Participant and Beneficiary with respect to whom a Vesting Event has occurred shall be 100% vested in his or her benefits or Awards earned or accrued hereunder as of the date of such Vesting Event, subject to the forfeiture provisions of Article 12. (dd) "Voting Stock" see paragraph 12.3(e). 2.2 Gender and Number. Except when otherwise indicated by the context, any masculine terminology used herein also shall include the feminine, and the definition of any term in the singular shall include the plural. -5- 6 ARTICLE 3. ELIGIBILITY AND PARTICIPATION 3.1 Eligibility. Eligibility for participation in the Plan will be limited to those senior officers of the Corporation and its subsidiaries who, by the nature and scope of their positions, are materially responsible for the management, growth, and overall success of the Corporation, as determined by the Committee. 3.2 Participation. Participation in the Plan shall be determined by the Committee with respect to each Plan Cycle prior to the commencement of the Plan Cycle. The Committee may base its approval upon the recommendation of the Chief Executive Officer of National City Corporation. The Committee shall classify senior officers for the purposes of the Plan into the following categories: Category Persons Included -------- ---------------- Category I Chief executive officer of the corporation Category II President and deputy chairmen of the Corporation and similar officers Category III Executive officers of the Corporation and Executive officers of major subsidiaries of the Corporation and similar officers Category IV Senior officers of the Corporation and senior officers of subsidiaries of the Corporation and similar officers Each Eligible Employee approved for participation shall be notified of the selection as soon after approval as is practicable and shall become a Participant upon acceptance by him or her of such selection; provided however, that after December 31, 1994, no Eligible Employee shall become a Participant in the Plan with respect to any Plan Cycle after the commencement of such Plan Cycle. 3.3 Partial Plan Cycle Participation; Category Changes During a Plan Cycle. After December 31, 1994 there shall be no participation in partial Plan Cycles and a Participant's -6- 7 change in Categories during a Plan Cycle shall not result in any change in participation in the Plan with respect to such Plan Cycle. 3.4 No Right to Participate. No Participant or Employee shall have a right at any time to be selected for current or future participation in the Plan. ARTICLE 4. AWARD DETERMINATION 4.1 Peer Group and Threshold, Target and Maximum Awards for Each Plan Cycle. Prior to the beginning of the Plan Cycle the Committee shall establish Threshold Award, Target Award and Maximum Award performance levels for the Plan Cycle, against which the Total Stockholder Return of the Corporation for the Plan Cycle shall be compared to other members of the Peer Group based on ranking of Plan Cycle results of the Corporation and members of the Peer Group. The Committee shall also determine the membership of the Peer Group for the Plan Cycle at such time. 4.2 Award. The amount of incentive compensation that shall be awarded to a Participant under this Plan shall be expressed as a percentage of Base Salary. Such percentage shall be determined on the basis of the attainment, or lack of attainment, by the Corporation of the Threshold, Target or Maximum performance, as follows: Percent of Base Compensation
Below Category Threshold Threshold Target Maximum -------- --------- --------- ------ ------- I 0% 30% 50% 100% II 0% 24% 40% 80% III 0% 18% 30% 60% IV 0% 12% 20% 40%
4.3 Limitation. Notwithstanding any provision in this Plan to the contrary, no Award for any one Plan Cycle shall exceed $1,000,000.00. -7- 8 ARTICLE 5. PAYMENT OF AWARDS 5.1 Form and Timing of Payment of Awards. Within 90 days after the end of the Plan Cycle, the Participant's shall be entitled to receive a cash payment equal to the entire amount of the Participant's Award. Except as otherwise provided for in Section 6.1, to receive an Award a Participant must be an Employee on the date on which the Plan Cycle ends. The Committee may terminate a Participant's Award prior to any Vesting Event. 5.2 Request to Defer Payment; Deferred Payments. A Participant may elect to request to have a portion or all of his or her Award for a Plan Cycle deferred and paid out at a future date. Such request shall be considered by the Committee. The Committee may determine that some, all, or none of the Awards, or parts thereof, shall be deferred in its discretion. Deferred amounts are subject to the provisions of Article 10. ARTICLE 6. TERMINATION OF EMPLOYMENT 6.1 Termination of Employment due to Death, Disability or Normal Retirement. In the event a Participant's employment is terminated during a Plan Cycle at or after the occurrence of a Vesting Event other than a Change of Control the Participant shall be eligible to receive a pro-rated Award reflecting his or her partial participation. This pro-ration shall be determined by multiplying the Award by a fraction the numerator of which is the number of full months of participation to the date participation ends, and the denominator of which is 36. The Award thus determined shall be payable as soon as practicable following the end of the Plan Cycle. 6.2 Other Terminations of Employment. In the event a Participant's employment is terminated during a Plan Cycle prior to a Vesting Event, the Participant's participation in such Plan Cycle shall end and the Participant shall not be entitled to any Award for such Plan Cycle. ARTICLE 7. RIGHTS OF PARTICIPANTS 7.1 Employment. Nothing in this Plan shall interfere with or limit in any way the right of the Corporation to terminate a Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Corporation. -8- 9 7.2 Restrictions on Assignments. The interest of a Participant or his or her beneficiary under this Plan may not be sold, transferred, assigned, or encumbered in any manner, either voluntarily or involuntarily, and any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be null and void; neither shall the benefits hereunder be liable for or subject to the debts, contracts, liabilities, engagements, or torts of any person to whom such benefits or funds are payable, nor shall they be subject to garnishment, attachment, or other legal or equitable process, nor shall they be an asset in bankruptcy. ARTICLE 8. ADMINISTRATION Administration . The Plan shall be administered by the Committee in accordance with any administrative guidelines and any rules that may be established from time to time by the Committee. The procedures, standards and provisions of this Plan for determining eligibility for and amounts of Awards in themselves confer no rights, duties or privileges upon Participants nor place obligations upon either the Board or the Corporation. Accordingly, the Committee may, in making such determinations hereunder, deviate from such procedures and standards in whatever manner that it, in its judgment, deems appropriate. The Committee shall have full power and authority to interpret, construe and administer the Plan and its interpretations and construction hereof, and actions hereunder, including the timing, form, amount or recipient of any payment to be made hereunder, and its decisions shall be binding and conclusive on all persons for all purposes. The Committee may name assistants who may be, but need not be, members of the Committee. Such assistants shall serve at the pleasure of the Committee, and shall perform such functions as are provided for herein and such other functions as may be assigned by the Committee. No member of the Committee or any assistant shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Plan unless attributable to his or her own willful misconduct or lack of good faith. -9- 10 ARTICLE 9. REQUIREMENTS OF LAW 9.1 Laws Governing. This Plan shall be construed in accordance with and governed by the laws of the State of Ohio. 9.2 Withholding Taxes. The Corporation shall have the right to deduct from all payments under this Plan any federal or state taxes required by the law to be withheld with respect to such payments. 9.3 Plan Binding on Corporation, Employees and Their Successors. This Plan shall be binding upon and inure to the benefit of the Corporation, its successors and assigns and each Participant and his or her beneficiaries, heirs, executors, administrators and legal representatives. ARTICLE 10. DEFERRAL OF AWARDS 10.1 Election to Request Deferral of Award; Deferral Percentage. Each Active Participant shall be given the opportunity, prior to the final year of each Plan Cycle, to elect to request deferral of a portion or all of his or her Award for each Plan Cycle. The Participant may not change his election with respect to a Plan Cycle from and after the December 31 of the year prior to the final year of the Plan Cycle. 10.2 Deferral of Awards; Committee's Decision. Notwithstanding any request to defer none, a portion, or all of an Award hereunder submitted by a Participant pursuant to Section 10.1 above, the Committee shall make the decision, in each case, whether or not to defer any portion or all of any Participant's Award with respect to any Plan Cycle. Such decision shall be made in the discretion of the Committee. The Committee's discretion extends to the percentage of any Award to be deferred. The Committee's decision shall be final and binding on all parties. Any amount to be deferred shall not be paid to the Participant but shall be deferred as provided in this Article 10. 10.3 Required Deferral. If any Mandatory Deferrals were made, the amount deferred shall yield such return as the Funds to which the deferral is credited in accordance with this Section 10. Any Mandatory Deferrals as adjusted pursuant to Section 9.6 of this Plan shall be paid at the earliest possible time and to the maximum extent possible such that a deduction for -10- 11 such payment would not be disallowed pursuant to the Internal Revenue Code Section 162(m)(1). 10.4 Accounts. An account shall be established and maintained by the Corporation in the name of each Participant who has deferred compensation hereunder. Such accounts shall remain a part of the general liabilities of the Corporation and nothing in this Plan shall be deemed to create a trust or fund of any kind or any fiduciary relationship. Each Account shall be comprised of ten sub-accounts: (a) the "Savings Account Fund"; (b) the "NCC Stock Fund"; (c) the "Equity Fund"; (d) the "Fixed Income Fund"; (e) the "Money Market Fund"; (f) the "Capital Preservation Fund"; (g) the "Mid Cap Regional Equity Fund"; (h) the "Equity Income Fund"; (i) the "Equity Index Fund;" and (j) the "Foreign Equity Fund"; such sub-accounts jointly are herein called the "Funds". 10.5 Crediting to Accounts. As of the dates of payment of cash Awards made under this Plan the amount of the Award to be deferred for each Participant under this Section 10 shall be credited to such Participant's Account, and shall correspondingly be credited to the Fund or Funds selected by the Participant. 10.6 Funds . The nine Funds hereunder other than the Savings Account Fund (such nine Funds being herein called "Parallel Funds") are designed to reflect investment funds maintained in the SIP. Accordingly, each such Parallel Fund and each Participant's Account therein shall be adjusted hereunder as of the end of each month to reflect the income, gain or loss of the corresponding SIP investment fund for such month, as calculated and published on a monthly basis by the Trustee of the SIP. In the event the SIP no longer offers a fund corresponding to one of the Parallel Funds, the amounts which would have been deemed invested in such Parallel Fund except for this provision shall be deemed to be invested in the Savings Account Fund. 10.7 Savings Account Fund. Amounts deferred to the Savings Account Fund shall be credited to the Participant's Account in such Fund as of the date that other Awards for such Plan Cycle are paid or would be paid, and interest shall be credited on amounts in the Participant's -11- 12 Account in such Fund at the end of each calendar quarter in amount equal to interest on the average credit balance in such Account during such calendar quarter, at the highest published rate being paid by National City Bank on savings or time deposits of less than $100,000 on the last day of such quarter, regardless of maturity. 10.8 Selection of Funds. Each Participant (and each Beneficiary of a deceased Participant) may select the Investment Fund or Funds he or she wishes to be used hereunder for his or her account. The selection of Funds shall be made in portions of the amount deferred equal to 5% of the total of such amounts. In the event no election is made by a Participant (or Beneficiary) his or her account shall be deemed invested in and credited to the Savings Account Fund. Selection of Funds by Participants shall be made no later than the earlier of December 1 of the final year of a Plan Cycle or the deferral or payment of the Award; provided however, that in the event a Participant who has not requested a deferral of any part of his or her Award nevertheless has a portion thereof deferred by decision of the Committee, then in such event, such Participant shall be given an election period of 10 days to determine appropriate investments, such period running from the date of his or her notification of the Committee's action. 10.9 No Change of Investment Fund Selection Permitted Except with Committee Approval. Each selection of a Fund hereunder shall be final and shall not thereafter be revised or changed, provided, however, that each Participant (or Beneficiary if the Participant is deceased) may request a change in his or her Investment Fund choice by filing such request with the Committee. Notwithstanding the foregoing, the consent of the Committee shall be necessary for any such change in investment fund choices; such consent is discretionary in the Committee and the Committee shall act upon such requests as are filed with it at the Committee's next regularly scheduled meeting. 10.10 Vesting of Deferred Amounts. Amounts of Awards made and deferred under the Plan, and earnings and gains thereon, are always 100% vested. -12- 13 10.11 Manner of Distribution. Except as otherwise provided herein, distributions hereunder shall take place over a period of ten years commencing on the retirement, death or other termination of employment of the Participant. The first distribution shall take place on the February 1 of the calendar year following the calendar year in which such retirement, death or other termination occurs. Succeeding payments shall be made on succeeding February 1sts. The amount to be distributed shall be determined by multiplying (i) the dollar value of the Participant's entire interest hereunder on the date of such installment, by (ii) a fraction, the numerator of which is one, and the denominator of which is the number of distributions remaining unpaid at such time, or by such other method as may be adopted by the Committee. The balances of each Account and each Investment Fund shall be appropriately reduced to reflect the distribution payments made. Amounts held pending distribution pursuant to this Paragraph 10.10 shall continue to be credited with appropriate income, gains and losses as herein otherwise provided and shall be subject to investment changes as herein provided. Balances in more than one Fund shall be reduced pro-rata to reflect distributions on a pro-rata basis from each Fund. 10.12 Accelerated Payments; Revised Distributions. Notwithstanding the foregoing, the Committee may determine that a Participant's interest hereunder which equals $100,000 or less shall be paid out in a lump sum. Furthermore, the Committee may determine that a lump sum distribution should be made to a Participant who has terminated employment by means other than death, Disability or retirement. In the event such determination is made, the lump sum distribution shall be made as of the next succeeding February 1, or at such other time as may be determined by the Committee. In the case of the first distribution after the death of a Participant, the Committee may, in its discretion, provide for payment of a portion or all of the distribution prior to the -13- 14 February 1 of the calendar year following the calendar year of such death, or at such other time as may be determined by the Committee. Notwithstanding any other provision hereof, the Committee, in its discretion, may provide that distributions may be made in a lesser number of installments, but not less than 5. 10.13 Beneficiary Designations. Each Participant, and each Beneficiary of a deceased Participant or Beneficiary hereunder, may designate, on a Beneficiary Designation form supplied by the Committee, any person or persons to whom payments are to be made if the Participant (or Beneficiary) dies before receiving payment of all amounts due hereunder. A beneficiary designation will be effective only after the signed Beneficiary Designation form is filed with an officer of the Corporation designated by the Committee for such purpose while the Participant (or Beneficiary) is alive, and will cancel all beneficiary designations signed and filed earlier. If the Participant (or Beneficiary) fails to designate a beneficiary as provided above, or if all designated beneficiaries die before the Participant or before complete payment of all amounts due hereunder, remaining unpaid distribution amounts shall be paid to the then surviving spouse of the Participant, if any, or, if there be none, in one lump sum to the estate of the last to die of the Participant or his or her designated beneficiaries, if any. In the event a Participant (or a Beneficiary of a deceased Participant) designates as a Beneficiary any so called "marital deduction trust" or any so called "qualified income trust", the Participant (or Beneficiary) may additionally indicate whether the dollar equivalent of the current income, during the distribution of an interest hereunder, should be distributed yearly to such Beneficiary. In the event of such an indication, such income shall be distributed at least annually. 10.14 Participants Rights; Beneficiaries Rights. Except as otherwise specifically provided, neither a Participant nor any of his or her Beneficiaries has rights under this Plan. The payment of deferred compensation shall be a general, unsecured obligation of the Corporation to be paid by the Corporation from its own funds, and such payments shall not impose any obligation upon any trust fund for any tax qualified plan, be paid from any such trust fund, or -14- 15 have any effect whatsoever upon the SIP or the payment of benefits from the Trust Fund under the SIP. No Participant or beneficiary shall have any title to or beneficial ownership in any assets which the Corporation may earmark to pay benefits hereunder. 10.15 Nature of deferred compensation. The election of deferred compensation under this Plan and any setting aside by the Corporation of amounts with which to discharge its deferred obligations hereunder in a trust fund, an insurance policy, or otherwise, shall not be deemed to create a right in any person; equitable title to any funds so set aside in a trust, an insurance policy, or otherwise shall remain in the Corporation, and any recipient of benefits hereunder shall have no security or other interest in such trust, policies or funds. Any and all funds so set aside in a trust, an insurance policy or otherwise shall remain subject to the claims of the general creditors of the Corporation, present and future. This provision shall not require the Corporation to set aside any funds, but the Corporation may set aside such funds if it chooses to do so. Any amount so set aside for this Plan shall be accounted for separately and apart from any other plan of the Corporation. This Plan is intended to constitute an unfunded plan of deferred compensation described in Section 201(2) of the Employee Retirement Income Security Act of 1974. 10.16 Distributions in Cash. Notwithstanding any other provision of this Plan, distributions hereunder shall be made only in cash and shall be subject to withholding of applicable taxes. 10.17 Nature of Deferred Compensation Plan. The provisions of the Plan relating to deferred compensation are fixed and final unless and until amended, revised or terminated as herein provided. ARTICLE 11. FORFEITURES Notwithstanding any provision in this Plan to the contrary excepting only the provisions of Article 12, in the event the Committee finds (a) that an Employee or former Employee who has an interest under this Plan has been discharged by his or her Employer in the reasonable belief (and such -15- 16 reasonable belief is the reason or one of the reasons for such discharge) that the Employee or former Employee did engage in fraud against the Employer or anyone else, or (b) that an Employee or former Employee who has an interest under this Plan has been convicted of a crime as a result of which it becomes illegal for his Employer to employ him or her, then any amounts held under this Plan for the benefit of such Employee or former Employee or his or her beneficiaries shall be forfeited and no longer payable to such Employee or former Employee or to any person claiming by or through such Employee or former Employee. ARTICLE 12. CHANGE IN CONTROL 12.1 Treatment of Awards. In the event of a Change in Control the Corporation shall pay to each Active Participant on the Implementation Date of such Change in Control a lump sum cash payment equal to the amount hereinafter determined. Such payment shall be payable in cash to the Participant within five business days after the Implementation Date of such Change in Control and shall be payment in full to each such Participant for such Plan Cycle, each of which shall be deemed terminated by operation of this Article 12. No further Plan Cycles shall commence thereafter under this Plan. Such cash payment shall be made without regard to any request to defer made with respect to any such Plan Cycle (which shall be inoperative) and without regard to any deferral action by the Committee. Amounts deferred under this Plan prior to the Effective Date (by request, as required, or as decided by the Committee) shall continue to be payable from time to time under this Plan as deferred payments hereunder. 12.2 Amount of Payment. The amount of the payment to be made as a consequence of a Change in Control shall, with respect to each Plan Cycle, be equal to the Maximum Award level (without regard to stockholder return during such abbreviated Plan Cycle) for the Participant for such Plan Cycle multiplied by a fraction the numerator of which is the number of -16- 17 full months completed from the commencement of the Plan Cycle to the Implementation Date of the Change in Control, and the denominator of which is 36. 12.3 Definition of Change in Control. Change in Control shall mean the occurrence of any of the following events: (a) The Corporation is merged, consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than sixty-five percent of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction are held in the aggregate by the holders of Voting Stock immediately prior to such transaction; (b) The Corporation sells or otherwise transfers all or substantially all of its assets to another corporation or other legal person, and as a result of such sale or transfer less than sixty-five percent of the combined voting power of the then- outstanding securities of such corporation or person immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock immediately prior to such sale or transfer; (c) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Exchange Act disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 15% or more of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of the Corporation ("Voting Stock"); (d) The Corporation files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Corporation has occurred or will occur in the future pursuant to any then-existing contract or transaction; or -17- 18 (e) If, during any period of two consecutive years, individuals who at the beginning of any such period constitute the Directors of the Corporation cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this clause (e) each Director who is first elected, or first nominated for election by the Corporation's stockholders, by a vote of at least two-thirds of the Directors of the Corporation (or a committee thereof) then still in office who were Directors of the Corporation at the beginning of any such period will be deemed to have been a Director of the Corporation at the beginning of such period. Notwithstanding the foregoing provision of paragraphs (c) or (d) above unless otherwise determined in a specific case by majority vote of the Board, a "Change in Control" shall not be deemed to have occurred for purposes of paragraphs (c) or (d) above, solely because (1) the Corporation, (2) an entity in which the Corporation directly or indirectly beneficially owns 50% or more of the voting equity securities (a "Subsidiary"), or (3) any employee stock ownership plan or any other employee benefit plan of the Corporation or any Subsidiary either files or becomes obligated to file a report or proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 15% or otherwise, or because the Corporation reports that a change in control of the Corporation has occurred or will occur in the future by reason of such beneficial ownership. 12.4 Effective Date of Change in Control. Notwithstanding the foregoing, in the event a Change in Control ultimately results from discussions or negotiations involving the Corporation or any of its officers or directors, the "Effective Date" of such Change in Control shall be the date such discussions or negotiations commenced; otherwise, such Effective Date or Change in Control shall be the Implementation Date of such Change in Control. 12.5 Implementation Date of Change in Control. The "Implementation Date" shall be the earliest to occur of the events specified in subsections (a), (b), (c), (d) or (e) of Section 12.3. -18- 19 As used herein, the Implementation Date of Change in Control shall be the last date of all current Plan Cycles. 12.6 Effect of Change in Control, In addition to other vesting under the Plan, the opportunity of a Participant to participate to the end of all current Plan Cycles is vested in such Participant in the event of a Change in Control, as of the Effective Date of and such Change in Control. ARTICLE 13. MISCELLANEOUS In the event of the liquidation of the Corporation the Committee may make any provisions for holding, handling and distributing the amounts standing to the credit of the Participants or beneficiaries hereunder which in the discretion of the Committee are appropriate and equitable under all circumstances and which are consistent with the spirit and purposes of these provisions. ARTICLE 14. AMENDMENT AND DISCONTINUANCE The Corporation expects to continue this Plan indefinitely, but reserves the right, by action of its shareholders, to amend it from time to time or to discontinue it. However, if the Corporation should amend or discontinue this Plan, the Corporation shall remain obligated under the Plan with respect to (1) Awards made final (and thus payable) by decision by the Committee prior to the date of such amendment or discontinuance, (2) Awards and rights of any Participant or beneficiary with respect to whom a Vesting Event has occurred, and (3) with respect to amounts deferred prior to the date of such amendment or discontinuation. Executed as of this ____ day of _________________, 1994 at Cleveland, Ohio. NATIONAL CITY CORPORATION By: --------------------- -19- EX-10.5 4 NATIONAL CITY CORP 10-K EXHIBIT 10.5 1 EXHIBIT 10.5 NATIONAL CITY CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (as Amended and Restated January 1, 1995) ARTICLE 1. THE PLAN AND ITS PURPOSE 1.1 Amendment and Restatement of the Plan. The following are the provisions of the National City Corporation Supplemental Executive Retirement Plan (herein referred to as the "SERP") effective as of January 1, 1995 (herein referred to as the "Effective Date"), which is an amendment and restatement of the SERP which was in effect prior thereto. The SERP as amended and restated herein is effective as of the Effective Date with respect to certain employees who retire, become disabled, die or otherwise terminate employment on or after the Effective Date. Benefits with respect to Employees who retired, became disabled, died or otherwise terminated employment prior to the Effective Date shall be governed by the provisions of relevant plans in effect on the date of such death, disability, retirement or other termination, and not by the provisions of the SERP. 1.2 Purpose. The purpose of the SERP is to provide for the payment of certain pension, disability and survivor benefits in addition to benefits which may be payable under other plans of the Corporation. The Corporation intends and desires by the provisions of the SERP to recognize the value to the Corporation of the past and present service of employees covered by the SERP and to encourage and assure their continued service to the Corporation by making more adequate provision for their future security than other plans of the Corporation provide. 1.3 Operation of the SERP. The SERP shall be administered by the Compensation and Organization Committee of the Board of Directors of the Corporation. 2 ARTICLE 2. DEFINITIONS 2.1 Definitions. Whenever used herein, the following terms shall have the meanings set forth below, unless otherwise expressly provided. When the defined meaning is intended, the term is capitalized. (a) "Accrued Benefit" as of any time means the benefit to be provided an Participant pursuant to the SERP which has accrued to such time under the SERP, determined in the same manner as an individual's accrued benefit pursuant to the NC Retirement Plan is determined at such time. In addition, "Accrued Benefit" shall include the right to receive, where applicable, any Additional Payment which would otherwise be payable to a SERP Retiree pursuant to Section 4.5 of the SERP. Accrued Benefits are to be determined by the Actuary. (b) "Actuarially Equivalent Benefit" means the actuarially equivalent benefit determined under the SERP using (i) the UP-1984 Mortality Table (with a one-year set-forward for employees and a one-year setback for beneficiaries) and (ii) the lower of (a) the interest rates utilized by the Pension Benefit Guaranty Corporation in effect on the date as of which a lump sum determination is made hereunder, or (b) the average of the interest rates utilized by the Pension Benefit Guaranty Corporation for the 12 month period ending 6 calendar months prior to the date as of which a lump sum determination is made hereunder, or (iii) an interest rate of 7% for all other purposes. (c) "Actuary" means the independent actuary or firm of actuaries engaged by the Corporation to perform actuarial services with respect to the NC Retirement Plan. (d) "Additional Payment" see Section 4.5. (e) "Award" means a Participant's award(s), if any, under either or both of (1) the NC Short Term Incentive Compensation Plan as in effect from time to time, and (2) the NC Annual Corporate Performance Incentive Plan as in effect from time to time. (f) "Base Pay" means a Participant's Base Pay as determined under the NC Retirement Plan as in effect from time to time. (g) "Change in Control" see Section 12.2. -2- 3 (h) "Committee" means the Compensation and Organization Committee of the Board of Directors of the Corporation or any successor committee of the board operating as the Committee under the SERP. (i) "Corporation" means National City Corporation, a Delaware corporation, and any successor corporation. (j) "Deemed Taxable Amount" see Paragraph 4.5(a). (k) "Disability" shall mean permanent disability as defined by the provisions of the NC Long Term Disability Plan. (l) "Earnings" means a Participant's Earnings as determined under the NC Retirement Plan as in effect from time to time. (m) "Effective Date" see Section 1.1. (n) "Employee" shall mean an individual employed with an Employer on a regular, active and full-time salaried basis (o) "Employer" shall mean the Corporation or any corporation, organization or entity controlled by the Corporation. (p) "FICA" means the Federal Insurance Contributions Act. (q) "Final Average Earnings" means Final Average Earnings as determined under the NC Retirement Plan as in effect from time to time. (r) "Final Average Total Earnings" means a Participant's Final Average Earnings as determined under the NC Retirement Plan as in effect from time to time, provided however, that there shall be added into the Participant's Earnings the average amount of the Participant's five (5) largest (not necessarily consecutive) Total Awards for any of the ten (10) calendar years completed immediately prior to the date of the determination. Final Average Total Earnings shall be used in the calculation of the SERP Retirement Benefit and the SERP Surviving Spouse Benefit. (s) "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time. -3- 4 (t) "NC Annual Corporate Performance Incentive Plan" means the National City Corporation Annual Corporate Performance Incentive Plan as in effect from time to time and any successor short term incentive compensation plan, with any amendment(s) thereto effective as of the effective date(s) of such amendment(s), and the same is hereby specifically referred to and shall form a part of the SERP as fully as if set forth in an exhibit to the SERP. (u) "NC Long Term Disability Plan" means the National City Long-Term Disability Plan as in effect from time to time and any successor disability plan, with any amendment(s) thereto from time to time, effective as of the effective date(s) of such amendment(s), and the same is hereby specifically referred to and shall form a part of the SERP as fully as if set forth in an exhibit to the SERP. (v) "NC Retirement Plan" means the National City Non-Contributory Retirement Plan as in effect from time to time and any successor retirement plan, with any amendment(s) thereto from time to time, effective as of the effective date(s) of such amendment(s), and the same is hereby specifically referred to and shall form a part of the SERP as fully as if set forth in an exhibit to the SERP. (w) "NC Short Term Incentive Compensation Plan" means the National City Corporation Short-Term Incentive Compensation Plan for Senior Officers as in effect from time to time and any successor retirement plan, with any amendment(s) thereto from time to time, effective as of the effective date(s) of such amendment(s), and the same is hereby specifically referred to and shall form a part of the SERP as fully as if set forth in an exhibit to the SERP. (x) "Normal Retirement Age" means the earlier of age 65, or age 62 with 20 or more years of Vesting Service under the NC Retirement Plan. (y) "Participant" means an Employee who is selected from time to time by the Committee pursuant to Article 3 of the SERP for participation in one or more of the benefits under the SERP (or a portion of the SERP). (z) "Plans" means the NC Retirement Plan and the NC Long Term Disability Plan as in effect from time to time. -4- 5 (aa) "Payments" see Section 4.5. (bb) "Regulation" or "Regulations" means any federal statute or rule or regulation of the Internal Revenue Service, the United States Department of Labor or any other division, department or agency of the United States Government. (cc) "SERP" means the Supplemental Executive Retirement Plan as effective on and after the Effective Date. (dd) "SERP Base Pay" means the Participant's Base Pay as determined under the NC Retirement Plan as in effect from time to time, determined as of the date of Long Term Disability, provided however, that the limitations of Sections 18.6, 18.7, 18.8 and 18.8A of the NC Retirement Plan and similar limitations upon retirement benefits resulting from restrictions imposed by the Internal Revenue Code or Regulations thereunder shall not apply. SERP Base Pay shall be used in the calculation of the SERP Long Term Disability Benefit. (ee) "SERP Disability Benefit" means the benefit provided for by Article 6 of the SERP. (ff) "SERP Early Retirement Benefit" means the early retirement benefit provided for by Section 4.3 of the SERP. (gg) "SERP Later Retirement Benefit" means the later retirement benefit provided for by Section 4.3 of the SERP. (hh) "SERP Normal Retirement Benefit" means the benefit provided for by Section 4.2 of the SERP. (ii) "SERP Offset Program" means a program or combination of programs designated by the Committee to be a SERP Offset Program with respect to one or more benefits otherwise provided by the SERP, as determined by the Committee. (jj) "SERP Retiree" means a Participant who has become eligible for a SERP Retirement Benefit or who would become eligible for such a benefit except for the existence of a SERP Offset Program. -5- 6 (kk) "SERP Retirement Benefit" means the benefit provided for by Section 4.1 of the SERP. (ll) "SERP Surviving Spouse Benefit" means the benefit provided for by Article 5 of the SERP. (mm) "Social Security Disability Benefits" means the amount which a Participant would be entitled to receive from the United States Social Security System upon proper application therefor, as disability benefits under such System, and in the event the Participant declines or fails to apply for any such benefit, such term shall also include all such amounts which would be payable if application were made. (nn) "Social Security Retirement Benefits" means the estimated United States Social Security old age retirement benefit which the Participant would be entitled to under the United States Social Security laws upon proper application therefor as of the first of the following two dates: (A) the date the Participant retires under the NC Retirement Plan, provided he is entitled to receive such a Social Security Retirement Benefit commencing at such time, and if not so entitled at such time, the earliest date thereafter when he becomes so entitled, or (B) the Participant's age 65. (oo) "Social Security Surviving Spouse Benefits" means the amount which a surviving spouse would be entitled to receive from the United States Social Security System upon proper application therefor, based upon the earnings of the Participant survived by the surviving spouse, unreduced as a consequence of any earnings received by the surviving spouse, and not increased by any payment made on account of or with respect to any minor or other dependent, and in the event the surviving spouse declines or fails to apply for any such benefit, such term shall also include all such amounts which would be payable if application were made. (pp) "Total Awards" for any calendar year shall mean the total of the Participant's Awards for such year, if any, under the NC Short Term Incentive Compensation Plan and the NC Annual Corporate Performance Incentive Plan. -6- 7 (qq) "Vesting Event" means the earliest of the following dates with respect to a Participant or surviving spouse: (1) the date the Participant has attained age fifty-five (55) and has executed a confidentiality and non-competition agreement substantially in form as Exhibit A attached to the SERP, (2) the date any benefit is in payment status hereunder, and (3) the Effective Date of a Change in Control. (rr) "Vesting Service" means Vesting Service as determined under the NC Retirement Plan as in effect from time to time. ARTICLE 3. ELIGIBILITY AND PARTICIPATION 3.1 Eligibility. The eligibility for benefits under the SERP shall be limited to management and highly-compensated Employees. The Committee may, from time to time and in its discretion designate certain Employees of the Corporation or its subsidiaries to be eligible for one or more of the benefits under the SERP, but not eligible for the remainder of such benefits. 3.2 Removal from Participation. The Committee may, from time to time and in its discretion, remove any employee from the list of Participants, provided such removal shall be effective only upon communication thereof in writing to the Participant prior to the earlier to occur of the following dates: (1) the date of the Participant's death, disability, or retirement, whichever first occurs, and (2) the date of the Committee's approval of the Participant's Early Retirement as provided for in Article 4 hereof, and provided further that in the event such removal takes place after a Vesting Event, such removal shall not serve to reduce any Participant's Accrued Benefit. Upon a removal of a Participant prior to the occurrence of a Vesting Event he or she shall no longer be a Participant in the SERP. -7- 8 ARTICLE 4. SERP RETIREMENT BENEFIT 4.1 SERP Retirement Benefits. "SERP Retirement Benefits" constitute the SERP Normal Retirement Benefit, the SERP Early Retirement Benefit and the SERP Later Retirement Benefit provided for by this Article 4. 4.2 Eligibility for SERP Normal Retirement Benefit. Each Participant becomes eligible for a SERP Normal Retirement Benefit upon attaining the Normal Retirement Age. 4.3 Eligibility for Early or Later Retirement Benefit. (a) Eligibility. A Participant may become eligible for a SERP Early Retirement Benefit prior to attainment of age 62, or may continue in employment after age 65 and thus become eligible for a SERP Later Retirement Benefit, but only upon the approval of the Committee, acting in its discretion. (b) Amount of Benefit. The amount of the SERP Early Retirement Benefit and the SERP Later Retirement Benefit shall be determined pursuant to Section 4.4 below, provided; however, that the Committee, acting in its discretion, may approve, as the SERP Early Retirement Benefit for a Participant, an immediate benefit which is unreduced as a consequence of its early commencement, notwithstanding the provisions of the NC Retirement Plan. 4.4 SERP Retirement Benefit. The annual SERP Retirement Benefit shall be equal to (a) the annual retirement benefit determined for the Participant at the time under the provisions of the NC Retirement Plan, provided, however, that (1) the limitations of Sections 18.6, 18.7, 18.8 and 18.8A of the NC Retirement Plan and similar limitations upon retirement benefits resulting from restrictions imposed by the Internal Revenue Code or Regulations thereunder shall not apply, and (2) there shall be substituted for the Participant's Final Average Earnings the Participant's Final Average Total Earnings, LESS (b) the total of -8- 9 (1) the annual retirement benefit payable with respect to the Participant pursuant to the NC Retirement Plan, (2) the annual retirement benefit (or Actuarially Equivalent Benefit, as determined by the Actuary) payable with respect to the Participant pursuant to any program designated by the Committee to serve as a SERP Offset Program, and (3) during the first five years of payment of any SERP benefits, the amount of the payments, if any, made from time to time by the Employer of the Participant's portion of FICA taxes pursuant to Section 7.3 of the SERP ("FICA Payment") divided by five (with the consequent loss to the Employer in the event the benefits cease before the end of the five year period), and provided further, that to the extent the Participant's benefit under the SERP is distributed in whole or in part by lump sum payment, the FICA Payment shall be deducted from such lump sum payment (to zero, if such be the case) and any FICA Payment not so reimbursed shall be divided equally among the benefit payments scheduled over the next five years. 4.5 Payment of SERP Retirement Benefit. The SERP Retirement Benefit shall be payable pursuant to the same optional forms as are permitted to be elected under the NC Retirement Plan, provided however, that (1) the form and method of payment is subject to the approval of the Committee, acting in its discretion, (2) there shall be no requirement for consent of Participant's spouse for any election to be effective under the SERP, (3) a lump sum payment of an Actuarially Equivalent Benefit (or a portion thereof), as determined by the Actuary, may be made at the election of the Committee acting in its discretion, and (4) the Committee in its discretion may select a combination of methods of payment of the SERP Retirement Benefit. In the event a lump sum payment of an Actuarially Equivalent Benefit (or a portion thereof) is made either (1) pursuant to the preceding paragraph of this Section 4.5 or (2) pursuant to a SERP Offset Program, or both (the total of such payments being herein called "Payments"), -9- 10 the SERP shall pay an additional payment ("Additional Payment") to the SERP Retiree determined as follows: (a) Subtract (x) from (y) where (x) equals an amount determined by multiplying an amount ("Deemed Taxable Amount") equal to the amount of the Payments less the threshold amount applicable to the maximum marginal federal income tax rate in effect for the tax year of the Payments, by the average of the maximum marginal federal income tax rates in effect for the five (5) tax years immediately preceding the tax year of the Payments, and (y) equals an amount determined by multiplying the Deemed Taxable Amount by the maximum marginal federal income tax rate in effect for the tax year of the Payments, and then (b) Divide the difference obtained pursuant to (a) above by 1 minus the maximum marginal federal income tax rate in effect for the tax year of the Payments. In determining the Additional Payment the marital status of the SERP Retiree at the time of the Payments shall be deemed to have been his or her marital status at all relevant times. ARTICLE 5. SERP SURVIVING SPOUSE BENEFIT 5.1 Eligibility for SERP Surviving Spouse Benefit. In the event a SERP Participant dies prior to retirement, there shall be annual amount payable to the Participant's surviving spouse, if any, a SERP Surviving Spouse Benefit which is equal to: (a) 35% of the Participant's Final Average Total Earnings at the time of the Participant's death, provided, however, that the limitations of Sections 18.6, 18.7, 18.8 and 18.8A of the NC Retirement Plan and similar limitations upon retirement benefits resulting from restrictions imposed by the Internal Revenue Code or Regulations thereunder shall not apply, LESS (b) the total of (1) the annual amount payable as a surviving spouse benefit (or Actuarially Equivalent Benefit, as determined by the Actuary) with respect to the Participant pursuant to the NC Retirement Plan, -10- 11 (2) the annual amount payable with respect to the Participant as a Social Security Surviving Spouse Benefit, (3) the annual amount payable as a surviving spouse benefit (or Actuarially Equivalent Benefit, as determined by the Actuary) with respect to the Participant pursuant to any program designated by the Committee to serve as a SERP Offset Program, and (4) during the first five years of payment of any SERP benefits, the amount of the payments, if any, made from time to time by the Employer of the Participant's portion of FICA taxes pursuant to Section 7.3 of the SERP ("FICA Payment") divided by five (with the consequent loss to the Employer in the event the benefits cease before the end of the five year period), and provided further, that to the extent the Participant's benefit under the SERP is distributed in whole or in part by lump sum payment, the FICA Payment shall be deducted from such lump sum payment (to zero, if such be the case) and any FICA Payment not so reimbursed shall be divided equally among the benefit payments scheduled over the next five years. 5.2 Beneficiary of SERP Surviving Spouse Benefit. The beneficiary of the SERP Surviving Spouse Benefit shall be limited to the surviving spouse of the deceased Participant at the time of such Participant's death and the estate of such surviving spouse in the event of the surviving spouse's death prior to receipt of a lump sum payment thereof if such method of payment was previously elected by the Committee, acting in its discretion, prior to the death of such surviving spouse. 5.3 Retirement by Participant Eliminates SERP Surviving Spouse Benefit. In all cases a retirement under the SERP by the Participant shall eliminate the SERP Surviving Spouse Benefit. 5.4 Method of Payment of SERP Surviving Spouse Benefit. The SERP Surviving Spouse Benefit shall be payable in the same manner as the Surviving Spouse Benefit under the -11- 12 NC Retirement Plan is paid, provided however, that in the discretion of the Committee (1) such benefit (or a portion thereof) may be paid in a lump sum payment of an Actuarially Equivalent Benefit, as determined by the Actuary, and (2) the Committee in its discretion may select a combination of methods of payment of the SERP Surviving Spouse Benefit. ARTICLE 6. SERP DISABILITY BENEFIT 6.1 Eligibility for SERP Disability Benefit. In the event a SERP Participant suffers a Disability prior to retirement a SERP Disability Benefit shall be payable. 6.2 Amount of SERP Disability Benefit. The annual SERP Disability Benefit shall be equal to (a) the greater of (1) 60% of the Participant's SERP Base Pay at the time of the Disability, or (2) 50% of the sum of the Participant's (A) SERP Base Pay at the time of Disability, plus (B) the average of the amounts of the Total Awards, if any, for the calendar year ended prior to the Disability and the year prior thereto, determined at the time of the Disability, LESS (b) the sum of (1) the annual amount of the benefit (or Actuarially Equivalent Benefit, as determined by the Actuary) payable to the Participant under the NC Long Term Disability Plan, (2) the annual amount of benefit payable to the Participant as Social Security Disability Benefit, (3) the annual amount of disability benefit (or Actuarially Equivalent Benefit, as determined by the Actuary) payable to the Participant pursuant to any program designated by the Committee to serve as a SERP Offset Program, and -12- 13 (4) during the first five years of payment of any SERP benefits, the amount of the payments, if any, made from time to time by the Employer of the Participant's portion of FICA taxes pursuant to Section 7.3 of the SERP ("FICA Payment") divided by five (with the consequent loss to the Employer in the event the benefits cease before the end of the five year period), and provided further, that to the extent the Participant's benefit under the SERP is distributed in whole or in part by lump sum payment, the FICA Payment shall be deducted from such lump sum payment (to zero, if such be the case) and any FICA Payment not so reimbursed shall be divided equally among the benefit payments scheduled over the next five years. 6.3 Form of Payment of SERP Disability Benefit. The SERP Disability Benefit shall be payable monthly, quarterly or annually as determined by the Committee, acting in its discretion, provided however, that the Committee may determine (1) that the same (or a portion thereof) shall be payable in a lump sum payment of an Actuarially Equivalent Benefit, as determined by the Actuary, and (2) the Committee in its discretion may select a combination of methods of payment of the SERP Disability Benefit. ARTICLE 7. MISCELLANEOUS 7.1 Payment of Benefits. Benefits hereunder shall be paid by the Corporation from its general assets, and shall not be paid from any trust fund established pursuant to any one or more of the Corporation's qualified retirement plans or the NC Long Term Disability Plan. All other provisions of the Plans relating to the payment of benefits, including but not limited to the dates of first and last payment of any benefits and the normal and optional forms of benefit payment, shall apply to the payment of benefits hereunder, except as otherwise specifically provided herein. 7.2 Administration. Except as herein provided, the SERP shall be administered by the Committee which shall administer it in a manner consistent with the administration of the Plans, except that the SERP shall be administered as an unfunded plan which is not intended to -13- 14 meet the qualification requirements of Section 401 of the Internal Revenue Code. The Committee shall have full power and authority to interpret, construe and administer the SERP and the Committee's interpretations and construction hereof, and actions hereunder, including the timing, form, amount or recipient of any payment to be made hereunder, shall be binding and conclusive on all persons for all purposes. No member of the Committee shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of the SERP unless attributable to his or her own willful misconduct or lack of good faith. 7.3 Corporation's Potential Payment of FICA Tax. The Corporation may, in its discretion, pay, for and on behalf of a Participant, the amount, if any, of such Participant's portion of any FICA taxes which may accrue and become payable during the Participant's employment which results from such Participant's Accrued Benefit, and the amount of any such payments(s) by the Employer (without interest) shall serve to reduce such Participant's benefits under this SERP, to the extent as is otherwise provided in the SERP. 7.4 Participants' Rights; Surviving Spouses' Rights. Except as otherwise specifically provided, neither a Participant nor a surviving spouse has rights under the SERP. It is specifically intended that no benefits shall be payable under the SERP to a Participant or his or her surviving spouse or beneficiary prior to the Participant's retirement either after attainment of Normal Retirement Age or, upon Committee approval in accordance with the provisions of Section 4 hereof, at an earlier age, excepting only (a) disability benefits, if applicable, (b) Surviving Spouse Benefits in the event of the death of the Participant prior to retirement, and (c) the payment of benefits after the occurrence of a Vesting Event with respect to the Participant. No Participant or his or her surviving spouse or beneficiary shall have any title to or beneficial ownership in any assets of the Corporation as a result of the SERP or its benefits. 7.5 Timing of Payments Hereunder. Notwithstanding any other provision of the SERP, the Committee may, in its discretion, determine that benefits under the SERP may be made at any time prior to Normal Retirement Age or retirement, whichever first occurs. -14- 15 ARTICLE 8. AMENDMENT; TERMINATION The Corporation expects to continue the SERP indefinitely, but reserves the right, by action of the Committee, to amend it from time to time, or to discontinue it if such a change or discontinuance is deemed necessary or desirable. However, if the SERP should be amended or discontinued, the Corporation shall remain obligated for benefits under the SERP with respect to Participants and surviving spouses whose benefits are in payment status at the time of such action, with respect to any other Participants who have attained Normal Retirement Age as of the date of such action, and, with respect to Accrued Benefits, with respect to any other Participant as to whom a Vesting Event has occurred. ARTICLE 9. UNFUNDED PLAN Plan not Funded. The SERP is an unfunded plan and its benefits are payable solely from the general assets of the Corporation. ARTICLE 10. FORFEITURES Notwithstanding any provision in the SERP to the contrary excepting only the provisions of Article 12, in the event the Committee finds (a) that an Employee or former Employee who has an interest under the SERP has been discharged by his or her Employer in the reasonable belief (and such reasonable belief is the reason or one of the reasons for such discharge) that the Employee or former Employee did engage in fraud against the Employer or anyone else, or (b) that an Employee or former Employee who has an interest under the SERP has been convicted of a crime as a result of which it becomes illegal for his Employer to employ him or her; then any amounts held under the SERP for the benefit of such Employee or former Employee or his or her beneficiaries shall be forfeited and no longer payable to such Employee or former Employee or to any person claiming by or through such Employee or former Employee. Each Participant agrees to the foregoing forfeiture provisions by his or her acceptance of his or her invitation to participate in the SERP and by his or her continued participation. -15- 16 ARTICLE 11. RESTRICTIONS ON ASSIGNMENTS The interest of a Participant or his or her surviving spouse or beneficiary may not be sold, transferred, assigned, or encumbered in any manner, either voluntarily or involuntarily, and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be null and void; neither shall the benefits hereunder be liable for or subject to the debts, contracts, liabilities, engagements, or torts of any person to whom such benefits or funds are payable, nor shall they be subject to garnishment, attachment, or other legal or equitable process nor shall they be an asset in bankruptcy. ARTICLE 12. CHANGE IN CONTROL 12.1 Treatment of Awards. In the event of a Change in Control: (i) the Effective Date of such Change in Control shall be deemed a Vesting Event with respect to all Participants and surviving spouses, and (ii) the rights of all Participants in their Accrued Benefits hereunder as of the Effective Date of such Change in Control shall be 100% vested and nonforfeitable, notwithstanding any other provision hereof. 12.2 Definition of Change in Control. "Change in Control" means the occurrence of any of the following events: (i) The Corporation is merged, consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than sixty-five percent of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction are held in the aggregate by the holders of Voting Stock (as that term is hereafter defined) immediately prior to such transaction; (ii) The Corporation sells or otherwise transfers all or substantially all of its assets to another corporation or other legal person, -16- 17 and as a result of such sale or transfer less than sixty-five percent of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock immediately prior to such sale or transfer; (iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 15% or more of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of the Corporation ("Voting Stock"); (iv) The Corporation files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Corporation has occurred or will occur in the future pursuant to any then-existing contract or transaction; or (v) If, during any period of two consecutive years, individuals who at the beginning of any such period constitute the Directors of the Corporation cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this clause (v) each Director who is first elected, or first nominated for election by the Corporation's stockholders, by a vote of at least two-thirds of the -17- 18 Directors of the Corporation (or a committee thereof) then still in office who were Directors of the Corporation at the beginning of any such period will be deemed to have been a Director of the Corporation at the beginning of such period. Notwithstanding the foregoing provisions of (iii) or (iv) above, unless otherwise determined in a specific case by majority vote of the Board, a "Change in Control" shall not be deemed to have occurred for purposes of (iii) or (iv) above solely because (1) the Corporation, (2) an entity in which the Corporation directly or indirectly beneficially owns 50% or more of the voting equity securities (a "Subsidiary"), or (3) any employee stock ownership plan or any other employee benefit plan of the Corporation or any Subsidiary either files or becomes obligated to file a report or proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 15% or otherwise, or because the Corporation reports that a change in control of the Corporation has occurred or will occur in the future by reason of such beneficial ownership. 12.3 Effective Date of Change in Control. Notwithstanding the foregoing, in the event a Change in Control ultimately results from discussions or negotiations involving the Corporation or any of its officers or directors the Effective Date of such Change in Control shall be the date such discussions or negotiations commenced. -18- 19 ARTICLE 13. BINDING ON CORPORATION, EMPLOYEES AND THEIR SUCCESSORS The SERP shall be binding upon and inure to the benefit of the Corporation, its successors and assigns and each Participant and his or her surviving spouse, beneficiaries, heirs, executors, administrators and legal representatives. ARTICLE 14. LAWS GOVERNING The SERP shall be construed in accordance with and governed by the laws of the State of Ohio. Executed this _____ day of ________________, 1994 at Cleveland, Ohio, but effective as of January 1, 1995. NATIONAL CITY CORPORATION By: -------------------------- -19- 20 EXHIBIT A AGREEMENT NOT TO COMPETE This Agreement, made and dated as of_______________,_____, by and between National City Corporation, a Delaware corporation, and______________________, ("Employee"). W I T N E S S E T H: WHEREAS, National City Corporation is engaged in the business of providing banking and related financial services through a network of banking and non-banking subsidiary corporations and associations (National City Corporation and its subsidiaries hereinafter being referred to collectively as "NCC"); and WHEREAS, the identity of NCC's customers and NCC's business practices are confidential and proprietary to NCC; and WHEREAS, NCC has employed and may in the future employ the Employee in various capacities in which the Employee has access to confidential and proprietary information relating to NCC, its customers, its methods of doing business, and its other business secrets: and WHEREAS, NCC will, under certain circumstances on condition of this Agreement Not to Compete, vest the Employee in benefits accrued under the National City Corporation Supplemental Executive Retirement Plan; NOW, THEREFORE, in consideration of these premises, the mutual covenants and undertakings herein contained, the parties mutually agree as follows: 1. Confidentiality and Non-Competition. The Employee acknowledges that, by virtue of his position with NCC, he has access to certain ideas, methods, developments, 21 inventions, improvements, licenses, trade secrets (including, but not limited to, customer lists), business plans and other information of NCC which are the confidential information and property of NCC. Accordingly, the Employee agrees that while he is employed by NCC and for a period of one (1) year immediately following termination of his employment with NCC for any reason other than termination of the Employee's employment by NCC without cause: a. Competitive Employment. The Employee shall not accept personal employment by any enterprise, firm, business or organization which solicits the customers of NCC to purchase products or services competitive with products or services offered by NCC within any state served by NCC (a "Competitive Business") where the principal situs of such employment is within a state which NCC maintains an office open to the public and providing services which constitutes Competitive Business. b. Investment in Competitor. The Employee shall not, for himself, or on behalf of any other person, persons, firm, partnership, company or corporation acquire or hold any financial interest in any Competitive Business except as a shareholder who owns less than one percent (1%) of the capital stock of any Competitive Business whose securities are traded on a recognized stock exchange or in the over-the-counter market. c. Solicitation of Customers. The Employee shall not, for himself, or on behalf or in conjunction with any other person, persons, firm partnership, company or corporation, for the purpose of diverting or taking away any business of NCC, solicits customers of NCC. d. Solicitation of Employees. The Employee shall not solicit or entice any employee of NCC to leave the employment of NCC. 2 22 For purposes of this Agreement "cause" shall be defined as (i) the willful and continued failure of the Employee to substantially perform the duties assigned to him by NCC, (ii) action by the Employee involving willful misfeasance or gross negligence, (iii) the order of a federal or state court or administrative agency having jurisdiction over NCC where such order involves or relates to the Employee's fitness for continued employment by NCC, (iv) conviction of a crime as a result of which it becomes illegal for NCC to employ the Employee, (v) the reasonable belief (and such reasonable belief is the reason or one of the reasons for his or her discharge) that the Employee did engage in fraud against NCC or anyone else, or (vi) any intentional breach by the Employee of a material term, condition or covenant of this agreement. 2. Confidential Business Information. The Employee recognizes and acknowledges that he will have access to certain confidential information to NCC which is a valuable, special and unique asset of NCC's business. The Employee therefore covenants and agrees that during and after his employment with NCC he shall not reveal to anyone any business information or business methods of NCC which are not known or ascertainable by proper means (including, but not limited to, customer lists). Upon termination of the Employee's employment by NCC, the Employee shall, upon NCC's written request therefor, deliver all customer lists, procedure manuals, other records and all other property belonging to NCC without retaining any copies thereof. 3. Reasonable Terms and Mutual Benefit. The Employee acknowledges and agrees that the constraints imposed upon him pursuant to this agreement are reasonable and necessary for NCC to compete successfully in its businesses. The Employee further acknowledges and agrees that he is in a position to benefit directly from the success of NCC's businesses through 3 23 salary, incentive compensation and other arrangements mutually agreed to from time to time by the Employee and NCC. 4. Right to Injunctive Relief. The Employee acknowledges and agrees that monetary damages will not be adequate or sufficient to protect NCC from any threatened or actual breach or violation of any of the provisions of paragraphs 1 and 2 of this agreement and accordingly acknowledges and agrees that NCC is entitled, in addition to any other remedies which it may have, to injunctive relief to enforce its rights hereunder. 5. Severability. The Employee and NCC agree that if any of the provisions of paragraph 1 of this agreement or any other provision of this agreement is determined by a court of competent jurisdiction to be unenforceable, the remainder of the provisions of paragraphs 1 and 2 of this agreement and the remainder of this agreement shall remain valid, binding and enforceable with respect to the parties. 6. Assignment and Obligations of Assigns. This agreement and the obligations of the Employee shall be binding upon the Employee's heirs and personal representatives. This agreement may be assigned or otherwise shall inure to the benefit of NCC's successor as a result of any disposition or combination of NCC's businesses and the restrictions and limitations imposed upon the Employee pursuant hereto shall continue for the benefit of NCC's assignee or successor, provided, however, notwithstanding anything herein to the contrary, paragraph 1 of this agreement shall not apply to Employee if Employee leaves the employ of NCC or any of its successors for any reason other than the Employee's termination for cause as defined herein, within one year after a Change in Control of NCC. A "Change of Control" shall be the same 4 24 meaning as in the National City Corporation Supplemental Executive Retirement Plan as of the Effective Date of such Change of Control. 7. Term. The term of this agreement shall be for a period commencing as of the date hereof and continuing indefinitely as provided herein as a condition of the Employee's continued employment by NCC or as otherwise mutually agreed in writing by the Employee and NCC. 8. Governing Law. This agreement is executed under and shall be construed in accordance with the laws of the state of Ohio. 9. Headings. The headings of the paragraphs of this agreement are for convenience only and shall not affect in any way the meaning or interpretation of this agreement. NATIONAL CITY CORPORATION ("NCC") Attest: By: --------------------------- --------------------------------- Secretary --------------------------------- ("Employee") --------------------- 5 EX-10.9 5 NATIONAL CITY CORP 10-K EXHIBIT 10.9 1 EXHIBIT 10.9 NATIONAL CITY CORPORATION EXECUTIVE SAVINGS PLAN As Amended and Restated Effective January 1, 1995 1. Amendment and Restatement of the Plan. The following are the provisions of the NATIONAL CITY CORPORATION EXECUTIVE SAVINGS PLAN effective January 1, 1995 ("Plan") which is an amendment and restatement of the Plan in effect prior thereto, which is maintained by National City Corporation ("Corporation") to offer the payment of deferred compensation to certain of the management and highly compensated employees of the Corporation and its subsidiaries and is designed to supplement benefits such employees may receive under the National City Savings and Investment Plan ("SIP") or Companion Savings Plans (as hereinafter defined). The Corporation intends and desires by the maintenance of this Plan to recognize the value to the Corporation of the past and present services of employees covered by this Plan and to encourage and assure their continued service to the Corporation by making more adequate provision for their future security by means of deferred compensation. 2. The SIP and Companion Savings Plans. The term "Companion Savings Plan" shall include those savings and investment plans, if any, of National City Corporation which are modeled after the SIP, but which cover a different group(s) of eligible employees. At the time of this Restatement such Companion Savings Plans include (a) the National City Savings and Investment Plan No. 2, and (b) the Military Banking Division Savings and Investment Plan. The SIP, whenever referred to in this Plan, shall mean the SIP and such Companion Savings Plans, as amended, as they exist as of the date any determination is made of benefits payable under this Plan, provided however that provisions of Section 10 hereof refer solely to the investment funds of the SIP and not to investment funds of any Companion Plan. 2 To the extent necessary to carry out the terms of this Plan, the SIP is hereby specifically referred to and shall form a part of this Plan as fully as if set forth in exhibits hereto. Where any matter is not covered by this Plan but is set forth in the SIP, the terms of the SIP shall control unless such terms are determined by the Committee to be adverse to the purposes of this Plan. In the event any express item or provision of this Plan conflicts with any term or provision of the SIP or any Companion Savings Plan, the terms and provisions of this Plan shall control to the extent necessary to carry out the purposes hereof. 3.1 Definitions. Whenever used herein, the following terms shall have the meanings set forth below, unless otherwise expressly provided. When the defined meaning is intended, the term is capitalized. (a) "Annual Enrollment Period" - the period prior to the December 1 immediately preceding a Plan Year. (b) "Base Compensation" shall have the same meanings as in the SIP. (c) "Board" shall mean the Board of Directors of the Corporation. (d) "Committee" shall mean the Compensation and Organization Committee of the Board, or another committee appointed by the Board to serve as the administering committee of the Plan. (e) "Corporation" shall mean National City Corporation, a Delaware corporation. (f) "Deferral Amount" see Section 5. (g) "Disability" shall mean permanent disability as defined in the provisions of the National City Corporation Long-Term Disability Plan. (h) "Eligible Employee" shall mean an Employee who is employed in a position meeting the defined eligibility criteria for participation in the Plan, as set forth in Section 4. -2- 3 (i) "Eligible Participant" shall mean an Eligible Employee who has been approved by the Committee to participate in the Plan for a particular Plan Year. Such approval shall be on a Plan Year basis and shall be reviewed annually. (j) "Employee" shall mean an individual employed by an Employer on a regular active and full-time salaried basis. (k) "Employer" shall mean the Corporation or any corporation, organization or entity controlled by the Corporation. (l) "Employer Matching Deferrals" see Section 7. (m) "Employer Contributions" shall have the same meaning as in the SIP. (n) "Funds" shall mean the Funds provided for in Section 8 hereof. (o) "Participant" shall mean an Eligible Participant who has elected to participate in the Plan for a given Plan Year. (p) "Plan" see Section 1. (q) "Plan Year" shall mean a period of a calendar year. (r) "Retirement" shall mean normal or early retirement as defined in the National City Corporation Non-Contributory Retirement Plan. (s) "SIP" shall mean the National City Savings and Investment Plan. 3.2 Gender and Number. Except when otherwise indicated by the context, any masculine terminology used herein also shall include the feminine, and the definition of any term in the singular shall include the plural. 4. Eligibility. Eligibility for benefits under this Plan shall be limited to management and highly-compensated employees of the Corporation or its subsidiaries. -3- 4 5. Election to Participate; Deferral of Compensation; Deferral Percentage. Each Eligible Participant shall be given the opportunity during the Annual Enrollment Period to elect to participate in this Plan and to elect the amount of compensation to be deferred hereunder during such Plan Year. Such election and amount to be deferred hereunder shall be irrevocable and fixed from and after the end of the Annual Enrollment Period with respect to such Plan Year. The determination of the amount to be deferred shall be made in terms of a percentage (1% through 10%) of Base Compensation to be deferred both under this Plan and under the SIP and shall assume that the maximum SIP salary contribution permitted the Participant is both elected and made to the SIP during the succeeding Plan Year. The amount to be deferred under this Plan is the difference between such percentage and such maximum permissible SIP contribution (so long as that difference results in a positive number) (called the "Deferral Amount") for such Plan Year shall not be paid to the Participant during such Plan Year but shall be deferred as provided in the Plan. Notwithstanding the foregoing, to be eligible to participate in the Plan in the succeeding Plan Year, an employee must, as of the December 1 prior to such Plan Year if he is employed on such date, effectively elect to contribute the maximum dollar amount of salary reduction contributions permitted him or her under the SIP. In the event such SIP election is revoked or the SIP contribution amount reduced by the Participant for any part of such Plan Year, the Deferral Amount for such Plan Year shall nevertheless continue unchanged for such Plan Year. 6. Employees Hired between Enrollment Periods. Notwithstanding the provisions of Paragraph 5 of the Plan, an employee hired by an Employer after the end of an Annual Enrollment Period may, nevertheless, become eligible to participate for a portion or all of such Plan Year if the following conditions have been met: (1) such employee is selected for participation in the Plan for such Plan Year (or part thereof) by the chief executive officer of the Corporation and -4- 5 (2) such employee completes enrollment in the Plan for such time period by making the elections and decisions provided for herein (including an election to contribute the maximum permissible SIP contribution). Such enrollment and participation in the Plan (including the deferral election) shall apply only with respect to compensation for future services to be rendered by such employee, namely, compensation for services rendered after the deferral election of such employee becomes final by acceptance on behalf of the Corporation. 7. Employer Matching Deferrals. (a) Eligibility. Employer Matching Deferrals under the Plan shall be made only with respect to Participants who throughout the Plan Year make the maximum permissible salary reduction contributions under the provisions of the SIP, as determined from time to time under the SIP. (b) Amount. Employer Matching Deferrals under the Plan for Participants shall equal the amount of Employer Matching Contributions for such Plan Year not allocated to the account of such Participant under the SIP for such Plan Year because of applicable limitations on contributions under the SIP. The Employer Matching Deferrals for the Deferral Amounts hereunder will be provided in the same fashion as Employer Matching Contributions match salary reduction contributions under the SIP. (c) Deferral. The amount of any Employer Matching Deferral for any Plan Year shall be deferred and added to the Participant's Deferral Amount in the account of such Participant for such Plan Year, and shall not be currently paid to such Participant. (d) Timing of Deferrals and Matches. Participant Deferral Amounts and Employer Matching Deferrals shall be made at the same times as Employer Matching Contributions are made under the SIP. 8. Accounts. An account shall be established and maintained by the Corporation in the name of each Participant. Such accounts shall remain a part of the general liabilities of the Corporation and nothing in this Plan shall be deemed to create a trust or fund of any kind or any fiduciary -5- 6 relationship. Each Participant's account shall be comprised of five sub- accounts: (a) the "Money Market Fund"; (b) the "Fixed Income Fund"; (c) the "Equity Fund"; (d) the "NCC Stock Fund"; and (e) the "Capital Preservation Fund"; such sub-accounts jointly are herein called the "Funds." 9. Crediting to Accounts and Funds. When the Deferral Amounts and the Employer Matching Deferrals are deemed to be made they shall be credited to each Participant's account, and shall correspondingly be credited to the Fund or Funds selected by the Participant. 10. Funds. The Funds hereunder are designed to reflect the five respective Investment Funds maintained in the SIP. Accordingly, each such Fund and each Participant's Account therein shall be adjusted hereunder as of the end of each month to reflect the income, gain or loss of the corresponding SIP investment fund for such month, as calculated and published on a monthly basis by the trustee of the SIP. In the event during a Plan Year a Fund selected hereunder is no longer offered by the SIP, the amounts which would have been deemed invested in such Fund except for this provision shall be deemed to be invested for the remainder of such Plan Year in a savings or time deposit of National City Bank of less than $100,000 which earns the highest rate of interest then being paid by the Bank on such deposits. Participants will be offered a new selection of investment with respect to later Plan Years (subject to Committee consent) and amounts not made subject to an effective investment selection at such time shall be deemed to be invested in the Money Market Fund of the SIP. 11. Selection of Funds. Each Participant and each beneficiary of a deceased Participant may select the Fund(s) he or she wishes to be used hereunder for his or her account. The selection of Funds shall be made in 5% increments of the Deferral Amounts and Employer Matching Deferrals and a single election shall govern both Deferral Amounts and Employer Matching Deferrals. In the event no -6- 7 election is made by a Participant his or her account shall be deemed invested in and credited to the Money Market Fund. 12. No Change of Investment Fund Selection Permitted Except by Death Beneficiary or as of a December 1 for following Plan Year, with Committee approval. Each selection of a Fund hereunder shall be final and shall not thereafter be revised or changed, provided, however, that upon the death of a Participant (or a beneficiary of a deceased Participant or beneficiary), any beneficiary hereunder, upon becoming such, may change such selection once at such time, and provided further that each Participant (or beneficiary if the Participant is deceased) may change his or her Funds choice on or before any December 1 for the next and later Plan Years. Notwithstanding the foregoing, the consent of the Committee shall be necessary for any such change in Funds choices; such consent is discretionary in the Committee. 13. Vesting of Deferrals. (a) Employer Matching Deferrals Require Maximum SIP Contribution. Employer Matching Deferrals are specifically conditioned upon the Participant making the maximum salary reduction contributions during the Plan Year permitted to him or her under the SIP. In the event such maximum salary reduction contributions are not made during the Plan Year, such Plan Year's Employer Matching Deferrals for such Participant, if any, shall be forfeited, with all earnings or gains thereon. (b) Vesting of Employer Matching Deferrals. (1) In the event of a voluntary termination of employment by a Participant on or before January 1, 1995 for a reason other than death, Disability or Retirement, Employer Matching Deferrals and the earnings and gains thereon credited to such Participant's account shall be vested or forfeited as follows: (A) Employer Matching Deferrals (and income and gain thereon) credited to the Participant for the Plan Year in which the employment termination occurred plus an amount equal to the Employer Matching Deferrals credited to the Participant for the Plan Year preceding the Plan Year of employment termination shall be forfeited. (B) All other Employer Matching Deferrals shall be vested. -7- 8 (2) In the event the Participant's employment termination occurs after January 1, 1995 or is by reason of death, Disability or Retirement, the Participant's Employer Matching Deferrals, plus earnings, gains and losses thereon, will be 100% vested in the Participant. (c) Deferral Amounts. Deferral Amounts contributed under the Plan by Participants and earnings and gains thereon are always 100% vested. 14. Manner of Distribution. Except as otherwise provided herein, distributions of vested Participant account balances shall take place over the period of ten years commencing on the death, Retirement or other termination of employment of the Participant and amounts deferred hereunder shall not be subject to any withdrawal in advance of such time. Further, this Plan shall not permit any Participant to borrow any portion of the Deferral Amount or Employer Matching Deferrals. The first distribution shall take place on the February 1 of the Plan Year following the Plan Year in which such death, Retirement or termination occurs. Succeeding payments shall be made on succeeding February 1sts. The amount to be distributed shall be determined by multiplying (i) the dollar value of the Participant's account on the date of such installment, by (ii) a fraction, the numerator of which is one, and the denominator of which is the number of remaining unpaid distributions. The balances of each Participant's account and each of the Funds shall be appropriately reduced to reflect the distribution payments made. Amounts held pending distribution pursuant to this Paragraph 14 shall continue to be credited with appropriate income, gains and losses as herein provided and shall be subject to investment changes as herein provided. Balances in more than one Fund shall be reduced pro-rata to reflect distributions on a pro-rata basis from the Account. In the case of the first distribution after the death of a Participant, the Committee may, in its discretion, provide for payment of a portion or all of the first distribution prior to the February 1 after such death. All distributions under this Plan shall be made only in cash. -8- 9 15. Accelerated Payments; Revised Distributions. Without regard to the provisions of Paragraph 14 above, the Committee may determine that a Participant's account which has a balance of $100,000 or less shall be paid out in a lump sum. Furthermore, the Committee may determine that a lump sum distribution should be made to a Participant who has terminated employment voluntarily by means other than death, Disability or Retirement. In the event such determination is made, such lump sum distribution shall be made as of the next succeeding February 1. In addition, the Committee, in its discretion, may provide that distributions may be made in a lesser number of annual installments, but not less than 5. 16. Beneficiary Designations. Each Participant and each beneficiary of a deceased Participant or beneficiary may designate, on a beneficiary designation form supplied by the Committee, any person or persons to whom payments are to be made if the Participant (or beneficiary) dies before receiving payment of all amounts due hereunder. A beneficiary designation will be effective only after the signed beneficiary designation form is filed with the Committee while the Participant (or beneficiary) is alive, and will cancel all beneficiary designations signed and filed earlier. If the Participant (or beneficiary) fails to designate a beneficiary as provided above, or if all designated beneficiaries die before the Participant (or beneficiary) or before complete payment of all amounts due hereunder, the remaining Participant's account balance shall be paid in one lump sum to the Surviving Spouse of the Participant, if any, or, if there be none, to the estate of the last to die of the Participant or his or her designated beneficiaries, if any. 17. Administration Except as herein provided, this Plan shall be administered by the Committee, which shall administer it in a manner consistent with the administration of the SIP, except that this Plan shall be administered as an unfunded plan which is not intended to meet the qualification requirements of Section 401 of the Internal Revenue Code. The Committee shall have full power and authority -9- 10 to interpret, construe and administer this Plan and its interpretations and construction hereof, and actions hereunder, including the timing, form, amount or recipient of any payment to be made hereunder, shall be binding and conclusive on all persons for all purposes. The Committee may name assistants who may be, but need not be, members of the Committee. Such assistants shall serve at the pleasure of the Committee, and shall perform such functions as may be assigned by the Committee. No member of the Committee or any assistant shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Plan unless attributable to his or her own willful misconduct or lack of good faith. 18. Participants Rights; Beneficiaries Rights. Except as otherwise specifically provided, neither a Participant nor any of his or her beneficiaries has rights under this Plan. The payment of deferred compensation shall be a general, unsecured obligation of the Corporation to be paid by the Corporation from its own funds, and such payments shall not (i) impose any obligation upon the trust fund under the SIP;(ii) be paid from the trust fund under the SIP; or (iii) have any effect whatsoever upon the SIP or the payment of benefits from the trust fund under the SIP. No Participant or beneficiary shall have any title to or beneficial ownership in any assets which the Corporation may earmark to pay benefits hereunder. 19. Amendment and Discontinuance. The Corporation expects to continue this Plan indefinitely, but reserves the right, by action of the Committee, to amend it from time to time, or to discontinue it if such a change is deemed necessary or desirable. However, if the Committee should amend this Plan, the Corporation shall remain obligated under the Plan with respect to Deferral Amounts and Employer Matching Deferrals (and the earnings, gains and losses thereon, if any) for which, as of the date of such action, deferral elections have been made hereunder and have become final by acceptance by the Corporation. -10- 11 20. Nature of Agreement. The adoption of this Plan and any setting aside by the Corporation of amounts with which to discharge its obligations hereunder in a trust fund, an insurance policy, or otherwise, shall not be deemed to create a right in any person; equitable title to any funds so set aside in a trust, an insurance policy, or otherwise shall remain in the Corporation, and any recipient of benefits hereunder shall have no security or other interest in such trust, policies or funds. Any and all funds so set aside in a trust, an insurance policy or otherwise shall remain subject to the claims of the general creditors of the Corporation, present and future. This provision shall not require the Corporation to set aside any funds, but the Corporation may set aside such funds if it chooses to do so. This Plan is intended to constitute an unfunded plan described in Section 201(2) of the Employee Retirement Income Security Act of 1974. 21. Restrictions on Assignments. The interest of a Participant or his or her beneficiary may not be sold, transferred, assigned, or encumbered in any manner, either voluntarily or involuntarily, and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be null and void; neither shall the benefits hereunder be liable for or subject to the debts, contracts, liabilities, engagements, or torts of any person to whom such benefits or funds are payable, nor shall they be subject to garnishment, attachment, or other legal or equitable process nor shall they be an asset in bankruptcy, except that no amount shall be payable hereunder until and unless any and all amounts representing debts or other obligations owed to the Employer by the Participant with respect to whom such amount would otherwise be payable shall have been fully paid and satisfied. 22. Binding on Corporation, Employees and Their Successors. This Plan shall be binding upon and inure to the benefit of the Corporation, its successors and assigns and each Participant and his or her beneficiaries, heirs, executors, administrators and legal representatives. -11- 12 23. Laws Governing. This Plan shall be construed in accordance with and governed by the laws of the State of Ohio. Executed as of this _____ day of ______________, 1994 at Cleveland, Ohio. NATIONAL CITY CORPORATION By: --------------------- -12- EX-10.21 6 NATIONAL CITY CORP 10-K EXHIBIT 10.21 1 EXHIBIT 10.21 NATIONAL CITY CORPORATION ANNUAL CORPORATE PERFORMANCE INCENTIVE PLAN Effective January 1, 1995 ARTICLE 1. THE PLAN AND ITS PURPOSE 1.1 Adoption of Plan. This National City Corporation Annual Corporate Performance Incentive Plan (herein referred to as the "Plan) is hereby adopted, effective January 1, 1995. to provide for the operation of the Plan on and after such date and to govern the treatment of deferrals made under this Plan. 1.2 Purpose. The purpose of the Plan is to maximize the Corporation's profitability and operating success by providing an incentive to Senior Officers to achieve superior results. The Plan is designed to promote teamwork to achieve overall corporate success and to motivate individual excellence. 1.3 Operation of the Plan. The Plan shall be administered by the Compensation and Organization Committee of the Board of Directors of the Corporation. The Plan operates on a calendar year basis and is subject to the review, interpretation, and administration by such Committee. The Plan governs the eligibility for and amounts of incentive compensation to be awarded under the Plan. With respect to any award made under the Plan, the Plan shall serve as a non-qualified plan providing for and governing the treatment of deferred compensation at the election of the Participant and/or the Committee, as provided herein. ARTICLE 2. DEFINITIONS 2.1 Definitions. Whenever used herein, the following terms shall have the meanings set forth below, unless otherwise expressly provided. When the defined meaning is intended, the term is capitalized. 2 (a) "Award" shall mean the payment earned by a Participant based on the Corporation's actual results measured against the performance of a peer group of companies as set forth in Article 4. (b) "Base Salary" shall mean the annual salary of each Active Participant at the close of the Plan Cycle, exclusive of any bonuses, incentive pay, special awards, or stock options. (c) "Board" shall mean the Board of Directors of the Corporation. (d) "Change in Control" see Section 11.3. (e) "Committee" shall mean the Compensation and Organization Committee of the Board, or another committee appointed by the Board to serve as the administering committee of the Plan. (f) "Corporation" shall mean National City Corporation, a Delaware corporation. (g) "Disability" shall mean permanent disability as defined in the provisions of the National City Corporation Long Term Disability Plan at the commencement of the Plan Cycle with respect to which such definition is relevant. (h) "Early Retirement" shall have the same meaning as in the National City Corporation Non-Contributory Retirement Plan. (i) "Effective Date" see Section 11.4. (j) "Eligible Employee" shall mean an Employee who is employed in a position meeting the defined eligibility criteria for participation in the Plan, as set forth in Article 3. (k) "Employee" shall mean an individual employed by an Employer on a regular, active and full-time salaried basis. (l) "Employer" shall mean the Corporation or any corporation, organization or entity controlled by the Corporation. (m) "Exchange Act" shall mean the Securiites Exchange Act of 1934, as amended. (n) "Funds" see Section 9.3. -2- 3 (o) "Implementation Date" see Section 11.5. (p) "Key Financial Indices" shall mean those indices frequently used by financial corporations to measure profitability and overall operating performance. These indices are: return on common equity; return on assets; overhead ratio; efficiency ratio; net interest margin; total annual return on common stock; earnings per share; and percent of change in earnings per share, as determined in accordance with generally accepted accounting principles, and as appropriately adjusted to take into account the use by different corporations of different accounting principles. With respect to any Plan Cycle the Committee shall determine, prior to the Plan Cycle, which indices are the Key Financial Indices to be used and the weighting to be given each index; thereafter, such Key Financial Indices and such weightings for such Plan Cycle shall not be changed. (q) "Normal Retirement" shall have the same meaning as in the National City Non-Contributory Retirement Plan at the commencement of the Plan Cycle with respect to which such definition is relevant. (r) "Parallel Funds" see Section 9.5. (s) "Participant" shall mean an Eligible Employee who is approved by the Committee for participation in the Plan. Such approval shall be on a Plan Cycle basis and shall be reviewed with respect to each new Plan Cycle. (t) "Peer Group" shall mean a group of comparable corporations used to measure relative performance. Such Peer Group shall be established by the Committee prior to the commencement of each Plan Cycle; thereafter, such Peer Group for such Plan Cycle shall not be changed, provided however, that one or more members of a Peer Group shall be dropped therefrom in the event of the acquisition of the Peer Group member, the acquisition of sixty-five percent or more of the gross assets of the Peer Group member or the merger of the Peer Group member with another company(ies) where the Peer Group member is not the surviving corporation. (u) "Plan" see Section 1.1. -3- 4 (v) "Plan Cycle" shall mean a period of a calendar year. (w) "SIP" shall mean the National City Savings and Investment Plan. (x) "Subsidiary" see paragraph 11.3(e). (y) "Vesting Event" means the earliest to occur of the following dates: (1) the date any Award is payable hereunder; (2) the Effective Date of a Change in Control; (3) the date a Participant is eligible to retire on a Normal Retirement; (4) the date a Participant has a Disability; or (5) the date of a Participant's death. (z) "Voting Stock" see paragraph 11.3(e). Each Participant and Beneficiary with respect to whom a Vesting Event has occurred shall be 100% vested in his or her benefits or Awards earned or accrued hereunder as of the date of such Vesting Event, subject to the forfeiture provisions of Article 10. 2.2 Gender and Number. Except when otherwise indicated by the context, any masculine terminology used herein also shall include the feminine, and the definition of any term in the singular shall include the plural. ARTICLE 3. ELIGIBILITY AND PARTICIPATION 3.1 Eligibility. Eligibility for participation in the Plan will be limited to those officers of the Corporation and its subsidiaries who, by the nature and scope of their position, play a key role in the management, growth and success of the Corporation, as determined by the Committee. 3.2 Participation. Participation in the Plan (including a Participant's Category) shall be determined by the Committee with respect to each Plan Cycle prior to the commencement of the Plan Cycle, and shall not thereafter be changed with respect to such Plan Cycle. The Committee may base its decision upon the recommendation of the Chief Executive Officer of National City Corporation. The Committee shall classify Senior Officers for the purposes of the Plan into the following categories: -4- 5 Category Persons Included -------- ---------------- Category I Chief executive officer of the Corporation Category II President and deputy chairmen of the Corporation, and similar officers Category III Executive vice presidents of the Corporation and the chief executive officers of major subsidiaries of the Corporation, and similar officers Category IV Senior officers of the Corporation and executive officers of major subsidiaries, and similar officers Categories V & VI All other officers of the Corporation or its subsidiaries who are approved for participation in the Plan by the Committee Each Eligible Employee approved for participation shall be notified of the selection as soon after approval as is practicable and shall become a Participant upon acceptance by him or her of such selection. 3.3 Participation for part of a Plan Cycle; Category Changes During a Plan Cycle. No Participant shall participate in this Plan for a portion of a Plan Cycle and changes in a Participant's Category in mid-Plan Cycle shall not serve to change his or her Category of participation in the Plan for any Plan Cycle which shall have commenced. 3.4 No Right to Participate. No Participant or Employee shall have a right at any time to be selected for current or future participation in the Plan. ARTICLE 4. PERFORMANCE MEASUREMENT 4.1 Performance Criteria. Performance, for purposes of this Plan, will be measured by corporate results. Corporate results will be measured by comparing corporate performance with respect to Key Financial Indices to that of the Peer Group. Prior to the beginning of each Plan Cycle, the Committee shall establish the Peer Group, the Key Financial Indices, the weighting of the Key Financial Indices chosen, and the levels of comparative performance at which the presumed Threshhold, Target and Maximum Awards will be provided under the Plan. -5- 6 4.2 Award Potential. The amount of incentive compensation that shall be awarded to a Participant under this Plan shall be expressed as a percentage of Base Salary. Such percentage shall equal the percentage set forth below depending upon the attainment of Target or Maximum results:
Percent of Base Compensation ---------------------------- Category Threshold Target Maximum -------- --------- ------ ------- I 0% 50% 76.5% II 0% 40% 60% III 0% 27% 42% IV 0% 14% 22% V 0% 5% 8% VI 0% 2.5% 5%
4.3 Award Calculation and Approval. The amount of the Award for each Participant for each Plan Cycle will be calculated as of the December 31 on which the Plan Cycle ends by applying the foregoing provisions of this Article 4 to the Corporate Results for such Plan Cycle. All such Awards may, for convenience purposes, be normally expressed as a percentage of Base Salary. Upon the close of the Plan Cycle the amounts of Awards hereunder for such Plan Cycle shall be final. 4.4 Limitation. Notwithstanding any provision in this Plan to the contrary, no Award for any one Plan Cycle shall exceed $1,000,000.00. ARTICLE 5. PAYMENT OF AWARDS 5.1 Form and Timing of Payment of Awards. Within 90 days after the end of the Plan Cycle, the Participant shall be entitled to receive a cash payment equal to the entire amount of the Participant's Award. Except as otherwise provided for in Section 5.2, to receive an Award a Participant must be an Employee on the date on which the Plan Cycle ends. The Committee may terminate a Participant's Award prior to any Vesting Event. -6- 7 5.2 Termination of Employment Due to Retirement, Disability or Death. In the event a Participant's employment is terminated during a Plan Cycle by reason of Normal Retirement, Early Retirement, Disability or Death, the Participant shall be eligible to receive a prorated Award based on Corporate Results during the Participant's employment, provided however, that the Participant must have been a Participant in the Plan for at least three months of the Plan Cycle to be eligible to receive any Award hereunder. Such Awards will be paid within ninety (90) days following the end of the Plan Cycle. In the event of death, the Award will be paid to the Participant's estate. 5.3 Other Terminations of Employment. In the event a Participant's employment is terminated during a Plan Cycle prior to a Vesting Event, the Participant's participation in a Plan Cycle shall end and the Participant shall not be entitled to any Award for such Plan Cycle. 5.4 Request to Defer Payment; Deferred Payments. A Participant may elect to request to have a portion or all of his or her Award for such Plan Cycle deferred and paid out at a future date. Such request shall be considered by the Committee. The Committee may determine that some, all, or none of the Awards, or parts thereof, shall be deferred, in its discretion. Deferred amounts are subject to the provisions of Article 9. ARTICLE 6. RIGHTS OF PARTICIPANTS 6.1 Employment. Nothing in this Plan shall interfere with or limit in any way the right of the Corporation to terminate a Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Employer. 6.2 Restrictions on Assignments. The interest of a Participant or his or her beneficiary under this Plan may not be sold, transferred, assigned, or encumbered in any manner, either voluntarily or involuntarily, and any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be null and void; neither shall the benefits hereunder be liable for or subject to the debts, contracts, liabilities, engagements, or torts of any person to whom such benefits or funds are payable, nor shall they be subject to garnishment, attachment, or other legal or equitable process, nor shall they be an asset in bankruptcy. -7- 8 ARTICLE 7. ADMINISTRATION Administration. The Plan shall be administered by the Committee in accordance with any administrative guidelines and any rules that may be established from time to time by the Committee. The Committee shall have full power and authority to interpret, construe and administer the Plan and its interpretations and construction hereof, and actions hereunder, including the timing, form, amount or recipient of any payment to be made hereunder, and its decisions shall be binding and conclusive on all persons for all purposes. The Committee may name assistants who may be, but need not be, members of the Committee. Such assistants shall serve at the pleasure of the Committee, and shall perform such functions as may be assigned by the Committee. No member of the Committee or any assistant shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Plan unless attributable to his or her own willful misconduct or lack of good faith. ARTICLE 8. REQUIREMENTS OF LAW 8.1 Laws Governing. This Plan shall be construed in accordance with and governed by the laws of the State of Ohio. 8.2 Withholding Taxes. The Corporation shall have the right to deduct from all payments under this Plan any federal or state taxes required by the law to be withheld with respect to such payments. 8.3 Plan Binding on Corporation, Employees and Their Successors. This Plan shall be binding upon and inure to the benefit of the Corporation, its successors and assigns and each Participant and his or her beneficiaries, heirs, executors, administrators and legal representatives. -8- 9 ARTICLE 9. DEFERRAL OF AWARDS 9.1 Election to Request Deferral of Award; Deferral Percentage. Prior to each Plan Cycle, the Committee shall determine which Participants, if any, shall be eligible to make deferral elections under this Plan. Each Participant who is therefore eligible to elect to request deferral of a portion or all of his or her Award for such Plan Cycle shall be given the opportunity prior to such Plan Cycle to make such request. Such election and the percentage of Award requested to be deferred shall be irrevocable and fixed with respect to such Participant and such Plan Cycle from and after the December 31 of the year prior to the Plan Cycle. The request and determination of the portion of the Award to be deferred shall be made in terms of 10% increments of the Award. Promotion or demotion during a Plan Cycle shall not affect the fixed and irrevocable nature of a deferral request made prior to such Plan Cycle for such Plan Cycle. 9.2 Deferral of Awards; Committee's Decision. Notwithstanding any request to defer none, a portion, or all of an Award hereunder submitted by a Participant pursuant to Section 9.1 above, and notwithstanding the Committee's prior determination as to the eligibility of any Participant to defer a portion or all of any Award hereunder, the Committee shall make the decision, in the case of each Participant, whether or not to defer any portion or all of any Participant's Award with respect to any Plan Cycle. Such decision shall be made in the discretion of the Committee. The Committee's discretion extends to the percentage of any Award to be deferred. The Committee's decision shall be final and binding on all parties. Any amount to be deferred shall not be paid to the Participant but shall be deferred as provided in this Article 9. 9.3 Accounts. An account shall be established and maintained by the Corporation in the name of each Participant who has deferred compensation hereunder. Such accounts shall remain a part of the general liabilities of the Corporation and nothing in this Plan shall be deemed to create a trust or fund of any kind or any fiduciary relationship. Each Account shall be comprised of ten sub-accounts: (a) the "Savings Account Fund"; (b) the "NCC Stock Fund"; (c) -9- 10 the "Equity Fund"; (d) the "Fixed Income Fund"; (e) the "Money Market Fund"; (f) the "Capital Preservation Fund"; (g) the "Mid Cap Regional Equity Fund"; (h) the "Equity Income Fund"; (i) the "Equity Index Fund"; and (j) the "Foreign Equity Fund"; such sub-accounts jointly are herein called the "Funds". 9.4 Crediting to Accounts. As of the dates of payment of cash Awards made under this Plan the amount of the Award to be deferred for each Participant under this Section 9 shall be credited to such Participant's Account, and shall correspondingly be credited to the Fund or Funds selected by the Participant. 9.5 Funds. The nine Funds hereunder other than the Savings Account Fund (such nine Funds being herein called "Parallel Funds") are designed to reflect investment funds maintained in the SIP. Accordingly, each such Parallel Fund and each Participant's Account therein shall be adjusted hereunder as of the end of each month to reflect the income, gain or loss of the corresponding SIP investment fund for such month, as calculated and published on a monthly basis by the Trustee of the SIP. In the event the SIP no longer offers a fund corresponding to one of the Parallel Funds, the amounts which would have been deemed invested in such Parallel Fund except for this provision shall be deemed to be invested in the Savings Account Fund. 9.6 Savings Account Fund. Amounts deferred to the Savings Account Fund shall be credited to the Participant's Account in such Fund as of the date that other Awards for such Plan Cycle are paid or would be paid, and interest shall be credited on amounts in the Participant's Account in such Fund at the end of each calendar quarter in amount equal to interest on the average credit balance in such Account during such calendar quarter, at the highest published rate being paid by National City Bank on savings or time deposits of less than $100,000 on the last day of such quarter, regardless of maturity. 9.7 Selection of Funds. Each Participant (and each Beneficiary of a deceased Participant) may select the Investment Fund or Funds he or she wishes to be used hereunder for his or her account. The selection of Funds shall be made in portions of the amount deferred -10- 11 equal to 5% of the total of such amounts. In the event no election is made by a Participant (or Beneficiary) his or her account shall be deemed invested in and credited to the Savings Account Fund. Selection of Funds by Participants shall be made no later than the December 1 of the Plan Cycle for which the Award is to be made in advance of the deferral or payment of the Award; provided however, that in the event a Participant who has not requested a deferral of any part of his or her Award nevertheless has a portion thereof deferred by decision of the Committee, or otherwise, then in such event, such Participant shall immediately be given an election period of 10 days to determine appropriate investments, such period running from the date of his or her notification of his or her right to make such selection. 9.8 No Change of Investment Fund Selection Permitted Except with Committee Approval. Each selection of a Fund hereunder shall be final and shall not thereafter be revised or changed, provided, however, that each Participant (or Beneficiary if the Participant is deceased) may request a change in his or her Investment Fund choice by filing such request with the Committee. Notwithstanding the foregoing, the consent of the Committee shall be necessary for any such change in investment fund choices; such consent is discretionary in the Committee and the Committee shall act upon such requests as are filed with it at the Committee's next regularly scheduled meeting. 9.9 Vesting of Deferred Amounts. Amounts of Awards made and deferred under the Plan, and earnings and gains thereon, are always 100% vested. 9.10 Manner of Distribution. Except as otherwise provided herein, distributions hereunder shall take place over a period of ten years commencing on the retirement, death or other termination of employment of the Participant. The first distribution shall take place on the February 1 of the calendar year following the calendar year in which such retirement, death or other termination occurs. Succeeding payments shall be made on succeeding February 1sts. The amount to be distributed shall be determined by multiplying (i) the dollar value of the Participant's entire interest hereunder on the date of such installment, by (ii) a -11- 12 fraction, the numerator of which is one, and the denominator of which is the number of distributions remaining unpaid at such time, or by such other method as may be adopted by the Committee. The balances of each Account and each Investment Fund shall be appropriately reduced to reflect the distribution payments made. Amounts held pending distribution pursuant to this Section 9.10 shall continue to be credited with appropriate income, gains and losses as herein otherwise provided and shall be subject to investment changes as herein provided. Balances in more than one Fund shall be reduced pro-rata to reflect distributions on a pro-rata basis from each Fund. 9.11 Accelerated Payments; Revised Distributions. Notwithstanding the foregoing, the Committee may determine that a Participant's interest hereunder which equals $100,000 or less shall be paid out in a lump sum. Furthermore, the Committee may determine that a lump sum distribution should be made to a Participant who has terminated employment by means other than death, disability or retirement. In the event such determination is made, such lump sum distribution shall be made as of the next succeeding February 1, or at such other time as may be determined by the Committee. In the case of the first distribution after the death of a Participant, the Committee may, in its discretion, provide for payment of a portion or all of the distribution prior to the February 1 after such death. Notwithstanding any other provision hereof, the Committee, in its discretion, may provide that distributions may be made in a lesser number of installments, but not less than 5. 9.12 Beneficiary Designations. Each Participant, and each Beneficiary of a deceased Participant or Beneficiary hereunder, may designate, on a Beneficiary Designation form supplied by the Committee, any person or persons to whom payments are to be made if the Participant (or Beneficiary) dies before receiving payment of all amounts due hereunder. A beneficiary designation will be effective only after the signed Beneficiary Designation form is filed with an -12- 13 officer of the Corporation designated by the Committee for such purpose while the Participant (or Beneficiary) is alive, and will cancel all beneficiary designations signed and filed earlier. If the Participant (or Beneficiary) fails to designate a beneficiary as provided above, or if all designated beneficiaries die before the Participant or before complete payment of all amounts due hereunder, remaining unpaid distribution amounts shall be paid to the then surviving spouse of the Participant, if any, or, if there be none, in one lump sum to the estate of the last to die of the Participant or his or her designated beneficiaries, if any. In the event a Participant (or a Beneficiary of a deceased Participant) designates as a Beneficiary any so called "marital deduction trust" or any so called "qualified income trust", the Participant (or Beneficiary) may additionally indicate whether the dollar equivalent of the current income, during the distribution of an interest hereunder, should be distributed yearly to such Beneficiary. In the event of such an indication, such income shall be distributed at least annually. 9.13 Participants Rights; Beneficiaries Rights. Except as otherwise specifically provided, neither a Participant nor any of his or her Beneficiaries has rights under this Plan. The payment of deferred compensation shall be a general, unsecured obligation of the Corporation to be paid by the Corporation from its own funds, and such payments shall not impose any obligation upon any trust fund for any tax qualified plan, be paid from any such trust fund, or have any effect whatsoever upon the SIP or the payment of benefits from the Trust Fund under the SIP. No Participant or beneficiary shall have any title to or beneficial ownership in any assets which the Corporation may earmark to pay benefits hereunder. 9.14 Nature of deferred compensation. The election of deferred compensation under this Plan and any setting aside by the Corporation of amounts with which to discharge its deferred obligations hereunder in a trust fund, an insurance policy, or otherwise, shall not be deemed to create a right in any person; equitable title to any funds so set aside in a trust, an insurance policy, or otherwise shall remain in the Corporation, and any recipient of benefits hereunder shall have no security or other interest in such trust, policies or funds. Any and all -13- 14 funds so set aside in a trust, an insurance policy or otherwise shall remain subject to the claims of the general creditors of the Corporation, present and future. This provision shall not require the Corporation to set aside any funds, but the Corporation may set aside such funds if it chooses to do so. Any amount so set aside for this Plan shall be accounted for separately and apart from any other plan of the Corporation. This Plan is intended to constitute an unfunded plan of deferred compensation described in Section 201(2) of the Employee Retirement Income Security Act of 1974. 9.15 Distributions in Cash. Notwithstanding any other provision of this Plan, distributions hereunder shall be made only in cash and shall be subject to withholding of applicable taxes. 9.16 Nature of Deferred Compensation Plan. The provisions of the Plan relating to deferred compensation are fixed and final unless and until amended, revised or terminated as herein provided. ARTICLE 10. FORFEITURES Notwithstanding any provision in this Plan to the contrary, excepting only the provisions of Article 11, in the event the Committee finds (a) that an Employee or former Employee who has an interest under this Plan has been discharged by his or her Employer in the reasonable belief (and such reasonable belief is the reason or one of the reasons for such discharge) that the Employee or former Employee did engage in fraud against the Employer or anyone else, or (b) that an Employee or former Employee who has an interest under this Plan has been convicted of a crime as a result of which it becomes illegal for his Employer to employ him or her, then any amounts held under this Plan for the benefit of such Employee or former Employee or his or her beneficiaries shall be forfeited and no longer payable to such Employee or former Employee or to any person claiming by or through such Employee or former Employee. -14- 15 ARTICLE 11. CHANGE IN CONTROL 11.1 Treatment of Awards. In the event of a Change in Control the Corporation shall pay to each Participant who is participating in a Plan Cycle on the Effective Date of such Change in Control, a lump sum cash payment equal to the amount hereinafter determined. Such payment shall be paid in cash to the Participant within five business days after the Implementation Date of such Change in Control and shall be payment in full to each Participant for the Plan Cycle, and such Plan Cycle shall be deemed terminated by operation of this Article 11. No further Plan Cycles shall commence thereafter under this Plan. Such cash payment shall be made without regard to any request to defer made with respect to any such Plan Cycle (which shall be inoperative) and without regard to any deferral action by the Committee. Amounts deferred under this Plan prior to the Effective Date (by request, as required, or as decided by the Committee) shall continue to be payable from time to time under this Plan as deferred payments hereunder. 11.2 Amount of Payment. The Amount of the payment to be made as a consequence of a Change in Control shall, with respect to each Plan Cycle, be equal to the maximum Award which could be paid hereunder to each Participant. 11.3 Definition of Change in Control. "Change in Control" shall mean the occurrence of any of the following events: (a) The Corporation is merged, consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than sixty-five percent of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction are held in the aggregate by the holders of Voting Stock immediately prior to such transaction; (b) The Corporation sells or otherwise transfers all or substantially all of its assets to another corporation or other legal person, and as a result of such sale or transfer less than sixty-five percent of the combined voting power of the then-outstanding securities of such -15- 16 corporation or person immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock immediately prior to such sale or transfer; (c) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Exchange Act, disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 15% or more of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of the Corporation ("Voting Stock"); (d) The Corporation files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Corporation has occurred or will occur in the future pursuant to any then-existing contract or transaction; or (e) If, during any period of two consecutive years, individuals who at the beginning of any such period constitute the Directors of the Corporation cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this clause (e) each Director who is first elected, or first nominated for election by the Corporation's stockholders, by a vote of at least two-thirds of the Directors of the Corporation (or a committee thereof) then still in office who were Directors of the Corporation at the beginning of any such period will be deemed to have been a Director of the Corporation at the beginning of such period. Notwithstanding the foregoing provision of paragraphs (c) or (d) above unless otherwise determined in a specific case by majority vote of the Board, a "Change in Control" shall not be deemed to have occurred for purposes of paragraphs (c) or (d) above, solely because (1) the Corporation, (2) an entity in which the Corporation directly or indirectly beneficially owns 50% or more of the voting equity securities (a "Subsidiary"), or (3) any employee stock ownership plan or any other employee benefit plan of the Corporation or any Subsidiary either files or -16- 17 becomes obligated to file a report or proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 15% or otherwise, or because the Corporation reports that a change in control of the Corporation has occurred or will occur in the future by reason of such beneficial ownership. 11.4 Effective Date of Change in Control. Notwithstanding the foregoing, in the event a Change in Control ultimately results from discussions or negotiations involving the Corporation or any of its officers or directors, the "Effective Date" of such Change in Control shall be the date such discussions or negotiations commenced; otherwise, such Effective Date of a Change in Control shall be the Implementation Date of such Change in Control. 11.5 Implementation Date of Change in Control. The "Implementation Date" shall be the earliest to occur of the events specified in paragraphs (a), (b), (c), (d) or (e) of Section 11.3. As used herein, the Implementation Date of Change in Control shall be the last date of the then current Plan Cycle. 11.6 Effect of Change in Control. In addition to other vesting under the Plan, the opportunity of a Participant to participate to the end of the current Plan Cycle is vested in such Participant in the event of a Change in Control, as of the Effective Date of such Change in Control. ARTICLE 12. MISCELLANEOUS In the event of the liquidation of the Corporation the Committee may make any provisions for holding, handling and distributing the amounts standing to the credit of the Participants or beneficiaries hereunder which, in the discretion of the Committee, are appropriate and equitable under all circumstances and which are consistent with the spirit and purposes of these provisions. -17- 18 ARTICLE 13. AMENDMENT AND DISCONTINUANCE The Corporation expects to continue this Plan indefinitely, but reserves the right, by action of its shareholders, to amend it from time to time, or to discontinue it. However, if the Corporation should amend or discontinue this Plan, the Corporation shall remain obligated under the Plan with respect to (1) Awards made final (and thus payable) by decision by the Committee prior to the date of such amendment or discontinuance, (2) Awards and rights of any Participant or beneficiary with respect to whom a Vesting Event has occurred, and (3) with respect to amounts deferred prior to the date of such amendment or discontinuance. Executed this ____ day of _____________, 1994 at Cleveland, Ohio. NATIONAL CITY CORPORATION By: --------------------- -18- EX-10.22 7 NATIONAL CITY CORP 10-K EXHIBIT 10.22 1 SEVERANCE AGREEMENT THIS SEVERANCE AGREEMENT (this "Agreement"), dated as of December 19, 1994, by and between National City Corporation, a Delaware corporation (the "Company"), and (the "Executive"). WITNESSETH: WHEREAS, the Executive is a senior executive of the Company, is employed by the Company and/or a Subsidiary (as defined below) and has made and is expected to continue to make major contributions to the profitability, growth and financial strength of the Company; WHEREAS, the Company recognizes that, as is the case of most companies, the possibility of a Change in Control exists; WHEREAS, the Company desires to assure itself of both present and future continuity of management and desires to establish certain minimum severance benefits for certain of its senior executive officers and other key employees, including the Executive, applicable in the event of a Change in Control; WHEREAS, the Company wishes to ensure that its senior executives and other key employees are not practically disabled from discharging their duties in respect of a proposed or actual transaction involving a Change in Control; and WHEREAS, the Company desires to provide additional inducement for the Executive to continue to remain in the ongoing employ of the Company. NOW, THEREFORE, the Company and the Executive agree as follows: 1. Certain Defined Terms: In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement with initial capital letters: (a) "Base Pay" means the Executive's annual base salary at a rate not less than the Executive's annual fixed or base compensation as in effect for Executive immediately prior to the occurrence of a Change in Control or such higher rate as may be in effect from time to time. (b) "Cause" means that, prior to any termination pursuant to Section 3(a) hereof, the Executive shall have committed: 2 (i) an intentional act of fraud, embezzlement or theft in connection with his duties or in the course of his employment with the Company or any Subsidiary; (ii) intentional wrongful damage to property of the Company or any Subsidiary; (iii) intentional wrongful disclosure of secret processes or confidential information of the Company or any Subsidiary; or (iv) intentional wrongful engagement in any Competitive Activity; and any such act shall have been materially harmful to the Company. For purposes of this Agreement, no act or failure to act on the part of the Executive shall be deemed "intentional" if it was due primarily to an error in judgment or negligence, but shall be deemed "intentional" only if done or omitted to be done by the Executive not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for "Cause" hereunder unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the Directors of the Company then in office at a meeting of the Board of Directors of the Company ("Board") called and held for such purpose, after reasonable notice to the Executive and an opportunity for the Executive, together with his counsel (if the Executive chooses to have counsel present at such meeting), to be heard before the Board, finding that, in the good faith opinion of the Board, the Executive had committed an act constituting "Cause" as herein defined and specifying the particulars thereof in detail. Nothing herein will limit the right of the Executive or his beneficiaries to contest the validity or propriety of any such determination. (c) "Change in Control" means the occurrence during the Term of any of the following events: (i) The Company is merged, consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than sixty-five percent of the combined voting power of the then- outstanding securities of such resulting corporation or person immediately after such transaction are held in the aggregate by the holders of Voting Stock (as that term is hereafter defined) of the Company immediately prior to such transaction; (ii) The Company sells or otherwise transfers all or substantially all of its assets to another corporation or other legal person, and as a result of such sale or transfer less than sixty-five percent of the combined voting power of the then- outstanding Voting Stock of such corporation or person immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale or transfer; 2 3 (iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 15% or more of the combined voting power of the then- outstanding securities entitled to vote generally in the election of directors ("Voting Stock") of the Company; (iv) The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has occurred or will occur in the future pursuant to any then-existing contract or transaction; or (v) If, during any period of two consecutive years, individuals who at the beginning of any such period constitute the Directors of the Company cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this clause (v) each Director who is first elected, or first nominated for election by the Company's stockholders, by a vote of at least two-thirds of the Directors of the Company (or a committee thereof) then still in office who were Directors of the Company at the beginning of any such period will be deemed to have been a Director of the Company at the beginning of such period. Notwithstanding the foregoing provisions of Sections 1(b)(iii) or 1(b)(iv), unless otherwise determined in a specific case by majority vote of the Board, a "Change in Control" shall not be deemed to have occurred for purposes of Sections 1(b)(iii) or 1(b)(iv) solely because (1) the Company, (2) an entity in which the Company directly or indirectly beneficially owns 50% or more of the outstanding Voting Stock (a "Subsidiary"), or (3) any employee stock ownership plan or any other employee benefit plan of the Company or any Subsidiary either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act disclosing beneficial ownership by it of shares of Voting Stock of the Company, whether in excess of 15% or otherwise, or because the Company reports that a change in control of the Company has occurred or will occur in the future by reason of such beneficial ownership. (d) "Competitive Activity" means the Executive's participation, without the written consent of an officer of the Company, in the management of any business enterprise if such enterprise engages in substantial and direct competition with the Company and such enterprise's revenues derived from any product or service competitive with any product or service of the Company amounted to 10% or more of such enterprise's revenues for its most recently completely fiscal year and if the Company's 3 4 revenues of said product or service amounted to 10% of the Company's revenues for its most recently completed fiscal year. "Competitive Activity" will not include (i) the mere ownership of securities in any such enterprise and the exercise of rights appurtenant thereto and (ii) participation in the management of any such enterprise other than in connection with the competitive operations of such enterprise. (e) "Employee Benefits" means the perquisites, benefits and service credit for benefits as provided under any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which Executive is entitled to participate, including without limitation any stock option, stock purchase, stock appreciation, savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred compensation, incentive compensation, group or other life, health, medical/hospital or other insurance (whether funded by actual insurance or self-insured by the Company), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist or any equivalent successor policies, plans, programs or arrangements that may be adopted hereafter, providing perquisites, benefits and service credit for benefits at least as great in the aggregate as are payable thereunder prior to a Change in Control. (f) "Incentive Pay" means an annual amount equal to not less than the highest aggregate annual bonus, incentive or other payments of cash compensation (including, without limitation, payments made pursuant to the Company's Long-Term Incentive Plan and Short-Term Incentive Plan), in addition to Base Pay, made or to be made in regard to services rendered in any calendar year during the three calendar years immediately preceding the year in which the Change in Control occurred pursuant to any bonus, incentive, profit-sharing, performance, discretionary pay or similar agreement, policy, plan, program or arrangement (whether or not funded), or any successor thereto providing benefits at least as great as the benefits payable thereunder prior to a Change in Control. (g) "Severance Period" means the period of time commencing on the date of an occurrence of a Change in Control and continuing until the earliest of (i) the third anniversary of the occurrence of the Change in Control, (ii) the Executive's death, or (iii) the Executive's attainment of age 65; provided, however, that on each anniversary of the Change in Control, the Severance Period will automatically be extended for an additional year unless, not later than 90 calendar days prior to such date, either the Company or the Executive shall have given written notice to the other that the Severance Period is not to be so extended. (h) "Term" means the period commencing as of the date hereof and expiring as of the later of (i) the close of business on December 31, 1997, or (ii) the expiration of the Severance Period; provided, however, that (A) commencing on January 1, 1996 and each January 1 thereafter, the term of this Agreement will automatically be extended for an additional year unless, not later than September 30 of the immediately preceding year, the Company or the Executive shall have given notice that it or the Executive, as the case may be, does not wish to have the Term extended and (B) except as otherwise provided in 4 5 the last sentence of Section 8, if, prior to a Change in Control, the Executive ceases for any reason to be an employee of the Company and any Subsidiary, thereupon without further action the Term shall be deemed to have expired and this Agreement will immediately terminate and be of no further effect. For purposes of this Section 1(h), the Executive shall not be deemed to have ceased to be an employee of the Company or any Subsidiary by reason of the transfer of Executive's employment between the Company and any Subsidiary, or among any Subsidiaries. 2. Operation of Agreement: This Agreement will be effective and binding immediately upon its execution, but, anything in this Agreement to the contrary notwithstanding, this Agreement will not be operative unless and until a Change in Control occurs, whereupon without further action this Agreement shall become immediately operative. 3. Termination Following a Change in Control: (a) In the event the Company, a Subsidiary or a successor of the Company (direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) terminates the Executive's employment during the Severance Period, the Executive will be entitled to the severance compensation provided by Section 4; provided, however, that the Executive shall not be entitled to the severance compensation provided by Section 4 hereof only upon the occurrence of one or more of the following events: (i) The Executive's death occurring prior to termination of his/her employment; (ii) Prior to the termination of his/her employment, the Executive becomes permanently disabled within the meaning of, and begins actually to receive disability benefits pursuant to, the long-term disability plan in effect for, or applicable to, Executive immediately prior to the Change in Control; or (iii) Cause. (b) In the event of the occurrence of a Change in Control, the Executive may terminate employment with the Company and any Subsidiary during the Severance Period with the right to severance compensation as provided in Section 4 upon the occurrence of one or more of the following events (regardless of whether any other reason for such termination exists or has occurred, including without limitation other employment): (i) Failure to elect or reelect or otherwise to maintain the Executive in the office or the position, or a substantially equivalent office or position, of or with the Company and/or a Subsidiary, as the case may be, which the Executive held immediately prior to a Change in Control, or the removal of the Executive as a Director of the Company (or any successor thereto) if the Executive shall have been a Director of the Company immediately prior to the Change in Control; 5 6 (ii) (I) A significant adverse change in the nature or scope of the authorities, powers, functions, responsibilities or duties attached to the position with the Company and any Subsidiary which the Executive held immediately prior to the Change in Control; (II) a reduction in the aggregate of the Executive's Base Pay and Incentive Pay received from the Company and any Subsidiary; or (III) the termination or denial of the Executive's rights to Employee Benefits or a reduction in the scope or value thereof, which situation is not remedied within 10 calendar days after written notice to the Company from the Executive; (iii) A determination by the Executive (which determination will be conclusive and binding upon the parties hereto provided it has been made in good faith and in all events will be presumed to have been made in good faith unless otherwise shown by the Company by clear and convincing evidence) that a change in circumstances has occurred following a Change in Control, including, without limitation, a change in the scope of the business or other activities for which the Executive was responsible immediately prior to the Change in Control, which has rendered the Executive substantially unable to carry out, has substantially hindered Executive's performance of, or has caused Executive to suffer a substantial reduction in, any of the authorities, powers, functions, responsibilities or duties attached to the position held by the Executive immediately prior to the Change in Control, which situation is not remedied within 10 calendar days after written notice to the Company from the Executive of such determination; (iv) The liquidation, dissolution, merger, consolidation or reorganization of the Company or any Subsidiary by which Executive is employed or transfer of all or substantially all of its business and/or assets, unless the successor or successors (by liquidation, merger, consolidation, reorganization, transfer or otherwise) to which all or substantially all of its business and/or assets have been transferred (directly or by operation of law) assumed all duties and obligations of the Company under this Agreement pursuant to Section 10(a); (v) The Company or any Subsidiary by which Executive is employed relocates its principal executive offices, or requires the Executive to have his principal location of work changed, to any location which is in excess of 25 miles from the location thereof immediately prior to the Change of Control, or requires the Executive to travel away from his office in the course of discharging his responsibilities or duties hereunder at least 20% more (in terms of aggregate days in any calendar year or in any calendar quarter when annualized for purposes of comparison to any prior year) than was required of Executive in any of the three full years immediately prior to the Change of Control without, in either case, his prior written consent; or (vi) Without limiting the generality or effect of the foregoing, any material breach of this Agreement by the Company or any successor thereto. 6 7 (c) Notwithstanding anything contained in this Agreement to the contrary, in the event of a Change in Control, the Executive may terminate employment with the Company and any Subsidiary for any reason, or without reason, during the 30-day period immediately following the first anniversary of the first occurrence of a Change in Control with the right to severance compensation as provided in Section 4. (d) A termination by the Company pursuant to Section 3(a) or by the Executive pursuant to Section 3(b)or 3(c) will not affect any rights which the Executive may have pursuant to any agreement, policy, plan, program or arrangement of the Company providing Employee Benefits, which rights shall be governed by the terms thereof. 4. Severance Compensation: (a) If, following the occurrence of a Change in Control, the Company or any Subsidiary by which Executive is employed terminates the Executive's employment during the Severance Period other than pursuant to Section 3(a)(i), 3(a)(ii) or 3(a)(iii), or if the Executive terminates his employment pursuant to Section 3(b) or 3(c), the Company will pay to the Executive the following amounts within five business days after the date (the "Termination Date") that the Executive's employment is terminated (the effective date of which shall be the date of termination, or such other date that may be specified by the Executive if the termination is pursuant to Section 3(b) or 3(c)) and continue to provide to the Executive the following benefits: (i) A lump sum payment (the "Severance Payment") in an amount equal to three times the sum of (A) Base Pay (at the highest rate in effect for any period prior to the Termination Date), plus (B) Incentive Pay (determined in accordance with the standards set forth in Section 1(f)). (ii) (A) for thirty-six months (the "Continuation Period") following the Termination Date, the Company will arrange to provide the Executive with Employee Benefits that are welfare benefits (but not stock option, stock purchase, stock appreciation or similar compensatory benefits) substantially similar to those which the Executive was receiving or entitled to receive immediately prior to the Termination Date, and (B) such Continuation Period will be considered service with the Company, assuming the amount of Base Pay and Incentive Pay payable to the Executive during the calendar year immediately preceding the year in which the Change in Control occurs, for the purpose of determining service credits and benefits due and payable to the Executive under the Company's retirement income, supplemental executive retirement and other benefit plans of the Company applicable to the Executive, his dependents or his beneficiaries immediately prior to the Termination Date. If and to the extent that any benefit described in subsections (A) and (B) of this Section 4(a)(ii) is not or cannot be paid or provided under any policy, plan, program or arrangement of the Company or any Subsidiary, as the case may be, then the Company will itself pay or provide for the payment to the Executive, his dependents and beneficiaries, of such Employee Benefits. Without otherwise limiting the purposes or effect of Section 5, Employee Benefits otherwise receivable by the Executive pursuant to the subsection (A) of this Section 4(a)(ii) will be 7 8 reduced to the extent comparable welfare benefits are actually received by the Executive from another employer during the Continuation Period, and any such benefits received by the Executive shall be reported by the Executive to the Company. (b) There will be no right of set-off or counterclaim in respect of any claim, debt or obligation against any payment to or benefit for the Executive provided for in this Agreement, except as expressly provided in the last sentence of Section 4(a)(ii). (c) Without limiting the rights of the Executive at law or in equity, if the Company fails to make any payment or provide any benefit required to be made or provided hereunder on a timely basis, the Company will pay interest on the amount or value thereof at an annualized rate of interest equal to the so-called composite "prime rate" as quoted from time to time during the relevant period in the Midwest Edition of The Wall Street Journal. Such interest will be payable as it accrues on demand. Any change in such prime rate will be effective on and as of the date of such change. (d) Notwithstanding any other provision hereof, the parties' respective rights and obligations under this Section 4 and under Section 7 will survive any termination or expiration of this Agreement following a Change in Control or the termination of the Executive's employment following a Change in Control for any reason whatsoever. 5. No Mitigation Obligation: The Company hereby acknowledges that it will be difficult and may be impossible (a) for the Executive to find reasonably comparable employment following the Termination Date, and (b) to measure the amount of damages which Executive may suffer as a result of termination of employment hereunder. In addition, the Company acknowledges that its severance pay plans applicable in general to its salaried employees do not provide for mitigation, offset or reduction of any severance payment received thereunder. Accordingly, the payment of the severance compensation by the Company to the Executive in accordance with the terms of this Agreement is hereby acknowledged by the Company to be reasonable and will be liquidated damages, and the Executive will not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor will any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of the Executive hereunder or otherwise, except as expressly provided in the last sentence of Section 4(a)(ii). 6. Certain Additional Payments by the Company: (a) Anything in this Agreement to the contrary notwithstanding, in the event that this Agreement shall become operative and it shall be determined (as hereafter provided) that any payment or distribution by the Company or any of its affiliates to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue 8 9 Code (or any successor provision thereto) by reason of being considered "contingent on a change in ownership or control" of the Company, within the meaning of Section 280G of the Internal Revenue Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such tax (such tax or taxes, together with any such interest and penalties, being hereafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment or payments (collectively, a "Gross-Up Payment"); provided, however, that no Gross-Up Payment shall be made with respect to the Excise Tax, if any, attributable to (A) any incentive stock option, as defined by Section 422 of the Internal Revenue Code ("ISO"), granted prior to the execution of this Agreement, or (B) any stock appreciation or similar right, whether or not limited, granted in tandem with any ISO described in clause (A). The Gross-Up Payment shall be in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. (b) Subject to the provisions of Section 6(f) hereof, all determinations required to be made under this Section 6, including whether an Excise Tax is payable by the Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required to be paid by the Company to the Executive and the amount of such Gross-Up Payment, if any, shall be made by a nationally recognized accounting firm (the "Accounting Firm") selected by the Executive in his sole discretion. The Executive shall direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Company and the Executive within 30 calendar days after the Termination Date, if applicable, and any such other time or times as may be requested by the Company or the Executive. If the Accounting Firm determines that any Excise Tax is payable by the Executive, the Company shall pay the required Gross-Up Payment to the Executive within five business days after receipt of such determination and calculations with respect to any Payment to the Executive. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall, at the same time as it makes such determination, furnish the Company and the Executive an opinion that the Executive has substantial authority not to report any Excise Tax on his federal, state or local income or other tax return. As a result of the uncertainty in the application of Section 4999 of the Internal Revenue Code (or any successor provision thereto) and the possibility of similar uncertainty regarding applicable state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (an "Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to Section 6(f) hereof and the Executive thereafter is required to make a payment of any Excise Tax, the Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and the Executive as promptly as possible. Any such Underpayment shall be promptly paid by the Company to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations. 9 10 (c) The Company and the Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determinations and calculations contemplated by Section 6(b) hereof. Any determination by the Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon the Company and the Executive. (d) The federal, state and local income or other tax returns filed by the Executive shall be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by the Executive. The Executive shall make proper payment of the amount of any Excise Payment, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior to the filing of the Executive's federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, the Executive shall within five business days pay to the Company the amount of such reduction. (e) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Section 6(b) hereof shall be borne by the Company. If such fees and expenses are initially paid by the Executive, the Company shall reimburse the Executive the full amount of such fees and expenses within five business days after receipt from the Executive of a statement therefor and reasonable evidence of his payment thereof. (f) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service or any other taxing authority that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as promptly as practicable but no later than 10 business days after the Executive actually receives notice of such claim and the Executive shall further apprise the Company of the nature of such claim and the date on which such claim is requested to be paid (in each case, to the extent known by the Executive). The Executive shall not pay such claim prior to the earlier of (i) the expiration of the 30-calendar-day period following the date on which he gives such notice to the Company and (ii) the date that any payment of such amount with respect to such claim is due. If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) provide the Company with any written records or documents in his possession relating to such claim reasonably requested by the Company; 10 11 (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation accepting legal representation with respect to such claim by an attorney competent in respect of the subject matter and reasonably selected by the Company; (iii) cooperate with the Company in good faith in order effectively to contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including interest and penalties) incurred in connection with such contest and shall indemnify and hold harmless the Executive, on an after-tax basis, for and against any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this Section 6(f), the Company shall control all proceedings taken in connection with the contest of any claim contemplated by this Section 6(f) and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim (provided, however, that the Executive may participate therein at his own cost and expense) and may, at its option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay the tax claimed and sue for a refund, the Company shall advance the amount of such payment to the Executive on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income or other tax, including interest or penalties with respect thereto, imposed with respect to such advance; and provided further, however, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which the contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of any such contested claim shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (g) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 6(f) hereof, the Executive receives any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 6(f) hereof) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after any taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 6(f) hereof, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial or refund prior to the expiration of 30 calendar days after such determination, then such advance shall be forgiven and 11 12 shall not be required to be repaid and the amount of any such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid by the Company to the Executive pursuant to this Section 6. 7. Legal Fees and Expenses. It is the intent of the Company that the Executive not be required to incur legal fees and the related expenses associated with the interpretation, enforcement or defense of Executive's rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if it should appear to the Executive that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, the Executive the benefits provided or intended to be provided to the Executive hereunder, the Company irrevocably authorizes the Executive from time to time to retain counsel of Executive's choice, at the expense of the Company as hereafter provided, to advise and represent the Executive in connection with any such interpretation, enforcement or defense, including without limitation the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, stockholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to the Executive's entering into an attorney-client relationship with such counsel, and in that connection the Company and the Executive agree that a confidential relationship shall exist between the Executive and such counsel. Without respect to whether the Executive prevails, in whole or in part, in connection with any of the foregoing, the Company will pay and be solely financially responsible for any and all attorneys' and related fees and expenses incurred by the Executive in connection with any of the foregoing. 8. Employment Rights; Termination Prior to Change in Control: Nothing expressed or implied in this Agreement will create any right or duty on the part of the Company or the Executive to have the Executive remain in the employment of the Company or any Subsidiary prior to or following any Change in Control. Any termination of employment of the Executive or the removal of the Executive from the office or position in the Company following the commencement of any discussion with a third person that ultimately results in a Change in Control shall be deemed to be a termination or removal of the Executive after a Change in Control for purposes of this Agreement. 9. Withholding of Taxes: The Company may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as the Company is required to withhold pursuant to any law or government regulation or ruling. 10. Successors and Binding Agreement: (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this 12 13 Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the "Company" for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company. (b) This Agreement will inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees. (c) This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Sections 10(a) and 10(b) hereof. Without limiting the generality or effect of the foregoing, the Executive's right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by Executive's will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section 10(c), the Company shall have no liability to pay any amount so attempted to be assigned, transferred or delegated. 11. Notices: For all purposes of this Agreement, all communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service such as Federal Express, UPS, or Purolator, addressed to the Company (to the attention of the Secretary of the Company) at its principal executive office and to the Executive at his principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 12. Governing Law: The validity, interpretation, construction and performance of this Agreement will be governed by and construed in accordance with the substantive laws of the State of Delaware, without giving effect to the principles of conflict of laws of such State. 13. Validity: If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision to any other person or circumstances will not be affected, and the provision so held to be invalid, unenforceable or otherwise illegal will be reformed to the extent (and only to the extent) necessary to make it enforceable, valid or legal. 13 14 14. Miscellaneous: No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto or compliance with any condition or provision of this Agreement to be performed by such other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, expressed or implied with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. References to Sections are to references to Sections of this Agreement. 15. Counterparts: This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first above written. NATIONAL CITY CORPORATION By --------------------- Edward B. Brandon Chairman and CEO --------------------- <> 14 15 Rec_Num NAME 1 Edward B. Brandon 2 David A. Daberko 3 William R. Robertson 4 William E. MacDonald III 5 Charles W. Hall 6 Jon L. Gorney 7 Harold B. Todd, Jr. 8 Robert G. Siefers 9 Robert J. Ondercik 10 Jeffrey D. Kelly 11 David L. Zoeller 12 Thomas A. Richlovsky 13 Thomas W. Owen 14 Gary A. Glaser 15 Vincent A. DiGirolamo 16 Morton Boyd EX-10.23 8 NATIONAL CITY CORP 10-K EXHIBIT 10.23 1 SEVERANCE AGREEMENT THIS SEVERANCE AGREEMENT (this "Agreement"), dated as of December 19, 1994, by and between National City Corporation, a Delaware corporation (the "Company"), and (the "Executive"). WITNESSETH: WHEREAS, the Executive is a senior executive of the Company, is employed by the Company and/or a Subsidiary (as defined below) and has made and is expected to continue to make major contributions to the profitability, growth and financial strength of the Company; WHEREAS, the Company recognizes that, as is the case of most companies, the possibility of a Change in Control exists; WHEREAS, the Company desires to assure itself of both present and future continuity of management and desires to establish certain minimum severance benefits for certain of its senior executive officers and other key employees, including the Executive, applicable in the event of a Change in Control; WHEREAS, the Company wishes to ensure that its senior executives and other key employees are not practically disabled from discharging their duties in respect of a proposed or actual transaction involving a Change in Control; and WHEREAS, the Company desires to provide additional inducement for the Executive to continue to remain in the ongoing employ of the Company. NOW, THEREFORE, the Company and the Executive agree as follows: 1. Certain Defined Terms: In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement with initial capital letters: (a) "Base Pay" means the Executive's annual base salary at a rate not less than the Executive's annual fixed or base compensation as in effect for Executive immediately prior to the occurrence of a Change in Control or such higher rate as may be in effect from time to time. (b) "Cause" means that, prior to any termination pursuant to Section 3(a) hereof, the Executive shall have committed: 2 (i) an intentional act of fraud, embezzlement or theft in connection with his duties or in the course of his employment with the Company or any Subsidiary; (ii) intentional wrongful damage to property of the Company or any Subsidiary; (iii) intentional wrongful disclosure of secret processes or confidential information of the Company or any Subsidiary; or (iv) intentional wrongful engagement in any Competitive Activity; and any such act shall have been materially harmful to the Company. For purposes of this Agreement, no act or failure to act on the part of the Executive shall be deemed "intentional" if it was due primarily to an error in judgment or negligence, but shall be deemed "intentional" only if done or omitted to be done by the Executive not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for "Cause" hereunder unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the Directors of the Company then in office at a meeting of the Board of Directors of the Company ("Board") called and held for such purpose, after reasonable notice to the Executive and an opportunity for the Executive, together with his counsel (if the Executive chooses to have counsel present at such meeting), to be heard before the Board, finding that, in the good faith opinion of the Board, the Executive had committed an act constituting "Cause" as herein defined and specifying the particulars thereof in detail. Nothing herein will limit the right of the Executive or his beneficiaries to contest the validity or propriety of any such determination. (c) "Change in Control" means the occurrence during the Term of any of the following events: (i) The Company is merged, consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than sixty-five percent of the combined voting power of the then- outstanding securities of such resulting corporation or person immediately after such transaction are held in the aggregate by the holders of Voting Stock (as that term is hereafter defined) of the Company immediately prior to such transaction; (ii) The Company sells or otherwise transfers all or substantially all of its assets to another corporation or other legal person, and as a result of such sale or transfer less than sixty-five percent of the combined voting power of the then- outstanding Voting Stock of such corporation or person immediately after such sale or transfer is held 2 3 in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale or transfer; (iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 15% or more of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors ("Voting Stock") of the Company; (iv) The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has occurred or will occur in the future pursuant to any then-existing contract or transaction; or (v) If, during any period of two consecutive years, individuals who at the beginning of any such period constitute the Directors of the Company cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this clause (v) each Director who is first elected, or first nominated for election by the Company's stockholders, by a vote of at least two-thirds of the Directors of the Company (or a committee thereof) then still in office who were Directors of the Company at the beginning of any such period will be deemed to have been a Director of the Company at the beginning of such period. Notwithstanding the foregoing provisions of Sections 1(b)(iii) or 1(b)(iv), unless otherwise determined in a specific case by majority vote of the Board, a "Change in Control" shall not be deemed to have occurred for purposes of Sections 1(b)(iii) or 1(b)(iv) solely because (1) the Company, (2) an entity in which the Company directly or indirectly beneficially owns 50% or more of the outstanding Voting Stock (a "Subsidiary"), or (3) any employee stock ownership plan or any other employee benefit plan of the Company or any Subsidiary either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act disclosing beneficial ownership by it of shares of Voting Stock of the Company, whether in excess of 15% or otherwise, or because the Company reports that a change in control of the Company has occurred or will occur in the future by reason of such beneficial ownership. 3 4 (d) "Competitive Activity" means the Executive's participation, without the written consent of an officer of the Company, in the management of any business enterprise if such enterprise engages in substantial and direct competition with the Company and such enterprise's revenues derived from any product or service competitive with any product or service of the Company amounted to 10% or more of such enterprise's revenues for its most recently completely fiscal year and if the Company's revenues of said product or service amounted to 10% of the Company's revenues for its most recently completed fiscal year. "Competitive Activity" will not include (i) the mere ownership of securities in any such enterprise and the exercise of rights appurtenant thereto and (ii) participation in the management of any such enterprise other than in connection with the competitive operations of such enterprise. (e) "Employee Benefits" means the perquisites, benefits and service credit for benefits as provided under any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which Executive is entitled to participate, including without limitation any stock option, stock purchase, stock appreciation, savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred compensation, incentive compensation, group or other life, health, medical/hospital or other insurance (whether funded by actual insurance or self-insured by the Company), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist or any equivalent successor policies, plans, programs or arrangements that may be adopted hereafter, providing perquisites, benefits and service credit for benefits at least as great in the aggregate as are payable thereunder prior to a Change in Control. (f) "Incentive Pay" means an annual amount equal to not less than the highest aggregate annual bonus, incentive or other payments of cash compensation (including, without limitation, payments made pursuant to the Company's Long-Term Incentive Plan and Short-Term Incentive Plan), in addition to Base Pay, made or to be made in regard to services rendered in any calendar year during the three calendar years immediately preceding the year in which the Change in Control occurred pursuant to any bonus, incentive, profit-sharing, performance, discretionary pay or similar agreement, policy, plan, program or arrangement (whether or not funded), or any successor thereto providing benefits at least as great as the benefits payable thereunder prior to a Change in Control. (g) "Severance Period" means the period of time commencing on the date of an occurrence of a Change in Control and continuing until the earliest of (i) the third anniversary of the occurrence of the Change in Control, (ii) the Executive's death, or (iii) the Executive's attainment of age 65; provided, however, that on each anniversary of the Change in Control, the Severance Period will automatically be extended for an additional year unless, not later than 90 calendar days prior to such date, either the Company or the Executive shall have given written notice to the other that the Severance Period is not to be so extended. 4 5 (h) "Term" means the period commencing as of the date hereof and expiring as of the later of (i) the close of business on December 31, 1997, or (ii) the expiration of the Severance Period; provided, however, that (A) commencing on January 1, 1996 and each January 1 thereafter, the term of this Agreement will automatically be extended for an additional year unless, not later than September 30 of the immediately preceding year, the Company or the Executive shall have given notice that it or the Executive, as the case may be, does not wish to have the Term extended and (B) except as otherwise provided in the last sentence of Section 8, if, prior to a Change in Control, the Executive ceases for any reason to be an employee of the Company and any Subsidiary, thereupon without further action the Term shall be deemed to have expired and this Agreement will immediately terminate and be of no further effect. For purposes of this Section 1(h), the Executive shall not be deemed to have ceased to be an employee of the Company or any Subsidiary by reason of the transfer of Executive's employment between the Company and any Subsidiary, or among any Subsidiaries. 2. Operation of Agreement: This Agreement will be effective and binding immediately upon its execution, but, anything in this Agreement to the contrary notwithstanding, this Agreement will not be operative unless and until a Change in Control occurs, whereupon without further action this Agreement shall become immediately operative. 3. Termination Following a Change in Control: (a) In the event the Company, a Subsidiary or a successor of the Company (direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) terminates the Executive's employment during the Severance Period, the Executive will be entitled to the severance compensation provided by Section 4; provided, however, that the Executive shall not be entitled to the severance compensation provided by Section 4 hereof only upon the occurrence of one or more of the following events: (i) The Executive's death occurring prior to termination of his/her employment; (ii) Prior to the termination of his/her employment, the Executive becomes permanently disabled within the meaning of, and begins actually to receive disability benefits pursuant to, the long-term disability plan in effect for, or applicable to, Executive immediately prior to the Change in Control; or (iii) Cause. (b) In the event of the occurrence of a Change in Control, the Executive may terminate employment with the Company and any Subsidiary during the Severance Period with the right to severance compensation as provided in Section 4 upon the occurrence of one or more of the following events (regardless of whether any other reason. 5 6 for such termination exists or has occurred, including without limitation other employment): (i) Failure to elect or reelect or otherwise to maintain the Executive in the office or the position, or a substantially equivalent office or position, of or with the Company and/or a Subsidiary, as the case may be, which the Executive held immediately prior to a Change in Control, or the removal of the Executive as a Director of the Company (or any successor thereto) if the Executive shall have been a Director of the Company immediately prior to the Change in Control; (ii) (I) A significant adverse change in the nature or scope of the authorities, powers, functions, responsibilities or duties attached to the position with the Company and any Subsidiary which the Executive held immediately prior to the Change in Control; (II) a reduction in the aggregate of the Executive's Base Pay and Incentive Pay received from the Company and any Subsidiary; or (III) the termination or denial of the Executive's rights to Employee Benefits or a reduction in the scope or value thereof, which situation is not remedied within 10 calendar days after written notice to the Company from the Executive; (iii) A determination by the Executive (which determination will be conclusive and binding upon the parties hereto provided it has been made in good faith and in all events will be presumed to have been made in good faith unless otherwise shown by the Company by clear and convincing evidence) that a change in circumstances has occurred following a Change in Control, including, without limitation, a change in the scope of the business or other activities for which the Executive was responsible immediately prior to the Change in Control, which has rendered the Executive substantially unable to carry out, has substantially hindered Executive's performance of, or has caused Executive to suffer a substantial reduction in, any of the authorities, powers, functions, responsibilities or duties attached to the position held by the Executive immediately prior to the Change in Control, which situation is not remedied within 10 calendar days after written notice to the Company from the Executive of such determination; (iv) The liquidation, dissolution, merger, consolidation or reorganization of the Company or any Subsidiary by which Executive is employed or transfer of all or substantially all of its business and/or assets, unless the successor or successors (by liquidation, merger, consolidation, reorganization, transfer or otherwise) to which all or substantially all of its business and/or assets have been transferred (directly or by operation of law) assumed all duties and obligations of the Company under this Agreement pursuant to Section 10(a); (v) The Company or any Subsidiary by which Executive is employed relocates its principal executive offices, or requires the Executive to have his principal 6 7 location of work changed, to any location which is in excess of 25 miles from the location thereof immediately prior to the Change of Control, or requires the Executive to travel away from his office in the course of discharging his responsibilities or duties hereunder at least 20% more (in terms of aggregate days in any calendar year or in any calendar quarter when annualized for purposes of comparison to any prior year) than was required of Executive in any of the three full years immediately prior to the Change of Control without, in either case, his prior written consent; or (vi) Without limiting the generality or effect of the foregoing, any material breach of this Agreement by the Company or any successor thereto. (c) A termination by the Company pursuant to Section 3(a) or by the Executive pursuant to Section 3(b) will not affect any rights which the Executive may have pursuant to any agreement, policy, plan, program or arrangement of the Company providing Employee Benefits, which rights shall be governed by the terms thereof. 4. Severance Compensation: (a) If, following the occurrence of a Change in Control, the Company or any Subsidiary by which Executive is employed terminates the Executive's employment during the Severance Period other than pursuant to Section 3(a)(i), 3(a)(ii) or 3(a)(iii), or if the Executive terminates his employment pursuant to Section 3(b), the Company will pay to the Executive the following amounts within five business days after the date (the "Termination Date") that the Executive's employment is terminated (the effective date of which shall be the date of termination, or such other date that may be specified by the Executive if the termination is pursuant to Section 3(b)) and continue to provide to the Executive the following benefits: (i) A lump sum payment (the "Severance Payment") in an amount equal to three times the sum of (A) Base Pay (at the highest rate in effect for any period prior to the Termination Date), plus (B) Incentive Pay (determined in accordance with the standards set forth in Section 1(f)). (ii) (A) for thirty-six months (the "Continuation Period") following the Termination Date, the Company will arrange to provide the Executive with Employee Benefits that are welfare benefits (but not stock option, stock purchase, stock appreciation or similar compensatory benefits) substantially similar to those which the Executive was receiving or entitled to receive immediately prior to the Termination Date, and (B) such Continuation Period will be considered service with the Company, assuming the amount of Base Pay and Incentive Pay payable to the Executive during the calendar year immediately preceding the year in which the Change in Control occurs, for the purpose of determining service credits and benefits due and payable to the Executive under the Company's retirement income, supplemental executive retirement and other benefit plans of the Company applicable to the Executive, his dependents or his beneficiaries immediately prior to the Termination Date. If and to the extent that any benefit described 7 8 in subsections (A) and (B) of this Section 4(a)(ii) is not or cannot be paid or provided under any policy, plan, program or arrangement of the Company or any Subsidiary, as the case may be, then the Company will itself pay or provide for the payment to the Executive, his dependents and beneficiaries, of such Employee Benefits. Without otherwise limiting the purposes or effect of Section 5, Employee Benefits otherwise receivable by the Executive pursuant to the subsection (A) of this Section 4(a)(ii) will be reduced to the extent comparable welfare benefits are actually received by the Executive from another employer during the Continuation Period, and any such benefits received by the Executive shall be reported by the Executive to the Company. (b) There will be no right of set-off or counterclaim in respect of any claim, debt or obligation against any payment to or benefit for the Executive provided for in this Agreement, except as expressly provided in the last sentence of Section 4(a)(ii). (c) Without limiting the rights of the Executive at law or in equity, if the Company fails to make any payment or provide any benefit required to be made or provided hereunder on a timely basis, the Company will pay interest on the amount or value thereof at an annualized rate of interest equal to the so-called composite "prime rate" as quoted from time to time during the relevant period in the Midwest Edition of The Wall Street Journal. Such interest will be payable as it accrues on demand. Any change in such prime rate will be effective on and as of the date of such change. (d) Notwithstanding any other provision hereof, the parties' respective rights and obligations under this Section 4 and under Section 7 will survive any termination or expiration of this Agreement following a Change in Control or the termination of the Executive's employment following a Change in Control for any reason whatsoever. 5. No Mitigation Obligation: The Company hereby acknowledges that it will be difficult and may be impossible (a) for the Executive to find reasonably comparable employment following the Termination Date, and (b) to measure the amount of damages which Executive may suffer as a result of termination of employment hereunder. In addition, the Company acknowledges that its severance pay plans applicable in general to its salaried employees do not provide for mitigation, offset or reduction of any severance payment received thereunder. Accordingly, the payment of the severance compensation by the Company to the Executive in accordance with the terms of this Agreement is hereby acknowledged by the Company to be reasonable and will be liquidated damages, and the Executive will not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor will any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of the Executive hereunder or otherwise, except as expressly provided in the last sentence of Section 4(a)(ii). 8 9 6. Certain Additional Payments by the Company: (a) Anything in this Agreement to the contrary notwithstanding, in the event that this Agreement shall become operative and it shall be determined (as hereafter provided) that any payment or distribution by the Company or any of its affiliates to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (or any successor provision thereto) by reason of being considered "contingent on a change in ownership or control" of the Company, within the meaning of Section 280G of the Internal Revenue Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such tax (such tax or taxes, together with any such interest and penalties, being hereafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment or payments (collectively, a "Gross-Up Payment"); provided, however, that no Gross-Up Payment shall be made with respect to the Excise Tax, if any, attributable to (A) any incentive stock option, as defined by Section 422 of the Internal Revenue Code ("ISO"), granted prior to the execution of this Agreement, or (B) any stock appreciation or similar right, whether or not limited, granted in tandem with any ISO described in clause (A). The Gross-Up Payment shall be in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross- Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. (b) Subject to the provisions of Section 6(f) hereof, all determinations required to be made under this Section 6, including whether an Excise Tax is payable by the Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required to be paid by the Company to the Executive and the amount of such Gross-Up Payment, if any, shall be made by a nationally recognized accounting firm (the "Accounting Firm") selected by the Executive in his sole discretion. The Executive shall direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Company and the Executive within 30 calendar days after the Termination Date, if applicable, and any such other time or times as may be requested by the Company or the Executive. If the Accounting Firm determines that any Excise Tax is payable by the Executive, the Company shall pay the required Gross-Up Payment to the Executive within five business days after receipt of such determination and calculations with respect to any Payment to the Executive. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall, at the same time as it makes such determination, furnish the Company and the Executive an opinion that the Executive has substantial authority not to report any Excise Tax on his federal, state or local income or other tax return. As a result of the uncertainty in the application of Section 4999 of the Internal Revenue Code (or any successor provision thereto) and the possibility of similar 9 10 uncertainty regarding applicable state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (an "Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to Section 6(f) hereof and the Executive thereafter is required to make a payment of any Excise Tax, the Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and the Executive as promptly as possible. Any such Underpayment shall be promptly paid by the Company to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations. (c) The Company and the Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determinations and calculations contemplated by Section 6(b) hereof. Any determination by the Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon the Company and the Executive. (d) The federal, state and local income or other tax returns filed by the Executive shall be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by the Executive. The Executive shall make proper payment of the amount of any Excise Payment, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior to the filing of the Executive's federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, the Executive shall within five business days pay to the Company the amount of such reduction. (e) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Section 6(b) hereof shall be borne by the Company. If such fees and expenses are initially paid by the Executive, the Company shall reimburse the Executive the full amount of such fees and expenses within five business days after receipt from the Executive of a statement therefor and reasonable evidence of his payment thereof. (f) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service or any other taxing authority that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be 10 11 given as promptly as practicable but no later than 10 business days after the Executive actually receives notice of such claim and the Executive shall further apprise the Company of the nature of such claim and the date on which such claim is requested to be paid (in each case, to the extent known by the Executive). The Executive shall not pay such claim prior to the earlier of (i) the expiration of the 30-calendar-day period following the date on which he gives such notice to the Company and (ii) the date that any payment of such amount with respect to such claim is due. If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) provide the Company with any written records or documents in his possession relating to such claim reasonably requested by the Company; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation accepting legal representation with respect to such claim by an attorney competent in respect of the subject matter and reasonably selected by the Company; (iii) cooperate with the Company in good faith in order effectively to contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including interest and penalties) incurred in connection with such contest and shall indemnify and hold harmless the Executive, on an after-tax basis, for and against any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this Section 6(f), the Company shall control all proceedings taken in connection with the contest of any claim contemplated by this Section 6(f) and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim (provided, however, that the Executive may participate therein at his own cost and expense) and may, at its option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay the tax claimed and sue for a refund, the Company shall advance the amount of such payment to the Executive on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income or other tax, including interest or penalties with respect thereto, imposed with respect to such advance; and provided further, however, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to 11 12 which the contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of any such contested claim shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (g) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 6(f) hereof, the Executive receives any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 6(f) hereof) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after any taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 6(f) hereof, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial or refund prior to the expiration of 30 calendar days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of any such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid by the Company to the Executive pursuant to this Section 6. 7. Legal Fees and Expenses. It is the intent of the Company that the Executive not be required to incur legal fees and the related expenses associated with the interpretation, enforcement or defense of Executive's rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if it should appear to the Executive that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, the Executive the benefits provided or intended to be provided to the Executive hereunder, the Company irrevocably authorizes the Executive from time to time to retain counsel of Executive's choice, at the expense of the Company as hereafter provided, to advise and represent the Executive in connection with any such interpretation, enforcement or defense, including without limitation the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, stockholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to the Executive's entering into an attorney-client relationship with such counsel, and in that connection the Company and the Executive agree that a confidential relationship shall exist between the Executive and such counsel. Without respect to whether the Executive prevails, in whole or in part, in connection with any of the foregoing, the Company will pay and be solely financially responsible for any and all attorneys' and related fees and expenses incurred by the Executive in connection with any of the foregoing. 12 13 8. Employment Rights; Termination Prior to Change in Control: Nothing expressed or implied in this Agreement will create any right or duty on the part of the Company or the Executive to have the Executive remain in the employment of the Company or any Subsidiary prior to or following any Change in Control. Any termination of employment of the Executive or the removal of the Executive from the office or position in the Company following the commencement of any discussion with a third person that ultimately results in a Change in Control shall be deemed to be a termination or removal of the Executive after a Change in Control for purposes of this Agreement. 9. Withholding of Taxes: The Company may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as the Company is required to withhold pursuant to any law or government regulation or ruling. 10. Successors and Binding Agreement: (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the "Company" for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company. (b) This Agreement will inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees. (c) This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Sections 10(a) and 10(b) hereof. Without limiting the generality or effect of the foregoing, the Executive's right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by Executive's will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section 10(c), the Company shall have no liability to pay any amount so attempted to be assigned, transferred or delegated. 11. Notices: For all purposes of this Agreement, all communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been duly given when hand 13 14 delivered or dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service such as Federal Express, UPS, or Purolator, addressed to the Company (to the attention of the Secretary of the Company) at its principal executive office and to the Executive at his principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 12. Governing Law: The validity, interpretation, construction and performance of this Agreement will be governed by and construed in accordance with the substantive laws of the State of Delaware, without giving effect to the principles of conflict of laws of such State. 13. Validity: If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision to any other person or circumstances will not be affected, and the provision so held to be invalid, unenforceable or otherwise illegal will be reformed to the extent (and only to the extent) necessary to make it enforceable, valid or legal. 14. Miscellaneous: No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto or compliance with any condition or provision of this Agreement to be performed by such other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, expressed or implied with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. References to Sections are to references to Sections of this Agreement. 15. Counterparts: This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement. 14 15 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first above written. NATIONAL CITY CORPORATION By ------------------------- Edward B. Brandon Chairman and CEO ------------------------- <> 15 16 Rec_Num NAME 1 W. Douglas Bannerman 2 William Cornett, Jr. 3 Thomas H. Schroth 4 Robert J. Rupp 5 Timothy J. Driscoll 6 Shelley J. Seifert 7 James R. Bell III 8 Jeffrey M. Biggar 9 John A. Dunham 10 James H. Gilmour 11 Gregory L. Tunis 12 Stephen McLane 13 Dorothy M. Horvath 14 A. Joseph Parker 15 Frederick W. Schantz 16 John V. White 17 Glenn R. Knific 18 W. Glenn Smith 19 William H. Olds, Jr. 20 Leonard V. Hardin 21 Barbara K. Pence 22 Bruce T. Muddell 23 Robert E. Hawkins 24 John W. Woods III 25 William H. Schecter 26 J. Christopher Graffeo 27 Robert E. Showalter 28 Delroy R. Hayunga 29 Leo E. Knight, Jr. 30 Tony G. Holcombe 31 Paul G. Clark EX-10.24 9 NATIONAL CITY CORP 10-K EXHIBIT 10.24 1 Exhibit 10.24 THE NATIONAL CITY SAVINGS AND INVESTMENT PLAN (As Amended and Restated Effective July 1, 1992) 2 THE NATIONAL CITY SAVINGS AND INVESTMENT PLAN National City Corporation, a Delaware corporation, hereby adopts this amendment and restatement of its profit sharing plan known as The National City Savings and Investment Plan (known prior to this amendment and restatement as The National City Savings and Investment Plan and Trust) (the "Plan"), effective as of July 1, 1992. ARTICLE I. - DEFINITIONS AND CONSTRUCTION 1.1 Definitions. The following terms when used in the Plan and the Trust Agreement with initial capital letters, unless the context clearly indicates otherwise, shall have the following respective meanings: (1) Account and Sub-Account: As defined in Section 5.2. (2) Administrator or Plan Administrator: The Administrator of the Plan, as defined in ERISA Section 3(16)(A) and Code Section 414(g), shall be the Company, which may delegate all or any part of its powers, duties and authorities in such capacity (without ceasing to be the Administrator of the Plan) as hereinafter provided. (3) After-Tax Contributions: After-Tax Contributions, if any, made to the Plan prior to January 1, 1987. (4) Before-Tax Contributions: Before-Tax Contributions provided for in Section 3.1. (5) Beneficiary: A Participant's Death Beneficiary or any other person who, after the death of a Participant, is 3 entitled to receive any benefit payable with respect to such Participant. (6) Break in Service and 1-Year Break in Service: An Employee or former Employee incurs a Break in Service or a 1-Year Break in Service if he terminates employment with the Controlled Group in an Employment Year and completes not more than 500 Hours of Service in such Employment Year or in any succeeding Employment Year. (7) Business Day: Each day during which both the Trust Department of the Trustee and the New York Stock Exchange are open for regular conduct of business. 4 (8) Capital Preservation Fund: (a) One of the Investment Funds provided for under the Plan. The Capital Preservation Fund shall be invested and reinvested principally in "Guaranteed Investment Contracts" and "Bank Investment Contracts", as defined below, but shall not be invested in any security or obligations of any Controlled Group Member. Obligations or instruments which are appropriate investments for the Money Market Fund may be purchased and held in the Capital Preservation Fund pending the selection and purchase of suitable investments under the preceding sentence or for the purpose of maintaining sufficient liquidity to provide for the payment of withdrawals, or for transfers, from the Capital Preservation Fund and for expenses incurred in connection with the investment and management of the Capital Preservation Fund. Investments of the Capital Preservation Fund shall be held to maturity under usual circumstances. The Trustee shall at all times have the responsibility of maintaining in cash and readily marketable investments such part of the investments of the Capital Preservation Fund as shall be deemed by the Trustee to be necessary to provide adequately for the needs of Participants who have amounts invested in the Capital Preservation Fund and to prevent inequities between such Participants. (b) The term "Guaranteed Investment Contract" shall mean an insurance contract or annuity approved by applicable state authority or which will upon appropriate submission be so approved and which meets the following requirements: (i) the contract 5 agreement is for a stated period of time; (ii) interest is guaranteed by the insurer at a fixed or predetermined rate for that period of time; (iii) principal amounts may be distributed upon maturity of the contract or during the contract period as provided in the contract; and (iv) withdrawal of some or all of the principal before maturity is permitted, but subject to such restrictions as are stated in the contract. (c) The term "Bank Investment Contract" shall mean an agreement with a federally insured bank or savings and loan association ("Bank or S/L") pursuant to which the Trustee agrees to deposit funds of the Capital Preservation Fund with such Bank or S/L under the following general terms and conditions: (i) the deposit shall be a time deposit (a deposit which shall not be payable until the passage of a stated period of time); (ii) interest shall be payable at a fixed or predetermined rate for that period of time; (iii) principal amounts may be distributed at the end of the stated period of time or prior thereto as provided in the agreement; and (iv) withdrawal of some or all of the principal before the end of the stated period of time is permitted, but subject to such restrictions as are stated in the agreement. (9) Code: The Internal Revenue Code of 1986, as it has been and may be amended from time to time. (10) Committee: The committee established by the Company, certain powers, duties and authorities of which are 6 provided for in Article X. The Committee shall be a Named Fiduciary hereunder. (11) Company: National City Corporation (a Delaware corporation) a bank holding company located in Cleveland, Ohio. The Company shall be the Plan Administrator and a Named Fiduciary hereunder. (12) Controlled Group: The Employers and any and all other corporations, trades and/or businesses, the employees of which, together with Employees of an Employer, are required by Code Section 414 to be treated as if they were employed by a single employer. (13) Controlled Group Member: Each corporation or unincorporated trade or business that is or was a member of the Controlled Group, but only during such period as it is or was such a member of the Controlled Group. (14) Conversion Date: The date in 1993 determined by the Trustee, as of which the Plan and Trust will have been converted to provide Participants with daily telephonic access to make changes in their participation and investments in the Plan and Trust. (15) Covered Employee: (a) An Employee of an Employer, including a salaried executive officer but not a director as such, but excluding: (i) any person employed as a student intern, (ii) any person who is a law enforcement officer employed by a local, county or state government and who is hired by an Employer to perform off-duty security services, (iii) any 7 person who is an Employee of an Employer who is included by such Employer in its Special Project Employee employment classification, (iv) any person employed by National Processing Company, Inc. or its successor who is treated as a non-exempt employee under the Fair Labor Standards Act, (v) any person employed by the Military Banking Division of Merchants National Bank & Trust Company of Indianapolis or its successor, except for individuals employed in the Military Banking Administration Department of such Division, and except for individuals of such Division serving on an expatriate rotational basis assignment outside the United States of from two to five years, which assignment has been approved as such by the Board of Directors of Merchants National Bank & Trust Company of Indianapolis, or or its successor, (vi) effective as of January 1, 1987 any person who is a leased employee (within the meaning of Section 1.1(19)). (b) Notwithstanding the foregoing provisions of this Subsection, in the event of acquisition by an Employer of all or part of the operating assets of another business organization (which is not an Employer) or a merger of such another business organization with an Employer, the Company shall determine whether or not individuals who are employed in the business operation(s) thus acquired or resulting and who would otherwise satisfy the definition of the term Covered Employee hereunder should be considered Covered Employees under the Plan; provided, however, that to the extent any individual employed in such a business operation is not considered a Covered Employee pursuant to this 8 sentence, his employment in such business operation shall be deemed employment in the employ of a Controlled Group Member; and, provided further, that no action shall be taken pursuant to this sentence which would discriminate in favor of Highly Compensated Employees. (16) Credited Compensation: (a) Regular salary and regular straight-time hourly wages paid by an Employer to an Employee. Unless otherwise provided in the Plan, an Employee's Credited Compensation shall be calculated prior to any reduction thereof made pursuant to a Salary Reduction Agreement under the Plan or pursuant to any agreement under Code Section 125. Except as otherwise provided in the following sentence, "Credited Compensation" shall not include overtime pay, bonuses, suggestion awards, commissions, incentive compensation payments or other forms of special compensation. Notwithstanding the foregoing sentence, with respect to periods while an Employee is classified by an Employer as being in one of the employment classifications listed below, effective for the times specified below applicable to each such classification, "Credited Compensation" shall include commissions paid by the Employer for work performed in that employment classification, provided that the total Credited Compensation taken into account under the Plan for any Year for such an Employee shall be limited to the dollar amount set forth below opposite the employment classification applicable to the Employee. 9
Maximum Amount of Credited Effective Employment Compensation Taken into times Classification Account Per Year - ---------- -------------- -------------------------- Jan. 1, 1990 - 12/31/93 Residential Mortgage Loan Originator $40,000 Jan. 1, 1994 & after Residential Mortgage Loan Originator $50,000 10119130 Jan. 1, 1990 -12/31/93 Residential Mortgage Loan Originator Branch Manager $50,000 Jan. 1, 1994 & after Branch Mgr I - Originations 10119050 $70,000 Jan. 1, 1994 & after Branch Mgr II - Originations 10119060 $70,000 Jan. 1, 1994 & after Branch Mgr III - Originations 10119070 $70,000 Jan. 1, 1994 & after Sales Manager/NCMC 10119140 $70,000 Jan. 1, 1992 - 12/31/93 NC Investments Investment Broker $40,000 March 1, 1992 - 12/31/93 Investment Sales Representative $40,000 Jan. 1, 1994 & after Investment Sales Rep I 10613320 $50,000 March 1, 1992 -12/31/93 Investment Sales Representative II $40,000 Jan. 1, 1994 & after Investment Sales Rep II 10809280 $50,000 March 1, 1992 -12/31/93 Investment Sales Representative III $40,000 Jan. 1, 1994 -12/31 94 Investment Sales Rep III 11005880 $50,000 Jan. 1, 1995 & after Investment Sales Rep III 11005880 $100,000 Jan. 1, 1995 & after Investment Sales Rep IV 11104440 $100,000 Jan. 1. 1992 - 12/31/93 NC Investments Investment Sales Manager $50,000 Jan. 1, 1994 & after Sales Manager/NC Investments 11006660 $50,000 Jan. 1, 1994 & after Investment Consultant 10119100 $50,000 Jan. 1, 1995 & after Investment Consultant-Sr 10119105 $100,000 Jan. 1, 1994 - 12/31/94 Investment Trader III 11005885 $50,000 Jan. 1. 1995 & after NCI Trader 11005885 $50,000 Jan.. 1, 1995 & after NCI Trader-Sr 11005884 $100,000 Nov. 1, 1994 & after CS Collector $50,000
(b) Notwithstanding the foregoing provisions of this Subsection, effective as of January 1, 1989, Credited Compensation of an Employee taken into account for any purpose for any Plan Year shall not exceed the limitation in effect for such Year under 10 Code Section 401(a)(17). For purposes of the preceding sentence, in the case of a Highly Compensated Employee who is a 5-percent owner (as such term is defined in Code Section 416(i)(1)) or one of the ten most Highly Compensated Employees, (i) such Highly Compensated Employee and his family members (which for this purpose shall mean an Employee's Spouse and lineal descendants who have not attained age 19 before the close of the Year in question) shall be treated as a single Employee and the Compensation of such family members shall be aggregated with the Credited Compensation of such Highly Compensated Employee, and (ii) the limitation on Credited Compensation shall be allocated among such Highly Compensated Employee and his family members in proportion to each individual's Credited Compensation. (c) Notwithstanding the foregoing provisions of this Subsection, effective as of January 1, 1994 the following shall apply: (1) In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary for Plan Years beginning on or after January 1, 1994, the annual compensation of each person taken into account under the Plan shall not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the Commissioner of Internal Revenue for increases in the cost of living in accordance with section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 11 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA '93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. (2) For Plan Years beginning on or after January 1, 1994, any reference in this Plan to the limitation under section 401(a)(17) of the Code shall mean the OBRA '93 annual compensation limit set forth in this provision. (3) If compensation for any prior determination period is taken into account in determining any person's benefits accruing in the current Plan Year, the compensation for that prior determination period is subject to the OBRA '93 annual compensation limit in effect for that prior determination period. For this purpose, for determination period beginning before the first day of the first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual compensation limit is $150,000. (17) Death Beneficiary: A Participant's Spouse or, if he has no Spouse or if his Spouse consents (in the manner hereinafter described in this Subsection) to the designation hereinafter provided for in this Subsection, such person or persons (natural or legal) other than, or in addition to, his Spouse as may be designated by a Participant as his Death Beneficiary under the Plan. Such a designation may be made, revoked or changed (without the consent of any previously 12 designated Death Beneficiary, except as otherwise provided herein) only by an instrument (in form provided by the Committee) which is signed by the Participant, which, if he has a Spouse, includes his Spouse's written consent to the action to be taken pursuant to such instrument (unless such action results in the Spouse being named as the Participant's sole Death Beneficiary), and which is filed with the Committee before the Participant's death. A Spouse's consent required by this Subsection shall be signed by the Spouse, shall acknowledge the effect of such consent, shall be witnessed by any person designated by the Committee as a Plan representative or by a notary public and shall be effective only with respect to such Spouse. A Spouse's consent is not required if it is established to the satisfaction of a Plan representative that the consent cannot be obtained because there is no Spouse, because the Spouse cannot be located, or because of such other circumstances as the Secretary of the Treasury may prescribe by regulations. In default of such a designation and at any other time when there is no existing Death Beneficiary designated by the Participant, his Death Beneficiary shall be, in the following order of priority: his surviving Spouse, his surviving children (both natural and adopted), his surviving parents or his estate. If, under the preceding sentence, the Death Beneficiary consists of a class of two or more persons, such persons shall share equally in benefits under the Plan. A person designated by a Participant as his Death Beneficiary who ceases to exist prior to or on the date of the Participant's death shall cease to be a Death 13 Beneficiary. If a Death Beneficiary is a natural person who dies after the Participant's death, the Death Beneficiary shall be the estate of such deceased Death Beneficiary. In any case in which the Committee concludes it cannot determine whether a Death Beneficiary designated by a Participant survived the Participant, it shall be conclusively presumed that such Death Beneficiary died before the Participant. (18) Disability: The physical or mental impairment of a presumably permanent and continuous nature which renders a Participant incapable of performing the duties the Participant is employed to perform for his Employer when such impairment commences, all as determined by the Committee upon the basis of evidence submitted to it by the Participant or the Participant's physician within a reasonable time after the Committee requests such evidence. (19) Early Retirement Age and Early Retirement Date: A Participant shall attain Early Retirement Age upon his attainment of age 55 and completion of 10 Employment Years and a Participant's Early Retirement Date shall be the first day of the calendar month following the Participant's attainment of Early Retirement Age. (20) Eligible Employee: An Employee who is eligible for participation in the Plan in accordance with the provisions of Article II. (21) Employee: An employee of a Controlled Group Member and, to the extent required by Code Section 414(n), any 14 person who is a "leased employee" of a Controlled Group Member. For purposes of this Subsection, effective as of January 1, 1987, a "leased employee" means any person who, pursuant to an agreement between a Controlled Group Member and any other person ("leasing organization"), has performed services for the Controlled Group Member on a substantially full-time basis for a period of at least one year, and such services are of a type historically performed by employees in the business field of the Controlled Group Member. Contributions or benefits provided a leased employee by the leasing organization which are attributable to services performed for a Controlled Group Member will be treated as provided by the Controlled Group Member. A leased employee will not be considered an Employee of a Controlled Group Member, however, if (a) leased employees do not constitute more than 20 percent of the Controlled Group Member's nonhighly compensated work force (within the meaning of Code Section 414(n)(5)(C)(ii)) and (b) such leased employee is covered by a money purchase pension plan maintained by the leasing organization that provides (i) a nonintegrated employer contribution rate of at least 10 percent of Credited Compensation, (ii) immediate participation and (iii) full and immediate vesting. (22) Employer: The Company and any other corporation or business organization adopting the Plan pursuant to Article XII. However, in the case of any person which adopts or has adopted the Plan and which ceases or has ceased to exist, 15 ceases to be a member of the Controlled Group or withdraws or is eliminated from the Plan, it shall not thereafter be an Employer. (23) Employer Contributions: Matching Employer Contributions provided for in Section 3.5, Profit Sharing Matching Contributions provided for in Section 3.7, Qualified Nonelective Contributions provided for in Section 3.10 and ESOP Contributions and Supplemental ESOP Contributions provided for in Section 16.5. (24) Employment Year: The 12-month period beginning on the first day an Employee performs an Hour of Service for a Controlled Group Member after initially becoming an Employee (or after again becoming an Employee following a Break in Service) and each subsequent 12-month period. (25) Enrollment Date: The first day of any calendar month following an Employee's completion of the eligibility requirements of Article II. (26) Equity Fund: One of the Investment Funds provided under the Plan. The Equity Fund shall be invested and reinvested only in common or capital stocks, or in bonds, debentures or preferred stocks convertible into common or capital stocks, or in any partnership or limited partnership the purposes of which are to invest or reinvest the partnership assets in any such securities, but the Equity Fund shall not be invested in any security of a Controlled Group Member. However, obligations or instruments which are appropriate investments for the Money Market Fund may be purchased and held in the Equity Fund pending the 16 selection and purchase of suitable investments under the preceding sentence. (27) ERISA: The Employee Retirement Income Security Act of 1974, as amended. (28) ESOP Contributions: Employer Contributions to the Plan to be applied to payment of principal and/or interest under an ESOP Loan pursuant to Section 16.5(2)(a). (29) ESOP Feature: The portion of the Plan described in Article XVI. (30) ESOP Loan: A loan described in Section 16.3. (31) Fiduciary: Any person who (a) exercises any discretionary authority or discretionary control respecting management of the Plan or exercises any authority or control respecting management or disposition of the Trust Fund, (b) renders investment advice for a fee or other compensation, direct or indirect, with respect to the Trust Fund, or has authority or responsibility to do so, or (c) has any discretionary authority or discretionary responsibility in the administration of the Plan or the Trust Fund. The term "Fiduciary" shall also include any person to whom a Named Fiduciary delegates any of its or his fiduciary responsibilities hereunder in accordance with the provisions of the Plan or Trust Agreement as long as such designation is in effect. (32) Fixed Income Fund: One of the Investment Funds provided under the Plan. The Fixed Income Fund shall be invested and reinvested only in those bonds, obligations, notes, 17 debentures, mortgages, preferred stocks, or other tangible or intangible property or interest in property, either real or personal, the income or return from which is fixed, limited or determinable in advance by the terms of the contract, document or instrument creating or evidencing such property or interest in property, or by the terms of acquisition thereof but shall not be invested in any security of a Controlled Group Member. However, obligations or instruments which are appropriate investments for the Money Market Fund may be purchased and held in the Fixed Income Fund pending the selection and purchase of suitable investments under the preceding sentence. (33) Hardship: Effective as of January 1, 1989, immediate and heavy financial need on the part of a Participant for: (a) expenses for medical care described in Code Section 213(d) previously incurred by the Participant, the Participant's Spouse, or any dependents of the Participant (as defined in Code Section 152), or expenses necessary for these persons to obtain such medical care; (b) costs directly related to the purchase (excluding mortgage payments) of a principal residence for the Participant; (c) the payment of tuition and related educational fees for the next twelve months of post-secondary education for the Participant, the Participant's Spouse, the Participant's 18 children or the Participant's dependents (as defined in Code Section 152); (d) payments necessary to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence; (e) repayment when due of any indebtedness incurred by the Participant or any dependents of the Participant (as defined in Code Section 152) to avoid insolvency; or (f) any other financial need which the Commissioner of Internal Revenue, through the publication of revenue rulings, notices and other documents of general applicability, may from time to time designate as a deemed immediate and heavy financial need as provided in Treasury Regulations Section 1.401(k)-1(d)(2)(iv)(C). (34) Highly Compensated Employee: (a) For a particular Plan Year, effective January 1, 1987, any Employee who, (i) during the preceding Plan Year, (A) was at any time a 5-percent owner (as such term is defined in Code Section 416(i)(1)), (B) received compensation from the Controlled Group in excess of the amount in effect for such Plan Year under Code Section 414(q)(1)(B), (C) received compensation from the Controlled Group in excess of the amount in effect for such Plan Year under Code Section 414(q)(1)(C), and was in the top-paid group of Employees for such Plan Year, or (D) was at any time an officer (limited to no more than 50 Employees or, if lesser, the greater of 3 Employees or 10 percent (10%) of the Employees) and received 19 compensation greater than 50 percent (50%) of the amount in effect under Code Section 415(b)(1)(A) for such Year, or (ii) who during the particular Plan Year (but not the prior Plan Year) (I) was at any time a 5-percent owner (as such term is defined in Code Section 416(i)(1)) or (II) was included in the foregoing Clauses (B), (C) or (D) of Subparagraph (i) and was in the group consisting of the 100 Employees paid the greatest compensation by the Controlled Group during such Plan Year. (b) "Highly Compensated Employee" shall include a former Employee whose Termination of Employment occurred prior to the Plan Year and who was a Highly Compensated Employee for the Plan Year in which his Termination of Employment occurred or for any Plan Year ending on or after his 55th birthday. (c) For the purposes of this Subsection, the term "compensation" shall mean the sum of an Employee's compensation under Section 4.9(3) and the Employee's Before-Tax Contributions (subject to the limitations described in Section 1.1(14)(b)) and the term "top-paid group of Employees" shall mean that group of Employees of the Controlled Group consisting of the top 20 percent (20%) of such Employees when ranked on the basis of compensation paid by the Controlled Group during the Plan Year. (35) Hour of Service: (a) An Employee shall be credited with one Hour of Service for each hour for which he is paid or entitled to payment by a Controlled Group Member: (i) for the performance of duties as an Employee; (ii) for other than the performance of duties (for reasons such as vacation, sickness or 20 disability); or (iii) for back pay, irrespective of mitigation of damages, awarded or agreed to by a Controlled Group Member. With respect to each Employee whose compensation is not determined on the basis of certain amounts for each hour worked during a given period and for whom hours of work are not required to be counted and recorded by any federal law (other than ERISA), Hours of Service shall be credited on the basis of 190 Hours of Service per month if he is paid on a monthly basis, 45 Hours of Service per week if he is paid on a weekly basis, or 10 Hours of Service per day if he is paid on a daily basis, for each month, week or day (as the case may be) for which he receives compensation from any Controlled Group Member. Employees shall be credited with Hours of Service at the rates described in the preceding sentence for leaves of absence of up to 12 months or such longer period as may be required by law to be counted for this purpose. No hour shall be counted more than once or be counted as more than one Hour of Service, even though more than straight-time pay may be paid for it. (b) If an Employee is absent from work for any period in accordance with an Employer's approved maternity or paternity leave policy (i) by reason of the pregnancy of such Employee, (ii) by reason of the birth of a child of such Employee, (iii) by reason of the placement of a child with such Employee, (iv) for purposes of caring for a child for a period beginning immediately following the birth or placement of such child, of (v) by reason of any absence granted or taken in partial or complete compliance 21 with The Family and Medical Leave Act of 1993 or required to be provided in accordance with the Americans With Disabilities Act, such Employee shall be credited with Hours of Service (solely for the purposes of determining whether he or she has incurred a Break in Service) equal to the number of Hours of Service which otherwise would normally have been credited to him but for such absence, or if the number of such Hours of Service is not determinable, 8 Hours of Service per normal workday of such absence, provided, however, that the total number of Hours of Service credited to an Employee under this paragraph by reason of any pregnancy, birth or placement shall not exceed 501 Hours of Service. Hours of Service credited to an Employee pursuant to this paragraph shall be treated as Hours of Service (A) only in the Employment Year in which an absence from work described in this paragraph begins, if the Employee would be prevented from incurring a Break in Service in such Employment Year solely because he is credited with Hours of Service during such absence pursuant to this paragraph, or (B) in any other case, in the immediately following Employment Year. Hours of Service shall not be credited to an Employee under this paragraph unless the Employee furnishes to the Committee such timely information as the Committee may reasonably require to establish that the Employee's absence from work is for a reason specified in this paragraph and the number of days for which there was such an absence. (36) Investment Fund or Funds: The Capital Preservation Fund, Equity Fund, Fixed Income Fund, NCC Stock Fund, 22 Money Market Fund and any other fund established by the Committee under Section 5.1. (37) Investment Manager: The person who, with respect to an Investment Fund, has the discretion to determine which assets in such Fund shall be sold (or exchanged) and what investments shall be acquired for such Fund. Such person must (a) be either registered as an investment advisor under the Investment Advisors Act of 1940, a bank as defined thereunder or an insurance company qualified to manage, acquire or dispose of Plan assets under the laws of more than one state, and (b) acknowledge in writing that he or it is a Fiduciary with respect to the Plan. (38) Loan Account: The separate recordkeeping account within a Participant's Account established by the Administrator pursuant to Section 6.13. (39) Matching Allocation: Any allocation made to a Participant's Account on account of the Participant's Before-Tax Contributions. (40) Matching Employer Contributions: Employer Contributions provided for in Section 3.5. (41) Money Market Fund: One of the Investment Funds provided for under the Plan. The Money Market Fund shall be invested and reinvested principally in bonds, notes or other evidence of indebtedness which are payable on demand (including variable amount notes) or which have a maturity date not exceeding one day after the date of purchase by such Fund or, in case of an 23 investment (pursuant to Section 5.1(2)(a)) in an NCB Investment Trust Fund, which are payable by such NCB Investment Trust Fund. (42) Named Fiduciaries: The Committee, the Company, the Investment Manager, the Trustee, the Participants to the 5 extent provided in Article XV, and each other person designated as a Named Fiduciary by the Committee pursuant to the power of delegation reserved to the Committee in Article X. (43) NCB Investment Trust Fund: Any fund now or hereafter established under the trust instrument executed by National City Bank on December 4, 1956, and now entitled Declaration of Trust Establishing NCC Investment Fund for Retirement Trusts, as such trust instrument has been or may be amended and/or restated. (44) NCC Stock: Common stock of National City Corporation, a Delaware corporation. (45) NCC Stock Fund: One of the Investment Funds provided for under the Plan. The NCC Stock Fund shall be invested and reinvested only in shares of common stock issued by the Company. However, obligations or instruments which are appropriate investments for the Money Market Fund may be purchased and held in the NCC Stock Fund pending the purchase of shares of such common stock. (46) Normal Retirement Age and Normal Retirement Date: A Participant shall attain Normal Retirement Age upon his attainment of age 65 and a Participant's Normal Retirement Date 24 shall be the first day of the calendar month following the Participant's attainment of Normal Retirement Age. (47) Participant: An Employee or former Employee who has become and continues to be a Participant of the Plan in accordance with the provisions of Article II, a Covered Employee who has made a Transfer Contribution, or any other person designated as a Participant by the terms of any Appendix. (48) Plan: The National City Savings and Investment Plan (known prior to this restatement as the National City Savings and Investment Plan and Trust), the terms and provisions of which are herein set forth, as the same may be amended, supplemented or restated from time to time. The Plan consists of a Profit Sharing Feature and an ESOP Feature. (49) Plan Year: A calendar year. (50) Prior Plan: Any qualified defined contribution plan which is merged into this Plan or the assets of which are transferred to this Plan, as described in any Appendix to the Plan. (51) Profit Sharing Feature: The portion of the Plan (a) which is not included within the ESOP Feature, (b) which is intended to qualify as a profit sharing plan under Code Section 401(a) and (c) which includes a qualified cash or deferred arrangement within the meaning of Code Section 401(k). (52) Profit Sharing Matching Contributions: Employer Contributions provided for in Section 3.7. 25 (53) Qualified Nonelective Contributions: A contribution made by an Employer pursuant to Section 3.9 that (a) Participants eligible to share therein may not elect to receive in cash until distribution from the Plan, (b) are nonforfeitable when made, (c) are distributable only in accordance with the distribution rules applicable to Before-Tax Contributions and (d) are paid to the Trust Fund during the Plan Year for which made or within the time following the close of such Plan Year which is prescribed by law for the filing by an Employer of its federal income tax return (including extensions thereof). (54) Return on Equity: For a particular Plan Year, "Return on Equity" means the percentage determined by dividing the Consolidated Net Income of the Company for the Year by the Daily Average Consolidated Stockholders' Equity of the Company for the Year (calculated without regard to any preferred stock of the Company), in accordance with generally accepted accounting principles and applicable Securities and Exchange Commission Regulations, all as determined by the principal accounting officer of the Company for the purpose of reporting such figures to stockholders of the Company and others. (55) Salary Reduction Agreement: An arrangement pursuant to which an Employee agrees to reduce, or to forego an increase in, his Credited Compensation and his Employer agrees to contribute to the Trust the amount so reduced or foregone as a Before-Tax Contribution. 26 (56) Spouse: The person to whom an Employee is legally married at the specified time; provided, however, that a former Spouse may be treated as a Spouse or surviving Spouse to the extent required under the terms of a "qualified domestic relations order" (as such term is defined in Code Section 414(p)). (57) Supplemental ESOP Contributions: Employer Contributions provided for in Section 16.5(2)(b). (58) Transfer Contributions: The Contributions provided for in Section 3.4. (59) Trust and Trust Fund: The trust estate held by the Trustee under the provisions of the Plan and the Trust Agreement, without distinction as to principal or income. (60) Trust Agreement: The Trust Agreement or Agreements between the Company and the Trustee or Trustees, as such Trust Agreement or Agreements may be amended or restated from time to time, or any trust agreement or agreements superseding the same. Each Trust Agreement is hereby incorporated in the Plan by reference. (61) Trustee: The trustee or trustees under the Trust Agreement or its or their successor or successors in trust under such Trust Agreement. (62) Valuation Date: The last Business Day of each calendar month and any other Business Day(s) on which the Committee determines that the Investment Funds shall be valued. (63) Vested Interest: The entire amount of a Participant's Account which has not previously been withdrawn by 27 him or distributed to or for him and which is nonforfeitable. All amounts credited to a Participant's Account shall be 100% nonforfeitable at all times unless otherwise provided in an Appendix hereto. 1.2 Construction. (1) Unless the context otherwise indicates, the masculine wherever used in the Plan or Trust Agreement shall include the feminine and neuter, the singular shall include the plural and words such as "herein", "hereof", "hereby", "hereunder" and words of similar import refer to the Plan as a whole and not to any particular part thereof. (2) Where headings have been supplied to portions of the Plan and the Trust Agreement (other than the headings to the Subsections in Section 1.1), they have been supplied for convenience only and are not to be taken as limiting or extending the meaning of any of such portions of such documents. (3) Wherever the word "person" appears in the Plan, it shall refer to both natural and legal persons. (4) A number of the provisions hereof and of the Trust Agreement are designed to contain provisions required or contemplated by certain federal laws and/or regulations thereunder. All such provisions herein and in the Trust Agreement are intended to have the meaning required or contemplated by such provisions of such law or regulations and shall be construed in accordance with valid regulations and valid published governmental rulings and interpretations of such provisions. In applying such provisions hereof or of the Trust Agreement, each Fiduciary may 28 rely (and shall be protected in relying) on any determination or ruling made by any agency of the United States Government that has authority to issue regulations, rulings or determinations with respect to the federal law thus involved. (5) Except to the extent federal law controls, the Plan and Trust Agreement shall be governed, construed and administered according to the laws of the State of Ohio. All persons accepting or claiming benefits under the Plan or Trust Agreement shall be bound by and deemed to consent to their provisions. (6) This amendment and restatement of the Plan is a continuation and complete restatement of the Plan, which was originally effective as of July 1, 1984 and subsequently amended and restated as of January 1, 1985. Effective as of July 1, 1992, the Merchants National Corporation Thrift Plan, which consisted of a profit sharing plan feature and an employee stock ownership plan feature, was merged into this Plan. This amendment and restatement shall constitute a continuation and complete restatement of the Merchants National Corporation Thrift Plan. Effective as of July 1, 1992, the Plan shall consist of the Profit Sharing Feature and the ESOP Feature. (7) This amendment and restatement is generally effective July 1, 1992. However, certain provisions of this amendment and restatement of the Plan are effective as of some other date. The provisions of this amendment and restatement of the Plan which are effective prior to July 1, 1992 shall be deemed to amend the corresponding provisions of the Plan (or to the 29 extent required by law, the corresponding provisions of any Prior Plan) as in effect before this amendment and restatement and all amendments thereto. Events occurring before the applicable effective date of any provision of this amendment and restatement Plan shall be governed by the applicable provision of the Plan (or Prior Plan) in effect on the date of the event. (8) The benefits payable with respect to an Employee or former Employee whose employment with the Controlled Group terminated before July 1, 1992 (and who is not rehired by a Controlled Group Member thereafter) shall be determined by and paid in accordance with the terms and provisions of the Plan as in effect at the date of such termination, except to the extent that certain provisions of the Plan, as amended and restated as of July 1, 1992, apply to such individual as a result of applicable law or the context clearly requires the application of such provision to such individual. 30 ARTICLE II. - ELIGIBILITY AND PARTICIPATION 2.1 Eligible Employees. Each Employee who was a Participant in the Plan on June 30, 1992 shall continue to be a Participant in the Plan on July 1, 1992. Each other Employee shall become an Eligible Employee under the Plan on the first Enrollment Date on which he meets the following requirements: (1) he is a Covered Employee (including such an Employee who is on a leave of absence), (2) he has attained age 21, or he has not attained age 21 but was eligible to have Before-Tax Contributions made for him under the provisions of the Plan in effect on December 31, 1988, and (3) he (a) has completed a period of at least one Employment Year, and (b) has been credited with at least 1,000 Hours of Service. 2.2 Commencement of Participation. Any Eligible Employee described in Section 2.1 may enroll as a Participant in the Plan on the Enrollment Date on which he is initially eligible or on any subsequent Enrollment Date by either (A) filing with an Employer or the Committee in the month preceding such Date (in accordance with rules established by the Committee) an enrollment form prescribed by the Committee which form shall include (1) the effective date on which the Eligible Employee is to become a Participant, (2) his election, commencing on or after such effective date, to have Before-Tax Contributions made by or for him to the Trust, (3), (a) his authorization, if any, to his 31 Employer to withhold from his unreduced Credited Compensation for each pay period, commencing on or after such effective date, any designated Before-Tax Contributions and to pay the same to the Trust Fund and/or (b) his agreement, if any, commencing on or after such effective date, to reduce, or to forego an increase in, his unreduced Credited Compensation and to have his Employer contribute the same as Before-Tax Contributions to the Trust Fund, and (4) his direction that the Before-Tax Contributions made by or for him be invested in any one of the investment options permitted by Section 5.5, or (B) if available to the Participant, enrolling as a Participant in the Plan by means of a voice response telephonic system, established and supervised by the Committee, which provides for the making of decisions (1) through (4) above by telephonic communication, confirmed in a writing mailed to the Participant within three days. 2.3 Duration of Participation. (1) Once an Eligible Employee becomes a Participant, he shall remain a Participant so long as he continues to be an Employee whether or not he continues to be an Eligible Employee, provided, however, that if a Participant ceases to be an Eligible Employee (while remaining an Employee), Before-Tax Contributions may not be made by or for him pursuant to Section 3.1 until he again becomes an Eligible Employee and he again enrolls as a Participant pursuant to Sections 2.2 and 3.1. (2) If an Account continues to be maintained for a former Employee after his termination of employment with the 32 Controlled Group, such former Employee shall remain a Participant for all purposes of the Plan, other than for the purposes of making, or having his Employer make, Participant or Employer Contributions hereunder. 2.4 Eligibility after Reemployment. (1) If an Employee incurs a Break in Service before satisfying the age and service requirements of Subsections (2) and (3) of Section 2.1 and is later reemployed before incurring five consecutive 1-Year Breaks in Service, periods of employment before the Break in Service shall not be taken into account in computing eligibility to participate until he has completed one Employment Year following his reemployment. (2) If an Employee incurs a Break in Service before satisfying the age and service requirements of Subsections (1) and (2) of Section 2.1 and is later reemployed after incurring five consecutive 1-Year Breaks in Service, periods of employment before the Break in Service shall not be taken into account in computing eligibility to participate. (3) If an Employee whose employment with the Controlled Group terminates after completing the age and service requirements of Subsections (2) and (3) of Section 2.1 is later reemployed as a Covered Employee, such Employee shall become a Participant on the first day of the calendar month after the month in which he enrolls as a Participant pursuant to Sections 2.2 and 3.1. 2.5 Special Rules for Transferred Participants. (1) In the event that a Participant ceases to be an Eligible Employee 33 hereunder due to a transfer of employment to a classification of Employees that is eligible to participate in another profit sharing retirement plan maintained by a Controlled Group Member which is qualified under Code Sections 401(a) and 401(k) (a "Comparable Savings Plan"), such Participant's Account shall be transferred to the Comparable Savings Plan and such Participant shall no longer be considered a Participant hereunder. Such transfer shall occur as of the day of such transfer of employment. (2) In the event that an individual who is a participant in a Comparable Savings Plan shall become an Eligible Employee hereunder, (a) any elections made by the individual on his enrollment form under the Comparable Savings Plan shall continue in effect under this Plan as of the date he becomes an Eligible Employee, until changed or modified in accordance with the terms hereof, (b) such individual's account from the Comparable Savings Plan shall be transferred to his Account hereunder as of the day such transfer of employment, (c) the assets of such account shall be allocated to comparable Sub-Accounts under this Plan and such transfer shall not be considered a Transfer Contribution hereunder, (d) the provisions of any Appendix to such Comparable Savings Plan which apply to any asset transferred to this Plan shall continue to apply to such asset, and (e) to the extent required by applicable law, the provisions of such Comparable Savings Plan shall continue to apply to the assets transferred to this Plan. 34 ARTICLE III - CONTRIBUTIONS 3.1 Before-Tax Contributions. Upon enrollment pursuant to Section 2.2, a Participant shall agree pursuant to a Salary Reduction Agreement to have his Employer make Before-Tax Contributions to the Trust of up to 10% of his unreduced Credited Compensation (in 1% increments) by means of pay period payments of the elected percentage. If a Participant's Before-Tax Contributions must be reduced to comply with the requirements of Section 4.1 or 4.2 or the requirements of applicable law, his Before-Tax Contributions shall be reduced to the next highest 1% increment of his unreduced Credited Compensation permitted by such Section or law. 3.2 Payments to Trustee. Before-Tax Contributions made for a Participant shall be transmitted by his Employer to the Trustee as soon as practicable, but in any event not later than 30 days after the end of the calendar month in which such Contributions are withheld or would otherwise have been paid to the Participant. 3.3 Changes in, and Suspensions of, Before-Tax Contributions. (1) The percentage or percentages designated by a Participant pursuant to Section 3.1 shall continue in effect, notwithstanding any changes in the Participant's Credited Compensation. A Participant may, however, in accordance with the percentages permitted by Section 3.1, change the percentage of his Before-Tax Contributions as often as may be permitted by the Committee by (either (A) the completion and proper filing 35 (pursuant to Committee rules) of election change forms, or (B) if available to the Participant, effecting such change by means of a voice response telephonic system, established and supervised by the Committee, confirmed in a writing mailed to the Participant within three days. (2) A Participant may at any time suspend his Before-Tax Contributions by notifying the Committee or his Employer, pursuant to Committee rules, of his desire to suspend such contributions. The eligibility for, and entitlement to, future Before-Tax Contributions of a Participant who has suspended such Contributions shall be limited as provided in rules established by the Committee. (3) The rules established by the Committee under this Section shall be established and administered in a uniform and nondiscriminatory fashion and may be amended from time to time in the sole and absolute discretion of the Committee. 3.4 Transfer Contributions. (1) The Trustee shall, at the direction of the Committee, receive and thereafter hold and administer as a part of the Trust Fund for a Covered Employee (whether or not he has met the eligibility requirements of Article II) all cash and other property which may be transferred to the Trustee from a trust held under another plan in which the Covered Employee was a participant, which meets the requirements of Code Sections 401(a) and 501(a) (each such trust and plan being hereinafter in this Section called a "Comparable Plan"). For purposes of this Subsection but not the following Subsection (2), 36 either the Comparable Plan must not be subject to the survivor annuity requirements of Code Section 401(a)(11) or the transfer must comply with the "elective transfer" requirements of Treasury Regulation Section 1.411(d)-4. (2) The Trustee shall also, at the direction of the Committee, receive and thereafter hold and administer as part of the Trust Fund for a Participant all cash and property which shall have been distributed to the Participant from a Comparable Plan in a distribution which constitutes a "qualified total distribution" as such term is defined in Code Section 402(a)(5)(E)(i) and which cash and other property, or any part thereof (other than amounts contributed by him to such Comparable Plan as employee contributions) is transferred by him to the Trustee on or before the 60th day after which he received such cash and other property and which transfer otherwise meets the requirements of Code Section 402(a)(5) or 402(a)(6). (3) Contributions made to the Trust Fund pursuant to Subsections (1) and (2) hereof shall be referred to herein as "Transfer Contributions." Whether or not Transfer Contributions may be made by an Employee or group of Employees shall be determined by the Committee in its sole and absolute discretion. Transfer Contributions will be permitted only in amounts in excess of $1,000 and shall be in cash unless the Committee approves a Transfer Contribution of other property. Such Transfer Contributions shall be allocated to such existing or new Sub-Account(s) as the Trustee shall determine and shall be invested as 37 specified in Section 5.5. Subject to other provisions of the Plan and Trust Agreement, the Trustee shall have authority to sell or otherwise convert to cash any property transferred to it pursuant to this Section. 3.5 Amount of Matching Employer Contributions. Subject to the provisions of the Plan and Trust Agreement, each Employer shall, as and to the extent it lawfully may, contribute to the Trust Fund on account of each month, Matching Employer Contributions in an amount equal to (1) 100% of the Before-Tax Contributions for such month for each Participant with respect to the first 3% of each such Participant's Credited Compensation and (2) 50% of the Before-Tax Contributions for such month for each Participant with respect to the next 4% of each such Participant's Credited Compensation. The Employer shall deliver its Matching Employer Contributions to the Trust Fund at the same time as the Before-Tax Contributions to which such Matching Employer Contributions relate are delivered. Notwithstanding the foregoing provisions of this Section, for any month during which an ESOP Loan is outstanding, ESOP Contributions and Supplemental ESOP Contributions shall be used to fund the Employers' obligation to make Matching Employer Contributions pursuant to this Section and shall be applied as provided in Section 16.5. 3.6 Allocation of Matching Employer Contributions. Each Employer's Matching Employer Contributions made for a month shall be allocated and credited to the Account of each Participant for whom Before-Tax Contributions were made during such month, 38 with each such Participant being credited with a portion of the Employer's Matching Employer Contribution equal to the applicable percentage (determined under Section 3.5) of his Before-Tax Contributions for the preceding calendar month. Notwithstanding the foregoing provisions of this Section, for any month during which an ESOP Loan is outstanding, Participants for whom Before-Tax Contributions were made during such month will not be credited with a Matching Allocation pursuant to this Section, but will be allocated and credited with a Matching Allocation in accordance with the provisions of Section 16.5. 3.7 Amount of Profit Sharing Matching Contributions. (1) Subject to the provisions of the Plan and Trust Agreement, each Employer shall, as and to the extent it lawfully may, contribute to the Trust Fund on account of each Plan Year, in addition to the Matching Employer Contributions described in Section 3.5, Profit Sharing Matching Contributions in the amount described in Subsection (2) of this Section. The Profit Sharing Matching Contribution of each Employer shall be made within the time, following the close of the Plan Year for which such Contribution is made, which is prescribed by law for the filing by each such Employer of its federal income tax return (including extensions thereof). (2) If the Company's Return on Equity equals or exceeds 12% for the Plan Year, the Employers shall contribute to the Trust Fund on account of such Year Profit Sharing Matching Contributions in an amount equal to that determined by applying the table below 39 to the Before-Tax Contributions made for such Year for each eligible Participant as described in Section 3.8:
Profit Sharing Matching Contributions (Per $1.00 Return on Equity for Year of Before-Tax Contributions) ------------------------- ---------------------------- less than 12% -0- 12% but less than 12.5% $0.02 12.5% but less than 13.0% $0.03 13.0% but less than 13.5% $0.04 13.5% but less than 14.0% $0.05 14.0% but less than 14.5% $0.06 14.5% but less than 15.0% $0.07 15.0% but less than 15.5% $0.08 15.5% but less than 16.0% $0.09 16.0% but less than 16.5% $0.10 16.5% but less than 17.0% $0.15 17.0% but less than 17.5% $0.20 17.5% but less than 18.0% $0.25 18.0% but less than 18.5% $0.30 18.5% but less than 19.0% $0.35 19.0% but less than 19.5% $0.40 19.5% but less than 20.0% $0.45 20.0% or more $0.50
provided however, that with respect to the Plan Year ending December 31, 1993 and later plan Years, the table below shall apply:
Profit Sharing Matching Contributions (Per $1.00 Return on Equity for Year of Before-Tax Contributions) ------------------------- ---------------------------- less than 12% -0- 12% but less than 13.5% $0.05 13.5% but less than 15.0% $0.10 15.0% but less than 15.5% $0.15 15.5% but less than 16.0% $0.20 16.0% but less than 16.5% $0.25 16.5% but less than 17.0% $0.30 17.0% but less than 17.5% $0.35 17.5% but less than 18.0% $0.40
40 18.0% but less than 18.5% $0.45 18.5% or more $0.50
(3) The Company shall determine the amount of the Employer Profit Sharing Matching Contribution, if any, to be made hereunder for each Plan Year pursuant to the Tables set forth in Subsection (2) hereof, based upon the Return on Equity and Net Income for the Year. Such determination shall be effected in accordance with generally accepted accounting principles and applicable Securities and Exchange Commission regulations in the same manner as for the Company's reports to stockholders, by the 8 principal accounting officer of the Company, and, upon approval by the Auditor of the Company, shall be final and conclusive as to all interested persons for all purposes of the Plan. (4) Notwithstanding the foregoing provisions of this Section, for any Plan Year during which an ESOP Loan is outstanding, ESOP Contributions and Supplemental ESOP Contributions shall be used to fund the Employers' obligations to make Profit Sharing Matching Contributions pursuant to this Section and shall be applied as provided in Section 16.5. 3.8 Allocation of Profit Sharing Matching Contributions. To be eligible to share in a Profit Sharing Matching Contribution for a Plan Year, an individual must (1) have made Before-Tax Contributions to the Trust during such Year, and (2) be an Employee of an Employer (including such an Employee who is on a leave of absence) as of December 31 of such Year, provided, however, that each individual who made such Before-Tax 41 Contributions during the Year but who does not meet such Employee test on such date because of his termination of employment during the Year on or after his Normal or Early Retirement Date or because of his incurring a Disability during the Year, shall, nevertheless, be eligible to share in such Profit Sharing Matching Contribution, and provided further, that the Accounts of Employees who made such Before-Tax Contributions during the Year but who died during the Year shall also share in such Profit Sharing Matching Contribution. Sharing in such Profit Sharing Matching Contribution for such Year shall be on the basis of the respective total amounts of Before-Tax Contributions made to the Trust during such Year, without regard to any withdrawals or distributions thereof made after such contributions. Profit Sharing Matching Contributions shall be allocated and credited as a Matching Allocation to eligible Participants' Accounts as of the December 31 of the Plan Year for which they are made. Notwithstanding the foregoing provisions of this Section, for any Plan Year during which an ESOP Loan is outstanding, Participants who would be eligible for a Matching Allocation pursuant to this Section shall, in lieu thereof, be allocated and credited with a Matching Allocation in accordance with the provisions of Section 16.5. 3.9 Reduction of Employer Contributions. The amount of Employer Contributions determined to be payable to the Trust Fund shall be reduced by amounts which have been forfeited or held in a suspense account in accordance with the terms of the Plan. 42 3.10 Qualified Nonelective Contributions. For any Plan Year, the Employers may make a Qualified Nonelective Contribution (1) in such amount, (2) for such Participants who are not Highly Compensated Employees for such Plan Year and (3) in such proportions among such Participants as such Employer shall deem necessary to cause Section 4.2 or 4.4 to be satisfied for such Plan Year. Qualified Nonelective Contributions may be made irrespective of whether the Employer has net earnings or retained earnings, and may be made in cash or other property. Each Employer shall designate to the Trustee the Plan Year for which and the Participants for whom any Qualified Nonelective Contribution is made. 3.11 Allocation of Qualified Nonelective Contributions. Qualified Nonelective Contributions shall be allocated to the Accounts of Participants who are designated by an Employer as eligible to share therein in such amounts as such Employer directs. 3.12 Contributions in NCC Stock. Contributions made by the Employers hereunder shall be made in cash or in shares of NCC Stock, provided that ESOP Contributions shall be made in cash. If a Contribution is made in the form of NCC Stock, such contribution shall be equal to the fair market value of such NCC Stock. Fair market value of NCC Stock shall be equal to the last quoted price of such Stock on the date of contribution. 43 ARTICLE IV. - LIMITATIONS ON CONTRIBUTIONS 4.1 Excess Deferrals. (1) Notwithstanding the provisions of Article III, a Participant's Before-Tax Contributions for any taxable year of such Participant commencing on or after January 1, 1987 shall not exceed the limitation in effect under Code Section 402(g). Except as otherwise provided in this Section, a Participant's Before-Tax Contributions for purposes of this Section shall include (a) any employer contribution made under any qualified cash or deferred arrangement as defined in Code Section 401(k) to the extent not includible in gross income for the taxable year under Code Section 402(a)(8) (determined without regard to Code Section 402(g)), (b) any employer contribution to the extent not includible in gross income for the taxable year under Code Section 402(h)(1)(B) (determined without regard to Code Section 402(g)) and (c) any employer contribution to purchase an annuity contract under Code Section 403(b) under a salary reduction agreement within the meaning of Code Section 3121(a)(5)(D). (2) In the event that a Participant's Before-Tax Contributions exceed the amount described in Subsection (1) of this Section (hereinafter called the "excess deferrals"), such excess deferrals (and any income allocable thereto) shall be distributed to the Participant by April 15 following the close of the taxable year in which such excess deferrals occurred if (and only if), by April 15 of such taxable year the Participant (a) allocates the amount of such excess deferrals among the plans 44 under which the excess deferrals were made and (b) notifies the Committee of the portion allocated to this Plan. (3) In the event that a Participant's Before-Tax Contributions under this Plan exceed the amount described in Subsection (1) of this Section, or in the event that a Participant's Before-Tax Contributions made under this Plan do not exceed such amount but he allocates a portion of his excess deferrals to his Before-Tax Contributions made to this Plan, Matching Employer Contributions and Profit Sharing Matching Contributions, if any, made with respect to such Before-Tax Contributions (and any income allocable thereto) shall be forfeited and applied to reduce subsequent Matching Employer Contributions and Profit Sharing Matching Contributions required under the Plan. 4.2 Excess Before-Tax Contributions. (1) Notwithstanding the provisions of Article III, for any Plan Year commencing on or after January 1, 1987, (a) the actual deferral percentage (as defined in Subsection (2) of this Section) for the group of Highly Compensated Eligible Employees (as defined in Subsection (3) of this Section) for such Plan Year shall not exceed the actual deferral percentage for all other Eligible Employees for such Plan Year multiplied by 1.25, or (b) the excess of the actual deferral percentage for the group of Highly Compensated Eligible Employees for such Plan Year over the actual deferral percentage for all other 45 Eligible Employees for such Plan Year shall not exceed 2 percentage points, and the actual deferral percentage for the group of Highly Compensated Eligible Employees for such Plan Year shall not exceed the actual deferral percentage for all other Eligible Employees for such Plan Year multiplied by 2. If two or more plans which include cash or deferred arrangements are considered as one plan for purposes of Code Sections 401(a)(4) or 410(b), such arrangements included in such plans shall be treated as one arrangement for the purposes of this Subsection; and if any Highly Compensated Eligible Employee is a participant under two or more cash or deferred arrangements of the Controlled Group, all such arrangements shall be treated as one cash or deferred arrangement for purposes of determining the deferral percentage with respect to such Highly Compensated Eligible Employee. (2) For the purposes of this Section, the actual deferral percentage for a specified group of Eligible Employees for a Plan Year shall be the average of the ratios (calculated separately for each Eligible Employee in such group) of (a) the amount of Before-Tax Contributions and, at the election of an Employer, any Qualified Nonelective Contributions actually paid to the Trust for each such Eligible Employee for such Plan Year (including any "excess deferrals" described in Section 4.1) to (b) the Eligible Employee's compensation for such Plan Year. For Plan Years commencing prior to January 1, 1992, any qualified matching contributions (as defined in Treasury Regulations issued 46 under Code Sections 401(k) and 401(m) may be taken into account for purposes of the preceding sentence, at the election of an Employer. For the purposes of this Section and Section 4.3, the term "compensation" shall mean the sum of an Eligible Employee's compensation under Section 4.9(3) and his Before-Tax Contributions (subject to the limitations described in Section 1.1(14)(b)). In the case of a Highly Compensated Eligible Employee who is either a 5-percent owner (as defined in Code Section 416(i)(1)) or one of the ten most Highly Compensated Employees, the combined actual deferral ratio for the family group (as such term is hereinafter defined), which shall be treated as one Highly Compensated Eligible Employee, shall be determined by combining the Before-Tax Contributions (and, at the election of an Employer, Qualified Nonelective Contributions) and compensation of all members of the family group who are Eligible Employees. For the purposes of this Section and Section 4.3, the term "family group" shall mean any Highly Compensated Eligible Employee described in the preceding sentence and such Employee's Spouse and lineal ascendants or descendants and the spouses of such lineal ascendants or descendants. For the purposes of determining "the actual deferral percentage for all other Eligible Employees" as referred to in Subsection (1) of this Section, the Before-Tax Contributions and compensation of all members of the family group shall be disregarded. 47 (3) For the purposes of this Section, the term "Highly Compensated Eligible Employee" for a particular Plan Year shall mean any Highly Compensated Employee who is an Eligible Employee. (4) In the event that excess contributions (as such term is hereinafter defined) are made to the Trust for any Plan Year, then, prior to March 15 of the following Plan Year, such excess contributions (and any income allocable thereto) shall be distributed to the Highly Compensated Eligible Employees on the basis of the respective portions of the excess contributions attributable to each such Eligible Employee. For the purposes of this Subsection, the term "excess contributions" shall mean, for any Plan Year, the excess of (a) the aggregate amount of Before-Tax Contributions actually paid to the Trust on behalf of Highly Compensated Eligible Employees for such Plan Year over (b) the maximum amount of such Before-Tax Contributions permitted for such Plan Year under Subsection (1) of this Section, determined by reducing Before-Tax Contributions made on behalf of Highly Compensated Eligible Employees in order of the actual deferral percentages (as defined in Subsection (2) of this Section) beginning with the highest of such percentages. Notwithstanding the foregoing provisions of this Subsection, in the case of a Highly Compensated Eligible Employee whose actual deferral ratio is determined under the family aggregation rules set forth in Subsection (2) of this Section, the determination and correction of the amount of excess contributions shall be made by reducing the actual deferral ratio in accordance with the "leveling" method 48 described in Treasury Regulations Section 1.401(k)-1(f)(2) and allocating the excess contributions for the family group among its members in proportion to the Before-Tax Contributions of each member of the family group that is combined to determine the actual deferral ratio. (5) Matching Allocations made with respect to a Participant's excess contributions (and any income allocable thereto) shall be forfeited and applied to reduce subsequent Matching Employer Contributions, Profit Sharing Matching Contributions and ESOP Contributions required under the Plan. 4.3 Excess Matching Allocations. (1) Notwithstanding the provisions of Article III, effective January 1, 1987, for any Plan Year the contribution percentage (as defined in Subsection (2) of this Section) for the group of Highly Compensated Eligible Employees (as defined in Section 4.2(3)) for such Plan Year shall not exceed the greater of (a) 125 percent of the contribution percentage for all other Eligible Employees or (b) the lesser of 200 percent of the contribution percentage for all other Eligible Employees, or the contribution percentage for all other Eligible Employees plus 2 percentage points. If two or more plans of the Controlled Group to which matching contributions, employee after-tax contributions or before-tax contributions (as defined in Section 4.1(1)) are made are treated as one plan for purposes of Code Section 410(b), such plans shall be treated as one plan for purposes of this Subsection; and if a Highly Compensated Eligible Employee participates in two or more plans of the Controlled Group 49 to which such contributions are made, all such contributions shall be aggregated for purposes of this Subsection. (2) For the purposes of this Section, the contribution percentage for a specified group of Eligible Employees for a Plan Year shall be the average of the ratios (calculated separately for each Eligible Employee in such group) of (a) the Matching Allocations made under the Plan for each such Eligible Employee for such Plan Year to (b) the Eligible Employee's compensation (as defined in Section 4.2(2)) for such Plan Year. In the case of a Highly Compensated Eligible Employee who is either a 5-percent owner (as defined in Code Section 416(i)(1)) or one of the ten most Highly Compensated Employees, the combined contribution ratio for the family group (as such term is defined in Section 4.2(2)), which shall be treated as one Highly Compensated Employee, shall be determined by combining the Matching Allocations and compensation of all members of the family group who are Eligible Employees. For the purposes of determining "the contribution percentage for all other Eligible Employees" as referred to in Subsection (1) of this Section, the Matching Allocations for, and the compensation of, all members of the family group shall be disregarded. (3) In the event that excess aggregate contributions (as such term is hereinafter defined) are made to the Trust for any Plan Year, then, prior to March 15 of the following Plan Year, such excess contributions (and any income allocable thereto) shall be forfeited (if forfeitable) and applied as provided in 50 Section 3.9 or (if not forfeitable) shall be distributed to the Highly Compensated Eligible Employees on the basis of the respective portions of the excess contributions attributable to each such Eligible Employee. For the purposes of this Subsection, the term "excess aggregate contributions" shall mean, for any Plan Year, the excess of (a) the aggregate amount of the Matching Allocations made for Highly Compensated Eligible Employees for such Plan Year over (b) the maximum amount of such Matching Allocations permitted for such Plan Year under Subsection (1) of this Section, determined by reducing Matching Allocations made for Highly Compensated Eligible Employees in order of their contribution percentages (as defined in Subsection (2) of this Section) beginning with the highest of such percentages. Notwithstanding the foregoing provisions of this Subsection, in the case of a Highly Compensated Eligible Employee whose contribution percentage is determined under the family aggregation rules set forth in Subsection (2) of this Section, the determination and correction of the amount of excess aggregate contributions shall be made by reducing the contribution ratio in accordance with the "leveling" method described in Treasury Regulation Section 1.401(m)-1(c)(2) and allocating the excess aggregate contributions for the family group among its members in proportion to the Matching Allocations of each member of the family group that is combined to determine the contribution ratio. (4) The determination of excess aggregate contributions under this Section shall be made after (a) first determining the 51 excess deferrals under Section 4.1 and (b) then determining the excess contributions under Section 4.2. 4.4 Multiple Use of the Alternative Limitation. (1) Notwithstanding the provisions of Article III or the foregoing provisions of this Article IV, effective January 1, 1989, if, after the application of Sections 4.1, 4.2 and 4.3, the sum of the actual deferral percentage and the contribution percentage for the group of Highly Compensated Eligible Employees (as defined in Section 4.2(3)) exceeds the aggregate limit (as defined in Subsection (2) of this Section), then the contributions made for such Plan Year for Highly Compensated Eligible Employees will be reduced so that the aggregate limit is not exceeded. Such reductions shall be made first in Before-Tax Contributions (but only to the extent that they are not matched by Matching Allocations) and then in Matching Allocations. Reductions in contributions shall be made in the manner provided in Section 4.2 or 4.3, as applicable. The amount by which each such Highly Compensated Eligible Employee's contribution percentage amount is reduced shall be treated as an excess contribution or an excess aggregate contribution under Section 4.2 or 4.3, as applicable. For the purposes of this Section, the actual deferral percentage and contribution percentage of the Highly Compensated Eligible Employees are determined after any reductions required to meet those tests under Sections 4.2 and 4.3. Notwithstanding the foregoing provisions of this Section, no reduction shall be required by this Subsection if either (a) the actual deferral 52 percentage of the Highly Compensated Eligible Employees does not exceed 1.25 multiplied by the actual deferral percentage of the non-Highly Compensated Eligible Employees, or (b) the contribution percentage of the Highly Compensated Eligible Employees does not exceed 1.25 multiplied by the contribution percentage of the non-Highly Compensated Eligible Employees. (2) For purposes of this Section, the term "aggregate limit" means the sum of (a) 125% of the greater of (i) the actual deferral percentage of the non-Highly Compensated Eligible Employees for the Plan Year, or (ii) the contribution percentage of the non-Highly Compensated Eligible Employees for the Plan Year, and (b)4 the lesser of (A) 200% of, or (B) two (2) plus, the lesser of such actual deferral percentage or contribution percentage. If it would result in a larger aggregate limit, the word "lesser" is substituted for the word "greater" in part (a) of this Subsection, and the word "greater" is substituted for the word "lesser" the second place such word appears in part (b) of this Subsection. 4.5 Monitoring Procedures. (1) In order to ensure that at least one of the actual deferral percentages specified in Section 4.2(1) and at least one of the contribution percentages specified in Section 4.3(1) and the aggregate limit specified in Section 4.4(2) are satisfied for each Plan Year, the Company shall monitor (or cause to be monitored) the amount of Before-Tax Contributions and Matching Allocations being made to the Plan by or for each Eligible Employee during each Plan Year. In the event 53 that the Company determines that neither of such actual deferral percentages, neither of such contribution percentages or such aggregate limit will be satisfied for a Plan Year, and if the Committee in its sole discretion determines that it is necessary or desirable, the Before-Tax Contributions and/or the Matching Allocations made thereafter by or for each Highly Compensated Eligible Employee (as defined in Section 4.2(3)) may be reduced (pursuant to non-discriminatory rules adopted by the Company) to the extent necessary to decrease the actual deferral percentage and/or the contribution percentage for Highly Compensated Eligible Employees for such Plan Year to a level which satisfies either of the actual deferral percentages, either of the contribution percentages and/or the aggregate limit. (2) In order to ensure that excess deferrals (as such term is defined in Section 4.1(2)) shall not be made to the Plan for any taxable year for any Participant, the Company shall monitor (or cause to be monitored) the amount of Before-Tax Contributions being made to the Plan for each Participant during each taxable year and may take such action (pursuant to non- discriminatory rules adopted by the Company) to prevent Before-Tax Contributions made for any Participant under the Plan for any taxable year from exceeding the maximum amount applicable under Section 4.1(1). (3) The actions permitted by this Section are in addition to, and not in lieu of, any other actions that may be taken pursuant to other Sections of the Plan or that may be 54 permitted by applicable law or regulation in order to ensure that the limitations described in Sections 4.1, 4.2, 4.3 and 4.4 are met. 4.6 Testing Procedures. (1) In applying the limitations set forth in Sections 4.2, 4.3 and 4.4, the Company may, at its option, utilize such testing procedures as may be permitted under Code Sections 401(a)(4), 401(k), 401(m) or 410(b), including, without limitation, (a) aggregation of the Plan with one or more other qualified plans of the Controlled Group, (b) inclusion of qualified matching contributions, qualified nonelective contributions or elective deferrals described in, and meeting the requirements of, Treasury Regulations under Code Sections 401(k) and 401(m) to any other qualified plan of the Controlled Group in applying the limitations set forth in Sections 4.2, 4.3 and 4.4, or (c) any permissible combination thereof. (2) Notwithstanding the foregoing provisions of this Article, to the extent required by the Code and Treasury Regulations the limitations of Sections 4.2, 4.3 and 4.4 shall be applied separately to each of the Profit Sharing Feature and the ESOP Feature. 4.7 Limitations on Employer and Before-Tax Contributions. Notwithstanding any provision of the Plan to the contrary, any Before-Tax Contributions or Employer Contributions hereunder for any Plan Year shall in no event exceed the amount that would be deductible by an Employer for such Plan Year for 55 federal income tax purposes and each Before-Tax Contribution and Employer Contribution to the Trust Fund made by any Employer is hereby specifically conditioned upon such deductibility. 4.8 Return of Contributions to Employers. (1) Except as specifically provided in this Section or in the other Sections of the Plan, the Trust Fund shall never inure to the benefit of the Employers and shall be held for the exclusive purposes of providing benefits to Employees, Participants and their Beneficiaries and defraying reasonable expenses of administering the Plan. (2) If an Employer Contribution to the Trust Fund is made by an Employer by a mistake of fact, the excess of the amount contributed over the amount that would have been contributed had there not occurred a mistake of fact shall be returned to such Employer within one year after the payment of such Contribution. If an Employer Contribution to the Trust Fund made by an Employer which is conditioned upon the deductibility of the Contribution under Code Section 404 (or any successor thereto) is not fully deductible under such Code Section (or any successor thereto), such Contribution, to the extent the deduction therefor is disallowed, shall be returned to the Employer within one year after the disallowance of the deduction. Earnings attributable to Employer Contributions returned to an Employer pursuant to this Subsection may not be returned, but losses attributable thereto shall reduce the amount to be returned; provided, however, that if the withdrawal of the amount attributable to the mistaken or non- 56 deductible contribution would cause the balance of the individual Account of any Participant to be reduced to less than the balance which would have been in such Account had the mistaken or non-deductible amount not have been contributed, the amount to be returned to the Employer pursuant to this Section shall be limited so as to avoid such reduction. 4.9 Maximum Additions. (1) Notwithstanding the provisions of Article III or the foregoing provision of this Article IV, effective as of January 1, 1987, the maximum annual addition (as defined in Subsection (2) of this Section) to a Participant's Account for any Plan Year (which shall be the limitation year) shall in no event exceed the lesser of (a) $30,000 (or, if greater, one-fourth of the dollar limitation in effect under Code Section 415(b)(1)(A)) or (b) 25% of his compensation for such Plan Year. (2) For the purpose of this Section, the term "annual additions" means the sum for any Plan Year of: (a) all contributions (including, without limitation, Before-Tax Contributions made pursuant to Section 3.1) made by the Controlled Group which are allocated to the Participant's account pursuant to a defined contribution plan maintained by a Controlled Group Member, (b) all employee contributions made by the Participant to a defined contribution plan maintained by a Controlled Group Member, 57 (c) all forfeitures allocated to the Participant's account pursuant to a defined contribution plan maintained by a Controlled Group Member, (d) any amount allocated to an individual medical benefit account (as defined in section 415(1)(2) of the Code) of the Participant which is part of a pension or annuity plan, and (e) any amount attributable to medical benefits allocated to the Participant's account established under Code Section 419A(d)(1) if the Participant is or was a key-employee (as such term is defined in Code Section 416(i)) during such Plan Year or any preceding Plan Year. (3) For the purposes of this Section, the term "compensation" shall mean Compensation within the meaning of Code Section 415(c)(3) and regulations thereunder. (4) If a Participant's annual additions would exceed the limitations of Subsection (1) of this Section for a Plan Year as a result of the allocation of forfeitures, a reasonable error in estimating the Participant's compensation, or a reasonable error in determining the amount of Before-Tax Contributions that may be made with respect to the Participant under the limitations of this Section (or other facts and circumstances which the Commissioner of Internal Revenue finds justify application of the following rules of this Subsection), Employer Contributions allocable to such Participant's Account for such Plan Year shall, to the extent necessary to cause the limitations of Subsection (1) 58 of this Section not to be exceeded for such Plan Year, be held by the Trustee in a suspense account and shall be used to reduce Employer Contributions for the next Plan Year (and succeeding Plan Years, as necessary) for such Participant if such Participant is covered by the Plan at the end of any such Plan Year; and if he is not covered by the Plan at the end of any such Plan Year, such Employer Contributions held by the Trustee in such suspense account shall be allocated and reallocated to the accounts of other Participants, except that no such allocation or reallocation shall cause the limitations of Subsection (1) of this Section to be exceeded for any such other Participant for such Plan Year. Investment gains and losses shall not be allocated to the suspense account during the period such suspense account is required to be maintained pursuant to this Subsection. In the event of a termination of the Plan, any then remaining balance of the suspense account, to the extent it may not then be allocated to Participants, shall revert to the Employers. If the allocation of such Employer Contributions to the suspense account described in this Subsection is not sufficient to cause the limitations of Subsection (1) of this Section not to be exceeded for such Plan Year, Before-Tax Contributions made for such Participant for such Plan Year which constitute part of the annual additions (together with any gains attributable thereto) shall be returned to him to the extent necessary to effectuate such reduction. 59 (5) Notwithstanding the foregoing provisions of this Section, in the event that an ESOP Loan is made to the Plan pursuant to the ESOP Feature the following rules shall apply: (a) If some or all of any Plan contribution is designated to repay the ESOP Loan, a portion of the amount of the contribution (exclusive of dividends) used to repay the ESOP Loan shall be attributed to each Participant who is eligible for an allocation pursuant to Sections 3.6, 3.8 or 3.11 in proportion to his share of the total amount allocated to all Participants pursuant to Sections 3.6, 3.8 and 3.11. Such attributable portion shall be treated as an annual addition for purposes of this Section. Assets released from the ESOP Suspense Account (as defined in Section 16.1) shall not constitute an annual addition for purposes of this Section. Any earnings allocated under Section 16.13(3) as a result of gains from the sale of unallocated NCC Stock held under the ESOP Feature shall not constitute an annual addition; and (b) If in a Plan Year no more than one-third of the deductible Employer contributions to the Plan are allocated to Highly Compensated Employees, forfeitures of NCC Stock shall not constitute an annual addition as long as such forfeited shares were acquired with the proceeds of an ESOP Loan, and Employer contributions used to make interest payments on an ESOP Loan shall not constitute an annual addition. 60 4.10 Maximum Benefits. (1) Except as otherwise provided in Code Section 415(e), in any case in which an individual is a participant in both a defined benefit plan and a defined contribution plan maintained by the Controlled Group, the sum of the defined benefit plan fraction and the defined contribution plan fraction for any Plan Year shall not exceed 1. In the event a reduction is necessary to avoid exceeding the limitation set forth in this Section, the affected Participant's benefits under the defined benefit plan shall be reduced to the extent necessary to avoid exceeding such limitation. For purposes hereof, (a) the defined benefit plan fraction for any Plan Year is a fraction, (i) the numerator of which is the projected annual benefit of the participant under the plan (determined as of the close of the Year), and (ii) the denominator of which is the lesser of (A) the product of 1.25, multiplied by the dollar limitation in effect under Code Section 415(b)(1)(A) for such Year or (B) the product of 1.4, multiplied by the amount which may be taken into account under Code Section 415(b)(1)(B) with respect to such participant under the plan for such Year; and (b) the defined contribution plan fraction for any Plan Year is a fraction, (i) the numerator of which is the sum of the annual additions to the participant's account as of the close of the Year and for all prior Years, and (ii) the denominator of which is the sum of the lesser of the 61 following amounts determined for such Year and for each prior year of service with the Controlled Group (regardless of whether a plan was in existence during such Year): (A) the product of 1.25, multiplied by the dollar limitation in effect under Code Section 415(c)(1)(A) for such Year and each such prior year of service, or (B) the product of 1.4, multiplied by the amount which may be taken into account under Code Section 415(c)(1)(B) with respect to such participant under such plan for such Year and each such prior year of service. (2) A Participant's projected annual benefit for purposes of Subsection (1) of this Section is equal to the annual benefit to which he would be entitled under the terms of the defined benefit plan, assuming he will continue employment until reaching normal retirement age as determined under the terms of such plan (or current age, if later), his compensation for the Plan Year under consideration will remain the same until the date he attains such age, and all other relevant factors used to determine benefits under the plan for the Plan Year under consideration will remain constant for all future Plan Years. 4.11 Definitions. (1) For purposes of applying the limitations set forth in Sections 4.9 and 4.10, all qualified defined benefit plans (whether or not terminated) ever maintained by one or more 62 Controlled Group Members shall be treated as one defined benefit plan, and all qualified defined contribution plans (whether or not terminated) ever maintained by one or more Controlled Group Members shall be treated as one defined contribution plan. (2) For purposes of this Section and Sections 4.9 and 4.10, the term "Controlled Group Member" shall be construed in the light of Code Section 415(h). 4.12 Funding Policy. To the extent such has not already been done, the Committee shall (1) determine, establish and carry out a funding policy and method consistent with the objectives of the Plan and the requirements of applicable law, and (2) furnish from time to time to the person responsible for the investment of the assets held in the Trust Fund information such Committee may have relative to the Plan's probable short-term and long-term financial needs, including any probable need for short-term liquidity, and such Committee's opinion (if any) with respect thereto. 63 ARTICLE V. - INVESTMENTS 5.1 Investment Funds. (1) The Trust Fund (other than the portion of the Trust Fund consisting of the Loan Accounts) shall be divided into the following Investment Funds: the Equity Fund, the Fixed Income Fund, the Money Market Fund, the NCC Stock Fund, and the Capital Preservation Fund and such other Investment Funds as the Committee may in its discretion select or establish. Before-Tax Contributions, Transfer Contributions and Employer Contributions shall be invested therein as provided in Section 5.5. Subject to the provisions of the Plan and Trust Agreement relating to the appointment of an Investment Manager and to other applicable provisions of the Plan and Trust Agreement, the Trustee shall hold, manage, administer, value, invest, reinvest, account for and otherwise deal with each Investment Fund separately. Dividends, interest and other distributions received by the Trustee in respect of each Investment Fund shall be reinvested in the same Investment Fund. (2) The Trustee shall invest and reinvest the principal and income of each such Investment Fund and shall keep each such Investment Fund invested, without distinction between principal and income, in such property, investments and securities as the Trustee may deem suitable without regard to any percentage or other limitation in any laws or rules of court applying to investments by trust companies or trustees; but subject, however, to the terms of the Plan and Trust Agreement and to the following provisions: 64 (a) All or any part of the Equity Fund, the Fixed Income Fund, the Capital Preservation Fund or the Money Market Fund may, in the discretion of the Trustee, be invested in any NCB Investment Trust Fund. Funds in the Fixed Income Fund, the Equity Fund and the Capital Preservation Fund may not be invested in an NCB Investment Trust Fund, unless such NCB Investment Trust Fund consists of the same general types of investments as are permitted under such Funds. Funds in the Money Market Fund may not be invested in an NCB Investment Trust Fund unless such NCB Investment Trust Fund consists generally of investments principally in bonds, notes or other evidences of indebtedness which are payable on demand (including variable amount notes) or which have a maturity date not exceeding 91 days after the date of purchase. (b) The Trustee may make deposits or investments of funds in time or savings deposits or instruments of a Controlled Group Member, provided such funds are awaiting investment or distribution, and nothing contained in this Section shall serve to preclude or prohibit such deposits or investment of such funds. (c) The determination of the Trustee as to whether an investment is within the category of investments which may be made for the Fixed Income Fund, the Equity Fund, the NCC Stock Fund, the Capital Preservation Fund or the Money Market Fund shall be conclusive. 65 (d) The Trustee in its discretion may keep such portion of the Investment Funds in cash as the Trustee may from time to time deem to be advisable and shall not be liable for interest on uninvested funds. 5.2 Account; Sub-Account. The Trustee shall establish and maintain, or cause to be maintained, an Account for each Participant, which Account shall reflect, pursuant to Sub-Accounts established and maintained thereunder, the amount, if any, of the Participant's (a) Before-Tax Contributions, (b) After-Tax Contributions, (c) Matching Allocations, (d) Qualified Nonelective Contributions and (e) Transfer Contributions (unless the Trustee determines to maintain the cash or property transferred to the Trust Fund as a Transfer Contribution pursuant to one or more of the foregoing Sub-Accounts). The Trustee shall establish any Sub-Account required by any Appendix to the Plan. The Trustee shall also maintain, or cause to be maintained, separate records which shall show (i) the portion of each such Sub-Account invested in each Investment Fund and (ii) the amount of contributions thereto, payments and withdrawals and loans therefrom and the amount of income, expenses, gains and losses attributable thereto. The interest of each Participant in the Trust Fund at any time shall consist of his Account balance (as determined pursuant to Section 5.4) as of the last preceding Valuation Date plus credits and minus debits to such Account since that Date plus the value of the Participant's Loan Account on the last preceding Valuation Date on which the Administrator valued such Loan Account pursuant to 66 Section 6.13 plus any amounts credited to such Loan Account and not invested in any Investment Fund. 5.3 Reports. The Committee shall cause reports to be made at least annually to each Participant and to the Beneficiary of each deceased Participant as to the value of his Account and the amount of his Vested Interest. In addition, the Committee shall cause such a report to be made to each Participant who (a) requests such a report in writing (provided that only one report shall be furnished a Participant upon such a request in any 12-month period), (b) has terminated employment with the Controlled Group, or (c) incurs a Break in Service. 5.4 Valuation of Investment Funds. (1) As of each Valuation Date, the Trustee shall determine the value of each Investment Fund in accordance with the terms of this Section and the Trust Agreement. The Trustee shall determine, from the change in value of each Investment Fund between the current Valuation Date and the then last preceding Valuation Date, the net gain or loss of such Investment Fund during such period resulting from expenses paid (including the fees and expenses of the Trustee and Investment Manager, if any, which are to be charged to such Investment Fund in accordance with the terms of the Plan and the Trust Agreement) and realized and unrealized earnings, profits and losses of such Investment Fund during such period. The transfer of funds to or from an Investment Fund pursuant to Section 5.6, Participant or Employer Contributions allocated to an Investment Fund, and payments, distributions and withdrawals from an 67 Investment Fund to provide benefits under the Plan for Participants or Death Beneficiaries shall not be deemed to be earnings, profits, expenses or losses of the Investment Fund. (2) After each Valuation Date, the net gain or loss of each Investment Fund determined pursuant to Subsection (1) of this Section shall be allocated as of such Valuation Date by the Trustee to the Accounts of Participants and Beneficiaries in such Investment Fund in proportion to the amounts of such Accounts invested in such Investment Fund on such Valuation Date, exclusive of amounts to be credited but including amounts (other than the net loss, if any, determined pursuant to Subsection (1) of this Section) to be debited to such Accounts as of such Valuation Date. (3) Except as may otherwise be provided by the Committee, Before-Tax Contributions, Matching Allocations, Qualified Nonelective Contributions and Transfer Contributions shall be credited to each Participant's Account and allocated to the appropriate Investment Fund as of the first business day following the Valuation Date coincident with or next following the date the Trustee has received such amounts and appropriate instructions as to the allocation of such amounts among the Investment Funds. (4) The reasonable and equitable decision of the Trustee as to the value of each Investment Fund as of each Valuation Date shall be conclusive and binding upon all persons having any interest, direct or indirect, in such Investment Fund. 68 5.5 Investment of Before-Tax, Transfer and Employer Contributions. (1) Each Participant may, pursuant to rules and procedures adopted by the Committee, direct that Before-Tax and Transfer Contributions made by or for him and repayments of a loan made pursuant to Section 6.13, shall be invested in any or all of the Investment Funds. An investment option selected by a Participant shall remain in effect and be applicable to all subsequent Before-Tax and Transfer Contributions and loan repayments made by or for him unless and until an investment change is made by him. (2) An investment direction described in this Section may only be made either (A) on a form supplied or approved by the Committee, signed by the Participant and filed with the Committee or an Employer or (B) if available to the Participant, by effecting such direction by means of a voice response telephonic system established and supervised by the Committee, with confirmation by means of a writing mailed to the Participant with-in three days. In the absence of an effective investment direction, Before-Tax and Transfer Contributions and loan repayments shall be invested in the Money Market Fund. Any cash received by the Trust between Valuation Dates may be temporarily invested until the Valuation Date next following the date such cash is received, at which time it shall be allocated among the Investment Funds in accordance with the foregoing provisions of this Section. 69 (3) A Participant may change his investment direction with respect to all subsequent Before-Tax and Transfer Contributions made by or for him either (A) by filing with the Committee or his Employer, on a form supplied or approved by the Committee or his Employer, a signed investment direction revision, or (B) if available to the Participant, by effecting such change by means of a voice response telephonic system, established by and supervised by the Committee, with written confirmation mailed to the Participant within three days. Only one such investment direction revision may be made by a Participant in any calendar quarter except that after the Conversion Date, only one such investment direction revision may be made by a Participant in any calendar month. Such investment direction revision shall affect only amounts contributed after the direction and prior to a subsequent revision. (4) All Employer Contributions shall be invested in the NCC Stock Fund. 5.6 Transfers of Investments. (1) Each Participant shall have the right from time to time to elect that all or a part of his interest in one or more of the Investment Funds (including amounts attributable to Employer Contributions) be liquidated and the proceeds thereof reinvested in any other Investment Fund(s). Such an investment-mix adjustment shall not affect investment of amounts received in the Trust as contributions, which shall continue to be invested pursuant to Section 5.5. Notwithstanding the foregoing provisions of this Section, a Participant may not 70 elect that any part of his interest in the Capital Preservation Fund be liquidated and the proceeds thereof reinvested in the Money Market Fund or the Fixed Income Fund. (2) An investment-mix adjustment described in this Section may only be made on either (a) a form supplied or approved by the Committee or an Employer, signed by the Participant and filed with the Committee or his Employer or (B) if available to the Participant, by effecting such adjustment by means of a voice response telephonic system, established by and supervised by the Committee, with written confirmation mailed to the Participant within three days. Only one such adjustment may be made by a Participant in any calendar quarter, except that after the Conversion Date only one such adjustment may be made by a Participant in any calendar month. (3) Notwithstanding any other provision of this Section to the contrary, a Participant (a) whose employment with the Controlled Group terminates for reasons other than the attainment of Normal or Early Retirement Age or the occurrence of a Disability, and (b) who does not receive a distribution of his entire Vested Interest in the Trust Fund before the expiration of six full calendar months following the date on which his employment terminates, shall be deemed to have made an investment-mix adjustment election pursuant to this Section to have all of his interest in the Trust Fund reinvested in the Money Market Fund (to the extent not already invested therein) effective as of the Valuation Date immediately following the expiration of such six- 71 month period. Thereafter, no investment-mix adjustment election may be made by such a Participant. An investment-mix adjustment made pursuant to this Section shall be made with respect to the Participant's interest in the Capital Preservation Fund, if any, notwithstanding the provisions of Subsection (1) which would otherwise prohibit such an investment-mix adjustment election. (4) A Beneficiary of a deceased Participant shall have the same rights as a Participant has under Subsections (1) and (2) of this Section. With respect to any other non-Participant who becomes eligible to receive a distribution under the Plan and who does not receive a distribution of the entire interest in the Trust Fund to which he is entitled before the expiration of six full calendar months following the date on which he would have been eligible to commence receiving a distribution, his interest in the Trust Fund shall be reinvested in the Money Market Fund (to the extent not already invested therein) effective as of the Valuation Date immediately following the expiration of such six-month period. Thereafter, no investment-mix adjustment election may be made by such a non-Participant. 5.7 Committee Rules and Directions to Trustee. (1) The Committee shall adopt, and may amend from time to time, general rules of uniform application which shall provide for the administration of each Investment Fund, including, but not limited to, rules providing (a) for the time or times that an investment direction or transfer pursuant to Sections 5.5 and 5.6 may be filed and be effective; (b) for minimum limits (not in excess of 72 $50) on the amount that may be invested for one Participant at any one time in an Investment Fund and on the amount that may be transferred from Investment Funds if such amount is less than all of the Participant's interest in any such Fund; (c) for procedures pursuant to which a Participant may designate the portion of his Before-Tax and Transfer Contributions to be invested in such Investment Funds as he elects in terms of a percentage (in even multiples of 5%) of the amount to be so invested; and (d) for any other matters which the Committee deems necessary or advisable in the administration of any Investment Fund. (2) The Committee shall give appropriate and timely directions to the Trustee in order to permit the Trustee to give effect to the investment choice and investment change elections made under Sections 5.5 and 5.6 and to provide funds for distributions and withdrawals pursuant to Article VI. Investments in and withdrawals from each Investment Fund shall be made only as of a Valuation Date. 73 ARTICLE VI - DISTRIBUTIONS, WITHDRAWALS AND LOANS 6.1 Distributions In General. A Participant's interest in the Trust Fund shall only be distributable as provided in this and the following Sections of this Article. A Participant or Beneficiary who is eligible to receive a distribution under applicable Sections of this Article shall obtain a blank application for that purpose from the Committee and file with such Committee his application in writing on such form, furnishing such information as such Committee may reasonably require, including satisfactory proof of his age and that of his Spouse (if applicable) and any authority in writing that the Committee may request authorizing it to obtain pertinent information, certificates, transcripts and/or other records from any public office. 6.2 Distributions on Death. (1) If a Participant dies before the payment or commencement of payment of his Vested Interest to him, his entire Account, valued as of the next Valuation Date which is at least 30 days after the date on which the Death Beneficiary files his application pursuant to Section 6.1, shall be paid or commence to be paid to the Participant's Death Beneficiary pursuant to Subsection (2) of this Section as soon as practicable after such Valuation Date, but in no event shall payment be made or commenced later than the time prescribed in Section 6.8(2) without regard to whether an application has been filed. 74 (2) In the event of the death of a Participant who dies under the circumstances described in Subsection (1) of this Section, such Participant's Account shall be paid to his Death Beneficiary under one of the following methods as the Death Beneficiary shall elect: (a) such amount shall be paid to him in a lump sum; or (b) such amount shall be paid to him in such annual, quarterly or monthly installments, as elected by the Death Beneficiary, over a term certain not extending beyond the life expectancy of the Death Beneficiary. (3) If a Participant dies after the commencement of payments of his Vested Interest to him in the form described in Section 6.3(1)(b), but before all of such payments have been made, the undistributed portion of his Vested Interest shall continue to be paid to his Death Beneficiary in the same manner as originally elected by the Participant, provided however, that, effective as of January 1, 1995, such Participant's Death Beneficiary shall be permitted to elect that the payment of such portion be made in a lump sum. 6.3 Distributions on Normal or Early Retirement or Disability. (1) If a Participant's termination of employment with the Controlled Group occurs (other than by reason of his death) on or after his attainment of his Normal or Early Retirement Age or by reason of his Disability, his entire Account, valued as of the Valuation Date specified in Subsection (2) of this Section, shall be paid or commence to be paid to him under 75 one or a combination of the following methods as the Participant shall elect upon application filed by him with the Committee pursuant to Section 6.1: (a) such amount shall be paid to him in a lump sum; or (b) such amount shall be paid to him in such annual, quarterly or monthly installments, as elected by the Participant, over a term certain not extending beyond the life expectancy of the Participant or the joint life expectancy of the Participant and his Beneficiary. (2) Distributions pursuant to this Section shall be paid or commence to be paid to a Participant as soon as practicable after, and shall be valued as of, the next Valuation Date which is at least 30 days after the later of (a) the date on which the Participant files his application with the Committee pursuant to Section 6.1 or (b) the date of the Participant's termination of employment from the Controlled Group, but in no event shall payment be made or commenced later than the time prescribed in Section 6.8(2) without regard to whether an application has been filed. (3) If a Participant described in Subsection (1) of this Section should again become an Employee before his entire Account has been distributed, the distribution of his Account shall cease until the Participant again terminates his employment with the Controlled Group. 6.4 Distribution on Other Termination of Employment. If a Participant's termination of employment with the Controlled 76 Group occurs under circumstances other than those covered by Sections 6.2 and 6.3, his entire Vested Interest, valued as of the Valuation Date coinciding with or next following the date determined pursuant to Section 6.3(2), shall be paid to him in a lump sum at such time as provided in Section 6.3(2). 6.5 Payment of Small Benefits. Notwithstanding the foregoing provisions of this Article, if the value of the Vested Interest of a Participant following his termination of employment (whether by death or otherwise) does not exceed $3,500 on the first Valuation Date next following such termination of employment (and never exceeded $3,500 at the time of any previous withdrawal or distribution), such Vested Interest shall be paid to the Participant (or, if applicable, his Beneficiary) in a lump sum within 90 days after such Valuation Date. 6.6 Distributions Pursuant to a QDRO. If a qualified domestic relations order (as defined in Code Section 414(p)) so provides, the portion of a Participant's Vested Interest payable to the alternate payee(s) may be distributed to the alternate payee(s) at the time specified in such order, regardless of whether the Participant is entitled to a distribution from the Plan at such time. The portion of the Vested Interest so payable shall be valued as of the Valuation Date coincident with or next following the date specified in such order. 6.7 Distribution on Sale of Assets or Disposition of Business. Notwithstanding the preceding provisions of this Section, in the event that a Participant's termination of 77 employment with the Controlled Group is caused by the disposition by an Employer of substantially all of the assets of a trade or business, or its interest in a subsidiary, and such Participant continues employment with the corporation acquiring such assets or such subsidiary, the Participant, if he so elects on an application filed with the Committee pursuant to Section 6.1, shall be entitled to a distribution of his Account valued as of the Valuation Date specified in Section 6.3(2), provided, however, that such Account may only be distributed in the form of a lump sum or in the form of NCC Stock. 6.8 Latest Time of Distribution. (1) Distributions under the Plan shall occur or begin as provided in the preceding Sections of this Article, but in no event later than 60 days after the close of the Plan Year in which the latest of the following events occur: (a) the date on which the Participant attains age 65, (b) the 10th anniversary of the year in which the Participant commenced participation in the Plan, or (c) the Participant's termination of employment with the Controlled Group, provided that, except as provided in Subsection (2) of this Section and Section 6.5, no distribution shall be required to be made or commence until the Participant files his application with the Committee pursuant to Section 6.1. (2)(a) Notwithstanding any other provision of the Plan, effective as of January 1, 1989, the entire Account of each Participant under the Plan (i) shall be distributed to him in a lump sum in cash not later than April 1 of the calendar 78 year following the calendar year in which he attains age 70-1/2 and, with respect to Participants who are Employees, on December 31 of such year and each succeeding year, or (ii) shall commence to be distributed not later than the time specified in Clause (i) of this Paragraph (a) in the form specified in Section 6.3(1)(b) if such form is elected by the Participant in accordance with Section 6.3. (b) If distribution of a Participant's Account under the Plan has begun and such Participant dies before his entire interest has been distributed to him, the remaining portion of such Account shall be distributed to his Death Beneficiary at least as rapidly as under the method of distribution being used as of the date of his death. (c) If a Participant dies before the distribution of his Account under the Plan has begun, the entire Account of the Participant shall be distributed to his Death Beneficiary by the December 31 of the year in which occurs the fifth anniversary of such Participant's death; provided, however, that such five-year rule shall not be applicable to any portion of the Participant's Account under the Plan which is payable to the Participant's Death Beneficiary if such portion is distributed in the form specified in Section 6.2(2)(b), and such distributions begin not later than the December 31 of the calendar year immediately following the calendar year in which the Participant died or, in the case of a Death Beneficiary who is the Participant's surviving 79 Spouse, the December 31 of the calendar year in which the Participant would have attained age 70-1/2. (d) Distributions under this Subsection shall be made in accordance with the provisions of Code Section 401(a)(9) and Treasury Regulations issued thereunder, which provisions are hereby incorporated herein by reference, provided that such provisions shall override the other distribution provisions of the Plan only to the extent that such other Plan provisions provide for distribution that is less rapid than required under such provisions of the Code and Regulations. Nothing contained in this Section shall be construed as providing any optional form of payment that is not available under the other distribution provisions of the Plan. 6.9 Withdrawal of Contributions Upon Attainment of Age 59-1/2. A Participant who is an Employee and who is at least age 59-1/2 may elect to withdraw all or any portion of his Vested Interest in his Account in the form of a single sum payment or a distribution of NCC Stock. A Participant who makes two such withdrawals in the same calendar year while he is an Employee shall not be permitted to have any further Before-Tax Contributions made for him for the remainder of such calendar year. Withdrawals pursuant to this Section shall be paid to the Participant as soon as practicable after, and shall be valued as of, the next Valuation Date which is at least 30 days after the 80 date on which the Participant files an application for withdrawal with the Committee. 6.10 Withdrawal of After-Tax and Transfer Contributions. (1) A Participant, whether or not he is an Employee, may elect to withdraw all or any portion of his After-Tax Contributions Sub-Account. A Participant who makes such a withdrawal shall not be permitted to make any further withdrawals of After-Tax Contributions during the 12-month period following such withdrawal. (2) A Participant, whether or not he is an Employee, may elect to withdraw all or any portion of his Transfer Contributions Sub-Account which is attributable to Transfer Contributions described in Section 3.4(2). (3) Withdrawals pursuant to this Section shall be paid to the Participant as soon as practicable after, and shall be valued as of, the next Valuation Date, which is at least 30 days after the date on which the Participant files an application for a withdrawal with the Committee. 6.11 Hardship Withdrawals. A Participant who is an Employee and who has obtained all distributions and withdrawals (other than for Hardship) and all nontaxable loans then available under all plans maintained by the Controlled Group may request, on a form provided by and filed with the Committee, a withdrawal on account of Hardship of all or a part of his Before-Tax Contributions Sub-Account (excluding any earnings allocated thereto on or after January 1, 1989). Upon making a determination 81 that the Participant is entitled to a withdrawal on account of Hardship, the Committee shall direct the Trustee to distribute to such Participant all or a portion of his Before-Tax Contributions Sub-Account (excluding any earnings allocated thereto on or after January 1, 1989), provided that the amount of the withdrawal shall not be in excess of the amount necessary to alleviate such Hardship. If a withdrawal on account of Hardship is made by a Participant pursuant to this Subsection, the following rules shall apply notwithstanding any other provision of the Plan (or any other plan maintained by the Controlled Group) to the contrary: (a) the Participant is prohibited from making elective contributions and employee contributions to the Plan (or to any other qualified or nonqualified plan maintained by the Controlled Group) for a period of 12 months following receipt of the Hardship withdrawal; and (b) the amount of the Participant's Before-Tax Contributions (and any comparable contributions to any other plan maintained by the Controlled Group) for the Participant's taxable year immediately following the taxable year of the Hardship withdrawal shall not be in excess of the applicable limit under Code Section 402(g) for such next taxable year less the amount of such Participant's Before-Tax Contributions (and any comparable contributions to any other plan maintained by the Controlled Group) for the taxable year of the Hardship withdrawal. 82 6.12 Mechanics of Making Distributions. (1) Where a distribution, withdrawal or loan is to be made from the Trust Fund of only a portion of a Participant's Vested Interest in the Trust Fund and such Interest is invested in more than one of the Investment Funds, the Participant shall designate (on a form approved by the Committee, signed by him and filed with the Committee) which of the Funds should be liquidated in order to make such distribution. Such a designation shall not be considered an investment direction or investment transfer for the purpose of the limitations described in Sections 5.5, 5.6 and 5.7. (2) All distributions, withdrawals and loans shall be made in cash, provided that if the Participant or Beneficiary so elects on a form provided by the Committee, a distribution or withdrawal (but not a loan) may be made in the form of full shares of NCC Stock, based on the fair market value of such Stock (as determined by the Trustee in accordance with the provisions of the Trust Agreement) on the Valuation Date as of which such distribution is made. 6.13 Loans to Participants. (1) A Participant who is a "party in interest" within the meaning of ERISA Section 3(14) may apply on a form provided by the Committee for a loan from his Account. If the Committee determines that the Participant is not in bankruptcy or similar proceedings and is entitled to a loan in accordance with the following provisions of this Section, the Committee shall direct the Trustee to make a loan to the Participant from his Account. Each loan shall be charged against 83 the Participant's Account as follows: first, against the Participant's Before-Tax Contributions Sub-Account; second, to the extent necessary, against the Participant's Matching Allocations Sub-Account; third, to the extent necessary, against the Participant's Transfer Contributions Sub-Account; fourth, to the extent necessary against the Participant's After-Tax Contributions Sub-Account; fifth, to the extent necessary against the Participant's Qualified Non-Elective Contributions Sub-Account; sixth, to the extent necessary, against the Participant's Prior Plan Employer Contributions described in any Appendix to the Plan. (2) A Participant shall not be entitled to a loan under this Section unless the Participant and, if he is married at the time the loan is made, his Spouse (determined at the time the loan is made), consent to (a) the use of the Participant's Account as security as provided in Subsection (5)(c) of this Section and (b) the possible reduction of the Participant's Account as provided in Subsection (6) of this Section. A Spouse's consent required by the preceding sentence shall be signed by the Spouse, shall acknowledge the effect of such consent, and shall be witnessed by any person designated by the Committee as a plan representative or by a notary public. Any consent required by the preceding sentences must be given within the ninety day period preceding the disbursement of the loan proceeds. Notwithstanding the foregoing, the consent of the spouse of a Participant shall not be required 84 with respect to any loan made under this Section after the Conversion Date. (3) Each loan shall be in an amount which is not less than $500. The maximum loan to any Participant (when added to the outstanding balance of all other loans to the Participant from all qualified employer plans (as defined in Code Section 72(p)(4)) of the Controlled Group) shall be an amount which does not exceed the lesser of (a) $50,000, reduced by the excess (if any) of (i) the highest outstanding balance of such other loans during the one-year period ending on the day before the date on which such loan is made, over (ii) the outstanding balance of such other loans on the date on which such loan is made, or (b) 50% of the value of such Participant's Account on the date on which such loan is made. (4) For each Participant for whom a loan is authorized pursuant to this Section, the Administrator shall (a) direct the Trustee to liquidate the Participant's interest in the Investment Funds as directed by the Participant or, in the absence of such direction, on a pro-rata basis, to the extent necessary to provide funds for the loan, (b) direct the Trustee to disburse such funds to the Participant upon the Participant's execution of the promissory note and security agreement referred to in Subsection (5)(d) of this Section, (c) transmit to the Trustee the executed promissory note and security agreement referred to in Subsection (5)(d) of this Section, and (d) establish and maintain a separate 85 recordkeeping account within the Participant's Account (the "Loan Account") (i) which initially shall be in the amount of the loan, (ii) to which the funds for the loan shall be deemed to have been allocated and then disbursed to the Participant, (iii) to which the promissory note shall be allocated and (iv) which shall show the unpaid principal of and interest on the promissory note from time to time. All payments of principal and interest by a Participant shall be credited initially to his Loan Account and applied against the Participant's promissory note, and then invested in the Investment Funds pursuant to the Participant's direction under Section 5.5. The Administrator shall value each Participant's Loan Account for purposes of Section 5.2 at such times as the Administrator shall deem appropriate, but not less frequently than quarterly. (5) Loans made pursuant to this Section: (a) shall be made available to all Participants on a reasonably equivalent basis; (b) shall not be made available to Highly Compensated Employees in a percentage amount greater than the percentage amount made available to other Participants; (c) shall be secured by the Participant's Loan Account; and (d) shall be evidenced by a promissory note and security agreement executed by the Participant which provides for: 86 (i) the security referred to in paragraph (c) of this Subsection; (ii) a rate of interest determined by the Committee in accordance with applicable law; (iii) repayment within a specified period of time, which shall not extend beyond five years; (iv) repayment in equal payments over the term of the loan, with payments not less frequently than quarterly; and (v) for such other terms and conditions as the Committee shall determine, which shall include provision that: (A) with respect to a Participant who is an Employee, the loan will be repaid pursuant to authorization by the Participant of equal payroll deductions over the repayment period sufficient to amortize fully the loan within the repayment period, provided, however, the Committee may waive the requirement of equal payroll deductions if the Employer payroll through which the Participant is paid cannot accommodate such deductions; (B) the loan shall be prepayable in whole at any time without penalty; and (C) the loan shall be in default and become immediately due and payable upon the first to occur of the following events: 87 (I) the Participant's failure to make required payments on the promissory note; or (II) in the case of a Participant who is not an Employee, distribution of his Account; or (III) in the case of a Participant who is an Employee, termination of his employment with the Controlled Group; or (IV) the Participant's death; or (V) the filing of a petition, the entry of an order or the appointment of a receiver, liquidator, trustee or other person in a similar capacity, with respect to the Participant, pursuant to any state or federal law relating to bankruptcy, moratorium, reorganization, insolvency or liquidation, or any assignment by the Participant for the benefit of his creditors. (6) Notwithstanding any other provision of the Plan, a loan made pursuant to this Section shall be a first lien against the Participant's Loan Account. Any amount of principal or interest due and unpaid on the loan at the time of any default on the loan, and any interest accruing thereafter, shall be satisfied by deduction from the Participant's Loan Account, and shall be deemed to have been distributed to the Participant, as follows: 88 (a) in the case of a Participant who is an Employee and who is not, at the time of the default, eligible (without regard to the required filing of an application pursuant to Section 6.1) to receive distribution of his Account under the provisions of Article VI, other than Section 6.11, or by order of a court, at such time as he first becomes eligible (without regard to the required filing of an application pursuant to Section 6.1) to receive distribution of his Account under the provisions of Article VI, other than Section 6.11, or by order of a court; or (b) in the case of any other Participant, immediately upon such default. If, as a result of the application of the preceding sentence, an amount of principal or interest on a loan remains outstanding after default, interest at the rate specified in the promissory note executed by the Participant in respect of such loan shall continue to accrue on such outstanding amount until fully satisfied by deduction from the Participant's Loan Account as hereinabove provided or by payment by or on behalf of such Participant. Notwithstanding any other provision of the Plan, a Participant shall not be eligible to have Before-Tax Contributions made on his behalf during the period of time of his default on a Plan loan and the time of satisfaction of the loan by deduction as described above or by payment by or on behalf of such Participant. 6.14 Other Optional Forms of Benefit. The provisions of any Appendix that are applicable to a portion of a 89 Participant's Account shall control (with respect to that portion of the Account) over the preceding provisions of this Article to the extent that such Appendix provisions provide, as required by applicable law, optional forms of benefit (within the meaning of Code Section 411(d)(6) and Treasury Regulations issued thereunder) which supercede, or are in addition to, the optional forms of benefit provided by this Article. Further, provisions of any Appendix or Prior Plan which relate to the election or waiver of any such optional forms of benefit, or consent requirements applicable to such elections or waivers shall control over the provisions of this Article. 6.15 Direct Rollover Provisions. (a) This Section applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Section 6.15, a Distributee may elect, at the time and in the manner prescribed by the plan administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover, provided, however, that if such Direct Rollover is of a portion less than 100% of such Eligible Rollover Distribution, such portion must equal or exceed $500 for this Section 6.15 to apply. (b) Definitions. (1) Eligible Rollover Distribution: An Eligible Rollover Distribution is any distribution of all or any portion of 90 the balance to the credit of the Distributee which equals or exceeds $200, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (2) Eligible Retirement Plan: An Eligible Retirement Plan in an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 401(a) of the Code, that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (3) Distributee: A Distributee includes an employee or former employee. In addition, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or 91 former spouse who is the alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code, are Distributees with regard to the interest of the spouse or former spouse. (4) Direct Rollover: A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. 92 ARTICLE VII. - ADMINISTRATION OF THE TRUST FUND 7.1 Appointment of Trustee. The Company has appointed the Trustee to act as such under the Plan and has executed the Trust Agreement with the Trustee. The Company may, without the consent of any Participant or other person, execute amendments to such Trust Agreement, execute such further agreements as it in its sole discretion may deem necessary or desirable to carry out the Plan, or at any time, in accordance with the terms of the Trust Agreement, remove the Trustee and appoint a successor. 7.2 Duties of Trustee. The Trustee shall invest Before-Tax Contributions, Transfer Contributions and Employer Contributions paid to it and earnings thereon in accordance with the Plan and Trust Agreement. The Trustee shall also establish and maintain separate Accounts and Sub-Accounts for each Participant in accordance with the Plan. The Trustee in its relation to the Plan shall be entitled to all of the rights, privileges, immunities and benefits conferred upon it by the Plan or Trust Agreement and shall be subject to all of the duties imposed upon it by the Plan and Trust Agreement. The Trust Agreement is hereby incorporated in the Plan by reference, and each Employer, by adopting the Plan, approves the Trust Agreement and authorizes the Company to execute any amendment or supplement thereto on its behalf. 7.3 The Trust Fund. The Trust Fund shall be held by the Trustee for the exclusive benefit of the Participants and their Beneficiaries and shall be invested by the Trustee upon such 93 terms and in such property as is provided in the Plan and in the Trust Agreement. The Trustee shall, from time to time, make payments, distributions and deliveries from the Trust Fund as provided in the Plan. 7.4 No Guarantee Against Loss. (1) Neither the Trustee, any Employer, the Committee nor any Investment Manager in any manner guarantees the Trust Fund or any part thereof against loss or depreciation. All persons having any interest in the Trust Fund shall look solely to the Trust Fund for payment with respect to such interest. (2) Neither the Company, the Committee, any Employer, the Trustee, nor any officer or employee of any of them is authorized to advise a Participant as to the manner in which contributions to the Plan and income thereon should be invested and reinvested. The election of the Investment Fund or Funds in which a Participant participates is his sole responsibility, and the fact that designated Investment Funds are available to Participants for investment shall not be construed as a recommendation for the investment of contributions hereunder in all or any of such Funds. 7.5 Payment of Benefits. All payments of benefits provided for by the Plan shall be made solely out of the Trust Fund in accordance with instructions given to the Trustee by the Committee pursuant to the terms of the Plan, and neither any Employer, the Committee nor the Trustee shall be otherwise liable for any benefits payable under the Plan. 94 7.6 Compensation and Expenses. Any expenses paid by the Trustee in the administration of any Investment Fund shall be charged to such Fund. The Trustee shall be entitled to receive such reasonable compensation for its services as may be agreed upon by it and the Company. Such compensation and all other expenses of the Trustee and other expenses necessary for the proper administration of the Plan and Trust Fund shall be paid by the Trustee from the Trust Fund, unless the Company determines, in its sole discretion, that all or any part of such compensation and expenses shall be paid by the Employers. Notwithstanding the foregoing, any extraordinary expenses incurred by the Trustee with respect to the interest of any person in the Trust Fund may, in the discretion of the Trustee and with the approval of the Committee, be charged to such person's interest in the Trust Fund. Taxes, if any, on any property held by the Trustee shall be paid out of the Trust Fund and taxes, if any, other than transfer taxes, on distributions to a Participant or Beneficiary of a Participant shall be paid by the Participant or the Beneficiary, respectively. 7.7 No Diversion of Trust Fund. Except as specifically provided in other Sections of the Plan, it shall be and it is hereby made impossible, at any time prior to the satisfaction of all liabilities with respect to Employees and their Beneficiaries under the Plan, for any part of the corpus or income of the Trust Fund to be (within the taxable year or thereafter) used for, or 95 diverted to, purposes other than the exclusive benefit of Employees or their Beneficiaries. 96 ARTICLE VIII. - INVESTMENT MANAGER 8.1 Duties and Functions. (1) The Committee shall have the exclusive authority and responsibility at any time or from time to time to appoint (and revoke the appointment of) an Investment Manager under the Plan with respect to the NCC Stock Fund. The Committee shall notify the Trustee of any such appointment (or revocation thereof) in writing, and the Trustee may rely upon any such appointment continuing in effect until it receives a written notice from the Committee of its revocation. Any such Investment Manager shall acknowledge in writing to the Committee and the Trustee that he or it is a fiduciary with respect to the Plan. (2) Any such Investment Manager shall have the powers, functions, duties and/or responsibilities of the Trustee relating to the investment and reinvestment of the NCC Stock Fund (other than those described in Article XV which shall remain with the Trustee) and shall exercise such authority, power and discretion exclusively. Custody of the assets of the NCC Stock Fund, however, shall remain with the Trustee who shall be responsible therefor. In no instance shall the authority or discretion of an Investment Manager with respect to the NCC Stock Fund exceed the authority or discretion which the Trustee would have had with respect to such Fund if there were no Investment Manager. (3) If an Investment Manager is so appointed (a) the Trustee shall not be liable for any loss which may result by reason of any action taken by it in accordance with a direction of 97 an Investment Manager or by reason of any lack of action by the Trustee upon the failure of an Investment Manager to exercise his or its authority and discretion, (b) the Trustee shall not be required to accept delivery of or pay for any security or other property purchased for the NCC Stock Fund to the extent that the assets in such Fund are insufficient to pay for such security or other property, and (c) the Trustee shall be under no duty or obligation to (i) invest or reinvest the NCC Stock Fund except as directed by the Investment Manager thereof, (ii) make any investment review or examination of the NCC Stock Fund or recommendations with respect to such Fund, or (iii) advise the Committee of directions received by the Trustee from an Investment Manager. 8.2 Compensation. The Investment Manager shall receive such reasonable compensation as may be agreed upon by it and the Committee, and payment thereof shall be made by the Employers. 98 ARTICLE IX. - CLAIMS PROCEDURES 9.1 Method of Filing Claim. Any Participant or Beneficiary who believes that he is entitled to receive a benefit under the Plan which he has not received may file with the Committee a written claim specifying the basis for his claim and the facts upon which he relies in making such claim. Such a claim must be signed by the claimant or his authorized representative and shall be deemed filed when delivered to any member of the Committee or its designee. 9.2 Notification to Claimant. Unless such claim is allowed in full by the Committee, the Committee shall (within 90 days after such claim was filed, plus an additional period of 90 days if required for processing and if notice of the 90-day extension of time indicating the specific circumstances requiring the extension and the date by which a decision shall be rendered is given to the claimant within the first 90-day period) cause written notice to be mailed to the claimant of the total or partial denial of such claim. Such notice shall be written in a manner calculated to be understood by the claimant and shall state (a) the specific reason(s) for the denial of the claim, (b) specific reference(s) to pertinent provisions of the Plan and/or Trust Agreement on which the denial of the claim was based, (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary, and (d) an explanation of the review procedure specified in Section 9.3. If a claimant 99 does not receive any notice from the Committee within 90 days after his claim is filed with the Committee, his claim shall be deemed to have been denied. 9.3 Review Procedure. Within six months after the denial of his claim, the claimant may appeal such denial by filing with the Company his written request for a review of his said claim. If the claimant does not file such a request with the Company within such six-month period, the claimant shall be conclusively presumed to have accepted as final and binding the initial decision of the Committee on his claim. If such an appeal is so filed within such six months, a Named Fiduciary designated by the Company shall (a) conduct a full and fair review of such claim and (b) mail or deliver to the claimant a written decision on the matter based on the facts and pertinent provisions of the Plan and/or Trust Agreement within a period of 60 days after the receipt of the request for review unless special circumstances require an extension of time, in which case such decision shall be rendered not later than 120 days after receipt of such request. If an extension of time for review is required, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. Such decision (i) shall be written in a manner calculated to be understood by the claimant, (ii) shall state the specific reason(s) for the decision, (iii) shall make specific reference(s) to pertinent provisions of the Plan and/or Trust Agreement on which the decision is based and (iv) shall, to the extent permitted by applicable law, be final 100 and binding on all interested persons. During such full review, the claimant or his duly authorized representative shall be given an opportunity to review documents that are pertinent to the claimant's claim and to submit issues and comments in writing. If the decision on review is not furnished within such 60-day or 120-day period, as the case may be, the claim shall be deemed denied on review. 101 ARTICLE X. - ADMINISTRATION OF THE PLAN AND FIDUCIARY RESPONSIBILITIES 10.1 Responsibility for Administration. Except to the extent that particular responsibilities are assigned or delegated to other Fiduciaries pursuant to the Trust Agreement, other Articles of the Plan or Section 10.3, the Company (as the Administrator) shall be responsible for the administration of the Plan. Each other Fiduciary shall have only such powers, duties, responsibilities and authorities as are specifically conferred upon him or it pursuant to provisions of the Plan or Trust Agreement. Any person may serve in more than one fiduciary capacity with respect to the Plan or Trust Fund, if pursuant to the Plan and/or Trust Agreement, he or it is assigned or delegated any multiple fiduciary capacities. 10.2 Named Fiduciaries. For the purposes of the Plan, the Named Fiduciaries shall be the Committee, the Company, the Investment Manager, the Trustee and to the extent provided in Article XV, the Participants. The Company may, by written instrument, designate any other person or persons as a Named Fiduciary or Named Fiduciaries to perform functions specified in such instrument (or in a delegation pursuant to Section 10.3) which relate to the administration of the Plan, provided such designee accepts such designation. Such a designation may be terminated at any time by notice from the Company to the designee or by notice from the designee to the Company. 102 10.3 Delegation of Fiduciary Responsibilities. (1) The Committee or the Company may delegate to any person or persons any one or more of its powers, functions, duties and/or responsibilities with respect to the Plan or the Trust Fund. (2) Any delegation pursuant to Subsection (1) of this Section, (a) shall be signed on behalf of the Committee or the Company, and be delivered to and accepted in writing by the delegatee, (b) shall contain such provisions and conditions relating to such delegation as the Committee or the Company deems appropriate, (c) shall specify the powers, functions, duties and/or responsibilities therein delegated, (d) may be amended from time to time by written agreement signed on behalf of the Committee or the Company and by the delegatee and (e) may be revoked (in whole or in part) at any time by written notice from one party to the other. A fully executed copy of any instrument relating to any delegation (or revocation of any delegation) under the Plan shall be filed with the Committee. 10.4 Immunities. Except as otherwise provided in Section 10.5 or by applicable law, (a) no Fiduciary shall have the duty to discharge any duty, function or responsibility which is specifically assigned exclusively to another Fiduciary or Fiduciaries by the terms of the Plan or Trust Agreement or is delegated exclusively to another Fiduciary or Fiduciaries pursuant to procedures for such delegation provided for in the Plan or Trust Agreement; (b) no Fiduciary shall be liable for any action taken or not taken with respect to the Plan or Trust Fund except 103 for his own negligence or willful misconduct; (c) no Fiduciary shall be personally liable upon any contract or other instrument made or executed by him or on his behalf in the administration of the Plan or Trust Fund; (d) no Fiduciary shall be liable for the neglect, omission or wrongdoing of another Fiduciary; and (e) any Fiduciary may rely and shall be fully protected in acting upon the advice of counsel, who may be counsel for any Controlled Group Member, upon the records of a Controlled Group Member, upon the opinion, certificate, valuation, report, recommendation or determination of the certified public accountants appointed to audit a Controlled Group Member's financial statements, or upon any certificate, statement or other representation made by an Employee, a Participant, a Beneficiary or the Trustee concerning any fact required to be determined under any of the provisions of the Plan. 10.5 Limitation on Exculpatory Provisions. Notwithstanding any other provision of the Plan or Trust Agreement, no provision of the Plan or Trust Agreement shall be construed to relieve (or have the effect of relieving) any Fiduciary from any responsibility or liability for any obligation, responsibility or duty imposed on such Fiduciary by Part 4 of Title 1 of ERISA. 10.6 Membership of the Committee. The Committee shall be appointed by the Board of Directors of the Company, which also shall provide for the number of the members of the Committee and the manner of appointing and removing such members. Any member of 104 the Committee may resign by filing a written resignation with the Company. 10.7 Administrative Assistance. The Committee may employ such clerical, legal or other assistance as it deems necessary or advisable for the proper administration of the Plan. 10.8 Compensation and Qualification. The members of the Committee shall serve without compensation for services hereunder. Participants of the Committee shall not be disqualified from acting because of any interest, benefit or advantage, inasmuch as it is recognized that the members may be Employees of the Employers and Participants in the Plan, but no member of the Committee shall vote or act in connection with the Committee's action relating solely to himself. No bond or other security need be required of any Committee member in such capacity or any jurisdiction. 10.9 Revocability of Committee Action. Any action taken by the Committee with respect to the rights or benefits under the Plan of any Participant or Beneficiary shall be revocable by the Committee as to payments or distributions not theretofore made pursuant to such action, and appropriate adjustments may be made in future payments or distributions to a Participant or his Beneficiaries to offset any excess or underpayments theretofore made to such Participant or his Beneficiaries. 10.10 Rules and Procedures. The Committee may adopt rules for the administration of the Plan and rules for its 105 government and the conduct of its business, including a rule authorizing one or more of its members or officers to execute instruments in its behalf evidencing its action, and the Trustee may rely upon any instrument signed by such person or persons so authorized as properly evidencing the action of the Committee. Except as may otherwise be provided by rules or procedures adopted by the Committee, the Committee may act by majority action either at a meeting or in writing without a meeting and an action evidenced by the signatures of a majority of the members of the Committee shall be deemed to be the action of the Committee. Although various provisions of the Plan provide for a filing with the Committee of various instruments, the Committee may, by general announcement, specifically designate some other person or persons, with whom or which such instruments may be filed. 10.11 Interpretation of the Plan and Findings of Facts. The Committee shall have sole and absolute discretion to interpret the provisions of the Plan (including, without limitation, by supplying omissions from, correcting deficiencies in, or resolving inconsistencies or ambiguities in, the language of the Plan), to determine the rights and status under the Plan of Participants and other persons, to decide disputes arising under the Plan and to make any determinations and findings with respect to the benefits payable thereunder and the persons entitled thereto as may be required for the purposes of the Plan. In furtherance of, but without limiting, the foregoing, the Committee is hereby granted the following specific authorities, which it shall discharge in 106 its sole and absolute discretion in accordance with the terms of the Plan (as interpreted, to the extent necessary, by the Committee): (1) to resolve all questions arising under the provisions of the Plan as to any individual's entitlement to become a Participant; (2) to determine the amount of benefits, if any, payable to any person under the Plan; and (3) to conduct the review procedure specified in Article IX. All decisions of the Committee as to the facts of any case, as to the interpretation of any provision of the Plan or its application to any case, and as to any other interpretative matter or other determination or question under the Plan shall be final and binding on all parties affected thereby, subject to the provisions of Section 10.9 and Article IX. The Committee shall direct the Trustee relative to benefits to be paid under the Plan and shall furnish the Trustee with any information reasonably required by it for the purpose of paying benefits under the Plan. 10.12 Directions to Trustee. The Committee shall direct the Trustee as to the method of payment of, and the time at which, any benefit is to be paid to a Participant or a Beneficiary from the Trust Fund and the particular Investment Fund and Sub-Account from which each such payment is to be made. The Trustee shall be entitled to rely conclusively on any such direction given to it by the Committee in accordance with the provisions hereof. 107 ARTICLE XI. - MISCELLANEOUS 11.1 Spendthrift Provisions. No right or interest of any kind of a Participant or Beneficiary in the Trust Fund shall be anticipated, assigned (either in law or equity), alienated or be subject to encumbrance, garnishment, attachment, execution or levy of any kind, voluntary or involuntary, or any other legal or equitable process, except in accordance with a qualified domestic relations order as defined in Code Section 414(p). The Committee shall establish procedures to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders in accordance with Code Section 414(p). 11.2 Facility of Payment. In the event the Committee finds that any Participant or Beneficiary to whom a benefit is payable under the Plan is (at the time such benefit is payable) unable to care for his affairs because of physical, mental or legal incompetence, the Committee, in its sole discretion, may cause any payment due to him hereunder, for which prior claim has not been made by a duly qualified guardian or other legal representative, to be paid to the person or institution deemed by the Committee to be maintaining or responsible for the maintenance of such Participant or Beneficiary; and any such payment shall be deemed a payment for the account of such Participant or Beneficiary and shall constitute a complete discharge of any liability therefor under the Plan. 11.3 No Enlargement of Employment Rights. Nothing herein contained shall constitute or be construed as a contract of 108 employment between any Employer and any Employee or Participant and all Employees shall remain subject to discipline, discharge and layoff to the same extent as if the Plan had never gone into effect. An Employer by adopting the Plan, making contributions to the Trust Fund or taking any other action with respect to the Plan does not obligate itself to continue the employment of any Participant or Employee for any period or, except as expressly provided in the Plan, to make any payments into the Trust Fund. 11.4 Merger or Transfer of Assets. There shall not be any merger or consolidation of the Plan with, or the transfer of assets or liabilities of the Plan to, any other plan, unless each Participant of the Plan would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan had then terminated). The Company reserves the right to merge or consolidate this Plan with, and to transfer the assets of the Plan to, any other Plan, without the consent of any other Employer. 11.5 Action by Company. Wherever the Company is authorized to act under the Plan (including but not limited to any delegation of its fiduciary powers and responsibilities under the Plan), such action shall be taken, unless otherwise provided in the Plan, by written instrument executed by an officer of the Company. The Trustee may rely on any instrument so executed as 109 being validly authorized and as properly evidencing the action of the Company. 11.6 Severability Provision. If any provision of the Plan or Trust Agreement or the application thereof to any circumstance or person is invalid, the remainder of the Plan or Trust Agreement and the application of such provision to other circumstances or persons shall not be affected thereby. 110 ARTICLE XII. - OTHER EMPLOYERS 12.1 Adoption by Other Employers. As of July 1, 1992, and thereafter the Employers under the Plan were the Company and those Employers listed on Exhibit A to the Plan. Any other corporation or business organization may, with the consent of the Committee, adopt the Plan and thereby become an Employer hereunder by executing an instrument evidencing such adoption and filing a copy thereof with the Committee and the Trustee. Such adoption may be subject to such terms and conditions as the Committee requires and approves. 12.2 Withdrawal of Employer. Any Employer (other than the Company) which adopts the Plan may elect separately to withdraw from the Plan. Any such withdrawal shall be expressed in an instrument executed by the withdrawing Employer and filed with the Company and the Trustee. Such withdrawal shall become effective when so filed unless some other effective date is designated in the instrument and approved by the Committee. No such withdrawal shall decrease the amount of Employer Contributions to be made by the Employer on account of periods preceding such withdrawal. In the event of such a withdrawal of an Employer, or in the event the Plan is terminated as to an Employer (but not all the Employers) pursuant to Section 13.1, such Employer (herein called "former Employer") shall cease to be an Employer, and Employer Contributions of such former Employer and Before-Tax and Transfer Contributions of Employees of such former Employer shall cease. 111 12.3 Withdrawal of Employee Group. Any Employer may elect to withdraw from the Plan any designated group of its Employees while continuing to include another group or other groups of its Employees within the Plan. Any such withdrawal of a designated group of Employees shall be expressed in an instrument executed by the Employer and filed with the Company (if the Employer making such withdrawal is not the Company) and the Trustee. Such withdrawal shall become effective when so filed unless some other effective date is designated in the instrument and approved by the Committee. No such withdrawal of a designated group of Employees shall decrease the amount of Employer Contributions to be made by the Employer in respect of Affected Employees on account of periods preceding such withdrawal. In the event of such withdrawal by an Employer or in the event the Plan is terminated by the Company as to a group of Employees of another Employer pursuant to Section 13.1, Employer Contributions of the Employer in respect of affected Employees and Before-Tax and Transfer Contributions of affected Employees shall cease. 112 ARTICLE XIII. - AMENDMENT OR TERMINATION 13.1 Right to Amend or Terminate. Subject to the limitations of Sections 4.8(1) and 7.7 of the Plan, the Company has reserved, and does hereby reserve, the right at any time, by action of any Executive Vice President or any officer of the Company who is senior to the Executive Vice Presidents of the Company, without the consent of any other Employer or of the Participants, Beneficiaries or any other person, (a) to terminate the Plan, in whole or in part or as to any or all of the Employers or as to any designated group of Employees, Participants and their Beneficiaries, or (b) to amend the Plan, in whole or in part. No such termination or amendment shall decrease the amount of Employer Contributions to be made by an Employer on account of any period preceding such termination or amendment. The Plan may be amended only by the Company. 13.2 Procedure for Termination or Amendment. Any termination or amendment of the Plan pursuant to Section 13.1 shall be expressed in an instrument executed by the Trustee and two officers of the Company (at least one of whom is an Executive Vice President or an officer senior to the Executive Vice Presidents) and shall become effective as of the date designated in such instrument or, if no date is so designated, on the date of its execution. 13.3 Distribution Upon Termination. If the Plan shall be terminated by the Company as to all Employers, Before-Tax, Transfer and Employer Contributions to the Plan shall cease and, 113 as soon as practicable after such termination, the Trustee shall make distribution (if such distribution is permitted by applicable law) to each Employee as if the Plan had not been terminated. 13.4 Amendment Changing Vesting Schedule. (1) If any Plan amendment changes any vesting schedule under the Plan, effective as of January 1, 1989, each Participant having not less than three years of service shall be permitted to elect, during the election period described in Subsection (2) of this Section, to have his nonforfeitable percentage computed under the Plan without regard to such amendment. (2) Such election period shall begin on the date the Plan amendment is adopted and shall end no earlier than the latest of the following dates: (a) the date which is 60 days after the day the Plan amendment is adopted, (b) the date which is 60 days after the day the Plan amendment becomes effective, or (c) the date which is 60 days after the day the Participant is issued written notice of the Plan amendment by the Committee or the Company. (3) For purposes of Subsection (1) of this Section, a Participant shall be considered to have completed three years of service if such Participant has completed three years of service, whether or not consecutive, without regard to the exceptions of Code Section 411(a)(4), prior to the expiration of the election period described in Subsection (2) of this Section. 13.5 Nonforfeitable Amounts. Notwithstanding any other provision of the Plan, upon the termination or partial termination 114 of the Plan or upon complete discontinuance of contributions under the Plan, the rights of all Employees to benefits accrued to the date of such termination or partial termination or discontinuance, to the extent then funded, or the amounts credited to the Employees' Accounts, shall be nonforfeitable. 13.6 Prohibition on Decreasing Accrued Benefits. No amendment to the Plan (other than an amendment described in Code Section 412(c)(8)) shall have the effect of decreasing the accrued benefit of any Participant. For purposes of the preceding sentence, a Plan amendment which has the effect of (a) eliminating or reducing an early retirement benefit or a retirement-type subsidy (as defined in regulations of the Secretary of the Treasury) or (b) eliminating an optional form of benefit (except as permitted by any such regulations) with respect to benefits attributable to service before the amendment, shall be treated as decreasing accrued benefits, provided, however, that in the case of a retirement-type subsidy this sentence shall apply only with respect to a Participant who satisfies (either before or after the amendment) the preamendment conditions for the subsidy. 115 ARTICLE XIV. - TOP-HEAVY PLAN REQUIREMENTS 14.1 Definitions. For the purposes of this Article, the following terms, when used with initial capital letters, shall have the following respective meanings: (1) Aggregation Group: Permissive Aggregation Group or Required Aggregation Group, as the context shall require. (2) Compensation: Effective as of January 1, 1989, "Compensation" as defined in Section 4.9(3) (subject to the limitations described in Section 1.1(14)(b)). (3) Defined Benefit Plan: A qualified plan as defined in Code Section 414(j). (4) Defined Contribution Plan: A qualified plan as defined in Code Section 414(i). (5) Determination Date: For any Plan Year, the last day of the immediately preceding Plan Year, except that in the case of the first Plan Year of the Plan, the Determination Date shall be the last day of such first Plan Year. (6) Extra Top-Heavy Group: An Aggregation Group if, as of a Determination Date, the aggregate present value of accrued benefits for Key Employees in all plans in the Aggregation Group (whether Defined Benefit Plans or Defined Contribution Plans) is more than ninety (90%) of the aggregate present value of all accrued benefits for all employees in such plans. (7) Extra Top-Heavy Plan: See Section 14.3. (8) Former Key Employee: A Non-Key Employee with respect to a Plan Year who was a Key Employee in a prior Plan 116 Year. Such term shall also include his Beneficiary in the event of his death. (9) Key Employee: An Employee or former Employee who is or was a Participant and who, at any time during the current Plan Year or any of the four preceding Plan Years, is (a) an officer of an Employer (limited to no more than 50 Employees or, if lesser, the greater of 3 Employees or 10 percent of the Employees) having an annual Compensation greater than, effective as of January 1, 1988, 50% of the dollar amount in effect under Code Section 415(b)(1)(A) for any such Plan Year, (b) one of the 10 Employees owning (or considered as owning within the meaning of Code Section 318) the largest interests in an Employer and having annual Compensation of more than the applicable dollar amount referred to in Section 4.9(1), (c) a 5-percent owner (as such term is defined in Code Section 416(i)(1)(B)(i)) or (d) a 1-percent owner (as such term is defined in Code Section 416(i)(1)(B)(ii)) having an annual Compensation of more than $150,000. For purposes of clause (b) of this Subsection, if two Employees have the same interest in an Employer, the Employee having greater annual Compensation shall be treated as having a larger interest. The term "Key Employee" shall also include such Employee's Beneficiary in the event of his death. For purposes of this Subsection, effective as of January 1, 1989, "Compensation" has the meaning given such term by Code Section 414(q)(7). 117 (10) Non-Key Employee: An Employee or former Employee who is or was a Participant and who is not a Key Employee. Such term shall also include his Beneficiary in the event of his death. (11) Permissive Aggregation Group: The group of qualified plans of an Employer consisting of: (a) the plans in the Required Aggregation Group; plus (b) one (1) or more plans designated from time to time by the Committee that are not part of the Required Aggregation Group but that satisfy the requirements of Code Sections 401(a)(4) and 410 when considered with the Required Aggregation Group. (12) Required Aggregation Group: The group of qualified plans of an Employer consisting of: (a) each plan in which a Key Employee participates; plus (b) each other plan which enables a plan in which a Key Employee participates to meet the requirements of Code Sections 401(a)(4) or 410. (13) Top-Heavy Account Balance: A Participant's (including a Participant who has received a total distribution from this Plan) or a Beneficiary's aggregate balance standing to his account as of the Valuation Date coinciding with or immediately preceding the Determination Date (as adjusted by the amount of any Employer Contributions made or due to be made after such Valuation Date but before the expiration of the extended payment period in Code Section 412(c)(10)), provided, however, 118 that such balance shall include the aggregate distributions made to such Participant or Beneficiary during the five (5) consecutive Plan Years ending with the Plan Year that includes the Determination Date (including distributions under a terminated plan which if it had not been terminated would have been included in a Required Aggregation Group), and provided further that if an Employee or former Employee has not performed services for any Employer maintaining the Plan at any time during the 5-year period ending on the Determination Date, his account (and/or the account of his Beneficiary) shall not be taken into account. (14) Top-Heavy Group: An Aggregation Group if, as of a Determination Date, the aggregate present value of accrued benefits for Key Employees in all plans in the Aggregation Group (whether Defined Benefit Plans or Defined Contribution Plans) is more than sixty percent (60%) of the aggregate present value of accrued benefits for all employees in such plans. (15) Top-Heavy Plan: See Section 14.2. 14.2 Determination of Top-Heavy Status. (1) Except as provided by Subsections (2) and (3) of this Section, the Plan shall be a Top-Heavy Plan if, as of a Determination Date: (a) the aggregate of Top-Heavy Account Balances for Key Employees is more than sixty percent (60%) of the aggregate of all Top-Heavy Account Balances, excluding for this purpose the aggregate Top-Heavy Account Balances of Former Key Employees; or 119 (b) if the Plan is included in a Required Aggregation Group which is a Top-Heavy Group. (c) If the Plan is included in a Required Aggregation Group which is not a Top-Heavy Group, the Plan shall not be a Top-Heavy Plan notwithstanding the fact that the Plan would otherwise be a Top-Heavy Plan under Paragraph (a) of Subsection (1) of this Section. (2) If the Plan is included in a Permissive Aggregation Group which is not a Top-Heavy Group, the Plan shall not be a Top-Heavy Plan notwithstanding the fact that the Plan would otherwise be a Top-Heavy Plan under Subsection (1) of this Section. 14.3 Determination of Extra Top-Heavy Status. (1) Except as provided by Subsections (2) and (3) of this Section, the Plan shall be an Extra Top-Heavy Plan if, as of the Determination Date: (a) the aggregate of Top-Heavy Account Balances for Key Employees is more than ninety percent (90%) of the aggregate of all Top-Heavy Account Balances, excluding for this purpose the aggregate Top-Heavy Account Balances of Former Key Employees; or (b) if the Plan is included in a Required Aggregation Group which is an Extra Top-Heavy Group. (2) If the Plan is included in a Required Aggregation Group which is not an Extra Top-Heavy Group, the Plan shall not be an Extra Top-Heavy Plan notwithstanding the fact that the Plan 120 would otherwise be an Extra Top-Heavy Plan under paragraph (a) of Subsection (1) of this Section. (3) If the Plan is included in a Permissive Aggregation Group which is not an Extra Top-Heavy Group, the Plan shall not be an Extra Top-Heavy Plan notwithstanding the fact that the Plan would otherwise be an Extra Top-Heavy Plan under Subsection (1) of this Section. 14.4 Top-Heavy Plan Requirements. Notwithstanding any other provisions of the Plan to the contrary, if the Plan is a Top-Heavy Plan for any Plan Year, the Plan shall then satisfy the following requirements for such Plan Year: (1) The minimum contribution requirement as set forth in Section 14.5. (2) The adjustment to minimum benefits and allocations as set forth in Section 14.6. 14.5 Minimum Contribution Requirement. If the Plan is a Top-Heavy Plan for any Plan Year: (1) Each Non-Key Employee who is eligible to share in any Employer Contribution for such Plan Year (or who would have been eligible to share in any such Employer Contribution if a Before-Tax Contribution had been made for him during such Plan Year) shall be entitled to receive an allocation of such Employer Contribution, which is at least equal to three percent (3%) of his Compensation for such Plan Year. (2) The three percent (3%) minimum contribution requirement under Subsection (1) of this Section for a Non-Key 121 Employee shall be increased to four percent (4%) if the Employer maintains a Defined Benefit Plan which does not cover such Non-Key Employee. (3) The percentage minimum contribution requirement set forth in Subsections (1) and (2) of this Section with respect to a Plan Year shall not exceed the percentage at which Employer Contributions are made (or required to be made) under the Plan for such Plan Year for the Key Employee for whom such percentage is the highest for such Year. (4) The percentage minimum contribution requirement set forth in Subsections (2) and (3) of this Section may also be reduced or eliminated in accordance with Section 14.8(2). (5) For the purpose of Subsection (3) of this Section, contributions taken into account shall include like contributions under all other Defined Contribution Plans in the Required Aggregation Group, excluding any such plan in the Required Aggregation Group if that plan enables a Defined Benefit Plan in such Required Aggregation Group to meet the requirements of Code Sections 401(a)(4) or 410. (6) For the purpose of this Section, the term "Employer Contributions" shall include Before-Tax Contributions made for an Employee. 14.6 Adjustment to Minimum Benefits and Allocations. If the Plan is a Top-Heavy Plan for any Plan Year, and if the Employer maintains a Defined Benefit Plan which could or does provide benefits to Participants in this Plan: 122 (a) If the Plan is not an Extra Top-Heavy Plan (but is a Top-Heavy Plan), then the percentage minimum contribution requirement in Section 14.5(a) shall be seven and one-half percent (7-1/2%) for a Non-Key Employee who is covered by this Plan and the Defined Benefit Plan. (b) If the Plan is an Extra Top-Heavy Plan, then parts (a) and (b) of Section 4.10(1) shall be calculated by substituting "1.0" for "1.25" for each place such "1.25" figure appears, and Code Section 415(e)(6)(B)(I) shall be calculated by substituting "$41,500: for "$51,875" for each place such "$51,875" amount appears. 14.7 Coordination With Other Plans. (1) In applying this Article, an Employer and all Controlled Group Members shall be treated as a single employer, and the qualified plans maintained by such single employer shall be taken into account. (2) In the event that another Defined Contribution Plan or Defined Benefit Plan maintained by the Controlled Group provides contributions or benefits on behalf of Participants in this Plan, such other plan(s) shall be taken into account in determining whether this Plan satisfies Section 14.4; and the minimum contribution required for a Non-Key Employee in this Plan under Section 14.5 will be reduced or eliminated, in accordance with the requirements of Code Section 416 and the Regulations thereunder, if a minimum contribution or benefit is made or accrued in whole or in part in respect of such other plan(s). 123 (3) Principles similar to those specifically applicable to this Plan under this Article, and in general as provided for in Code Section 416 and the Regulations thereunder, shall be applied to the other plan(s) required to be taken into account under this Article in determining whether this Plan and such other plan(s) meet the requirements of such Code Section 416 and the Regulations thereunder. 124 ARTICLE XV. - PROVISIONS RELATING TO VOTING AND TENDER OFFERS FOR NCC STOCK 15.1 Voting of NCC Stock. All voting rights on shares of NCC Stock held by the Trustee shall be exercised by the Trustee only as directed by the Participants and Beneficiaries with respect to allocated shares of NCC Stock, and acting in their capacity as Named Fiduciaries (within the meaning of Section 402 of ERISA) with respect to unallocated and non-directed shares of NCC Stock, in accordance with the following provisions of this Section: (1) As soon as practicable before each annual or special shareholders' meeting of the Company, the Trustee shall furnish to each Participant a copy of the proxy solicitation material sent generally to shareholders, together with a form requesting confidential instructions on how the shares allocated to such Participant's Account and a proportionate share (based on the amount of any shares allocated to his Account) of any unallocated shares and non-directed shares (including fractional shares to 1/1000th of a share) are to be voted. The Company and the Committee shall cooperate with the Trustee to ensure that Participants receive the requisite information in a timely manner. Except as provided in Subsection (d) of this Section, the materials furnished to the Participants shall include a notice from the Trustee explaining each Participant's right to instruct the Trustee with respect to the voting of allocated and unallocated shares. Upon timely receipt of such instructions, the 125 Trustee (after combining votes of fractional shares to give effect to the greatest extent to Participants' instructions) shall vote the shares as instructed. If voting instructions for shares of NCC Stock allocated or unallocated to the Account of any Participant are not timely received by the Trustee for a particular shareholders' meeting, such shares shall not be voted in accordance with the instructions but shall be voted as provided in Subsection (3) below. The instructions received by the Trustee from Participants or Beneficiaries shall be held by the Trustee in strict confidence and shall not be divulged or released to any person including directors, officers or employees of the Company, or of any other Employer, except as otherwise required by law. (2) With respect to all corporate matters submitted to Participants, all shares of NCC Stock allocated to the Accounts of Participants shall be voted only in accordance with the directions of such Participants as given to the Trustee. Each Participant shall be entitled to direct the voting of shares of NCC Stock (including fractional shares to 1/1000th of a share) allocated to his Account. With respect to shares of NCC Stock allocated to the Account of a deceased Participant, such Participant's Beneficiary shall be entitled to direct the voting with respect to such allocated shares as if such Beneficiary were the Participant. (3) Each Participant who has been allocated NCC Stock in his Account and who is entitled to vote on any manner presented for a vote by the shareholders also shall, as a Named Fiduciary, direct the Trustee with respect to the vote of a portion of the 126 shares of NCC Stock that are unallocated to the Account of any Participant and the Shares of NCC Stock allocated to Participants' Accounts for which no timely instructions were received. Such direction shall be with respect to such number of votes equal to the total number of votes attributable to NCC Stock not allocated to the Accounts of Participants and non-directed shares multiplied by a fraction, the numerator of which is the number of shares of NCC Stock allocated to the Participant's Account and the denominator of which is the total number of shares allocated to the Accounts of such Participants who have provided directions to the Trustee with respect to unallocated shares under this Subsection. Each Participant's voting instructions shall be separately stated as to his allocated shares on the one hand, and as a Named Fiduciary with respect of a portion of the unallocated and non-directed shares on the other hand. Fractional shares shall be rounded to the nearest 1/100th of a share. 15.2 Tender Offers. Except as otherwise expressly provided in the Plan, the Trustee shall not sell, alienate, encumber, pledge, transfer or otherwise dispose of or tender or withdraw, any shares of NCC Stock held by it under the Plan. All tender or exchange decisions with respect to NCC Stock held by the Plan shall be made only by the Participants and Beneficiaries with respect to shares allocated to their accounts, and Participants and Beneficiaries acting in their capacity as Named Fiduciaries (within the meaning of Section 402 of ERISA) with respect to 127 unallocated and non-directed shares in accordance with the following provisions of this Section: (1) In the event an offer shall be received by the Trustee (including a tender offer for shares of NCC Stock subject to Section 14(d)(1) of the Securities Exchange Act of 1934 or subject to Rule 13e-4 promulgated under that Act, as those provisions may from time to time be amended) to purchase or exchange any shares of NCC Stock held by the Plan, the Trustee shall advise each Participant who has shares of NCC Stock credited to such Participant's Account in writing of the terms of the offer as soon as practicable after its commencement and shall furnish each Participant with a form by which he may separately instruct the Trustee confidentially whether or not to tender or exchange shares allocated to such Participant's Account and (based on any NCC Stock allocated to such Participant's Account) a proportionate share of any unallocated shares and non-directed shares (including fractional shares to 1/1000th of a share). The materials furnished to the Participants shall include: (a) a notice from the Trustee explaining Participants' rights to instruct the Trustee with respect to allocated and unallocated and non- directed shares as provided herein; and (b) such related documents as are prepared by any person and provided to the shareholders of the Company pursuant to the Securities Exchange Act of 1934. The Committee and the Trustee may also provide Participants with such other material concerning the tender or exchange offer as the 128 Trustee or the Committee in its discretion determine to be appropriate; provided, however, that prior to any distribution of materials by the Committee, the Trustee shall be furnished with complete copies of all such materials. The Company and the Committee shall cooperate with the Trustee to ensure that Participants receive the requisite information in a timely manner. (2) The Trustee shall tender or not tender shares or exchange shares of NCC Stock allocated to the Accounts of any Participant (including fractional shares to 1/1000th of a share), only as and to the extent instructed by the Participant. With respect to shares of NCC Stock allocated to the Account of a deceased Participant, such Participant's Beneficiary shall be entitled to direct the Trustee whether or not to tender or exchange such shares as if such Beneficiary were the Participant. The instructions received by the Trustee from Participants or Beneficiaries shall be held by the Trustee in strict confidence and shall not be divulged or released to any person, including directors, officers or employees of the Company, or of any other Employer, except as otherwise required by law. (3) Each Participant who has been allocated NCC Stock in his Account and who is entitled to direct the Trustee whether or not to tender or exchange shares of NCC Stock allocated to his Accounts also shall direct the Trustee, as a Named Fiduciary, with respect to the tender or exchange of a portion of the shares of NCC Stock that are unallocated to the Account of any Participant and of the shares of NCC Stock allocated to Participants' Accounts 129 for which no timely instructions are received. Such direction shall apply to such number of unallocated and non-directed shares multiplied by a fraction, the numerator of which is the number of shares of NCC Stock allocated to the Participant's Account and the denominator of which is the total number of shares of NCC Stock allocated to the Accounts of such Participants who have provided directions to the Trustee with respect to unallocated shares under this Subsection. Each Participant's directions shall be separately stated as to his allocated shares on the one hand and as a Named Fiduciary with respect to a portion of the unallocated and non-directed shares on the other hand. Fractional shares shall be rounded to the nearest 1/1000th of a share. (4) In the event, under the terms of a tender offer or otherwise, any shares of NCC Stock tendered for sale, exchange or transfer pursuant to such offer may be withdrawn from such offer, the Trustee shall follow such instructions respecting the withdrawal of such securities from such offer in the same manner and the same proportion as shall be timely received by the Trustee from the Participants entitled under this Section to give instructions as to the sale, exchange or transfer of securities pursuant to such offer. (5) In the event that an offer for fewer than all of the shares of NCC Stock held by the Trustee shall be received by the Trustee, each Participant who has been allocated any NCC Stock subject to such offer shall be entitled to direct the Trustee as to the acceptance or rejection of such offer (as provided by 130 Subsections (1)-(4) of this Section) with respect to the largest portion of such NCC Stock as may be possible given the total number or amount of shares of Stock the Plan may sell, exchange or transfer pursuant to the offer based upon the instructions received by the Trustee from all other Participants who shall timely instruct the Trustee pursuant to this Section to sell, exchange or transfer such shares pursuant to such offer, each on a pro rata basis in accordance with the number or amount of such shares allocated to his Accounts. (6) In the event an offer shall be received by the Trustee and instructions shall be solicited from Participants pursuant to Subsections (1)- (4) of this Section regarding such offer, and prior to termination of such offer, another offer is received by the Trustee for the securities subject to the first offer, the Trustee shall use its best efforts under the circumstances to solicit instructions from the Participants to the Trustee: (a) with respect to securities tendered for sale, exchange or transfer pursuant to the first offer, whether to withdraw such tender, if possible, and, if withdrawn, whether to tender any securities so withdrawn for sale, exchange or transfer pursuant to the second offer and (b) with respect to securities not tendered for sale, exchange or transfer pursuant to the first offer, whether to tender or not to tender such securities for sale, exchange or transfer pursuant to the second offer. 131 The Trustee shall follow all such instructions received in a timely manner from Participants in the same manner and in the same proportion as provided in Subsections (1)-(4) of this Section. With respect to any further offer for any NCC Stock received by the Trustee and subject to any earlier offer (including successive offers from one or more existing offerors), the Trustee shall act in the same manner as described above. (7) A Participant's instructions to the Trustee to tender or exchange shares of NCC Stock shall not be deemed a withdrawal or suspension from the Plan or a forfeiture of any portion of the Participant's interest in the Plan. Funds received in exchange for tendered shares shall be credited to the Account of the Participant whose shares were tendered and shall be used by the Trustee to purchase NCC Stock, as soon as practicable. In the interim, the Trustee shall invest such funds in obligations or instruments which are appropriate investments for the Money Market Fund. (8) Subject to any provisions of this Plan to the contrary, in the event the Company initiates a tender or exchange offer, the Trustee may, in its sole discretion, enter into an agreement with the Company not to tender or exchange any shares of NCC Stock in such offer, in which event, the foregoing provisions of this Section shall have no effect with respect to such offer and the Trustee shall not tender or exchange any shares of NCC Stock (allocated or unallocated) in such offer. 132 ARTICLE XVI. - LEVERAGED ESOP PROVISIONS 16.1 Definitions. For purposes of this Article, the following terms shall have the following meanings: (1) Allocated Dividends: Cash dividends which are paid during the Plan Year on NCC Stock held in a Participant's ESOP Sub-Account which was acquired with the proceeds of an outstanding ESOP Loan. (2) Disqualified Person: A disqualified person within the meaning of Code Section 4975(e)(2). (3) Dividend Replacement Allocations: The allocation to a Participant's ESOP Sub-Account of NCC Stock equivalent in market value to the amount of the Allocated Dividends paid on shares credited to such ESOP Sub- Account on the record date of such dividend (which dividend was used during the Valuation Period ending on such Valuation Date in making an ESOP Loan amortization payment). (4) ESOP Interim Account: The account in which Excess ESOP Allocations shall be held and the operation of which is described in Section 16.5(3). (5) ESOP Payment Account: The account described in Section 16.4(1). (6) ESOP Sub-Account: The separate portion of a Participant's Matching Allocation Sub-Account which is credited with the amounts described in Section 16.5(3). (7) ESOP Suspense Account: The account described in Section 16.3(4). 133 (8) Excess ESOP Allocations: Shares of NCC Stock held in the ESOP Interim Account which are not allocated to the ESOP Sub-Accounts as of a Valuation Date because the fair market value of shares of NCC Stock available to be allocated to the ESOP Sub-Accounts from the ESOP Interim Account (including Excess ESOP Allocations from an earlier Valuation Date in such Plan Year) at such Valuation Date are in excess of the required Matching Allocations and Dividend Replacement Allocations for such Valuation Date. (9) Merchants Plan: The Merchants National Corporation Thrift Plan, as amended and restated as of October 1, 1990 and as further amended and in effect on June 30, 1992. (10) Supplemental ESOP Contribution: The Employer contributions described in Section 16.5(2)(b). (11) Unallocated Dividends: The cash dividends paid on NCC Stock held in the ESOP Suspense Account or ESOP Interim Account. (12) Valuation Period: The period from the last day following a Valuation Date to and including the next succeeding Valuation Date. 16.2 In General: Effective as of July 1, 1992, as described in Appendix M hereto, the Merchants Plan shall be merged into the Plan and the ESOP feature of the Merchants Plan shall continue as part of this Plan in the manner described in this Article. On and after July 1, 1992, the Plan shall consist of two components, the ESOP Feature and the Profit Sharing Feature. The 134 ESOP Feature is described in this Article. The ESOP Feature is intended to qualify as a stock bonus plan under Code Section 401(a) and as an employee stock ownership plan under Code Section 4975(e)(7). The ESOP Feature is designed to invest primarily in "qualifying employer securities," as defined in Code Sections 4975(e)(8) and 409(l) and ERISA Section 407(d)(5). On and after July 1, 1992, Matching Allocations under this Plan shall be funded through the ESOP Feature. Matching Allocations made before July 1, 1992 to this Plan and all of other Employer and Employee contributions have been and shall continue to be funded through the Profit Sharing Feature of the Plan. The assets of the employee stock ownership plan feature of the Merchants Plan and all amounts credited to Participant's Accounts pursuant to the provisions of this Article shall constitute the ESOP Feature of this Plan. For purposes of this Article, any reference to NCC Stock acquired with the proceeds of an ESOP Loan shall be deemed to include shares of common stock of Merchants National Corporation that were acquired with the proceeds of the ESOP Loan made to the Merchants Plan which shares of common stock were converted into NCC Stock upon the merger of Merchants National Corporation and the Company. The provisions of this Article XVI shall supercede any contrary provisions of the Plan. 16.3 ESOP Loan. (1) Authority. The Company may direct the Trustee to obtain an ESOP Loan or Loans. The term "ESOP Loan" means a loan made to the Plan (including the loan made to the Merchants Plan to 135 which this Plan has succeeded by virtue of the merger of the Merchants Plan into this Plan), including a direct loan of cash, a purchase money transaction and an assumption of an obligation by the Plan. An ESOP Loan may be made by a Disqualified Person or may be secured by a guarantee of a Disqualified Person. "Guarantee" includes an unsecured guarantee and the use of the assets of a Disqualified Person as collateral for an ESOP Loan. (2) Conditions of Loans. An ESOP Loan must be primarily for the benefit of the Participants and their Beneficiaries. The terms of an ESOP Loan, whether or not between independent parties, must, at the time the ESOP Loan is made, be at least as favorable to the Plan as the terms of a comparable loan resulting from arm's length negotiations between independent parties. At the time the ESOP Loan is made, the interest rate for the ESOP Loan must not be in excess of a reasonable rate of interest, taking into account the amount and duration of the ESOP Loan, the security and guarantee (if any) involved, and the interest rate prevailing for comparable loans. The term of the ESOP Loan must be definitely ascertainable. (3) Use of Loan Proceeds. The proceeds of an ESOP Loan must be used within a reasonable time after their receipt by the Plan and may be used only for one or more of the following purposes: (a) to acquire NCC Stock, (b) to repay the ESOP Loan, or (c) to repay a prior ESOP Loan. 136 (4) ESOP Suspense Account. All assets acquired by the Plan with the proceeds of an ESOP Loan shall be added to and maintained in the ESOP Suspense Account. The note or any security agreements executed by the Trustee in connection with an ESOP Loan shall provide that assets shall be released from the ESOP Suspense Account pursuant to the provisions of Section 16.5(1) as though all securities in the ESOP Suspense Account were encumbered. (5) Liability and Collateral for Loan. An ESOP Loan must be without recourse against the Plan. The only assets of the Plan which may be used as collateral on an ESOP Loan are NCC Stock acquired with the proceeds of the ESOP Loan and NCC Stock that was used as collateral on a prior ESOP Loan. Except as permitted pursuant to Code Section 404(k), no person entitled to payment under an ESOP Loan shall have any right to assets of the Plan other than -- (a) collateral given for the ESOP Loan, (b) Employer contributions that are made to the Plan to meet its obligations under the ESOP Loan, and (c) earnings attributable to such collateral and the investment of such Employer contributions. (6) Default. The note or any security agreements executed by the Trustee in connection with an ESOP Loan shall provide that in the event of default under the ESOP Loan, the value of assets of the Plan, if any, transferred in satisfaction of the Loan must not exceed the amount of such default and if the lender is a Disqualified Person, the ESOP Loan must provide for 137 the transfer of such assets only upon and to the extent of the failure of the Trustee to meet the payment schedule of the ESOP Loan. (7) Limitation on Payments. Payments made by the Trustee with respect to an ESOP Loan during a Plan Year shall not exceed the sum of (a) ESOP Contributions made during the Plan Year and each prior Plan Year to meet its obligations under the ESOP Loan and the earnings attributable to the investment of such Contributions and (b) earnings attributable to allocated and unallocated NCC Stock acquired with the proceeds of any ESOP Loan, reduced by (c) payments made under the ESOP Loan in prior Plan Years, and increased by (d) the proceeds of any sale of NCC Stock held in the ESOP Suspense Account used to make payments on such ESOP Loans. Such ESOP Contributions and earnings shall be accounted for separately in the books of account of the ESOP Feature until the ESOP Loan is repaid. 16.4 Repayment of Loan. (1) The Trustee shall cause the Plan to repay the ESOP Loan to the lender as payments on the ESOP Loan are required pursuant to the terms of the ESOP Loan agreement. If ESOP Contributions are made prior to the date on which a payment is required under an ESOP Loan agreement or in excess of the amount of a required payment, upon the direction of the Company pursuant to Section 16.8, the Trustee shall cause the Plan to apply such ESOP Contributions to the prepayment of the ESOP Loan. Payments shall be made from the ESOP Payment Account. 138 Except as otherwise provided herein, the ESOP Payment Account shall hold: (a) proceeds (if any) arising from the sale of NCC Stock held in the ESOP Suspense Account; (b) Allocated Dividends and Unallocated Dividends (to the extent provided by Section 16.13(1); (c) Employer contributions (if any) made with respect to the ESOP Feature; and (d) proceeds (if any) of a subsequent ESOP Loan made to repay a prior ESOP Loan. (2) In the event of default upon an ESOP Loan for failure to meet the required payment schedule, the Trustee shall transfer shares of NCC Stock in the ESOP Suspense Account to the ESOP Payment Account that are sufficient, when added to the other assets in the ESOP Payment Account, to make the required ESOP Loan payment. 16.5 Contributions, Release from ESOP Suspense Account and Allocation Among Participants' Accounts. (1) Release. Each Valuation Date that payment is made on an ESOP Loan (whether a regularly-scheduled payment or a prepayment, but not including any prepayment made with the proceeds of a new ESOP Loan incurred to refinance an existing ESOP Loan), the Trustee shall release shares of NCC Stock then held in the ESOP Suspense Account for allocation to Participants' Accounts. The number of shares of NCC Stock to be released for each Valuation Period shall equal the number of encumbered shares 139 held in the ESOP Suspense Account immediately before the payment multiplied by a fraction the numerator of which is the amount of principal and interest paid at such time and the denominator of which is the sum of the numerator and the principal and interest to be paid under the ESOP Loan later in such Plan Year and in all future Plan Years without regard to any possible extension or renewal periods. The shares of NCC Stock released from the ESOP Suspense Account pursuant to this Subsection shall be transferred to the ESOP Interim Account, and such shares shall be allocated as specified in subsection (3) below. (2) Contributions. A Participant shall be entitled to an allocation to his ESOP Sub-Account for each Valuation Period equal to his Matching Allocations required under Section 3.6 and with respect to the last Valuation Period of a Plan Year, under Section 3.8, if any, payable in the form of NCC Stock. A Participant with an undistributed ESOP Sub-Account shall also be entitled to share in any Dividend Replacement Allocations during such Valuation Period. The required Matching Allocations and the Dividend Replacement Allocations shall be funded by shares of NCC Stock released from the ESOP Suspense Account (as provided in Subsection (1)) and as a result of the ESOP Contributions made by the Employer and Supplemental ESOP Contributions described below: (a) ESOP Contributions. For each Valuation Period during which an ESOP Loan is outstanding, the Employers may make ESOP Contributions to the Trustee in such amount or under such a formula as the Company may determine, provided 140 that the aggregate ESOP Contributions made for a Plan Year are an amount sufficient (after taking into account the use of certain amounts lent to the Trustee, Allocated Dividends and Unallocated Dividends in accordance with Section 16.13(1)) to enable the Trustee to repay the amounts of principal and interest on any ESOP Loan which become due and payable. The share of each Employer in the aggregate ESOP Contributions for each Plan Year shall be equal to the total amount of ESOP Contributions attributable to the Participants who are Employees of such Employer, as determined by the Company. (b) Supplemental ESOP Contributions. (i) With respect to each Valuation Period, the Employers shall make Supplemental ESOP Contributions as of the Valuation Date in such Valuation Period if: (A) the fair market value (as determined as of such Valuation Date) of shares of NCC Stock released from the ESOP Suspense Account and allocated as of the Valuation Date in such Valuation Period is less than (B) the sum (during such Valuation Period) of the Dividend Replacement Allocations and required Matching Allocations for such Valuation Period reduced by: (I) the amount of Excess ESOP Allocations from prior Valuation Periods in such Plan Year not previously applied to reduce required Matching 141 Allocations and Dividend Replacement Allocations, and (II) amounts from prior Plan Years in excess of limits prescribed in Section 4.9 and Section 4.10 which have not been applied in prior Valuation Periods. If (B) exceeds (A), the Employers shall make, as soon as practicable after such Valuation Date, Supplemental ESOP Contributions to the Trustee in the aggregate amount required to fund allocations of NCC Stock which are equal to the excess of (B) over (A) determined above as of such Valuation Date. (ii) The aggregate Supplemental ESOP Contributions, if any, for any Valuation Period shall be determined by the Company pursuant to the first sentence of this Subsection (b). The share of each Employer in the aggregate Supplemental ESOP Contributions (if any) for any such Period shall be equal to the total amount of Supplemental ESOP Contributions required to fund allocations to the ESOP Sub- Accounts of Participants who are Employees of such Employer, as determined by the Company. The Employers, as directed by the Company, may make all or a portion of the Supplemental ESOP Contributions by (A) contributing cash to the Trustee which the Trustee shall use to prepay part of the ESOP Loan(s) to release additional shares of NCC Stock as of 142 the applicable Valuation Date, (B) contributing cash to the Trustee which the Trustee shall use to buy NCC Stock for allocation as of the applicable Valuation Date, (C) contributing NCC Stock for allocation as of the applicable Valuation Date, or (D) any combination of the foregoing. (3) Application and Allocation. Both Supplemental ESOP Contributions (whether in cash or in the form of NCC Stock) that are not applied to an ESOP Loan payment and shares of NCC Stock released from the ESOP Suspense Account by reason of ESOP Loan payments and held in the ESOP Interim Account shall be allocated to Participants' ESOP Sub-Accounts in accordance with the provisions of this Section 16.5(3). For each Valuation Period the amounts of allocations shall be determined in accordance with the following, and in the following order of priority: (a) Dividend Replacement Allocation. To the extent that Allocated Dividends are to be applied to repay an ESOP Loan as provided by Section 16.13(1), such dividends shall not be allocated to Participants' ESOP Sub-Accounts, but Dividend Replacement Allocations of released shares of NCC Stock (and, if applicable, shares of NCC Stock contributed as part of a Supplemental ESOP Contribution or purchased by the Trustee with cash contributed as part of a Supplemental ESOP Contribution) shall be made with respect thereto in accordance with the following provisions: 143 (i) The aggregate amount of the Allocated Dividends shall be calculated as of the relevant record date for dividends paid on shares of NCC Stock, based on the aggregate number of shares of NCC Stock allocated to ESOP Sub-Accounts as of such record date. Dividend Replacement Allocations with respect thereto shall be made as of each Valuation Date, as soon as practicable following a release of shares from the ESOP Suspense Account which results from an ESOP Loan amortization payment made, partially or wholly, with Allocated Dividends. The Dividend Replacement Allocations shall be made with released shares of NCC Stock (and, if applicable, any NCC Stock contributed as part of a Supplemental ESOP Contribution or purchased by the Trustee with cash contributed as part of a Supplemental ESOP Contribution made to fund Dividend Replacement Allocations) having an aggregate fair market value (determined at the applicable Valuation Date) equal to the amount of Allocated Dividends, and shall be allocated to the ESOP Sub-Accounts of Participants to which shares were credited as of the relevant record date for such Allocated Dividends, such allocation to be made in proportion to the shares of NCC Stock so credited; provided, however, that the Dividend Replacement Allocation amounts for the Valuation Date which is the last day of the Plan Year shall first be 144 satisfied with any unused amount of Excess ESOP Allocations held in the ESOP Interim Account from the preceding Valuation Date in such Plan Year (valued at fair market value as of such last day of the Plan Year). (b) Matching Allocations. After the completion of the Dividend Replacement Allocations, the Matching Allocations required under Sections 3.6 and 3.8 for each Participant shall be made as of the Valuation Date for such Valuation Period. As soon as practicable following each such determination, released shares of NCC Stock (and, if applicable, NCC Stock contributed as a Supplemental ESOP Contribution or purchased by the Trustee with a cash Supplemental ESOP Contribution) having an aggregate fair market value (as of the applicable Valuation Date) equal to the Matching Allocations required under Sections 3.6 and 3.8 with respect to each Participant shall be allocated as of such Valuation Date to such Participant's ESOP Sub-Account. If after the allocation of shares released from the ESOP Suspense Account the required Matching Allocations for such Valuation Date are not met, the Committee shall apply any unused amount of Excess ESOP Allocations from the prior Valuation Date, if any, in such Plan Year (valued at fair market value as of the date of an allocation thereof) for purposes of meeting the required Matching Allocations for such Valuation Date. For purposes of determining the amount of shares of NCC Stock to be allocated as required Matching 145 Allocations, shares of NCC Stock released from the ESOP Suspense Account shall be valued at their fair market value as of the applicable Valuation Date on which they are to be allocated. (c) Excess Shares. Subject to Sections 4.9 and 4.10, if at the end of a Plan Year after the completion of the foregoing allocations for the Plan Year there are still Excess ESOP Allocation shares of NCC Stock held in the ESOP Interim Account which have not been allocated, then such shares shall be allocated to each Participant who would be eligible in accordance with the provisions of Section 3.8 to share in a Matching Allocation made pursuant to Section 3.8 for the Plan Year (whether or not a Matching Allocation is in fact made pursuant to Section 3.8 for such Plan Year). The amount of such shares to be allocated to each such Participant shall be the amount that bears the same ratio to the total amount of Excess ESOP Allocation shares as the Credited Compensation of such Participant for the Plan Year bears to the aggregate Credited Compensation of all such Participants for such Plan Year. An allocation under this Subsection shall be allocated to the Participants' ESOP Sub- Accounts as part of the ESOP Feature. 16.6 Investment of ESOP Feature. The Trust Fund assets held under the ESOP Feature of the Plan (other than the ESOP Suspense Account) shall be invested in the NCC Stock Fund. The 146 proceeds of an ESOP Loan shall be invested in NCC Stock. Such NCC Stock shall be subject to the provisions of Section 16.10. 16.7 Acquisition and Disposition of Employer Securities. (1) General. Any purchase of NCC Stock by the Trust Fund shall be made at a price which is not in excess of it fair market value. The Committee shall determine fair market value of any nonpublicly traded NCC Stock based upon the value determined by an independent appraiser having expertise in rendering such evaluations and meeting requirements similar to those contained in Treasury Regulations under Code Section 170(a)(1). The Committee may direct the Trustee to buy NCC Stock from, or sell NCC Stock to, any person, subject to Subsection (2). All sales of NCC Stock shall be charged pro rata to the ESOP Sub-Accounts of the Participants. (2) Transactions with Disqualified Persons. In the case of any transaction involving NCC Stock between the Trust Fund and a Disqualified Person or any transaction involving NCC Stock which is subject to ERISA Section 406(b), no commission shall be charged with respect to the transaction and the transaction shall be for adequate consideration (as defined in ERISA Section 3(18)) or, in the case of an evidence of indebtedness of an Employer or an affiliate of an Employer, at a price not less favorable to the Plan than the price determined under ERISA Section 407(e)(1). 16.8 Employer Contributions to Retire Debt. Contributions made to the Plan shall be designated by the Company so as to indicate which portion of the contribution may be used to 147 retire ESOP Loans. If the Loan may be accelerated at the election of the borrower, the Company shall have sole discretion to direct the Trustee to accelerate repayment of the ESOP Loan. 16.9 Stock Rights and Restrictions. (1) Company Stock Acquired by Loan. Except as provided in Section 16.10, no NCC Stock acquired with the proceeds of an ESOP Loan shall be subject to a put, call, or other option, or buy-sell or similar arrangement while held by and when distributed from the Plan. (2) Nonterminable Restrictions. The protections and rights of Subsection (1) and Section 16.10 shall be non-terminable. If the ESOP Feature holds or has distributed NCC Stock acquired with the proceeds of an ESOP Loan, the foregoing protections and rights shall continue to apply to such NCC Stock after the ESOP Loan is repaid and whether or not the Plan's ESOP Feature continues. 16.10 Put Option on Company Stock Acquired with a Loan. (1) When Put Required. If a Participant receives a distribution of NCC Stock which was acquired with the proceeds of an ESOP Loan, and either: (a) the NCC Stock is not publicly-traded stock, or (b) the NCC Stock is subject to a trading limitation under federal or state securities law, or regulations thereunder, or an agreement which would make the NCC Stock not as freely tradable as stock not subject to such limitation, then the NCC Stock distributed to the Participant 148 (or his Beneficiary) must be subject to a put option as described in this Section. (2) Holder of Put. The put option shall be exercisable by the Participant or, if deceased, by the Participant's Beneficiary, by the donees of either, or by a person (including an estate or its distributee) to whom the NCC Stock passes by reason of the death of the Participant or the Beneficiary. (3) Responsibility for Put. The holder of the put option shall be entitled to put the NCC Stock to the Company. The Committee shall have the authority to have the Plan assume the rights and obligations of the Company at the time the put option is exercised by directing the Trustee to repurchase the NCC Stock; provided, however, that under no circumstances may the put option bind the Plan. If it is known at the time an ESOP Loan is made that federal or state law will be violated by the Company's honoring the put option, the put option must permit the NCC Stock to be put, in a manner consistent with such law, to a third party (for example, an affiliate of the Company or a shareholder other than the Plan) that has substantial net worth at the time the ESOP Loan is made and whose net worth is reasonably expected to remain substantial. (4) Duration of Put. The holder of the put option shall be entitled to exercise the option at any time during two option periods. The first option period shall be the 60-day period commencing on the date of the distribution of the NCC Stock, and if the option is not exercised during that period, a 149 second 60-day period shall commence in the following Plan Year pursuant to applicable Treasury Regulations. The period during which a put option is exercisable does not include any time when a holder of the put option is unable to exercise it because the party bound by the put option is prohibited from honoring it by applicable federal or state law. (5) Manner of Exercise. A put option is exercised by the holder notifying the Company in writing that the option is being exercised. (6) Price. The exercise price for a put option shall be the value of the NCC Stock (as determined pursuant to Treasury Regulation Section 54.4975-11(d)(5)) based on all relevant factors for determining the fair market value of the NCC Stock and shall be made in good faith. In the case of a transaction between the Plan and a Disqualified Person, value shall be determined as of the date of the transaction. For all other purposes, value shall be determined as of the most recent Valuation Date under the Plan. An independent appraisal will not in itself be a good faith determination of value in the case of a transaction between the Plan and a Disqualified Person. However, in other cases, a determination of fair market value based on at least an annual appraisal independently arrived at by a person who customarily makes such appraisals and who is independent of any party to a transaction involving a right of first refusal or a put option with respect to NCC Stock distributed under this Plan will be deemed to be a good faith determination of value. 150 (7) Payment Terms and Restrictions. The terms of payment for the sale of NCC Stock pursuant to a put option shall be as provided in the put and may be either paid in a lump sum or in installments as provided by the Committee. An agreement to pay through installments shall be permissible only if -- (a) the agreement is adequately secured, as determined by the Committee, (b) a reasonable rate of interest is charged, as determined by the Committee, (c) annual payments are equal, (d) installment payments must begin not later than 30 days after the date the put option is exercised, (e) the term of payment does not extend beyond the greater of -- (i) five years from the date the put option is exercised, or (ii) the earlier of -- (A) ten years from the date the put option is exercised, or (B) the date the ESOP Loan used by the Plan to acquire NCC Stock subject to the put option has been entirely repaid, and (f) in all other respects the requirements of Treasury Regulations Section #54.4975-7(b)(12)(iv) are satisfied. 16.11 Diversification of Investment. Participants may diversify the investment of amounts held in their ESOP Sub- 151 Accounts by transferring amounts held in their ESOP Sub-Accounts from the NCC Stock Fund to one of the other Investment Funds maintained under the Profit Sharing Feature in accordance with the provisions of Section 5.6. Any transfer of such amounts from the NCC Stock Fund to another Investment Fund shall be deemed to be a transfer from the ESOP Feature to the Profit Sharing Feature. 16.12 Stock Disposition Ordering Rule. In any case where the Trustee is required to distribute or dispose of NCC Stock, shares of NCC Stock acquired with the proceeds of an ESOP Loan shall not be distributed or disposed of prior to any other shares of NCC Stock held under the ESOP Feature. 16.13 Miscellaneous ESOP Feature Provisions. (1) Application of Dividends. All cash dividends on NCC Stock allocated to Participants' ESOP Sub-Accounts may, as determined by the Company, be used, in whole or in part, consistent with Code Section 404(k) to make principal or interest payments on an ESOP Loan, or may be retained in the Participant's ESOP Sub-Accounts or paid out to the Participant. The Company may determine how such dividends may be applied for any Valuation Period up to the time when such dividends are finally allocated to the ESOP Sub-Accounts of Participants as of the last day of such Valuation Period. Such dividends may not be used for payment of an ESOP Loan unless the Dividend Replacement Allocations described in Section 16.5(3)(a) are made. Except as otherwise directed by the Company, all cash dividends on unallocated shares of NCC Stock 152 held in the ESOP Suspense and Interim Accounts shall be used to repay an ESOP Loan related to such shares of NCC Stock. (2) Independent Appraiser. NCC Stock held in Participants' ESOP Sub-Accounts shall be valued as of each Valuation Date, or at the discretion of the Committee, more frequently. All valuations of NCC Stock held in Participants' ESOP Sub-Accounts which is not readily tradeable on an established securities market shall be made by an independent appraiser meeting requirements similar to those contained in Treasury Regulations under Code Section 170(a)(1). (3) Termination of ESOP Component. Upon a complete termination of the Plan or of the ESOP Feature but only to the extent permitted by the Code and ERISA, any unallocated NCC Stock shall be sold either to the Company (at a price no less than fair market value) or on the open market. To the extent permitted by the Code and ERISA, the proceeds of such sale shall be used to satisfy any outstanding ESOP Loan and the balance of any funds remaining shall be allocated as income to each Participant's ESOP Sub-Account based on the proportion that the Participant's ESOP Sub-Account balance as of the immediately preceding Valuation Date bears to the aggregate ESOP Sub-Account balances of all Participants as of the immediately preceding Valuation Date, provided, however, that former Participants, if any, who transferred from this Plan to a Comparable Savings Plan during the thirty (30) days immediately prior to such termination shall share 153 in such allocation on the basis of the balance(s) in their ESOP Sub-Account(s) immediately prior to any such transfer(s). 154 ARTICLE XVII. - APPENDICES 17.1 Rules Governing Construction of Appendices. Each Appendix attached hereto contains terms and conditions governing the application of the Plan to the group of Employees described therein. In the event of an inconsistency between the other provisions of the Plan and such terms and conditions set forth in an Appendix, the latter shall control as to the Employees (or former Employees) covered by such Appendix; provided, however, that if such inconsistency results from changes made in the provisions of the Plan to comply with applicable law, then such provisions of the Plan shall control as to the Employees (or former Employees) covered by such Appendix. The terms and provisions of the Appendices that were adopted before the effective date of this amendment and restatement of the Plan shall remain in effect until changed or superceded. Any reference in any Appendix to provisions of the Plan as in effect at the time such Appendix became effective shall be deemed to refer to the comparable provisions of the Plan as later amended or restated. 17.2 Appendix A -- National City Bank Deferred Profit Sharing Plan and Trust -- Merger into this Plan and Trust. Attached hereto and made a part of the Plan and Trust is Appendix A, relating to and providing for the merger of the National City Bank Deferred Profit Sharing Plan and Trust, as amended, into this Plan and Trust as of June 30, 1987 (or such later date as may be required by applicable law). 155 17.3 Appendix B -- BancOhio Corporation 1982 Qualified Employee Stock Purchase Plan and Trust -- Merger into this Plan and Trust. Attached hereto and made a part of the Plan and Trust is Appendix B, relating to and providing for the merger of the BancOhio Corporation 1982 Qualified Employee Stock Purchase Plan and Trust, as amended, into this Plan and Trust as of December 31, 1987 (or such later date as may be required by applicable law). 17.4 Appendix C -- First Kentucky National Corporation Thrift Plan - -- Merger into this Plan and Trust. Attached hereto and made a part of the Plan and Trust is Appendix C, relating to and providing for the merger of the First Kentucky National Corporation Thrift Plan, as amended, into this Plan and Trust as of January 1, 1989. 17.5 Appendix D -- First Kentucky National Corporation Retirement Plan -- Merger into this Plan and Trust. Attached hereto and made a part of the Plan and Trust is Appendix D, relating to and providing for the merger of the First Kentucky National Corporation Retirement Plan, as amended, into this Plan and Trust as of January 1, 1989. 17.6 Appendix E -- Farmers-Citizens Bank Amended and Restated Profit-Sharing Retirement Plan -- Merger into this Plan and Trust. Attached hereto and made a part of the Plan and Trust is Appendix E, relating to and providing for the merger of the Farmers-Citizens Bank Amended and Restated Profit-Sharing Retirement Plan, as amended, into this Plan and Trust as of January 1, 1989. 156 17.7 Appendix F -- Adoption by NCC Services, Inc. Attached hereto and made a part of the Plan and Trust is Appendix F relating to the adoption of the Plan by NCC Services, Inc. 17.8 Appendix G -- Crestwood State Bank Savings Plan -- Merger into this Plan and Trust. Attached hereto and made a part of the Plan and Trust is Appendix G, relating to and providing for the merger of the Crestwood State Bank Savings Plan into this Plan and Trust as of January 1, 1990. 17.9 Appendix H -- Gem Savings Retirement Savings Plan -- Merger into this Plan and Trust. Attached hereto and made a part of this Plan and Trust is Appendix H relating to and providing for the merger of the Gem Savings Retirement Savings Plan into this Plan and Trust as of February 1, 1990. 17.10 Appendix I -- Gem Savings Retirement Security Plan -- Merger into this Plan and Trust. Attached hereto and made a part of this Plan and Trust is Appendix I relating to and providing for the merger of the Gem Savings Retirement Security Plan into this Plan and Trust as of February 1, 1990. 17.11 Appendix J -- Buckeye Financial Corporation Employee Stock Ownership Plan -- Merger into this Plan and Trust. Attached hereto and made a part of this Plan and Trust is Appendix J relating to and providing for the merger of the Buckeye Financial Corporation Employee Stock Ownership Plan into this Plan and Trust as of January 24, 1991. 157 17.12 Appendix K -- Buckeye Financial Corporation Section 401(k) Plan -- Merger into this Plan and Trust. Attached hereto and made a part of this Plan and Trust is Appendix K relating to and providing for the merger of the Buckeye Financial Corporation Section 401(k) Plan into this Plan and Trust as of March 1, 1991. 17.13 Appendix L -- Ohio Citizens Bank Profit-Sharing Retirement Plan and Declaration of Trust -- Merger into this Plan and Trust. Attached hereto and made a part of this Plan and Trust is Appendix L relating to and providing for the merger of the Ohio Citizens Bank Profit-Sharing Retirement Plan and Declaration of Trust into this Plan and Trust as of April 30, 1992 immediately after the spin off and transfer of certain assets of the Ohio Citizens Bank Profit-Sharing Retirement Plan and Declaration of Trust to The National City Savings and Investment Plan No. 2 and Trust. 17.14 Appendix M -- Merchants National Corporation Thrift Plan -- Merger into this Plan. Attached hereto and made a part of this Plan is Appendix M relating to and providing for the merger of the Merchants National Corporation Thrift Plan into this Plan as of July 1, 1992. 17.15 Appendix N -- Conversion to Daily Access System. Attached hereto and made a part of this Plan is Appendix N relating to and providing for the conversion of the Plan and Trust to a daily access system (originally identified as "Appendix M" 158 and added by "Amendment No. 16 to the National City Savings and Investment Plan and Trust," executed October 12, 1993). 17.16 Appendix O -- Ohio Bancorp Profit Sharing and 401(k) Savings Plan -- Merger into this Plan and Trust. Attached hereto and made a part of this Plan and Trust is Appendix O relating to and providing for the merger of the Ohio Bancorp Profit Sharing and 401(k) Savings Plan into this Plan and Trust as of the Consolidation Date defined therein. 17.17 Appendix P -- Military Banking Division Savings and Investment Plan -- Merger into this Plan and Trust. Attached hereto and made a part of this Plan and Trust is Appendix P relating to and providing for the merger of the Military Banking Division Savings and Investment Plan and Trust into this Plan and Trust as of January 1, 1995 (or such later date as may be required by applicable law). 159 This amendment and restatement of the National City Savings and Investment Plan is hereby executed at Cleveland, Ohio, this 30th day of December, 1994 but effective as otherwise herein set forth. NATIONAL CITY BANK, TRUSTEE NATIONAL CITY CORPORATION By: R. KENT LUDWIG By: DAVID A. DABERKO ---------------------- -------------------- Title: Vice President Title: And: J.M. BUCHAGEN And: SHELLEY J. SEIFERT ---------------------- -------------------- Title: Vice President Title: 160 EXHIBIT A Participating Employers as of July 1, 1992 National City Bank, Akron First National Bank of Ashland National City Bank National City Bank, Northeast BancOhio National Bank First National Bank, Dayton National City Bank, Norwalk Third National Bank of Sandusky Ohio Citizens Bank National City Trust Company BancOhio Leasing Company BancOhio Mortgage Company W. Lyman Case & Company First Kentucky National Corporation First National Bank of Louisville First Kentucky Trust Company First National Bank, Louisville First Kentucky Company National Processing Company, Inc. The American National Bank & Trust Company Central Bank and Trust Company CommerceNational Bank First National Bank of Indiana The Third National Bank of Ashland Farmers-Citizens Bank Crestwood State Bank Gem Savings Association NCC Services, Inc. Merchants National Corporation Madison Bank and Trust Company Merchants National Bank & Trust Company of Indianapolis Anderson Banking Company Batesville State Bank Central National Bank of Greencastle 161 Citizens National Bank of Tipton Elston Bank & Trust Company Farmers National Bank of Shelbyville Fayette Bank and Trust Company First National Bank of East Chicago First National Bank of Indiana, Logansport First National Bank of Indiana, New Albany Hancock Bank & Trust Company Mid State Bank Mid State Bank of Hendricks County The National Bank of Greenwood The Seymour National Bank Union State Bank National Asset Management Corporation Merchants Capital Management, Inc. Mortgage Company of Indiana National City Mortgage Corporation Merchants Mortgage Company North Madison Insurance Agency, Inc. Merchants Security Company EMPLOYERS ADDED AS OF JANUARY 1, 1994 Ohio Bancorp The Dollar Savings & Trust Company The Peoples Banking Company The Potters Bank & Trust Company Bank 2000 The Miners and Mechanics Savings and Trust Company EX-10.25 10 NATIONAL CITY CORP 10-K EXHIBIT 10.25 1 Exhibit 10.25 THE NATIONAL CITY SAVINGS AND INVESTMENT PLAN NO. 2 (As Amended and Restated Effective January 1, 1992) 2 THE NATIONAL CITY SAVINGS AND INVESTMENT PLAN NO 2 WHEREAS, National City Corporation, a Delaware corporation (the "Corporation"), originally adopted (pursuant to the spin-off described hereafter) this profit sharing plan known as The National City Savings and Investment Plan No. 2 and Trust (the "Plan") effective as of January 1, 1992 (the "Effective Date"); and WHEREAS, pursuant to the Instrument of Amendment of, and Spin Off from, the National City Savings and Investment Plan and Trust dated December 30, 1991 (the "Instrument"), the Plan was spun off from The National City Savings and Investment Plan and Trust (the "Prior Plan") as of the Effective Date; and WHEREAS, the Plan is a continuation of the Prior Plan as to those individuals described as "Transferred Participants" in the Instrument; and WHEREAS, pursuant to the Instrument, the terms of the Plan were identical to those of the Prior Plan except as otherwise provided in the Instrument; and WHEREAS, the Plan was subsequently amended by Amendments Nos. 1 through 4 thereto; and WHEREAS, the Corporation desires to amend and restate the Plan to incorporate Amendments Nos. 1 through 4 and to make certain other changes including the removal of the Trust provisions from the Plan to a separate Trust Agreement; 3 NOW, THEREFORE, the Corporation hereby adopts this amendment and restatement of the Plan effective as of January 1, 1992 which incorporates the provisions of Amendments Nos. 1 through 4 to the Plan and hereby renames the Plan The National City Savings and Investment Plan No. 2. 4 ARTICLE I. - DEFINITIONS AND CONSTRUCTION 1.1 Definitions. The following terms when used in the Plan and the Trust Agreement with initial capital letters, unless the context clearly indicates otherwise, shall have the following respective meanings: (1) Account and Sub-Account: As defined in Section 5.2. (2) Administrator or Plan Administrator: The Administrator of the Plan, as defined in ERISA Section 3(16)(A) and Code Section 414(g), shall be the Company, which may delegate all or any part of its powers, duties and authorities in such capacity (without ceasing to be the Administrator of the Plan) as hereinafter provided. (3) After-Tax Contributions: After-Tax Contributions, if any, made to the Plan prior to January 1, 1987. (4) Before-Tax Contributions: Before-Tax Contributions provided for in Section 3.1. (5) Beneficiary: A Participant's Death Beneficiary or any other person who, after the death of a Participant, is entitled to receive any benefit payable with respect to such Participant. (6) Break in Service and 1-Year Break in Service: An Employee or former Employee incurs a Break in Service or a 1-Year Break in Service if he terminates employment with the Controlled Group in an Employment Year and completes not more than 500 Hours 5 of Service in such Employment Year or in any succeeding Employment Year. (7) Business Day: Each day during which both the Trust Department of the Trustee and the New York Stock Exchange are open for regular conduct of business. (8) Capital Preservation Fund: (a) One of the Investment Funds provided for under the Plan. The Capital Preservation Fund shall be invested and reinvested principally in "Guaranteed Investment Contracts" and "Bank Investment Contracts", as defined below, but shall not be invested in any security or obligations of any Controlled Group Member. Obligations or instruments which are appropriate investments for the Money Market Fund may be purchased and held in the Capital Preservation Fund pending the selection and purchase of suitable investments under the preceding sentence or for the purpose of maintaining sufficient liquidity to provide for the payment of withdrawals, or for transfers, from the Capital Preservation Fund and for expenses incurred in connection with the investment and management of the Capital Preservation Fund. Investments of the Capital Preservation Fund shall be held to maturity under usual circumstances. The Trustee shall at all times have the responsibility of maintaining in cash and readily marketable investments such part of the investments of the Capital Preservation Fund as shall be deemed by the Trustee to be necessary to provide adequately for the needs of Participants who 6 have amounts invested in the Capital Preservation Fund and to prevent inequities between such Participants. (b) The term "Guaranteed Investment Contract" shall mean an insurance contract or annuity approved by applicable state authority or which will upon appropriate submission be so approved and which meets the following requirements: (i) the contract agreement is for a stated period of time; (ii) interest is guaranteed by the insurer at a fixed or predetermined rate for that period of time; (iii) principal amounts may be distributed upon maturity of the contract or during the contract period as provided in the contract; and (iv) withdrawal of some or all of the principal before maturity is permitted, but subject to such restrictions as are stated in the contract. (c) The term "Bank Investment Contract" shall mean an agreement with a federally insured bank or savings and loan association ("Bank or S/L") pursuant to which the Trustee agrees to deposit funds of the Capital Preservation Fund with such Bank or S/L under the following general terms and conditions: (i) the deposit shall be a time deposit (a deposit which shall not be payable until the passage of a stated period of time); (ii) interest shall be payable at a fixed or predetermined rate for that period of time; (iii) principal amounts may be distributed at the end of the stated period of time or prior thereto as provided in the agreement; and (iv) withdrawal of some or all of the principal before the end of the stated period of 7 time is permitted, but subject to such restrictions as are stated in the agreement. (9) Code: The Internal Revenue Code of 1986, as it has been and may be amended from time to time. (10) Committee: The committee established by the Company, certain powers, duties and authorities of which are provided for in Article X. The Committee shall be a Named Fiduciary hereunder. (11) Company: National City Corporation (a Delaware corporation) a bank holding company located in Cleveland, Ohio. The Company shall be the Plan Administrator and a Named Fiduciary hereunder. (12) Controlled Group: The Employers and any and all other corporations, trades and/or businesses, the employees of which, together with Employees of an Employer, are required by Code Section 414 to be treated as if they were employed by a single employer. (13) Controlled Group Member: Each corporation or unincorporated trade or business that is or was a member of the Controlled Group, but only during such period as it is or was such a member of the Controlled Group. (14) Conversion Date: The date in 1993 determined by the Trustee, as of which the Plan and Trust will have been converted to provide Participants with daily telephonic access to make changes in their participation and investments in the Plan and Trust. 8 (15) Covered Employee: (a) An Employee employed by National Processing Company, Inc. or its successor who is treated as a non-exempt employee under the Fair Labor Standards Act, but excluding: (i) any person employed as a student intern, (ii) any person who is a law enforcement officer employed by a local, county or state government and who is hired by an Employer to perform off-duty security services, (iii) any person who is an Employee of an Employer who is included by such Employer in its Special Project Employee employment classification, or (iv) effective as of January 1, 1987 any person who is a leased employee (within the meaning of Section 1.1(19)). (b) Notwithstanding the foregoing provisions of this Subsection, in the event of acquisition by an Employer of all or part of the operating assets of another business organization (which is not an Employer) or a merger of such another business organization with an Employer, the Company shall determine whether or not individuals who are employed in the business operation(s) thus acquired or resulting and who would otherwise satisfy the definition of the term Covered Employee hereunder should be considered Covered Employees under the Plan; provided, however, that to the extent any individual employed in such a business operation is not considered a Covered Employee pursuant to this sentence, his employment in such business operation shall be deemed employment in the employ of a Controlled Group Member; and, provided further, that no action shall be taken pursuant to this 9 sentence which would discriminate in favor of Highly Compensated Employees. (16) Credited Compensation: (a) Regular salary and regular straight-time hourly wages paid by an Employer to an Employee. Unless otherwise provided in the Plan, an Employee's Credited Compensation shall be calculated prior to any reduction thereof made pursuant to a Salary Reduction Agreement under the Plan or pursuant to any agreement under Code Section 125. Except as otherwise provided in the following sentence, "Credited Compensation" shall not include overtime pay, bonuses, suggestion awards, commissions, incentive compensation payments or other forms of special compensation. (b) Notwithstanding the foregoing provisions of this Subsection, effective as of January 1, 1989, Credited Compensation of an Employee taken into account for any purpose for any Plan Year shall not exceed the limitation in effect for such Year under Code Section 401(a)(17). For purposes of the preceding sentence, in the case of a Highly Compensated Employee who is a 5-percent owner (as such term is defined in Code Section 416(i)(1)) or one of the ten most Highly Compensated Employees, (i) such Highly Compensated Employee and his family members (which for this purpose shall mean an Employee's Spouse and lineal descendants who have not attained age 19 before the close of the Year in question) shall be treated as a single Employee and the Compensation of such family members shall be aggregated with the Credited Compensation of such Highly Compensated Employee, and (ii) the limitation on 10 Credited Compensation shall be allocated among such Highly Compensated Employee and his family members in proportion to each individual's Credited Compensation. (c) Notwithstanding the foregoing provisions of this Subsection, effective as of January 1, 1994 the following shall apply: (1) In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary for Plan Years beginning on or after January 1, 1994, the annual compensation of each person taken into account under the Plan shall not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the Commissioner of Internal Revenue for increases in the cost of living in accordance with section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA '93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. (2) For Plan Years beginning on or after January 1, 1994, any reference in this Plan to the limitation under section 401(a)(17) of the Code shall mean the OBRA '93 annual compensation limit set forth in this provision. 11 (3) If compensation for any prior determination period is taken into account in determining any person's benefits accruing in the current Plan Year, the compensation for that prior determination period is subject to the OBRA '93 annual compensation limit in effect for that prior determination period. For this purpose, for determination period beginning before the first day of the first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual compensation limit is $150,000. (17) Death Beneficiary: A Participant's Spouse or, if he has no Spouse or if his Spouse consents (in the manner hereinafter described in this Subsection) to the designation hereinafter provided for in this Subsection, such person or persons (natural or legal) other than, or in addition to, his Spouse as may be designated by a Participant as his Death Beneficiary under the Plan. Such a designation may be made, revoked or changed (without the consent of any previously designated Death Beneficiary, except as otherwise provided herein) only by an instrument (in form provided by the Committee) which is signed by the Participant, which, if he has a Spouse, includes his Spouse's written consent to the action to be taken pursuant to such instrument (unless such action results in the Spouse being named as the Participant's sole Death Beneficiary), and which is filed with the Committee before the Participant's death. A Spouse's consent required by this Subsection shall be signed by the Spouse, shall acknowledge the effect of such consent, shall be witnessed by any person designated by the Committee as a Plan 12 representative or by a notary public and shall be effective only with respect to such Spouse. A Spouse's consent is not required if it is established to the satisfaction of a Plan representative that the consent cannot be obtained because there is no Spouse, because the Spouse cannot be located, or because of such other circumstances as the Secretary of the Treasury may prescribe by regulations. In default of such a designation and at any other time when there is no existing Death Beneficiary designated by the Participant, his Death Beneficiary shall be, in the following order of priority: his surviving Spouse, his surviving children (both natural and adopted), his surviving parents or his estate. If, under the preceding sentence, the Death Beneficiary consists of a class of two or more persons, such persons shall share equally in benefits under the Plan. A person designated by a Participant as his Death Beneficiary who ceases to exist prior to or on the date of the Participant's death shall cease to be a Death Beneficiary. If a Death Beneficiary is a natural person who dies after the Participant's death, the Death Beneficiary shall be the estate of such deceased Death Beneficiary. In any case in which the Committee concludes it cannot determine whether a Death Beneficiary designated by a Participant survived the Participant, it shall be conclusively presumed that such Death Beneficiary died before the Participant. (18) Disability: The physical or mental impairment of a presumably permanent and continuous nature which renders a Participant incapable of performing the duties the Participant is 13 employed to perform for his Employer when such impairment commences, all as determined by the Committee upon the basis of evidence submitted to it by the Participant or the Participant's physician within a reasonable time after the Committee requests such evidence. (19) Early Retirement Age and Early Retirement Date: A Participant shall attain Early Retirement Age upon his attainment of age 55 and completion of 10 Employment Years and a Participant's Early Retirement Date shall be the first day of the calendar month following the Participant's attainment of Early Retirement Age. (20) Eligible Employee: An Employee who is eligible for participation in the Plan in accordance with the provisions of Article II. (21) Employee: An employee of a Controlled Group Member and, to the extent required by Code Section 414(n), any person who is a "leased employee" of a Controlled Group Member. For purposes of this Subsection, effective as of January 1, 1987, a "leased employee" means any person who, pursuant to an agreement between a Controlled Group Member and any other person ("leasing organization"), has performed services for the Controlled Group Member on a substantially full-time basis for a period of at least one year, and such services are of a type historically performed by employees in the business field of the Controlled Group Member. Contributions or benefits provided a leased employee by the leasing organization which are attributable to services performed 14 for a Controlled Group Member will be treated as provided by the Controlled Group Member. A leased employee will not be considered an Employee of a Controlled Group Member, however, if (a) leased employees do not constitute more than 20 percent of the Controlled Group Member's nonhighly compensated work force (within the meaning of Code Section 414(n)(5)(C)(ii)) and (b) such leased employee is covered by a money purchase pension plan maintained by the leasing organization that provides (i) a nonintegrated employer contribution rate of at least 10 percent of Credited Compensation, (ii) immediate participation and (iii) full and immediate vesting. (22) Employer: The Company and any other corporation or business organization adopting the Plan pursuant to Article XII. However, in the case of any person which adopts or has adopted the Plan and which ceases or has ceased to exist, ceases to be a member of the Controlled Group or withdraws or is eliminated from the Plan, it shall not thereafter be an Employer. (23) Employer Contributions: Matching Employer Contributions provided for in Section 3.5, Profit Sharing Matching Contributions provided for in Section 3.7, Qualified Nonelective Contributions provided for in Section 3.10. (24) Employment Year: The 12-month period beginning on the first day an Employee performs an Hour of Service for a Controlled Group Member after initially becoming an Employee (or after again becoming an Employee following a Break in Service) and each subsequent 12-month period. 15 (25) Enrollment Date: The first day of any calendar month following an Employee's completion of the eligibility requirements of Article II. (26) Equity Fund: One of the Investment Funds provided under the Plan. The Equity Fund shall be invested and reinvested only in common or capital stocks, or in bonds, debentures or preferred stocks convertible into common or capital stocks, or in any partnership or limited partnership the purposes of which are to invest or reinvest the partnership assets in any such securities, but the Equity Fund shall not be invested in any security of a Controlled Group Member. However, obligations or instruments which are appropriate investments for the Money Market Fund may be purchased and held in the Equity Fund pending the selection and purchase of suitable investments under the preceding sentence. (27) ERISA: The Employee Retirement Income Security Act of 1974, as amended. (28) Fiduciary: Any person who (a) exercises any discretionary authority or discretionary control respecting management of the Plan or exercises any authority or control respecting management or disposition of the Trust Fund, (b) renders investment advice for a fee or other compensation, direct or indirect, with respect to the Trust Fund, or has authority or responsibility to do so, or (c) has any discretionary authority or discretionary responsibility in the administration of the Plan or the Trust Fund. The term "Fiduciary" shall also 16 include any person to whom a Named Fiduciary delegates any of its or his fiduciary responsibilities hereunder in accordance with the provisions of the Plan or Trust Agreement as long as such designation is in effect. (29) Fixed Income Fund: One of the Investment Funds provided under the Plan. The Fixed Income Fund shall be invested and reinvested only in those bonds, obligations, notes, debentures, mortgages, preferred stocks, or other tangible or intangible property or interest in property, either real or personal, the income or return from which is fixed, limited or determinable in advance by the terms of the contract, document or instrument creating or evidencing such property or interest in property, or by the terms of acquisition thereof but shall not be invested in any security of a Controlled Group Member. However, obligations or instruments which are appropriate investments for the Money Market Fund may be purchased and held in the Fixed Income Fund pending the selection and purchase of suitable investments under the preceding sentence. (30) Hardship: Effective as of January 1, 1989, immediate and heavy financial need on the part of a Participant for: (a) expenses for medical care described in Code Section 213(d) previously incurred by the Participant, the Participant's Spouse, or any dependents of the Participant (as defined in Code Section 152), or expenses necessary for these persons to obtain such medical care; 17 (b) costs directly related to the purchase (excluding mortgage payments) of a principal residence for the Participant; (c) the payment of tuition and related educational fees for the next twelve months of post-secondary education for the Participant, the Participant's Spouse, the Participant's children or the Participant's dependents (as defined in Code Section 152); (d) payments necessary to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence; (e) repayment when due of any indebtedness incurred by the Participant or any dependents of the Participant (as defined in Code Section 152) to avoid insolvency; or (f) any other financial need which the Commissioner of Internal Revenue, through the publication of revenue rulings, notices and other documents of general applicability, may from time to time designate as a deemed immediate and heavy financial need as provided in Treasury Regulations Section 1.401(k)-1(d)(2)(iv)(C). (31) Highly Compensated Employee: (a) For a particular Plan Year, effective January 1, 1987, any Employee who, (i) during the preceding Plan Year, (A) was at any time a 5-percent owner (as such term is defined in Code Section 416(i)(1)), (B) received compensation from the Controlled Group in excess of the amount in effect for such Plan Year under Code Section 18 414(q)(1)(B), (C) received compensation from the Controlled Group in excess of the amount in effect for such Plan Year under Code Section 414(q)(1)(C), and was in the top-paid group of Employees for such Plan Year, or (D) was at any time an officer (limited to no more than 50 Employees or, if lesser, the greater of 3 Employees or 10 percent (10%) of the Employees) and received compensation greater than 50 percent (50%) of the amount in effect under Code Section 415(b)(1)(A) for such Year, or (ii) who during the particular Plan Year (but not the prior Plan Year) (I) was at any time a 5-percent owner (as such term is defined in Code Section 416(i)(1)) or (II) was included in the foregoing Clauses (B), (C) or (D) of Subparagraph (i) and was in the group consisting of the 100 Employees paid the greatest compensation by the Controlled Group during such Plan Year. (b) "Highly Compensated Employee" shall include a former Employee whose Termination of Employment occurred prior to the Plan Year and who was a Highly Compensated Employee for the Plan Year in which his Termination of Employment occurred or for any Plan Year ending on or after his 55th birthday. (c) For the purposes of this Subsection, the term "compensation" shall mean the sum of an Employee's compensation under Section 4.9(3) and the Employee's Before-Tax Contributions (subject to the limitations described in Section 1.1(14)(b)) and the term "top-paid group of Employees" shall mean that group of Employees of the Controlled Group consisting of the top 20 percent 19 (20%) of such Employees when ranked on the basis of compensation paid by the Controlled Group during the Plan Year. (32) Hour of Service: (a) An Employee shall be credited with one Hour of Service for each hour for which he is paid or entitled to payment by a Controlled Group Member: (i) for the performance of duties as an Employee; (ii) for other than the performance of duties (for reasons such as vacation, sickness or disability); or (iii) for back pay, irrespective of mitigation of damages, awarded or agreed to by a Controlled Group Member. With respect to each Employee whose compensation is not determined on the basis of certain amounts for each hour worked during a given period and for whom hours of work are not required to be counted and recorded by any federal law (other than ERISA), Hours of Service shall be credited on the basis of 190 Hours of Service per month if he is paid on a monthly basis, 45 Hours of Service per week if he is paid on a weekly basis, or 10 Hours of Service per day if he is paid on a daily basis, for each month, week or day (as the case may be) for which he receives compensation from any Controlled Group Member. Employees shall be credited with Hours of Service at the rates described in the preceding sentence for leaves of absence of up to 12 months or such longer period as may be required by law to be counted for this purpose. No hour shall be counted more than once or be counted as more than one Hour of Service, even though more than straight-time pay may be paid for it. 20 (b) If an Employee is absent from work for any period in accordance with an Employer's approved maternity or paternity leave policy (i) by reason of the pregnancy of such Employee, (ii) by reason of the birth of a child of such Employee, (iii) by reason of the placement of a child with such Employee, (iv) for purposes of caring for a child for a period beginning immediately following the birth or placement of such child, of (v) by reason of any absence granted or taken in partial or complete compliance with The Family and Medical Leave Act of 1993 or required to be provided in accordance with the Americans With Disabilities Act, such Employee shall be credited with Hours of Service (solely for the purposes of determining whether he or she has incurred a Break in Service) equal to the number of Hours of Service which otherwise would normally have been credited to him but for such absence, or if the number of such Hours of Service is not determinable, 8 Hours of Service per normal workday of such absence, provided, however, that the total number of Hours of Service credited to an Employee under this paragraph by reason of any pregnancy, birth or placement shall not exceed 501 Hours of Service. Hours of Service credited to an Employee pursuant to this paragraph shall be treated as Hours of Service (A) only in the Employment Year in which an absence from work described in this paragraph begins, if the Employee would be prevented from incurring a Break in Service in such Employment Year solely because he is credited with Hours of Service during such absence pursuant to this paragraph, or (B) in any other case, in the 21 immediately following Employment Year. Hours of Service shall not be credited to an Employee under this paragraph unless the Employee furnishes to the Committee such timely information as the Committee may reasonably require to establish that the Employee's absence from work is for a reason specified in this paragraph and the number of days for which there was such an absence. (33) Investment Fund or Funds: The Capital Preservation Fund, Equity Fund, Fixed Income Fund, NCC Stock Fund, Money Market Fund and any other fund established by the Committee under Section 5.1. (34) Investment Manager: The person who, with respect to an Investment Fund, has the discretion to determine which assets in such Fund shall be sold (or exchanged) and what investments shall be acquired for such Fund. Such person must (a) be either registered as an investment advisor under the Investment Advisors Act of 1940, a bank as defined thereunder or an insurance company qualified to manage, acquire or dispose of Plan assets under the laws of more than one state, and (b) acknowledge in writing that he or it is a Fiduciary with respect to the Plan. (35) Loan Account: The separate recordkeeping account within a Participant's Account established by the Administrator pursuant to Section 6.13. (36) Matching Allocation: Any allocation made to a Participant's Account on account of the Participant's Before-Tax Contributions. 22 (37) Matching Employer Contributions: Employer Contributions provided for in Section 3.5. (38) Money Market Fund: One of the Investment Funds provided for under the Plan. The Money Market Fund shall be invested and reinvested principally in bonds, notes or other evidence of indebtedness which are payable on demand (including variable amount notes) or which have a maturity date not exceeding one day after the date of purchase by such Fund or, in case of an investment (pursuant to Section 5.1(2)(a)) in an NCB Investment Trust Fund, which are payable by such NCB Investment Trust Fund. (39) Named Fiduciaries: The Committee, the Company, the Investment Manager, the Trustee, the Participants to the extent provided in Article XV, and each other person designated as a Named Fiduciary by the Committee pursuant to the power of delegation reserved to the Committee in Article X. (40) NCB Investment Trust Fund: Any fund now or hereafter established under the trust instrument executed by National City Bank on December 4, 1956, and now entitled Declaration of Trust Establishing NCC Investment Fund for Retirement Trusts, as such trust instrument has been or may be amended and/or restated. (41) NCC Stock: Common stock of National City Corporation, a Delaware corporation. (42) NCC Stock Fund: One of the Investment Funds provided for under the Plan. The NCC Stock Fund shall be invested and reinvested only in shares of common stock issued by the 23 Company. However, obligations or instruments which are appropriate investments for the Money Market Fund may be purchased and held in the NCC Stock Fund pending the purchase of shares of such common stock. (43) Normal Retirement Age and Normal Retirement Date: A Participant shall attain Normal Retirement Age upon his attainment of age 65 and a Participant's Normal Retirement Date shall be the first day of the calendar month following the Participant's attainment of Normal Retirement Age. (44) Participant: An Employee or former Employee who has become and continues to be a Participant of the Plan in accordance with the provisions of Article II, a Covered Employee who has made a Transfer Contribution, or any other person designated as a Participant by the terms of any Appendix. (45) Plan: The National City Savings and Investment Plan No. 2 (known prior to this restatement as the National City Savings and Investment Plan No. 2 and Trust), the terms and provisions of which are herein set forth, as the same may be amended, supplemented or restated from time to time. (46) Plan Year: A calendar year. (47) Predecessor Plan: Any qualified defined contribution plan which is merged into this Plan or the assets of which are transferred to this Plan, as described in any Appendix to the Plan. (48) Prior Plan: The National City Savings and Investment Plan and Trust, from which this Plan was spun off. 24 (49) Profit Sharing Feature: The provisions of the Plan (a) which are intended to qualify as a profit sharing plan under Code Section 401(a) and (b) which include a qualified cash or deferred arrangement within the meaning of Code Section 401(k). (50) Profit Sharing Matching Contributions: Employer Contributions provided for in Section 3.7. (51) Qualified Nonelective Contributions: A contribution made by an Employer pursuant to Section 3.9 that (a) Participants eligible to share therein may not elect to receive in cash until distribution from the Plan, (b) are nonforfeitable when made, (c) are distributable only in accordance with the distribution rules applicable to Before-Tax Contributions and (d) are paid to the Trust Fund during the Plan Year for which made or within the time following the close of such Plan Year which is prescribed by law for the filing by an Employer of its federal income tax return (including extensions thereof). (52) Return on Equity: For a particular Plan Year, "Return on Equity" means the percentage determined by dividing the Consolidated Net Income of the Company for the Year by the Daily Average Consolidated Stockholders' Equity of the Company for the Year (calculated without regard to any preferred stock of the Company), in accordance with generally accepted accounting principles and applicable Securities and Exchange Commission Regulations, all as determined by the principal accounting officer of the Company for the purpose of reporting such figures to stockholders of the Company and others. 25 (53) Salary Reduction Agreement: An arrangement pursuant to which an Employee agrees to reduce, or to forego an increase in, his Credited Compensation and his Employer agrees to contribute to the Trust the amount so reduced or foregone as a Before-Tax Contribution. (54) Spouse: The person to whom an Employee is legally married at the specified time; provided, however, that a former Spouse may be treated as a Spouse or surviving Spouse to the extent required under the terms of a "qualified domestic relations order" (as such term is defined in Code Section 414(p)). (55) Transfer Contributions: The Contributions provided for in Section 3.4. (56) Trust and Trust Fund: The trust estate held by the Trustee under the provisions of the Plan and the Trust Agreement, without distinction as to principal or income. (57) Trust Agreement: The Trust Agreement or Agreements between the Company and the Trustee or Trustees, as such Trust Agreement or Agreements may be amended or restated from time to time, or any trust agreement or agreements superseding the same. Each Trust Agreement is hereby incorporated in the Plan by reference. (58) Trustee: The trustee or trustees under the Trust Agreement or its or their successor or successors in trust under such Trust Agreement. 26 (59) Valuation Date: The last Business Day of each calendar month and any other Business Day(s) on which the Committee determines that the Investment Funds shall be valued. (60) Vested Interest: The entire amount of a Participant's Account which has not previously been withdrawn by him or distributed to or for him and which is nonforfeitable. All amounts credited to a Participant's Account shall be 100% nonforfeitable at all times unless otherwise provided in an Appendix hereto. 1.2 Construction. (1) Unless the context otherwise indicates, the masculine wherever used in the Plan or Trust Agreement shall include the feminine and neuter, the singular shall include the plural and words such as "herein", "hereof", "hereby", "hereunder" and words of similar import refer to the Plan as a whole and not to any particular part thereof. (2) Where headings have been supplied to portions of the Plan and the Trust Agreement (other than the headings to the Subsections in Section 1.1), they have been supplied for convenience only and are not to be taken as limiting or extending the meaning of any of such portions of such documents. (3) Wherever the word "person" appears in the Plan, it shall refer to both natural and legal persons. (4) A number of the provisions hereof and of the Trust Agreement are designed to contain provisions required or contemplated by certain federal laws and/or regulations thereunder. All such provisions herein and in the Trust Agreement 27 are intended to have the meaning required or contemplated by such provisions of such law or regulations and shall be construed in accordance with valid regulations and valid published governmental rulings and interpretations of such provisions. In applying such provisions hereof or of the Trust Agreement, each Fiduciary may rely (and shall be protected in relying) on any determination or ruling made by any agency of the United States Government that has authority to issue regulations, rulings or determinations with respect to the federal law thus involved. (5) Except to the extent federal law controls, the Plan and Trust Agreement shall be governed, construed and administered according to the laws of the State of Ohio. All persons accepting or claiming benefits under the Plan or Trust Agreement shall be bound by and deemed to consent to their provisions. (6) This Plan was originally established effective January 1, 1992 by the Instrument of Amendment of, and Spin Off from The National City Savings and Investment Plan and Trust dated December 30, 1991 and constitutes a continuation of the Prior Plan with respect to the "Transferred Participants" as defined in such Instrument. Pursuant to such Instrument, the terms of the Plan were deemed to be the terms of the Prior Plan with certain modifications specified in the Instrument. The Plan was subsequently amended by Amendments Nos. 1 through 4. This amendment and restatement incorporates such Amendments and additional amendments so that it constitutes a continuation and complete restatement of the Plan. 28 (7) This amendment and restatement is generally effective as of January 1, 1992. However, certain provisions of this amendment and restatement of the Plan are effective as of some other date. The provisions of this amendment and restatement of the Plan which are effective prior to January 1, 1992 shall be deemed to amend the corresponding provisions of the Plan and the Prior Plan as in effect before this amendment and restatement and all amendments thereto. Events occurring before the applicable effective date of any provision of this amendment and restatement Plan shall be governed by the application provision of the Prior Plan in effect on the date of the event. (8) The benefits payable with respect to an Employee or former Employee whose employment with the Controlled Group terminated before January 1, 1992 (and who is not rehired by a Controlled Group Member thereafter) shall be determined by and paid in accordance with the terms and provisions of the Prior Plan. 29 ARTICLE II. - ELIGIBILITY AND PARTICIPATION 2.1 Eligible Employees. Each Employee who was a Participant in the Prior Plan on December 31, 1991 shall continue to be a Participant in the Plan on January 1, 1992. Each other Employee shall become an Eligible Employee under the Plan on the first Enrollment Date on which he meets the following requirements: (1) he is a Covered Employee (including such an Employee who is on a leave of absence), (2) he has attained age 21, or he has not attained age 21 but was eligible to have Before-Tax Contributions made for him under the provisions of the Prior Plan in effect on December 31, 1988, and (3) he (a) has completed a period of at least one Employment Year, and (b) has been credited with at least 1,000 Hours of Service. 2.2 Commencement of Participation. Any Eligible Employee described in Section 2.1 may enroll as a Participant in the Plan on the Enrollment Date on which he is initially eligible or on any subsequent Enrollment Date by either (A) filing with an Employer or the Committee in the month preceding such Date (in accordance with rules established by the Committee) an enrollment form prescribed by the Committee which form shall include (1) the effective date on which the Eligible Employee is to become a Participant, (2) his election, commencing on or after such effective date, to have Before-Tax Contributions made by or for 30 him to the Trust, (3), (a) his authorization, if any, to his Employer to withhold from his unreduced Credited Compensation for each pay period, commencing on or after such effective date, any designated Before-Tax Contributions and to pay the same to the Trust Fund and/or (b) his agreement, if any, commencing on or after such effective date, to reduce, or to forego an increase in, his unreduced Credited Compensation and to have his Employer contribute the same as Before-Tax Contributions to the Trust Fund, and (4) his direction that the Before-Tax Contributions made by or for him be invested in any one of the investment options permitted by Section 5.5, or (B) if available to the Participant, enrolling as a Participant in the Plan by means of a voice response telephonic system, established and supervised by the Committee, which provides for the making of decisions (1) through (4) above by telephonic communication, confirmed in a writing mailed to the Participant within three days. 2.3 Duration of Participation. (1) Once an Eligible Employee becomes a Participant, he shall remain a Participant so long as he continues to be an Employee whether or not he continues to be an Eligible Employee, provided, however, that if a Participant ceases to be an Eligible Employee (while remaining an Employee), Before-Tax Contributions may not be made by or for him pursuant to Section 3.1 until he again becomes an Eligible Employee and he again enrolls as a Participant pursuant to Sections 2.2 and 3.1. 31 (2) If an Account continues to be maintained for a former Employee after his termination of employment with the Controlled Group, such former Employee shall remain a Participant for all purposes of the Plan, other than for the purposes of making, or having his Employer make, Participant or Employer Contributions hereunder. 2.4 Eligibility after Reemployment. (1) If an Employee incurs a Break in Service before satisfying the age and service requirements of Subsections (2) and (3) of Section 2.1 and is later reemployed before incurring five consecutive 1- Year Breaks in Service, periods of employment before the Break in Service shall not be taken into account in computing eligibility to participate until he has completed one Employment Year following his reemployment. (2) If an Employee incurs a Break in Service before satisfying the age and service requirements of Subsections (1) and (2) of Section 2.1 and is later reemployed after incurring five consecutive 1-Year Breaks in Service, periods of employment before the Break in Service shall not be taken into account in computing eligibility to participate. (3) If an Employee whose employment with the Controlled Group terminates after completing the age and service requirements of Subsections (2) and (3) of Section 2.1 is later reemployed as a Covered Employee, such Employee shall become a Participant on the first day of the calendar month after the month in which he enrolls as a Participant pursuant to Sections 2.2 and 3.1. 32 2.5 Special Rules for Transferred Participants. (1) In the event that a Participant ceases to be an Eligible Employee hereunder due to a transfer of employment to a classification of Employees that is eligible to participate in another profit sharing retirement plan maintained by a Controlled Group Member which is qualified under Code Sections 401(a) and 401(k) (a "Comparable Savings Plan"), such Participant's Account shall be transferred to the Comparable Savings Plan and such Participant shall no longer be considered a Participant hereunder. Such transfer shall occur as of the day of such transfer of employment. (2) In the event that an individual who is a participant in a Comparable Savings Plan shall become an Eligible Employee hereunder, (a) any elections made by the individual on his enrollment form under the Comparable Savings Plan shall continue in effect under this Plan as of the date he becomes an Eligible Employee, until changed or modified in accordance with the terms hereof, (b) such individual's account from the Comparable Savings Plan shall be transferred to his Account hereunder as of the day such transfer of employment, (c) the assets of such account shall be allocated to comparable Sub-Accounts under this Plan and such transfer shall not be considered a Transfer Contribution hereunder, (d) the provisions of any Appendix to such Comparable Savings Plan which apply to any asset transferred to this Plan shall continue to apply to such asset, and (e) to the extent required by applicable law, the provisions of such Comparable 33 Savings Plan shall continue to apply to the assets transferred to this Plan. 34 ARTICLE III - CONTRIBUTIONS 3.1 Before-Tax Contributions. Upon enrollment pursuant to Section 2.2, a Participant shall agree pursuant to a Salary Reduction Agreement to have his Employer make Before-Tax Contributions to the Trust of up to 10% of his unreduced Credited Compensation (in 1% increments) by means of pay period payments of the elected percentage. If a Participant's Before- Tax Contributions must be reduced to comply with the requirements of Section 4.1 or 4.2 or the requirements of applicable law, his Before-Tax Contributions shall be reduced to the next highest 1% increment of his unreduced Credited Compensation permitted by such Section or law. 3.2 Payments to Trustee. Before-Tax Contributions made for a Participant shall be transmitted by his Employer to the Trustee as soon as practicable, but in any event not later than 30 days after the end of the calendar month in which such Contributions are withheld or would otherwise have been paid to the Participant. 3.3 Changes in, and Suspensions of, Before-Tax Contributions. (1) The percentage or percentages designated by a Participant pursuant to Section 3.1 shall continue in effect, notwithstanding any changes in the Participant's Credited Compensation. A Participant may, however, in accordance with the percentages permitted by Section 3.1, change the percentage of his Before-Tax Contributions as often as may be permitted by the Committee by (either (A) the completion and proper filing 35 (pursuant to Committee rules) of election change forms, or (B) if available to the Participant, effecting such change by means of a voice response telephonic system, established and supervised by the Committee, confirmed in a writing mailed to the Participant within three days. (2) A Participant may at any time suspend his Before-Tax Contributions by notifying the Committee or his Employer, pursuant to Committee rules, of his desire to suspend such contributions. The eligibility for, and entitlement to, future Before-Tax Contributions of a Participant who has suspended such Contributions shall be limited as provided in rules established by the Committee. (3) The rules established by the Committee under this Section shall be established and administered in a uniform and nondiscriminatory fashion and may be amended from time to time in the sole and absolute discretion of the Committee. 3.4 Transfer Contributions. (1) The Trustee shall, at the direction of the Committee, receive and thereafter hold and administer as a part of the Trust Fund for a Covered Employee (whether or not he has met the eligibility requirements of Article II) all cash and other property which may be transferred to the Trustee from a trust held under another plan in which the Covered Employee was a participant, which meets the requirements of Code Sections 401(a) and 501(a)(each such trust and plan being hereinafter in this Section called a "Comparable Plan"). For purposes of this Subsection but not the following Subsection (2), 36 either the Comparable Plan must not be subject to the survivor annuity requirements of Code Section 401(a)(11) or the transfer must comply with the "elective transfer" requirements of Treasury Regulation Section 1.411(d)-4. (2) The Trustee shall also, at the direction of the Committee, receive and thereafter hold and administer as part of the Trust Fund for a Participant all cash and property which shall have been distributed to the Participant from a Comparable Plan in a distribution which constitutes a "qualified total distribution" as such term is defined in Code Section 402(a)(5)(E)(i) and which cash and other property, or any part thereof (other than amounts contributed by him to such Comparable Plan as employee contributions) is transferred by him to the Trustee on or before the 60th day after which he received such cash and other property and which transfer otherwise meets the requirements of Code Section 402(a)(5) or 402(a)(6). (3) Contributions made to the Trust Fund pursuant to Subsections (1) and (2) hereof shall be referred to herein as "Transfer Contributions." Whether or not Transfer Contributions may be made by an Employee or group of Employees shall be determined by the Committee in its sole and absolute discretion. Transfer Contributions will be permitted only in amounts in excess of $1,000 and shall be in cash unless the Committee approves a Transfer Contribution of other property. Such Transfer Contributions shall be allocated to such existing or new Sub-Account(s) as the Trustee shall determine and shall be invested as 37 specified in Section 5.5. Subject to other provisions of the Plan and Trust Agreement, the Trustee shall have authority to sell or otherwise convert to cash any property transferred to it pursuant to this Section. 3.5 Amount of Matching Employer Contributions. Subject to the provisions of the Plan and Trust Agreement, each Employer shall, as and to the extent it lawfully may, contribute to the Trust Fund on account of each month, Matching Employer Contributions in an amount equal to (1) 100% of the Before-Tax Contributions for such month for each Participant with respect to the first 3% of each such Participant's Credited Compensation and (2) 50% of the Before-Tax Contributions for such month for each Participant with respect to the next 4% of each such Participant's Credited Compensation. The Employer shall deliver its Matching Employer Contributions to the Trust Fund at the same time as the Before-Tax Contributions to which such Matching Employer Contributions relate are delivered. 3.6 Allocation of Matching Employer Contributions. Each Employer's Matching Employer Contributions made for a month shall be allocated and credited to the Account of each Participant for whom Before-Tax Contributions were made during such month, with each such Participant being credited with a portion of the Employer's Matching Employer Contribution equal to the applicable percentage (determined under Section 3.5) of his Before-Tax Contributions for the preceding calendar month. Notwithstanding the foregoing provisions of this Section, for any month during 38 which an ESOP Loan is outstanding, Participants for whom Before-Tax Contributions were made during such month will not be credited with a Matching Allocation pursuant to this Section, but will be allocated and credited with a Matching Allocation in accordance with the provisions of Section 16.5. 3.7 Amount of Profit Sharing Matching Contributions. (1) Subject to the provisions of the Plan and Trust Agreement, each Employer shall, as and to the extent it lawfully may, contribute to the Trust Fund on account of each Plan Year, in addition to the Matching Employer Contributions described in Section 3.5, Profit Sharing Matching Contributions in the amount described in Subsection (2) of this Section. The Profit Sharing Matching Contribution of each Employer shall be made within the time, following the close of the Plan Year for which such Contribution is made, which is prescribed by law for the filing by each such Employer of its federal income tax return (including extensions thereof). (2) If the Company's Return on Equity equals or exceeds 12% for the Plan Year, the Employers shall contribute to the Trust Fund on account of such Year Profit Sharing Matching Contributions in an amount equal to that determined by applying the table below to the Before-Tax Contributions made for such Year for each eligible Participant as described in Section 3.8: 39
Profit Sharing Matching Contributions (Per $1.00 Return on Equity for Year of Before-Tax Contributions) ------------------------- ---------------------------- less than 12% -0- 12% but less than 12.5% $0.02 12.5% but less than 13.0% $0.03 13.0% but less than 13.5% $0.04 13.5% but less than 14.0% $0.05 14.0% but less than 14.5% $0.06 14.5% but less than 15.0% $0.07 15.0% but less than 15.5% $0.08 15.5% but less than 16.0% $0.09 16.0% but less than 16.5% $0.10 16.5% but less than 17.0% $0.15 17.0% but less than 17.5% $0.20 17.5% but less than 18.0% $0.25 18.0% but less than 18.5% $0.30 18.5% but less than 19.0% $0.35 19.0% but less than 19.5% $0.40 19.5% but less than 20.0% $0.45 20.0% or more $0.50
provided however, that with respect to the Plan Year ending December 31, 1993, and later plan Years, the table below shall apply:
Profit Sharing Matching Contributions (Per $1.00 Return on Equity for Year of Before-Tax Contributions) ------------------------- ---------------------------- less than 12% -0- 12% but less than 13.5% $0.05 13.5% but less than 15.0% $0.10 15.0% but less than 15.5% $0.15 15.5% but less than 16.0% $0.20 16.0% but less than 16.5% $0.25 16.5% but less than 17.0% $0.30 17.0% but less than 17.5% $0.35 17.5% but less than 18.0% $0.40 18.0% but less than 18.5% $0.45 18.5% or more $0.50
40 (3) The Company shall determine the amount of the Employer Profit Sharing Matching Contribution, if any, to be made hereunder for each Plan Year pursuant to the Tables set forth in Subsection (2) hereof, based upon the Return on Equity and Net Income for the Year. Such determination shall be effected in accordance with generally accepted accounting principles and applicable Securities and Exchange Commission regulations in the same manner as for the Company's reports to stockholders, by the principal accounting officer of the Company, and, upon approval by the Auditor of the Company, shall be final and conclusive as to all interested persons for all purposes of the Plan. 3.8 Allocation of Profit Sharing Matching Contributions. To be eligible to share in a Profit Sharing Matching Contribution for a Plan Year, an individual must (1) have made Before-Tax Contributions to the Trust during such Year, and (2) be an Employee of an Employer (including such an Employee who is on a leave of absence) as of December 31 of such Year, provided, however, that each individual who made such Before-Tax Contributions during the Year but who does not meet such Employee test on such date because of his termination of employment during the Year on or after his Normal or Early Retirement Date or because of his incurring a Disability during the Year, shall, nevertheless, be eligible to share in such Profit Sharing Matching Contribution, and provided further, that the Accounts of Employees who made such Before-Tax Contributions during the Year but who died during the Year shall also share in such Profit Sharing 41 Matching Contribution. Sharing in such Profit Sharing Matching Contribution for such Year shall be on the basis of the respective total amounts of Before-Tax Contributions made to the Trust during such Year, without regard to any withdrawals or distributions thereof made after such contributions. Profit Sharing Matching Contributions shall be allocated and credited as a Matching Allocation to eligible Participants' Accounts as of the December 31 of the Plan Year for which they are made. Notwithstanding the foregoing provisions of this Section, for any Plan Year during which an ESOP Loan is outstanding, Participants who would be eligible for a Matching Allocation pursuant to this Section shall, in lieu thereof, be allocated and credited with a Matching Allocation in accordance with the provisions of Section 16.5. 3.9 Reduction of Employer Contributions. The amount of Employer Contributions determined to be payable to the Trust Fund shall be reduced by amounts which have been forfeited or held in a suspense account in accordance with the terms of the Plan. 3.10 Qualified Nonelective Contributions. For any Plan Year, the Employers may make a Qualified Nonelective Contribution (1) in such amount, (2) for such Participants who are not Highly Compensated Employees for such Plan Year and (3) in such proportions among such Participants as such Employer shall deem necessary to cause Section 4.2 or 4.4 to be satisfied for such Plan Year. Qualified Nonelective Contributions may be made irrespective of whether the Employer has net earnings or retained 42 earnings, and may be made in cash or other property. Each Employer shall designate to the Trustee the Plan Year for which and the Participants for whom any Qualified Nonelective Contribution is made. 3.11 Allocation of Qualified Nonelective Contributions. Qualified Nonelective Contributions shall be allocated to the Accounts of Participants who are designated by an Employer as eligible to share therein in such amounts as such Employer directs. 3.12 Contributions in NCC Stock. Contributions made by the Employers hereunder shall be made in cash or in shares of NCC Stock. If a Contribution is made in the form of NCC Stock, such contribution shall be equal to the fair market value of such NCC Stock. Fair market value of NCC Stock shall be equal to the last quoted price of such Stock on the date of contribution. 43 ARTICLE IV. - LIMITATIONS ON CONTRIBUTIONS 4.1 Excess Deferrals. (1) Notwithstanding the provisions of Article III, a Participant's Before-Tax Contributions for any taxable year of such Participant commencing on or after January 1, 1987 shall not exceed the limitation in effect under Code Section 402(g). Except as otherwise provided in this Section, a Participant's Before-Tax Contributions for purposes of this Section shall include (a) any employer contribution made under any qualified cash or deferred arrangement as defined in Code Section 401(k) to the extent not includible in gross income for the taxable year under Code Section 402(a)(8) (determined without regard to Code Section 402(g)), (b) any employer contribution to the extent not includible in gross income for the taxable year under Code Section 402(h)(1)(B) (determined without regard to Code Section 402(g)) and (c) any employer contribution to purchase an annuity contract under Code Section 403(b) under a salary reduction agreement within the meaning of Code Section 3121(a)(5)(D). (2) In the event that a Participant's Before-Tax Contributions exceed the amount described in Subsection (1) of this Section (hereinafter called the "excess deferrals"), such excess deferrals (and any income allocable thereto) shall be distributed to the Participant by April 15 following the close of the taxable year in which such excess deferrals occurred if (and only if), by April 15 of such taxable year the Participant (a) allocates the amount of such excess deferrals among the plans 44 under which the excess deferrals were made and (b) notifies the Committee of the portion allocated to this Plan. (3) In the event that a Participant's Before-Tax Contributions under this Plan exceed the amount described in Subsection (1) of this Section, or in the event that a Participant's Before-Tax Contributions made under this Plan do not exceed such amount but he allocates a portion of his excess deferrals to his Before-Tax Contributions made to this Plan, Matching Employer Contributions and Profit Sharing Matching Contributions, if any, made with respect to such Before-Tax Contributions (and any income allocable thereto) shall be forfeited and applied to reduce subsequent Matching Employer Contributions and Profit Sharing Matching Contributions required under the Plan. 4.2 Excess Before-Tax Contributions. (1) Notwithstanding the provisions of Article III, for any Plan Year commencing on or after January 1, 1987, (a) the actual deferral percentage (as defined in Subsection (2) of this Section) for the group of Highly Compensated Eligible Employees (as defined in Subsection (3) of this Section) for such Plan Year shall not exceed the actual deferral percentage for all other Eligible Employees for such Plan Year multiplied by 1.25, or (b) the excess of the actual deferral percentage for the group of Highly Compensated Eligible Employees for such Plan Year over the actual deferral percentage for all other 45 Eligible Employees for such Plan Year shall not exceed 2 percentage points, and the actual deferral percentage for the group of Highly Compensated Eligible Employees for such Plan Year shall not exceed the actual deferral percentage for all other Eligible Employees for such Plan Year multiplied by 2. If two or more plans which include cash or deferred arrangements are considered as one plan for purposes of Code Sections 401(a)(4) or 410(b), such arrangements included in such plans shall be treated as one arrangement for the purposes of this Subsection; and if any Highly Compensated Eligible Employee is a participant under two or more cash or deferred arrangements of the Controlled Group, all such arrangements shall be treated as one cash or deferred arrangement for purposes of determining the deferral percentage with respect to such Highly Compensated Eligible Employee. (2) For the purposes of this Section, the actual deferral percentage for a specified group of Eligible Employees for a Plan Year shall be the average of the ratios (calculated separately for each Eligible Employee in such group) of (a) the amount of Before-Tax Contributions and, at the election of an Employer, any Qualified Nonelective Contributions actually paid to the Trust for each such Eligible Employee for such Plan Year (including any "excess deferrals" described in Section 4.1) to (b) the Eligible Employee's compensation for such Plan Year. For Plan Years commencing prior to January 1, 1992, any qualified matching contributions (as defined in Treasury Regulations issued 46 under Code Sections 401(k) and 401(m) may be taken into account for purposes of the preceding sentence, at the election of an Employer. For the purposes of this Section and Section 4.3, the term "compensation" shall mean the sum of an Eligible Employee's compensation under Section 4.9(3) and his Before-Tax Contributions (subject to the limitations described in Section 1.1(14)(b)). In the case of a Highly Compensated Eligible Employee who is either a 5-percent owner (as defined in Code Section 416(i)(1)) or one of the ten most Highly Compensated Employees, the combined actual deferral ratio for the family group (as such term is hereinafter defined), which shall be treated as one Highly Compensated Eligible Employee, shall be determined by combining the Before-Tax Contributions (and, at the election of an Employer, Qualified Nonelective Contributions) and compensation of all members of the family group who are Eligible Employees. For the purposes of this Section and Section 4.3, the term "family group" shall mean any Highly Compensated Eligible Employee described in the preceding sentence and such Employee's Spouse and lineal ascendants or descendants and the spouses of such lineal ascendants or descendants. For the purposes of determining "the actual deferral percentage for all other Eligible Employees" as referred to in Subsection (1) of this Section, the Before-Tax Contributions and compensation of all members of the family group shall be disregarded. 47 (3) For the purposes of this Section, the term "Highly Compensated Eligible Employee" for a particular Plan Year shall mean any Highly Compensated Employee who is an Eligible Employee. (4) In the event that excess contributions (as such term is hereinafter defined) are made to the Trust for any Plan Year, then, prior to March 15 of the following Plan Year, such excess contributions (and any income allocable thereto) shall be distributed to the Highly Compensated Eligible Employees on the basis of the respective portions of the excess contributions attributable to each such Eligible Employee. For the purposes of this Subsection, the term "excess contributions" shall mean, for any Plan Year, the excess of (a) the aggregate amount of Before-Tax Contributions actually paid to the Trust on behalf of Highly Compensated Eligible Employees for such Plan Year over (b) the maximum amount of such Before- Tax Contributions permitted for such Plan Year under Subsection (1) of this Section, determined by reducing Before-Tax Contributions made on behalf of Highly Compensated Eligible Employees in order of the actual deferral percentages (as defined in Subsection (2) of this Section) beginning with the highest of such percentages. Notwithstanding the foregoing provisions of this Subsection, in the case of a Highly Compensated Eligible Employee whose actual deferral ratio is determined under the family aggregation rules set forth in Subsection (2) of this Section, the determination and correction of the amount of excess contributions shall be made by reducing the actual deferral ratio in accordance with the "leveling" method 48 described in Treasury Regulations Section 1.401(k)-1(f)(2) and allocating the excess contributions for the family group among its members in proportion to the Before-Tax Contributions of each member of the family group that is combined to determine the actual deferral ratio. (5) Matching Allocations made with respect to a Participant's excess contributions (and any income allocable thereto) shall be forfeited and applied to reduce subsequent Matching Employer Contributions, Profit Sharing Matching Contributions and ESOP Contributions required under the Plan. 4.3 Excess Matching Allocations. (1) Notwithstanding the provisions of Article III, effective January 1, 1987, for any Plan Year the contribution percentage (as defined in Subsection (2) of this Section) for the group of Highly Compensated Eligible Employees (as defined in Section 4.2(3)) for such Plan Year shall not exceed the greater of (a) 125 percent of the contribution percentage for all other Eligible Employees or (b) the lesser of 200 percent of the contribution percentage for all other Eligible Employees, or the contribution percentage for all other Eligible Employees plus 2 percentage points. If two or more plans of the Controlled Group 49 to which matching contributions, employee after-tax contributions or before-tax contributions (as defined in Section 4.1(1)) are made are treated as one plan for purposes of Code Section 410(b), such plans shall be treated as one plan for purposes of this Subsection; and if a Highly Compensated Eligible Employee participates in two or more plans of the Controlled Group to which such contributions are made, all such contributions shall be aggregated for purposes of this Subsection. (2) For the purposes of this Section, the contribution percentage for a specified group of Eligible Employees for a Plan Year shall be the average of the ratios (calculated separately for each Eligible Employee in such group) of (a) the Matching Allocations made under the Plan for each such Eligible Employee for such Plan Year to (b) the Eligible Employee's compensation (as defined in Section 4.2(2)) for such Plan Year. In the case of a Highly Compensated Eligible Employee who is either a 5-percent owner (as defined in Code Section 416(i)(1)) or one of the ten most Highly Compensated Employees, the combined contribution ratio for the family group (as such term is defined in Section 4.2(2)), which shall be treated as one Highly Compensated Employee, shall be determined by combining the Matching Allocations and compensation of all members of the family group who are Eligible Employees. For the purposes of determining "the contribution percentage for all other Eligible Employees" as referred to in Subsection (1) of this Section, the Matching Allocations for, and the compensation of, all members of the family group shall be disregarded. (3) In the event that excess aggregate contributions (as such term is hereinafter defined) are made to the Trust for any Plan Year, then, prior to March 15 of the following Plan Year, such excess contributions (and any income allocable thereto) shall be forfeited (if forfeitable) and applied as provided in 50 Section 3.9 or (if not forfeitable) shall be distributed to the Highly Compensated Eligible Employees on the basis of the respective portions of the excess contributions attributable to each such Eligible Employee. For the purposes of this Subsection, the term "excess aggregate contributions" shall mean, for any Plan Year, the excess of (a) the aggregate amount of the Matching Allocations made for Highly Compensated Eligible Employees for such Plan Year over (b) the maximum amount of such Matching Allocations permitted for such Plan Year under Subsection (1) of this Section, determined by reducing Matching Allocations made for Highly Compensated Eligible Employees in order of their contribution percentages (as defined in Subsection (2) of this Section) beginning with the highest of such percentages. Notwithstanding the foregoing provisions of this Subsection, in the case of a Highly Compensated Eligible Employee whose contribution percentage is determined under the family aggregation rules set forth in Subsection (2) of this Section, the determination and correction of the amount of excess aggregate contributions shall be made by reducing the contribution ratio in accordance with the "leveling" method described in Treasury Regulation Section 1.401(m)-1(c)(2) and allocating the excess aggregate contributions for the family group among its members in proportion to the Matching Allocations of each member of the family group that is combined to determine the contribution ratio. (4) The determination of excess aggregate contributions under this Section shall be made after (a) first determining the 51 excess deferrals under Section 4.1 and (b) then determining the excess contributions under Section 4.2. 4.4 Multiple Use of the Alternative Limitation. (1) Notwithstanding the provisions of Article III or the foregoing provisions of this Article IV, effective January 1, 1989, if, after the application of Sections 4.1, 4.2 and 4.3, the sum of the actual deferral percentage and the contribution percentage for the group of Highly Compensated Eligible Employees (as defined in Section 4.2(3)) exceeds the aggregate limit (as defined in Subsection (2) of this Section), then the contributions made for such Plan Year for Highly Compensated Eligible Employees will be reduced so that the aggregate limit is not exceeded. Such reductions shall be made first in Before-Tax Contributions (but only to the extent that they are not matched by Matching Allocations) and then in Matching Allocations. Reductions in contributions shall be made in the manner provided in Section 4.2 or 4.3, as applicable. The amount by which each such Highly Compensated Eligible Employee's contribution percentage amount is reduced shall be treated as an excess contribution or an excess aggregate contribution under Section 4.2 or 4.3, as applicable. For the purposes of this Section, the actual deferral percentage and contribution percentage of the Highly Compensated Eligible Employees are determined after any reductions required to meet those tests under Sections 4.2 and 4.3. Notwithstanding the foregoing provisions of this Section, no reduction shall be required by this Subsection if either (a) the actual deferral 52 percentage of the Highly Compensated Eligible Employees does not exceed 1.25 multiplied by the actual deferral percentage of the non-Highly Compensated Eligible Employees, or (b) the contribution percentage of the Highly Compensated Eligible Employees does not exceed 1.25 multiplied by the contribution percentage of the non-Highly Compensated Eligible Employees. (2) For purposes of this Section, the term "aggregate limit" means the sum of (a) 125% of the greater of (i) the actual deferral percentage of the non-Highly Compensated Eligible Employees for the Plan Year, or (ii) the contribution percentage of the non-Highly Compensated Eligible Employees for the Plan Year, and (b)4 the lesser of (A) 200% of, or (B) two (2) plus, the lesser of such actual deferral percentage or contribution percentage. If it would result in a larger aggregate limit, the word "lesser" is substituted for the word "greater" in part (a) of this Subsection, and the word "greater" is substituted for the word "lesser" the second place such word appears in part (b) of this Subsection. 4.5 Monitoring Procedures. (1) In order to ensure that at least one of the actual deferral percentages specified in Section 4.2(1) and at least one of the contribution percentages specified in Section 4.3(1) and the aggregate limit specified in Section 4.4(2) are satisfied for each Plan Year, the Company shall monitor (or cause to be monitored) the amount of Before-Tax Contributions and Matching Allocations being made to the Plan by or for each Eligible Employee during each Plan Year. In the event 53 that the Company determines that neither of such actual deferral percentages, neither of such contribution percentages or such aggregate limit will be satisfied for a Plan Year, and if the Committee in its sole discretion determines that it is necessary or desirable, the Before-Tax Contributions and/or the Matching Allocations made thereafter by or for each Highly Compensated Eligible Employee (as defined in Section 4.2(3)) may be reduced (pursuant to non-discriminatory rules adopted by the Company) to the extent necessary to decrease the actual deferral percentage and/or the contribution percentage for Highly Compensated Eligible Employees for such Plan Year to a level which satisfies either of the actual deferral percentages, either of the contribution percentages and/or the aggregate limit. (2) In order to ensure that excess deferrals (as such term is defined in Section 4.1(2)) shall not be made to the Plan for any taxable year for any Participant, the Company shall monitor (or cause to be monitored) the amount of Before- Tax Contributions being made to the Plan for each Participant during each taxable year and may take such action (pursuant to non-discriminatory rules adopted by the Company) to prevent Before-Tax Contributions made for any Participant under the Plan for any taxable year from exceeding the maximum amount applicable under Section 4.1(1). (3) The actions permitted by this Section are in addition to, and not in lieu of, any other actions that may be taken pursuant to other Sections of the Plan or that may be 54 permitted by applicable law or regulation in order to ensure that the limitations described in Sections 4.1, 4.2, 4.3 and 4.4 are met. 4.6 Testing Procedures. (1) In applying the limitations set forth in Sections 4.2, 4.3 and 4.4, the Company may, at its option, utilize such testing procedures as may be permitted under Code Sections 401(a)(4), 401(k), 401(m) or 410(b), including, without limitation, (a) aggregation of the Plan with one or more other qualified plans of the Controlled Group, (b) inclusion of qualified matching contributions, qualified nonelective contributions or elective deferrals described in, and meeting the requirements of, Treasury Regulations under Code Sections 401(k) and 401(m) to any other qualified plan of the Controlled Group in applying the limitations set forth in Sections 4.2, 4.3 and 4.4, or (c) any permissible combination thereof. (2) Notwithstanding the foregoing provisions of this Article, to the extent required by the Code and Treasury Regulations the limitations of Sections 4.2, 4.3 and 4.4 shall be applied separately to each of the Profit Sharing Feature and the ESOP Feature. 4.7 Limitations on Employer and Before-Tax Contributions. Notwithstanding any provision of the Plan to the contrary, any Before-Tax Contributions or Employer Contributions hereunder for any Plan Year shall in no event exceed the amount that would be deductible by an Employer for such Plan Year for 55 federal income tax purposes and each Before-Tax Contribution and Employer Contribution to the Trust Fund made by any Employer is hereby specifically conditioned upon such deductibility. 4.8 Return of Contributions to Employers. (1) Except as specifically provided in this Section or in the other Sections of the Plan, the Trust Fund shall never inure to the benefit of the Employers and shall be held for the exclusive purposes of providing benefits to Employees, Participants and their Beneficiaries and defraying reasonable expenses of administering the Plan. (2) If an Employer Contribution to the Trust Fund is made by an Employer by a mistake of fact, the excess of the amount contributed over the amount that would have been contributed had there not occurred a mistake of fact shall be returned to such Employer within one year after the payment of such Contribution. If an Employer Contribution to the Trust Fund made by an Employer which is conditioned upon the deductibility of the Contribution under Code Section 404 (or any successor thereto) is not fully deductible under such Code Section (or any successor thereto), such Contribution, to the extent the deduction therefor is disallowed, shall be returned to the Employer within one year after the disallowance of the deduction. Earnings attributable to Employer Contributions returned to an Employer pursuant to this Subsection may not be returned, but losses attributable thereto shall reduce the amount to be returned; provided, however, that if the withdrawal of the amount attributable to the mistaken or non- 56 deductible contribution would cause the balance of the individual Account of any Participant to be reduced to less than the balance which would have been in such Account had the mistaken or non-deductible amount not have been contributed, the amount to be returned to the Employer pursuant to this Section shall be limited so as to avoid such reduction. 4.9 Maximum Additions. (1) Notwithstanding the provisions of Article III or the foregoing provision of this Article IV, effective as of January 1, 1987, the maximum annual addition (as defined in Subsection (2) of this Section) to a Participant's Account for any Plan Year (which shall be the limitation year) shall in no event exceed the lesser of (a) $30,000 (or, if greater, one-fourth of the dollar limitation in effect under Code Section 415(b)(1)(A)) or (b) 25% of his compensation for such Plan Year. (2) For the purpose of this Section, the term "annual additions" means the sum for any Plan Year of: (a) all contributions (including, without limitation, Before-Tax Contributions made pursuant to Section 3.1) made by the Controlled Group which are allocated to the Participant's account pursuant to a defined contribution plan maintained by a Controlled Group Member, (b) all employee contributions made by the Participant to a defined contribution plan maintained by a Controlled Group Member, 57 (c) all forfeitures allocated to the Participant's account pursuant to a defined contribution plan maintained by a Controlled Group Member, (d) any amount allocated to an individual medical benefit account (as defined in section 415(1)(2) of the Code) of the Participant which is part of a pension or annuity plan, and (e) any amount attributable to medical benefits allocated to the Participant's account established under Code Section 419A(d)(1) if the Participant is or was a key-employee (as such term is defined in Code Section 416(i)) during such Plan Year or any preceding Plan Year. (3) For the purposes of this Section, the term "compensation" shall mean Compensation within the meaning of Code Section 415(c)(3) and regulations thereunder. (4) If a Participant's annual additions would exceed the limitations of Subsection (1) of this Section for a Plan Year as a result of the allocation of forfeitures, a reasonable error in estimating the Participant's compensation, or a reasonable error in determining the amount of Before-Tax Contributions that may be made with respect to the Participant under the limitations of this Section (or other facts and circumstances which the Commissioner of Internal Revenue finds justify application of the following rules of this Subsection), Employer Contributions allocable to such Participant's Account for such Plan Year shall, to the extent necessary to cause the limitations of Subsection (1) 58 of this Section not to be exceeded for such Plan Year, be held by the Trustee in a suspense account and shall be used to reduce Employer Contributions for the next Plan Year (and succeeding Plan Years, as necessary) for such Participant if such Participant is covered by the Plan at the end of any such Plan Year; and if he is not covered by the Plan at the end of any such Plan Year, such Employer Contributions held by the Trustee in such suspense account shall be allocated and reallocated to the accounts of other Participants, except that no such allocation or reallocation shall cause the limitations of Subsection (1) of this Section to be exceeded for any such other Participant for such Plan Year. Investment gains and losses shall not be allocated to the suspense account during the period such suspense account is required to be maintained pursuant to this Subsection. In the event of a termination of the Plan, any then remaining balance of the suspense account, to the extent it may not then be allocated to Participants, shall revert to the Employers. If the allocation of such Employer Contributions to the suspense account described in this Subsection is not sufficient to cause the limitations of Subsection (1) of this Section not to be exceeded for such Plan Year, Before-Tax Contributions made for such Participant for such Plan Year which constitute part of the annual additions (together with any gains attributable thereto) shall be returned to him to the extent necessary to effectuate such reduction. 59 4.10 Maximum Benefits. (1) Except as otherwise provided in Code Section 415(e), in any case in which an individual is a participant in both a defined benefit plan and a defined contribution plan maintained by the Controlled Group, the sum of the defined benefit plan fraction and the defined contribution plan fraction for any Plan Year shall not exceed 1. In the event a reduction is necessary to avoid exceeding the limitation set forth in this Section, the affected Participant's benefits under the defined benefit plan shall be reduced to the extent necessary to avoid exceeding such limitation. For purposes hereof, (a) the defined benefit plan fraction for any Plan Year is a fraction, (i) the numerator of which is the projected annual benefit of the participant under the plan (determined as of the close of the Year), and (ii) the denominator of which is the lesser of (A) the product of 1.25, multiplied by the dollar limitation in effect under Code Section 415(b)(1)(A) for such Year or (B) the product of 1.4, multiplied by the amount which may be taken into account under Code Section 415(b)(1)(B) with respect to such participant under the plan for such Year; and (b) the defined contribution plan fraction for any Plan Year is a fraction, (i) the numerator of which is the sum of the annual additions to the participant's account as of the close of the Year and for all prior Years, and (ii) the denominator of which is the sum of the lesser of the 60 following amounts determined for such Year and for each prior year of service with the Controlled Group (regardless of whether a plan was in existence during such Year): (A) the product of 1.25, multiplied by the dollar limitation in effect under Code Section 415(c)(1)(A) for such Year and each such prior year of service, or (B) the product of 1.4, multiplied by the amount which may be taken into account under Code Section 415(c)(1)(B) with respect to such participant under such plan for such Year and each such prior year of service. (2) A Participant's projected annual benefit for purposes of Subsection (1) of this Section is equal to the annual benefit to which he would be entitled under the terms of the defined benefit plan, assuming he will continue employment until reaching normal retirement age as determined under the terms of such plan (or current age, if later), his compensation for the Plan Year under consideration will remain the same until the date he attains such age, and all other relevant factors used to determine benefits under the plan for the Plan Year under consideration will remain constant for all future Plan Years. 4.11 Definitions. (1) For purposes of applying the limitations set forth in Sections 4.9 and 4.10, all qualified defined benefit plans (whether or not terminated) ever maintained by one or more 61 Controlled Group Members shall be treated as one defined benefit plan, and all qualified defined contribution plans (whether or not terminated) ever maintained by one or more Controlled Group Members shall be treated as one defined contribution plan. (2) For purposes of this Section and Sections 4.9 and 4.10, the term "Controlled Group Member" shall be construed in the light of Code Section 415(h). 4.12 Funding Policy. To the extent such has not already been done, the Committee shall (1) determine, establish and carry out a funding policy and method consistent with the objectives of the Plan and the requirements of applicable law, and (2) furnish from time to time to the person responsible for the investment of the assets held in the Trust Fund information such Committee may have relative to the Plan's probable short-term and long-term financial needs, including any probable need for short-term liquidity, and such Committee's opinion (if any) with respect thereto. 62 ARTICLE V. - INVESTMENTS 5.1 Investment Funds. (1) The Trust Fund (other than the portion of the Trust Fund consisting of the Loan Accounts) shall be divided into the following Investment Funds: the Equity Fund, the Fixed Income Fund, the Money Market Fund, the NCC Stock Fund, and the Capital Preservation Fund and such other Investment Funds as the Committee may in its discretion select or establish. Before-Tax Contributions, Transfer Contributions and Employer Contributions shall be invested therein as provided in Section 5.5. Subject to the provisions of the Plan and Trust Agreement relating to the appointment of an Investment Manager and to other applicable provisions of the Plan and Trust Agreement, the Trustee shall hold, manage, administer, value, invest, reinvest, account for and otherwise deal with each Investment Fund separately. Dividends, interest and other distributions received by the Trustee in respect of each Investment Fund shall be reinvested in the same Investment Fund. (2) The Trustee shall invest and reinvest the principal and income of each such Investment Fund and shall keep each such Investment Fund invested, without distinction between principal and income, in such property, investments and securities as the Trustee may deem suitable without regard to any percentage or other limitation in any laws or rules of court applying to investments by trust companies or trustees; but subject, however, to the terms of the Plan and Trust Agreement and to the following provisions: 63 (a) All or any part of the Equity Fund, the Fixed Income Fund, the Capital Preservation Fund or the Money Market Fund may, in the discretion of the Trustee, be invested in any NCB Investment Trust Fund. Funds in the Fixed Income Fund, the Equity Fund and the Capital Preservation Fund may not be invested in an NCB Investment Trust Fund, unless such NCB Investment Trust Fund consists of the same general types of investments as are permitted under such Funds. Funds in the Money Market Fund may not be invested in an NCB Investment Trust Fund unless such NCB Investment Trust Fund consists generally of investments principally in bonds, notes or other evidences of indebtedness which are payable on demand (including variable amount notes) or which have a maturity date not exceeding 91 days after the date of purchase. (b) The Trustee may make deposits or investments of funds in time or savings deposits or instruments of a Controlled Group Member, provided such funds are awaiting investment or distribution, and nothing contained in this Section shall serve to preclude or prohibit such deposits or investment of such funds. (c) The determination of the Trustee as to whether an investment is within the category of investments which may be made for the Fixed Income Fund, the Equity Fund, the NCC Stock Fund, the Capital Preservation Fund or the Money Market Fund shall be conclusive. 64 (d) The Trustee in its discretion may keep such portion of the Investment Funds in cash as the Trustee may from time to time deem to be advisable and shall not be liable for interest on uninvested funds. (e) The Trustee is authorized to commingle the assets of the Trust with other trusts through the medium of the National City Corporation Investment Trust for Retirement Trusts established by a trust instrument executed by National City Corporation and National City Bank (the "NCC Investment Trust"). To the extent of the equitable share of the Trust in the National City Corporation Investment Trust for Retirement Trusts, the NCC Investment Trust, as such document has been or may be amended, and the trust created thereunder, shall be deemed part of this Plan and Trust. 5.2 Account; Sub-Account. The Trustee shall establish and maintain, or cause to be maintained, an Account for each Participant, which Account shall reflect, pursuant to Sub-Accounts established and maintained thereunder, the amount, if any, of the Participant's (a) Before-Tax Contributions, (b) After-Tax Contributions, (c) Matching Allocations, (d) Qualified Nonelective Contributions and (e) Transfer Contributions (unless the Trustee determines to maintain the cash or property transferred to the Trust Fund as a Transfer Contribution pursuant to one or more of the foregoing Sub-Accounts). The Trustee shall establish any Sub-Account required by any Appendix to the Plan. The Trustee shall also maintain, or cause to be maintained, separate records which 65 shall show (i) the portion of each such Sub-Account invested in each Investment Fund and (ii) the amount of contributions thereto, payments and withdrawals and loans therefrom and the amount of income, expenses, gains and losses attributable thereto. The interest of each Participant in the Trust Fund at any time shall consist of his Account balance (as determined pursuant to Section 5.4) as of the last preceding Valuation Date plus credits and minus debits to such Account since that Date plus the value of the Participant's Loan Account on the last preceding Valuation Date on which the Administrator valued such Loan Account pursuant to Section 6.13 plus any amounts credited to such Loan Account and not invested in any Investment Fund. 5.3 Reports. The Committee shall cause reports to be made at least annually to each Participant and to the Beneficiary of each deceased Participant as to the value of his Account and the amount of his Vested Interest. In addition, the Committee shall cause such a report to be made to each Participant who (a) requests such a report in writing (provided that only one report shall be furnished a Participant upon such a request in any 12-month period), (b) has terminated employment with the Controlled Group, or (c) incurs a Break in Service. 5.4 Valuation of Investment Funds. (1) As of each Valuation Date, the Trustee shall determine the value of each Investment Fund in accordance with the terms of this Section and the Trust Agreement. The Trustee shall determine, from the change in value of each Investment Fund between the current Valuation 66 Date and the then last preceding Valuation Date, the net gain or loss of such Investment Fund during such period resulting from expenses paid (including the fees and expenses of the Trustee and Investment Manager, if any, which are to be charged to such Investment Fund in accordance with the terms of the Plan and the Trust Agreement) and realized and unrealized earnings, profits and losses of such Investment Fund during such period. The transfer of funds to or from an Investment Fund pursuant to Section 5.6, Participant or Employer Contributions allocated to an Investment Fund, and payments, distributions and withdrawals from an Investment Fund to provide benefits under the Plan for Participants or Death Beneficiaries shall not be deemed to be earnings, profits, expenses or losses of the Investment Fund. (2) After each Valuation Date, the net gain or loss of each Investment Fund determined pursuant to Subsection (1) of this Section shall be allocated as of such Valuation Date by the Trustee to the Accounts of Participants and Beneficiaries in such Investment Fund in proportion to the amounts of such Accounts invested in such Investment Fund on such Valuation Date, exclusive of amounts to be credited but including amounts (other than the net loss, if any, determined pursuant to Subsection (1) of this Section) to be debited to such Accounts as of such Valuation Date. (3) Except as may otherwise be provided by the Committee, Before-Tax Contributions, Matching Allocations, Qualified Nonelective Contributions and Transfer Contributions shall be credited to each Participant's Account and allocated to 67 the appropriate Investment Fund as of the first business day following the Valuation Date coincident with or next following the date the Trustee has received such amounts and appropriate instructions as to the allocation of such amounts among the Investment Funds. (4) The reasonable and equitable decision of the Trustee as to the value of each Investment Fund as of each Valuation Date shall be conclusive and binding upon all persons having any interest, direct or indirect, in such Investment Fund. 5.5 Investment of Before-Tax, Transfer and Employer Contributions. (1) Each Participant may, pursuant to rules and procedures adopted by the Committee, direct that Before-Tax and Transfer Contributions made by or for him and repayments of a loan made pursuant to Section 6.13, shall be invested in any or all of the Investment Funds. An investment option selected by a Participant shall remain in effect and be applicable to all subsequent Before-Tax and Transfer Contributions and loan repayments made by or for him unless and until an investment change is made by him. (2) An investment direction described in this Section may only be made either (A) on a form supplied or approved by the Committee, signed by the Participant and filed with the Committee or an Employer or (B) if available to the Participant, by effecting such direction by means of a voice response telephonic system established and supervised by the Committee, with confirmation by means of a writing mailed to the Participant with- 68 in three days. In the absence of an effective investment direction, Before-Tax and Transfer Contributions and loan repayments shall be invested in the Money Market Fund. Any cash received by the Trust between Valuation Dates may be temporarily invested until the Valuation Date next following the date such cash is received, at which time it shall be allocated among the Investment Funds in accordance with the foregoing provisions of this Section. (3) A Participant may change his investment direction with respect to all subsequent Before-Tax and Transfer Contributions made by or for him either (A) by filing with the Committee or his Employer, on a form supplied or approved by the Committee or his Employer, a signed investment direction revision, or (B) if available to the Participant, by effecting such change by means of a voice response telephonic system, established by and supervised by the Committee, with written confirmation mailed to the Participant within three days. Only one such investment direction revision may be made by a Participant in any calendar quarter except that after the Conversion Date, only one such investment direction revision may be made by a Participant in any calendar month. Such investment direction revision shall affect only amounts contributed after the direction and prior to a subsequent revision. (4) All Employer Contributions shall be invested in the NCC Stock Fund. 69 5.6 Transfers of Investments. (1) Each Participant shall have the right from time to time to elect that all or a part of his interest in one or more of the Investment Funds (including amounts attributable to Employer Contributions) be liquidated and the proceeds thereof reinvested in any other Investment Fund(s). Such an investment-mix adjustment shall not affect investment of amounts received in the Trust as contributions, which shall continue to be invested pursuant to Section 5.5. Notwithstanding the foregoing provisions of this Section, a Participant may not elect that any part of his interest in the Capital Preservation Fund be liquidated and the proceeds thereof reinvested in the Money Market Fund or the Fixed Income Fund. (2) An investment-mix adjustment described in this Section may only be made on either (A) a form supplied or approved by the Committee or an Employer, signed by the Participant and filed with the Committee or his Employer or (B) if available to the Participant, by effecting such adjustment by means of a voice response telephonic system, established by and supervised by the Committee, with written confirmation mailed to the Participant within three days. Only one such adjustment may be made by a Participant in any calendar quarter, except that after the Conversion Date only one such adjustment may be made by a Participant in any calendar month. (3) Notwithstanding any other provision of this Section to the contrary, a Participant (a) whose employment with the Controlled Group terminates for reasons other than the attainment 70 of Normal or Early Retirement Age or the occurrence of a Disability, and (b) who does not receive a distribution of his entire Vested Interest in the Trust Fund before the expiration of six full calendar months following the date on which his employment terminates, shall be deemed to have made an investment-mix adjustment election pursuant to this Section to have all of his interest in the Trust Fund reinvested in the Money Market Fund (to the extent not already invested therein) effective as of the Valuation Date immediately following the expiration of such six-month period. Thereafter, no investment-mix adjustment election may be made by such a Participant. An investment-mix adjustment made pursuant to this Section shall be made with respect to the Participant's interest in the Capital Preservation Fund, if any, notwithstanding the provisions of Subsection (1) which would otherwise prohibit such an investment-mix adjustment election. (4) A Beneficiary of a deceased Participant shall have the same rights as a Participant has under Subsections (1) and (2) of this Section. With respect to any other non-Participant who becomes eligible to receive a distribution under the Plan and who does not receive a distribution of the entire interest in the Trust Fund to which he is entitled before the expiration of six full calendar months following the date on which he would have been eligible to commence receiving a distribution, his interest in the Trust Fund shall be reinvested in the Money Market Fund (to the extent not already invested therein) effective as of the Valuation Date immediately following the expiration of such six- 71 month period. Thereafter, no investment-mix adjustment election may be made by such a non-Participant. 5.7 Committee Rules and Directions to Trustee. (1) The Committee shall adopt, and may amend from time to time, general rules of uniform application which shall provide for the administration of each Investment Fund, including, but not limited to, rules providing (a) for the time or times that an investment direction or transfer pursuant to Sections 5.5 and 5.6 may be filed and be effective; (b) for minimum limits (not in excess of $50) on the amount that may be invested for one Participant at any one time in an Investment Fund and on the amount that may be transferred from Investment Funds if such amount is less than all of the Participant's interest in any such Fund; (c) for procedures pursuant to which a Participant may designate the portion of his Before-Tax and Transfer Contributions to be invested in such Investment Funds as he elects in terms of a percentage (in even multiples of 5%) of the amount to be so invested; and (d) for any other matters which the Committee deems necessary or advisable in the administration of any Investment Fund. (2) The Committee shall give appropriate and timely directions to the Trustee in order to permit the Trustee to give effect to the investment choice and investment change elections made under Sections 5.5 and 5.6 and to provide funds for distributions and withdrawals pursuant to Article VI. Investments in and withdrawals from each Investment Fund shall be made only as of a Valuation Date. 72 ARTICLE VI - DISTRIBUTIONS, WITHDRAWALS AND LOANS 6.1 Distributions In General. A Participant's interest in the Trust Fund shall only be distributable as provided in this and the following Sections of this Article. A Participant or Beneficiary who is eligible to receive a distribution under applicable Sections of this Article shall obtain a blank application for that purpose from the Committee and file with such Committee his application in writing on such form, furnishing such information as such Committee may reasonably require, including satisfactory proof of his age and that of his Spouse (if applicable) and any authority in writing that the Committee may request authorizing it to obtain pertinent information, certificates, transcripts and/or other records from any public office. 6.2 Distributions on Death. (1) If a Participant dies before the payment or commencement of payment of his Vested Interest to him, his entire Account, valued as of the next Valuation Date which is at least 30 days after the date on which the Death Beneficiary files his application pursuant to Section 6.1, shall be paid or commence to be paid to the Participant's Death Beneficiary pursuant to Subsection (2) of this Section as soon as practicable after such Valuation Date, but in no event shall payment be made or commenced later than the time prescribed in Section 6.8(2) without regard to whether an application has been filed. 73 (2) In the event of the death of a Participant who dies under the circumstances described in Subsection (1) of this Section, such Participant's Account shall be paid to his Death Beneficiary under one of the following methods as the Death Beneficiary shall elect: (a) such amount shall be paid to him in a lump sum; or (b) such amount shall be paid to him in such annual, quarterly or monthly installments, as elected by the Death Beneficiary, over a term certain not extending beyond the life expectancy of the Death Beneficiary. (3) If a Participant dies after the commencement of payments of his Vested Interest to him in the form described in Section 6.3(1)(b), but before all of such payments have been made, the undistributed portion of his Vested Interest shall continue to be paid to his Death Beneficiary in the same manner as originally elected by the Participant, provided however, that, effective as of January 1, 1995, such Participant's Death Beneficiary shall be permitted to elect that the payment of such portion be made in a lump sum. 6.3 Distributions on Normal or Early Retirement or Disability. (1) If a Participant's termination of employment with the Controlled Group occurs (other than by reason of his death) on or after his attainment of his Normal or Early Retirement Age or by reason of his Disability, his entire Account, valued as of the Valuation Date specified in Subsection (2) of this Section, shall be paid or commence to be paid to him under 74 one or a combination of the following methods as the Participant shall elect upon application filed by him with the Committee pursuant to Section 6.1: (a) such amount shall be paid to him in a lump sum; or (b) such amount shall be paid to him in such annual, quarterly or monthly installments, as elected by the Participant, over a term certain not extending beyond the life expectancy of the Participant or the joint life expectancy of the Participant and his Beneficiary. (2) Distributions pursuant to this Section shall be paid or commence to be paid to a Participant as soon as practicable after, and shall be valued as of, the next Valuation Date which is at least 30 days after the later of (a) the date on which the Participant files his application with the Committee pursuant to Section 6.1 or (b) the date of the Participant's termination of employment from the Controlled Group, but in no event shall payment be made or commenced later than the time prescribed in Section 6.8(2) without regard to whether an application has been filed. (3) If a Participant described in Subsection (1) of this Section should again become an Employee before his entire Account has been distributed, the distribution of his Account shall cease until the Participant again terminates his employment with the Controlled Group. 6.4 Distribution on Other Termination of Employment. If a Participant's termination of employment with the Controlled 75 Group occurs under circumstances other than those covered by Sections 6.2 and 6.3, his entire Vested Interest, valued as of the Valuation Date coinciding with or next following the date determined pursuant to Section 6.3(2), shall be paid to him in a lump sum at such time as provided in Section 6.3(2). 6.5 Payment of Small Benefits. Notwithstanding the foregoing provisions of this Article, if the value of the Vested Interest of a Participant following his termination of employment (whether by death or otherwise) does not exceed $3,500 on the first Valuation Date next following such termination of employment (and never exceeded $3,500 at the time of any previous withdrawal or distribution), such Vested Interest shall be paid to the Participant (or, if applicable, his Beneficiary) in a lump sum within 90 days after such Valuation Date. 6.6 Distributions Pursuant to a QDRO. If a qualified domestic relations order (as defined in Code Section 414(p)) so provides, the portion of a Participant's Vested Interest payable to the alternate payee(s) may be distributed to the alternate payee(s) at the time specified in such order, regardless of whether the Participant is entitled to a distribution from the Plan at such time. The portion of the Vested Interest so payable shall be valued as of the Valuation Date coincident with or next following the date specified in such order. 6.7 Distribution on Sale of Assets or Disposition of Business. Notwithstanding the preceding provisions of this Section, in the event that a Participant's termination of 76 employment with the Controlled Group is caused by the disposition by an Employer of substantially all of the assets of a trade or business, or its interest in a subsidiary, and such Participant continues employment with the corporation acquiring such assets or such subsidiary, the Participant, if he so elects on an application filed with the Committee pursuant to Section 6.1, shall be entitled to a distribution of his Account valued as of the Valuation Date specified in Section 6.3(2), provided, however, that such Account may only be distributed in the form of a lump sum or in the form of NCC Stock. 6.8 Latest Time of Distribution. (1) Distributions under the Plan shall occur or begin as provided in the preceding Sections of this Article, but in no event later than 60 days after the close of the Plan Year in which the latest of the following events occur: (a) the date on which the Participant attains age 65, (b) the l0th anniversary of the year in which the Participant commenced participation in the Plan, or (c) the Participant's termination of employment with the Controlled Group, provided that, except as provided in Subsection (2) of this Section and Section 6.5, no distribution shall be required to be made or commence until the Participant files his application with the Committee pursuant to Section 6.1. (2)(a) Notwithstanding any other provision of the Plan, effective as of January 1, 1989, the entire Account of each Participant under the Plan (i) shall be distributed to him in a lump sum in cash not later than April 1 of the calendar 77 year following the calendar year in which he attains age 70-1/2 and, with respect to Participants who are Employees, on December 31 of such year and each succeeding year, or (ii) shall commence to be distributed not later than the time specified in Clause (i) of this Paragraph (a) in the form specified in Section 6.3(1)(b) if such form is elected by the Participant in accordance with Section 6.3. (b) If distribution of a Participant's Account under the Plan has begun and such Participant dies before his entire interest has been distributed to him, the remaining portion of such Account shall be distributed to his Death Beneficiary at least as rapidly as under the method of distribution being used as of the date of his death. (c) If a Participant dies before the distribution of his Account under the Plan has begun, the entire Account of the Participant shall be distributed to his Death Beneficiary by the December 31 of the year in which occurs the fifth anniversary of such Participant's death; provided, however, that such five-year rule shall not be applicable to any portion of the Participant's Account under the Plan which is payable to the Participant's Death Beneficiary if such portion is distributed in the form specified in Section 6.2(2)(b), and such distributions begin not later than the December 31 of the calendar year immediately following the calendar year in which the Participant died or, in the case of a Death Beneficiary who is the Participant's surviving 78 Spouse, the December 31 of the calendar year in which the Participant would have attained age 70-1/2. (d) Distributions under this Subsection shall be made in accordance with the provisions of Code Section 401(a)(9) and Treasury Regulations issued thereunder, which provisions are hereby incorporated herein by reference, provided that such provisions shall override the other distribution provisions of the Plan only to the extent that such other Plan provisions provide for distribution that is less rapid than required under such provisions of the Code and Regulations. Nothing contained in this Section shall be construed as providing any optional form of payment that is not available under the other distribution provisions of the Plan. 6.9 Withdrawal of Contributions Upon Attainment of Age 59-1/2. A Participant who is an Employee and who is at least age 59-1/2 may elect to withdraw all or any portion of his Vested Interest in his Account in the form of a single sum payment or a distribution of NCC Stock. A Participant who makes two such withdrawals in the same calendar year while he is an Employee shall not be permitted to have any further Before-Tax Contributions made for him for the remainder of such calendar year. Withdrawals pursuant to this Section shall be paid to the Participant as soon as practicable after, and shall be valued as of, the next Valuation Date which is at least 30 days after the 79 date on which the Participant files an application for withdrawal with the Committee. 6.10 Withdrawal of After-Tax and Transfer Contributions. (1) A Participant, whether or not he is an Employee, may elect to withdraw all or any portion of his After-Tax Contributions Sub-Account. A Participant who makes such a withdrawal shall not be permitted to make any further withdrawals of After-Tax Contributions during the 12-month period following such withdrawal. (2) A Participant, whether or not he is an Employee, may elect to withdraw all or any portion of his Transfer Contributions Sub-Account which is attributable to Transfer Contributions described in Section 3.4(2). (3) Withdrawals pursuant to this Section shall be paid to the Participant as soon as practicable after, and shall be valued as of, the next Valuation Date, which is at least 30 days after the date on which the Participant files an application for a withdrawal with the Committee. 6.11 Hardship Withdrawals. A Participant who is an Employee and who has obtained all distributions and withdrawals (other than for Hardship) and all nontaxable loans then available under all plans maintained by the Controlled Group may request, on a form provided by and filed with the Committee, a withdrawal on account of Hardship of all or a part of his Before-Tax Contributions Sub-Account (excluding any earnings allocated thereto on or after January 1, 1989). Upon making a determination 80 that the Participant is entitled to a withdrawal on account of Hardship, the Committee shall direct the Trustee to distribute to such Participant all or a portion of his Before-Tax Contributions Sub-Account (excluding any earnings allocated thereto on or after January 1, 1989), provided that the amount of the withdrawal shall not be in excess of the amount necessary to alleviate such Hardship. If a withdrawal on account of Hardship is made by a Participant pursuant to this Subsection, the following rules shall apply notwithstanding any other provision of the Plan (or any other plan maintained by the Controlled Group) to the contrary: (a) the Participant is prohibited from making elective contributions and employee contributions to the Plan (or to any other qualified or nonqualified plan maintained by the Controlled Group) for a period of 12 months following receipt of the Hardship withdrawal; and (b) the amount of the Participant's Before-Tax Contributions (and any comparable contributions to any other plan maintained by the Controlled Group) for the Participant's taxable year immediately following the taxable year of the Hardship withdrawal shall not be in excess of the applicable limit under Code Section 402(g) for such next taxable year less the amount of such Participant's Before-Tax Contributions (and any comparable contributions to any other plan maintained by the Controlled Group) for the taxable year of the Hardship withdrawal. 81 6.12 Mechanics of Making Distributions. (1) Where a distribution, withdrawal or loan is to be made from the Trust Fund of only a portion of a Participant's Vested Interest in the Trust Fund and such Interest is invested in more than one of the Investment Funds, the Participant shall designate (on a form approved by the Committee, signed by him and filed with the Committee) which of the Funds should be liquidated in order to make such distribution. Such a designation shall not be considered an investment direction or investment transfer for the purpose of the limitations described in Sections 5.5, 5.6 and 5.7. (2) All distributions, withdrawals and loans shall be made in cash, provided that if the Participant or Beneficiary so elects on a form provided by the Committee, a distribution or withdrawal (but not a loan) may be made in the form of full shares of NCC Stock, based on the fair market value of such Stock (as determined by the Trustee in accordance with the provisions of the Trust Agreement) on the Valuation Date as of which such distribution is made. 6.13 Loans to Participants. (1) A Participant who is a "party in interest" within the meaning of ERISA Section 3(14) may apply on a form provided by the Committee for a loan from his Account. If the Committee determines that the Participant is not in bankruptcy or similar proceedings and is entitled to a loan in accordance with the following provisions of this Section, the Committee shall direct the Trustee to make a loan to the Participant from his Account. Each loan shall be charged against 82 the Participant's Account as follows: first, against the Participant's Before - -Tax Contributions Sub-Account; second, to the extent necessary, against the Participant's Matching Allocations Sub-Account; third, to the extent necessary, against the Participant's Transfer Contributions Sub-Account; fourth, to the extent necessary against the Participant's After-Tax Contributions Sub-Account; fifth, to the extent necessary against the Participant's Qualified Non-Elective Contributions Sub- Account; sixth, to the extent necessary, against the Participant's Prior Plan Employer Contributions described in any Appendix to the Plan. (2) A Participant shall not be entitled to a loan under this Section unless the Participant and, if he is married at the time the loan is made, his Spouse (determined at the time the loan is made), consent to (a) the use of the Participant's Account as security as provided in Subsection (5)(c) of this Section and (b) the possible reduction of the Participant's Account as provided in Subsection (6) of this Section. A Spouse's consent required by the preceding sentence shall be signed by the Spouse, shall acknowledge the effect of such consent, and shall be witnessed by any person designated by the Committee as a plan representative or by a notary public. Any consent required by the preceding sentences must be given within the ninety day period preceding the disbursement of the loan proceeds. Notwithstanding the foregoing, the consent of the spouse of a Participant shall not be required 83 with respect to any loan made under this Section after the Conversion Date. (3) Each loan shall be in an amount which is not less than $500. The maximum loan to any Participant (when added to the outstanding balance of all other loans to the Participant from all qualified employer plans (as defined in Code Section 72(p)(4)) of the Controlled Group) shall be an amount which does not exceed the lesser of (a) $50,000, reduced by the excess (if any) of (i) the highest outstanding balance of such other loans during the one-year period ending on the day before the date on which such loan is made, over (ii) the outstanding balance of such other loans on the date on which such loan is made, or (b) 50% of the value of such Participant's Account on the date on which such loan is made. (4) For each Participant for whom a loan is authorized pursuant to this Section, the Administrator shall (a) direct the Trustee to liquidate the Participant's interest in the Investment Funds as directed by the Participant or, in the absence of such direction, on a pro-rata basis, to the extent necessary to provide funds for the loan, (b) direct the Trustee to disburse such funds to the Participant upon the Participant's execution of the promissory note and security agreement referred to in Subsection (5)(d) of this Section, (c) transmit to the Trustee the executed promissory note and security agreement referred to in Subsection (5)(d) of this Section, and (d) establish and maintain a separate 84 recordkeeping account within the Participant's Account (the "Loan Account") (i) which initially shall be in the amount of the loan, (ii) to which the funds for the loan shall be deemed to have been allocated and then disbursed to the Participant, (iii) to which the promissory note shall be allocated and (iv) which shall show the unpaid principal of and interest on the promissory note from time to time. All payments of principal and interest by a Participant shall be credited initially to his Loan Account and applied against the Participant's promissory note, and then invested in the Investment Funds pursuant to the Participant's direction under Section 5.5. The Administrator shall value each Participant's Loan Account for purposes of Section 5.2 at such times as the Administrator shall deem appropriate, but not less frequently than quarterly. (5) Loans made pursuant to this Section: (a) shall be made available to all Participants on a reasonably equivalent basis; (b) shall not be made available to Highly Compensated Employees in a percentage amount greater than the percentage amount made available to other Participants; (c) shall be secured by the Participant's Loan Account; and (d) shall be evidenced by a promissory note and security agreement executed by the Participant which provides for: 85 (i) the security referred to in paragraph (c) of this Subsection; (ii) a rate of interest determined by the Committee in accordance with applicable law; (iii) repayment within a specified period of time, which shall not extend beyond five years; (iv) repayment in equal payments over the term of the loan, with payments not less frequently than quarterly; and (v) for such other terms and conditions as the Committee shall determine, which shall include provision that: (A) with respect to a Participant who is an Employee, the loan will be repaid pursuant to authorization by the Participant of equal payroll deductions over the repayment period sufficient to amortize fully the loan within the repayment period, provided, however, the Committee may waive the requirement of equal payroll deductions if the Employer payroll through which the Participant is paid cannot accommodate such deductions; (B) the loan shall be prepayable in whole at any time without penalty; and (C) the loan shall be in default and become immediately due and payable upon the first to occur of the following events: 86 (I) the Participant's failure to make required payments on the promissory note; or (II) in the case of a Participant who is not an Employee, distribution of his Account; or (III) in the case of a Participant who is an Employee, termination of his employment with the Controlled Group; or (IV) the Participant's death; or (V) the filing of a petition, the entry of an order or the appointment of a receiver, liquidator, trustee or other person in a similar capacity, with respect to the Participant, pursuant to any state or federal law relating to bankruptcy, moratorium, reorganization, insolvency or liquidation, or any assignment by the Participant for the benefit of his creditors. (6) Notwithstanding any other provision of the Plan, a loan made pursuant to this Section shall be a first lien against the Participant's Loan Account. Any amount of principal or interest due and unpaid on the loan at the time of any default on the loan, and any interest accruing thereafter, shall be satisfied by deduction from the Participant's Loan Account, and shall be deemed to have been distributed to the Participant, as follows: 87 (a) in the case of a Participant who is an Employee and who is not, at the time of the default, eligible (without regard to the required filing of an application pursuant to Section 6.1) to receive distribution of his Account under the provisions of Article VI, other than Section 6.11, or by order of a court, at such time as he first becomes eligible (without regard to the required filing of an application pursuant to Section 6.1) to receive distribution of his Account under the provisions of Article VI, other than Section 6.11, or by order of a court; or (b) in the case of any other Participant, immediately upon such default. If, as a result of the application of the preceding sentence, an amount of principal or interest on a loan remains outstanding after default, interest at the rate specified in the promissory note executed by the Participant in respect of such loan shall continue to accrue on such outstanding amount until fully satisfied by deduction from the Participant's Loan Account as hereinabove provided or by payment by or on behalf of such Participant. Notwithstanding any other provision of the Plan, a Participant shall not be eligible to have Before-Tax Contributions made on his behalf during the period of time of his default on a Plan loan and the time of satisfaction of the loan by deduction as described above or by payment by or on behalf of such Participant. 6.14 Other Optional Forms of Benefit. The provisions of any Appendix that are applicable to a portion of a 88 Participant's Account shall control (with respect to that portion of the Account) over the preceding provisions of this Article to the extent that such Appendix provisions provide, as required by applicable law, optional forms of benefit (within the meaning of Code Section 411(d)(6) and Treasury Regulations issued thereunder) which supercede, or are in addition to, the optional forms of benefit provided by this Article. Further, provisions of any Appendix or Prior Plan or Predecessor Plan which relate to the election or waiver of any such optional forms of benefit, or consent requirements applicable to such elections or waivers shall control over the provisions of this Article. 6.15 Direct Rollover Provisions. (a) This Section applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Section 6.15, a Distributee may elect, at the time and in the manner prescribed by the plan administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover, provided, however, that if such Direct Rollover is of a portion less than 100% of such Eligible Rollover Distribution, such portion must equal or exceed $500 for this Section 6.15 to apply. (b) Definitions. (1) Eligible Rollover Distribution: An Eligible Rollover Distribution is any distribution of all or any portion of 89 the balance to the credit of the Distributee which equals or exceeds $200, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (2) Eligible Retirement Plan: An Eligible Retirement Plan in an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 401(a) of the Code, that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (3) Distributee: A Distributee includes an employee or former employee. In addition, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or 90 former spouse who is the alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code, are Distributees with regard to the interest of the spouse or former spouse. (4) Direct Rollover: A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. 91 ARTICLE VII. - ADMINISTRATION OF THE TRUST FUND 7.1 Appointment of Trustee. The Company has appointed the Trustee to act as such under the Plan and has executed the Trust Agreement with the Trustee. The Company may, without the consent of any Participant or other person, execute amendments to such Trust Agreement, execute such further agreements as it in its sole discretion may deem necessary or desirable to carry out the Plan, or at any time, in accordance with the terms of the Trust Agreement, remove the Trustee and appoint a successor. 7.2 Duties of Trustee. The Trustee shall invest Before-Tax Contributions, Transfer Contributions and Employer Contributions paid to it and earnings thereon in accordance with the Plan and Trust Agreement. The Trustee shall also establish and maintain separate Accounts and Sub-Accounts for each Participant in accordance with the Plan. The Trustee in its relation to the Plan shall be entitled to all of the rights, privileges, immunities and benefits conferred upon it by the Plan or Trust Agreement and shall be subject to all of the duties imposed upon it by the Plan and Trust Agreement. The Trust Agreement is hereby incorporated in the Plan by reference, and each Employer, by adopting the Plan, approves the Trust Agreement and authorizes the Company to execute any amendment or supplement thereto on its behalf. 7.3 The Trust Fund. The Trust Fund shall be held by the Trustee for the exclusive benefit of the Participants and their Beneficiaries and shall be invested by the Trustee upon such 92 terms and in such property as is provided in the Plan and in the Trust Agreement. The Trustee shall, from time to time, make payments, distributions and deliveries from the Trust Fund as provided in the Plan. 7.4 No Guarantee Against Loss. (1) Neither the Trustee, any Employer, the Committee nor any Investment Manager in any manner guarantees the Trust Fund or any part thereof against loss or depreciation. All persons having any interest in the Trust Fund shall look solely to the Trust Fund for payment with respect to such interest. (2) Neither the Company, the Committee, any Employer, the Trustee, nor any officer or employee of any of them is authorized to advise a Participant as to the manner in which contributions to the Plan and income thereon should be invested and reinvested. The election of the Investment Fund or Funds in which a Participant participates is his sole responsibility, and the fact that designated Investment Funds are available to Participants for investment shall not be construed as a recommendation for the investment of contributions hereunder in all or any of such Funds. 7.5 Payment of Benefits. All payments of benefits provided for by the Plan shall be made solely out of the Trust Fund in accordance with instructions given to the Trustee by the Committee pursuant to the terms of the Plan, and neither any Employer, the Committee nor the Trustee shall be otherwise liable for any benefits payable under the Plan. 93 7.6 Compensation and Expenses. Any expenses paid by the Trustee in the administration of any Investment Fund shall be charged to such Fund. The Trustee shall be entitled to receive such reasonable compensation for its services as may be agreed upon by it and the Company. Such compensation and all other expenses of the Trustee and other expenses necessary for the proper administration of the Plan and Trust Fund shall be paid by the Trustee from the Trust Fund, unless the Company determines, in its sole discretion, that all or any part of such compensation and expenses shall be paid by the Employers. Notwithstanding the foregoing, any extraordinary expenses incurred by the Trustee with respect to the interest of any person in the Trust Fund may, in the discretion of the Trustee and with the approval of the Committee, be charged to such person's interest in the Trust Fund. Taxes, if any, on any property held by the Trustee shall be paid out of the Trust Fund and taxes, if any, other than transfer taxes, on distributions to a Participant or Beneficiary of a Participant shall be paid by the Participant or the Beneficiary, respectively. 7.7 No Diversion of Trust Fund. Except as specifically provided in other Sections of the Plan, it shall be and it is hereby made impossible, at any time prior to the satisfaction of all liabilities with respect to Employees and their Beneficiaries under the Plan, for any part of the corpus or income of the Trust Fund to be (within the taxable year or thereafter) used for, or 94 diverted to, purposes other than the exclusive benefit of Employees or their Beneficiaries. 95 ARTICLE VIII. - INVESTMENT MANAGER 8.1 Duties and Functions. (1) The Committee shall have the exclusive authority and responsibility at any time or from time to time to appoint (and revoke the appointment of) an Investment Manager under the Plan with respect to the NCC Stock Fund. The Committee shall notify the Trustee of any such appointment (or revocation thereof) in writing, and the Trustee may rely upon any such appointment continuing in effect until it receives a written notice from the Committee of its revocation. Any such Investment Manager shall acknowledge in writing to the Committee and the Trustee that he or it is a fiduciary with respect to the Plan. (2) Any such Investment Manager shall have the powers, functions, duties and/or responsibilities of the Trustee relating to the investment and reinvestment of the NCC Stock Fund (other than those described in Article XV which shall remain with the Trustee) and shall exercise such authority, power and discretion exclusively. Custody of the assets of the NCC Stock Fund, however, shall remain with the Trustee who shall be responsible therefor. In no instance shall the authority or discretion of an Investment Manager with respect to the NCC Stock Fund exceed the authority or discretion which the Trustee would have had with respect to such Fund if there were no Investment Manager. (3) If an Investment Manager is so appointed (a) the Trustee shall not be liable for any loss which may result by reason of any action taken by it in accordance with a direction of 96 an Investment Manager or by reason of any lack of action by the Trustee upon the failure of an Investment Manager to exercise his or its authority and discretion, (b) the Trustee shall not be required to accept delivery of or pay for any security or other property purchased for the NCC Stock Fund to the extent that the assets in such Fund are insufficient to pay for such security or other property, and (c) the Trustee shall be under no duty or obligation to (i) invest or reinvest the NCC Stock Fund except as directed by the Investment Manager thereof, (ii) make any investment review or examination of the NCC Stock Fund or recommendations with respect to such Fund, or (iii) advise the Committee of directions received by the Trustee from an Investment Manager. 8.2 Compensation. The Investment Manager shall receive such reasonable compensation as may be agreed upon by it and the Committee, and payment thereof shall be made by the Employers. 97 ARTICLE IX. - CLAIMS PROCEDURES 9.1 Method of Filing Claim. Any Participant or Beneficiary who believes that he is entitled to receive a benefit under the Plan which he has not received may file with the Committee a written claim specifying the basis for his claim and the facts upon which he relies in making such claim. Such a claim must be signed by the claimant or his authorized representative and shall be deemed filed when delivered to any member of the Committee or its designee. 9.2 Notification to Claimant. Unless such claim is allowed in full by the Committee, the Committee shall (within 90 days after such claim was filed, plus an additional period of 90 days if required for processing and if notice of the 90-day extension of time indicating the specific circumstances requiring the extension and the date by which a decision shall be rendered is given to the claimant within the first 90-day period) cause written notice to be mailed to the claimant of the total or partial denial of such claim. Such notice shall be written in a manner calculated to be understood by the claimant and shall state (a) the specific reason(s) for the denial of the claim, (b) specific reference(s) to pertinent provisions of the Plan and/or Trust Agreement on which the denial of the claim was based, (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary, and (d) an explanation of the review procedure specified in Section 9.3. If a claimant 98 does not receive any notice from the Committee within 90 days after his claim is filed with the Committee, his claim shall be deemed to have been denied. 9.3 Review Procedure. Within six months after the denial of his claim, the claimant may appeal such denial by filing with the Company his written request for a review of his said claim. If the claimant does not file such a request with the Company within such six-month period, the claimant shall be conclusively presumed to have accepted as final and binding the initial decision of the Committee on his claim. If such an appeal is so filed within such six months, a Named Fiduciary designated by the Company shall (a) conduct a full and fair review of such claim and (b) mail or deliver to the claimant a written decision on the matter based on the facts and pertinent provisions of the Plan and/or Trust Agreement within a period of 60 days after the receipt of the request for review unless special circumstances require an extension of time, in which case such decision shall be rendered not later than 120 days after receipt of such request. If an extension of time for review is required, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. Such decision (i) shall be written in a manner calculated to be understood by the claimant, (ii) shall state the specific reason(s) for the decision, (iii) shall make specific reference(s) to pertinent provisions of the Plan and/or Trust Agreement on which the decision is based and (iv) shall, to the extent permitted by applicable law, be final 99 and binding on all interested persons. During such full review, the claimant or his duly authorized representative shall be given an opportunity to review documents that are pertinent to the claimant's claim and to submit issues and comments in writing. If the decision on review is not furnished within such 60-day or 120-day period, as the case may be, the claim shall be deemed denied on review. 100 ARTICLE X. - ADMINISTRATION OF THE PLAN AND FIDUCIARY RESPONSIBILITIES 10.1 Responsibility for Administration. Except to the extent that particular responsibilities are assigned or delegated to other Fiduciaries pursuant to the Trust Agreement, other Articles of the Plan or Section 10.3, the Company (as the Administrator) shall be responsible for the administration of the Plan. Each other Fiduciary shall have only such powers, duties, responsibilities and authorities as are specifically conferred upon him or it pursuant to provisions of the Plan or Trust Agreement. Any person may serve in more than one fiduciary capacity with respect to the Plan or Trust Fund, if pursuant to the Plan and/or Trust Agreement, he or it is assigned or delegated any multiple fiduciary capacities. 10.2 Named Fiduciaries. For the purposes of the Plan, the Named Fiduciaries shall be the Committee, the Company, the Investment Manager, the Trustee and to the extent provided in Article XV, the Participants. The Company may, by written instrument, designate any other person or persons as a Named Fiduciary or Named Fiduciaries to perform functions specified in such instrument (or in a delegation pursuant to Section 10.3) which relate to the administration of the Plan, provided such designee accepts such designation. Such a designation may be terminated at any time by notice from the Company to the designee or by notice from the designee to the Company. 101 10.3 Delegation of Fiduciary Responsibilities. (1) The Committee or the Company may delegate to any person or persons any one or more of its powers, functions, duties and/or responsibilities with respect to the Plan or the Trust Fund. (2) Any delegation pursuant to Subsection (1) of this Section, (a) shall be signed on behalf of the Committee or the Company, and be delivered to and accepted in writing by the delegatee, (b) shall contain such provisions and conditions relating to such delegation as the Committee or the Company deems appropriate, (c) shall specify the powers, functions, duties and/or responsibilities therein delegated, (d) may be amended from time to time by written agreement signed on behalf of the Committee or the Company and by the delegatee and (e) may be revoked (in whole or in part) at any time by written notice from one party to the other. A fully executed copy of any instrument relating to any delegation (or revocation of any delegation) under the Plan shall be filed with the Committee. 10.4 Immunities. Except as otherwise provided in Section 10.5 or by applicable law, (a) no Fiduciary shall have the duty to discharge any duty, function or responsibility which is specifically assigned exclusively to another Fiduciary or Fiduciaries by the terms of the Plan or Trust Agreement or is delegated exclusively to another Fiduciary or Fiduciaries pursuant to procedures for such delegation provided for in the Plan or Trust Agreement; (b) no Fiduciary shall be liable for any action taken or not taken with respect to the Plan or Trust Fund except 102 for his own negligence or willful misconduct; (c) no Fiduciary shall be personally liable upon any contract or other instrument made or executed by him or on his behalf in the administration of the Plan or Trust Fund; (d) no Fiduciary shall be liable for the neglect, omission or wrongdoing of another Fiduciary; and (e) any Fiduciary may rely and shall be fully protected in acting upon the advice of counsel, who may be counsel for any Controlled Group Member, upon the records of a Controlled Group Member, upon the opinion, certificate, valuation, report, recommendation or determination of the certified public accountants appointed to audit a Controlled Group Member's financial statements, or upon any certificate, statement or other representation made by an Employee, a Participant, a Beneficiary or the Trustee concerning any fact required to be determined under any of the provisions of the Plan. 10.5 Limitation on Exculpatory Provisions. Notwithstanding any other provision of the Plan or Trust Agreement, no provision of the Plan or Trust Agreement shall be construed to relieve (or have the effect of relieving) any Fiduciary from any responsibility or liability for any obligation, responsibility or duty imposed on such Fiduciary by Part 4 of Title 1 of ERISA. 10.6 Membership of the Committee. The Committee shall be appointed by the Board of Directors of the Company, which also shall provide for the number of the members of the Committee and the manner of appointing and removing such members. Any member of 103 the Committee may resign by filing a written resignation with the Company. 10.7 Administrative Assistance. The Committee may employ such clerical, legal or other assistance as it deems necessary or advisable for the proper administration of the Plan. 10.8 Compensation and Qualification. The members of the Committee shall serve without compensation for services hereunder. Participants of the Committee shall not be disqualified from acting because of any interest, benefit or advantage, inasmuch as it is recognized that the members may be Employees of the Employers and Participants in the Plan, but no member of the Committee shall vote or act in connection with the Committee's action relating solely to himself. No bond or other security need be required of any Committee member in such capacity or any jurisdiction. 10.9 Revocability of Committee Action. Any action taken by the Committee with respect to the rights or benefits under the Plan of any Participant or Beneficiary shall be revocable by the Committee as to payments or distributions not theretofore made pursuant to such action, and appropriate adjustments may be made in future payments or distributions to a Participant or his Beneficiaries to offset any excess or underpayments theretofore made to such Participant or his Beneficiaries. 10.10 Rules and Procedures. The Committee may adopt rules for the administration of the Plan and rules for its 104 government and the conduct of its business, including a rule authorizing one or more of its members or officers to execute instruments in its behalf evidencing its action, and the Trustee may rely upon any instrument signed by such person or persons so authorized as properly evidencing the action of the Committee. Except as may otherwise be provided by rules or procedures adopted by the Committee, the Committee may act by majority action either at a meeting or in writing without a meeting and an action evidenced by the signatures of a majority of the members of the Committee shall be deemed to be the action of the Committee. Although various provisions of the Plan provide for a filing with the Committee of various instruments, the Committee may, by general announcement, specifically designate some other person or persons, with whom or which such instruments may be filed. 10.11 Interpretation of the Plan and Findings of Facts. The Committee shall have sole and absolute discretion to interpret the provisions of the Plan (including, without limitation, by supplying omissions from, correcting deficiencies in, or resolving inconsistencies or ambiguities in, the language of the Plan), to determine the rights and status under the Plan of Participants and other persons, to decide disputes arising under the Plan and to make any determinations and findings with respect to the benefits payable thereunder and the persons entitled thereto as may be required for the purposes of the Plan. In furtherance of, but without limiting, the foregoing, the Committee is hereby granted the following specific authorities, which it shall discharge in 105 its sole and absolute discretion in accordance with the terms of the Plan (as interpreted, to the extent necessary, by the Committee): (1) to resolve all questions arising under the provisions of the Plan as to any individual's entitlement to become a Participant; (2) to determine the amount of benefits, if any, payable to any person under the Plan; and (3) to conduct the review procedure specified in Article IX. All decisions of the Committee as to the facts of any case, as to the interpretation of any provision of the Plan or its application to any case, and as to any other interpretative matter or other determination or question under the Plan shall be final and binding on all parties affected thereby, subject to the provisions of Section 10.9 and Article IX. The Committee shall direct the Trustee relative to benefits to be paid under the Plan and shall furnish the Trustee with any information reasonably required by it for the purpose of paying benefits under the Plan. 10.12 Directions to Trustee. The Committee shall direct the Trustee as to the method of payment of, and the time at which, any benefit is to be paid to a Participant or a Beneficiary from the Trust Fund and the particular Investment Fund and Sub-Account from which each such payment is to be made. The Trustee shall be entitled to rely conclusively on any such direction given to it by the Committee in accordance with the provisions hereof. 106 ARTICLE XI. - MISCELLANEOUS 11.1 Spendthrift Provisions. No right or interest of any kind of a Participant or Beneficiary in the Trust Fund shall be anticipated, assigned (either in law or equity), alienated or be subject to encumbrance, garnishment, attachment, execution or levy of any kind, voluntary or involuntary, or any other legal or equitable process, except in accordance with a qualified domestic relations order as defined in Code Section 414(p). The Committee shall establish procedures to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders in accordance with Code Section 414(p). 11.2 Facility of Payment. In the event the Committee finds that any Participant or Beneficiary to whom a benefit is payable under the Plan is (at the time such benefit is payable) unable to care for his affairs because of physical, mental or legal incompetence, the Committee, in its sole discretion, may cause any payment due to him hereunder, for which prior claim has not been made by a duly qualified guardian or other legal representative, to be paid to the person or institution deemed by the Committee to be maintaining or responsible for the maintenance of such Participant or Beneficiary; and any such payment shall be deemed a payment for the account of such Participant or Beneficiary and shall constitute a complete discharge of any liability therefor under the Plan. 11.3 No Enlargement of Employment Rights. Nothing herein contained shall constitute or be construed as a contract of 107 employment between any Employer and any Employee or Participant and all Employees shall remain subject to discipline, discharge and layoff to the same extent as if the Plan had never gone into effect. An Employer by adopting the Plan, making contributions to the Trust Fund or taking any other action with respect to the Plan does not obligate itself to continue the employment of any Participant or Employee for any period or, except as expressly provided in the Plan, to make any payments into the Trust Fund. 11.4 Merger or Transfer of Assets. There shall not be any merger or consolidation of the Plan with, or the transfer of assets or liabilities of the Plan to, any other plan, unless each Participant of the Plan would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan had then terminated). The Company reserves the right to merge or consolidate this Plan with, and to transfer the assets of the Plan to, any other Plan, without the consent of any other Employer. 11.5 Action by Company. Wherever the Company is authorized to act under the Plan (including but not limited to any delegation of its fiduciary powers and responsibilities under the Plan), such action shall be taken, unless otherwise provided in the Plan, by written instrument executed by an officer of the Company. The Trustee may rely on any instrument so executed as 108 being validly authorized and as properly evidencing the action of the Company. 11.6 Severability Provision. If any provision of the Plan or Trust Agreement or the application thereof to any circumstance or person is invalid, the remainder of the Plan or Trust Agreement and the application of such provision to other circumstances or persons shall not be affected thereby. 109 ARTICLE XII. - OTHER EMPLOYERS 12.1 Adoption by Other Employers. As of January 1, 1992, and thereafter the Company was the only Employer under the Plan. Any other corporation or business organization may, with the consent of the Committee, adopt the Plan and thereby become an Employer hereunder by executing an instrument evidencing such adoption and filing a copy thereof with the Committee and the Trustee. Such adoption may be subject to such terms and conditions as the Committee requires and approves. 12.2 Withdrawal of Employer. Any Employer (other than the Company) which adopts the Plan may elect separately to withdraw from the Plan. Any such withdrawal shall be expressed in an instrument executed by the withdrawing Employer and filed with the Company and the Trustee. Such withdrawal shall become effective when so filed unless some other effective date is designated in the instrument and approved by the Committee. No such withdrawal shall decrease the amount of Employer Contributions to be made by the Employer on account of periods preceding such withdrawal. In the event of such a withdrawal of an Employer, or in the event the Plan is terminated as to an Employer (but not all the Employers) pursuant to Section 13.1, such Employer (herein called "former Employer") shall cease to be an Employer, and Employer Contributions of such former Employer and Before-Tax and Transfer Contributions of Employees of such former Employer shall cease. 110 12.3 Withdrawal of Employee Group. Any Employer may elect to withdraw from the Plan any designated group of its Employees while continuing to include another group or other groups of its Employees within the Plan. Any such withdrawal of a designated group of Employees shall be expressed in an instrument executed by the Employer and filed with the Company (if the Employer making such withdrawal is not the Company) and the Trustee. Such withdrawal shall become effective when so filed unless some other effective date is designated in the instrument and approved by the Committee. No such withdrawal of a designated group of Employees shall decrease the amount of Employer Contributions to be made by the Employer in respect of Affected Employees on account of periods preceding such withdrawal. In the event of such withdrawal by an Employer or in the event the Plan is terminated by the Company as to a group of Employees of another Employer pursuant to Section 13.1, Employer Contributions of the Employer in respect of affected Employees and Before-Tax and Transfer Contributions of affected Employees shall cease. 111 ARTICLE XIII. - AMENDMENT OR TERMINATION 13.1 Right to Amend or Terminate. Subject to the limitations of Sections 4.8(1) and 7.7 of the Plan, the Company has reserved, and does hereby reserve, the right at any time, by action of any Executive Vice President or any officer of the Company who is senior to the Executive Vice Presidents of the Company, without the consent of any other Employer or of the Participants, Beneficiaries or any other person, (a) to terminate the Plan, in whole or in part or as to any or all of the Employers or as to any designated group of Employees, Participants and their Beneficiaries, or (b) to amend the Plan, in whole or in part. No such termination or amendment shall decrease the amount of Employer Contributions to be made by an Employer on account of any period preceding such termination or amendment. The Plan may be amended only by the Company. 13.2 Procedure for Termination or Amendment. Any termination or amendment of the Plan pursuant to Section 13.1 shall be expressed in an instrument executed by the Trustee and two officers of the Company (at least one of whom is an Executive Vice President or an officer senior to the Executive Vice Presidents) and shall become effective as of the date designated in such instrument or, if no date is so designated, on the date of its execution. 13.3 Distribution Upon Termination. If the Plan shall be terminated by the Company as to all Employers, Before-Tax, Transfer and Employer Contributions to the Plan shall cease and, 112 as soon as practicable after such termination, the Trustee shall make distribution (if such distribution is permitted by applicable law) to each Employee as if the Plan had not been terminated. 13.4 Amendment Changing Vesting Schedule. (1) If any Plan amendment changes any vesting schedule under the Plan, effective as of January 1, 1989, each Participant having not less than three years of service shall be permitted to elect, during the election period described in Subsection (2) of this Section, to have his nonforfeitable percentage computed under the Plan without regard to such amendment. (2) Such election period shall begin on the date the Plan amendment is adopted and shall end no earlier than the latest of the following dates: (a) the date which is 60 days after the day the Plan amendment is adopted, (b) the date which is 60 days after the day the Plan amendment becomes effective, or (c) the date which is 60 days after the day the Participant is issued written notice of the Plan amendment by the Committee or the Company. (3) For purposes of Subsection (1) of this Section, a Participant shall be considered to have completed three years of service if such Participant has completed three years of service, whether or not consecutive, without regard to the exceptions of Code Section 411(a)(4), prior to the expiration of the election period described in Subsection (2) of this Section. 13.5 Nonforfeitable Amounts. Notwithstanding any other provision of the Plan, upon the termination or partial termination 113 of the Plan or upon complete discontinuance of contributions under the Plan, the rights of all Employees to benefits accrued to the date of such termination or partial termination or discontinuance, to the extent then funded, or the amounts credited to the Employees' Accounts, shall be nonforfeitable. 13.6 Prohibition on Decreasing Accrued Benefits. No amendment to the Plan (other than an amendment described in Code Section 412(c)(8)) shall have the effect of decreasing the accrued benefit of any Participant. For purposes of the preceding sentence, a Plan amendment which has the effect of (a) eliminating or reducing an early retirement benefit or a retirement-type subsidy (as defined in regulations of the Secretary of the Treasury) or (b) eliminating an optional form of benefit (except as permitted by any such regulations) with respect to benefits attributable to service before the amendment, shall be treated as decreasing accrued benefits, provided, however, that in the case of a retirement-type subsidy this sentence shall apply only with respect to a Participant who satisfies (either before or after the amendment) the preamendment conditions for the subsidy. 114 ARTICLE XIV. - TOP-HEAVY PLAN REQUIREMENTS 14.1 Definitions. For the purposes of this Article, the following terms, when used with initial capital letters, shall have the following respective meanings: (1) Aggregation Group: Permissive Aggregation Group or Required Aggregation Group, as the context shall require. (2) Compensation: Effective as of January 1, 1989, "Compensation" as defined in Section 4.9(3) (subject to the limitations described in Section 1.1(14)(b)). (3) Defined Benefit Plan: A qualified plan as defined in Code Section 414(j). (4) Defined Contribution Plan: A qualified plan as defined in Code Section 414(i). (5) Determination Date: For any Plan Year, the last day of the immediately preceding Plan Year, except that in the case of the first Plan Year of the Plan, the Determination Date shall be the last day of such first Plan Year. (6) Extra Top-Heavy Group: An Aggregation Group if, as of a Determination Date, the aggregate present value of accrued benefits for Key Employees in all plans in the Aggregation Group (whether Defined Benefit Plans or Defined Contribution Plans) is more than ninety (90%) of the aggregate present value of all accrued benefits for all employees in such plans. (7) Extra Top-Heavy Plan: See Section 14.3. (8) Former Key Employee: A Non-Key Employee with respect to a Plan Year who was a Key Employee in a prior Plan 115 Year. Such term shall also include his Beneficiary in the event of his death. (9) Key Employee: An Employee or former Employee who is or was a Participant and who, at any time during the current Plan Year or any of the four preceding Plan Years, is (a) an officer of an Employer (limited to no more than 50 Employees or, if lesser, the greater of 3 Employees or 10 percent of the Employees) having an annual Compensation greater than, effective as of January 1, 1988, 50% of the dollar amount in effect under Code Section 415(b)(1)(A) for any such Plan Year, (b) one of the 10 Employees owning (or considered as owning within the meaning of Code Section 318) the largest interests in an Employer and having annual Compensation of more than the applicable dollar amount referred to in Section 4.9(1), (c) a 5- percent owner (as such term is defined in Code Section 416(i)(1)(B)(i)) or (d) a 1-percent owner (as such term is defined in Code Section 416(i)(1)(B)(ii)) having an annual Compensation of more than $150,000. For purposes of clause (b) of this Subsection, if two Employees have the same interest in an Employer, the Employee having greater annual Compensation shall be treated as having a larger interest. The term "Key Employee" shall also include such Employee's Beneficiary in the event of his death. For purposes of this Subsection, effective as of January 1, 1989, "Compensation" has the meaning given such term by Code Section 414(q)(7). 116 (10) Non-Key Employee: An Employee or former Employee who is or was a Participant and who is not a Key Employee. Such term shall also include his Beneficiary in the event of his death. (11) Permissive Aggregation Group: The group of qualified plans of an Employer consisting of: (a) the plans in the Required Aggregation Group; plus (b) one (1) or more plans designated from time to time by the Committee that are not part of the Required Aggregation Group but that satisfy the requirements of Code Sections 401(a)(4) and 410 when considered with the Required Aggregation Group. (12) Required Aggregation Group: The group of qualified plans of an Employer consisting of: (a) each plan in which a Key Employee participates; plus (b) each other plan which enables a plan in which a Key Employee participates to meet the requirements of Code Sections 401(a)(4) or 410. (13) Top-Heavy Account Balance: A Participant's (including a Participant who has received a total distribution from this Plan) or a Beneficiary's aggregate balance standing to his account as of the Valuation Date coinciding with or immediately preceding the Determination Date (as adjusted by the amount of any Employer Contributions made or due to be made after such Valuation Date but before the expiration of the extended payment period in Code Section 412(c)(10)), provided, however, 117 that such balance shall include the aggregate distributions made to such Participant or Beneficiary during the five (5) consecutive Plan Years ending with the Plan Year that includes the Determination Date (including distributions under a terminated plan which if it had not been terminated would have been included in a Required Aggregation Group), and provided further that if an Employee or former Employee has not performed services for any Employer maintaining the Plan at any time during the 5-year period ending on the Determination Date, his account (and/or the account of his Beneficiary) shall not be taken into account. (14) Top-Heavy Group: An Aggregation Group if, as of a Determination Date, the aggregate present value of accrued benefits for Key Employees in all plans in the Aggregation Group (whether Defined Benefit Plans or Defined Contribution Plans) is more than sixty percent (60%) of the aggregate present value of accrued benefits for all employees in such plans. (15) Top-Heavy Plan: See Section 14.2. 14.2 Determination of Top-Heavy Status. (1) Except as provided by Subsections (2) and (3) of this Section, the Plan shall be a Top-Heavy Plan if, as of a Determination Date: (a) the aggregate of Top-Heavy Account Balances for Key Employees is more than sixty percent (60%) of the aggregate of all Top-Heavy Account Balances, excluding for this purpose the aggregate Top-Heavy Account Balances of Former Key Employees; or 118 (b) if the Plan is included in a Required Aggregation Group which is a Top-Heavy Group. (c) If the Plan is included in a Required Aggregation Group which is not a Top-Heavy Group, the Plan shall not be a Top-Heavy Plan notwithstanding the fact that the Plan would otherwise be a Top-Heavy Plan under Paragraph (a) of Subsection (1) of this Section. (2) If the Plan is included in a Permissive Aggregation Group which is not a Top-Heavy Group, the Plan shall not be a Top-Heavy Plan notwithstanding the fact that the Plan would otherwise be a Top-Heavy Plan under Subsection (1) of this Section. 14.3 Determination of Extra Top-Heavy Status. (1) Except as provided by Subsections (2) and (3) of this Section, the Plan shall be an Extra Top-Heavy Plan if, as of the Determination Date: (a) the aggregate of Top-Heavy Account Balances for Key Employees is more than ninety percent (90%) of the aggregate of all Top-Heavy Account Balances, excluding for this purpose the aggregate Top-Heavy Account Balances of Former Key Employees; or (b) if the Plan is included in a Required Aggregation Group which is an Extra Top-Heavy Group. (2) If the Plan is included in a Required Aggregation Group which is not an Extra Top-Heavy Group, the Plan shall not be an Extra Top-Heavy Plan notwithstanding the fact that the Plan 119 would otherwise be an Extra Top-Heavy Plan under paragraph (a) of Subsection (1) of this Section. (3) If the Plan is included in a Permissive Aggregation Group which is not an Extra Top-Heavy Group, the Plan shall not be an Extra Top-Heavy Plan notwithstanding the fact that the Plan would otherwise be an Extra Top-Heavy Plan under Subsection (1) of this Section. 14.4 Top-Heavy Plan Requirements. Notwithstanding any other provisions of the Plan to the contrary, if the Plan is a Top-Heavy Plan for any Plan Year, the Plan shall then satisfy the following requirements for such Plan Year: (1) The minimum contribution requirement as set forth in Section 14.5. (2) The adjustment to minimum benefits and allocations as set forth in Section 14.6. 14.5 Minimum Contribution Requirement. If the Plan is a Top-Heavy Plan for any Plan Year: (1) Each Non-Key Employee who is eligible to share in any Employer Contribution for such Plan Year (or who would have been eligible to share in any such Employer Contribution if a Before-Tax Contribution had been made for him during such Plan Year) shall be entitled to receive an allocation of such Employer Contribution, which is at least equal to three percent (3%) of his Compensation for such Plan Year. (2) The three percent (3%) minimum contribution requirement under Subsection (1) of this Section for a Non-Key 120 Employee shall be increased to four percent (4%) if the Employer maintains a Defined Benefit Plan which does not cover such Non-Key Employee. (3) The percentage minimum contribution requirement set forth in Subsections (1) and (2) of this Section with respect to a Plan Year shall not exceed the percentage at which Employer Contributions are made (or required to be made) under the Plan for such Plan Year for the Key Employee for whom such percentage is the highest for such Year. (4) The percentage minimum contribution requirement set forth in Subsections (2) and (3) of this Section may also be reduced or eliminated in accordance with Section 14.8(2). (5) For the purpose of Subsection (3) of this Section, contributions taken into account shall include like contributions under all other Defined Contribution Plans in the Required Aggregation Group, excluding any such plan in the Required Aggregation Group if that plan enables a Defined Benefit Plan in such Required Aggregation Group to meet the requirements of Code Sections 401(a)(4) or 410. (6) For the purpose of this Section, the term "Employer Contributions" shall include Before-Tax Contributions made for an Employee. 14.6 Adjustment to Minimum Benefits and Allocations. If the Plan is a Top-Heavy Plan for any Plan Year, and if the Employer maintains a Defined Benefit Plan which could or does provide benefits to Participants in this Plan: 121 (a) If the Plan is not an Extra Top-Heavy Plan (but is a Top-Heavy Plan), then the percentage minimum contribution requirement in Section 14.5(a) shall be seven and one-half percent (7-1/2%) for a Non-Key Employee who is covered by this Plan and the Defined Benefit Plan. (b) If the Plan is an Extra Top-Heavy Plan, then parts (a) and (b) of Section 4.10(1) shall be calculated by substituting "1.0" for "1.25" for each place such "1.25" figure appears, and Code Section 415(e)(6)(B)(I) shall be calculated by substituting "$41,500: for "$51,875" for each place such "$51,875" amount appears. 14.7 Coordination With Other Plans. (1) In applying this Article, an Employer and all Controlled Group Members shall be treated as a single employer, and the qualified plans maintained by such single employer shall be taken into account. (2) In the event that another Defined Contribution Plan or Defined Benefit Plan maintained by the Controlled Group provides contributions or benefits on behalf of Participants in this Plan, such other plan(s) shall be taken into account in determining whether this Plan satisfies Section 14.4; and the minimum contribution required for a Non-Key Employee in this Plan under Section 14.5 will be reduced or eliminated, in accordance with the requirements of Code Section 416 and the Regulations thereunder, if a minimum contribution or benefit is made or accrued in whole or in part in respect of such other plan(s). 122 (3) Principles similar to those specifically applicable to this Plan under this Article, and in general as provided for in Code Section 416 and the Regulations thereunder, shall be applied to the other plan(s) required to be taken into account under this Article in determining whether this Plan and such other plan(s) meet the requirements of such Code Section 416 and the Regulations thereunder. 123 ARTICLE XV. - PROVISIONS RELATING TO VOTING AND TENDER OFFERS FOR NCC STOCK 15.1 Voting of NCC Stock. All voting rights on shares of NCC Stock held by the Trustee shall be exercised by the Trustee only as directed by the Participants and Beneficiaries with respect to allocated shares of NCC Stock, and acting in their capacity as Named Fiduciaries (within the meaning of Section 402 of ERISA) with respect to non-directed shares of NCC Stock, in accordance with the following provisions of this Section: (1) As soon as practicable before each annual or special shareholders' meeting of the Company, the Trustee shall furnish to each Participant a copy of the proxy solicitation material sent generally to shareholders, together with a form requesting confidential instructions on how the shares allocated to such Participant's Account and a proportionate share (based on the amount of any shares allocated to his Account) of any non-directed shares (including fractional shares to 1/1000th of a share) are to be voted. The Company and the Committee shall cooperate with the Trustee to ensure that Participants receive the requisite information in a timely manner. Except as provided in Subsection (d) of this Section, the materials furnished to the Participants shall include a notice from the Trustee explaining each Participant's right to instruct the Trustee with respect to the voting of shares. Upon timely receipt of such instructions, the Trustee (after combining votes of fractional shares to give effect to the greatest extent to Participants' instructions) shall 124 vote the shares as instructed. If voting instructions for shares of NCC Stock allocated to the Account of any Participant are not timely received by the Trustee for a particular shareholders' meeting, such shares shall not be voted in accordance with the instructions but shall be voted as provided in Subsection (3) below. The instructions received by the Trustee from Participants or Beneficiaries shall be held by the Trustee in strict confidence and shall not be divulged or released to any person including directors, officers or employees of the Company, or of any other Employer, except as otherwise required by law. (2) With respect to all corporate matters submitted to Participants, all shares of NCC Stock allocated to the Accounts of Participants shall be voted only in accordance with the directions of such Participants as given to the Trustee. Each Participant shall be entitled to direct the voting of shares of NCC Stock (including fractional shares to 1/1000th of a share) allocated to his Account. With respect to shares of NCC Stock allocated to the Account of a deceased Participant, such Participant's Beneficiary shall be entitled to direct the voting with respect to such allocated shares as if such Beneficiary were the Participant. (3) Each Participant who has been allocated NCC Stock in his Account and who is entitled to vote on any manner presented for a vote by the shareholders also shall, as a Named Fiduciary, direct the Trustee with respect to the vote of a portion of the shares of NCC Stock for which no timely instructions were received. Such direction shall be with respect to such number of 125 votes equal to the total number of votes attributable to non-directed shares of NCC Stock multiplied by a fraction, the numerator of which is the number of shares of NCC Stock allocated to the Participant's Account and the denominator of which is the total number of shares allocated to the Accounts of such Participants who have provided directions to the Trustee with respect to non-directed shares under this Subsection. Each Participant's voting instructions shall be separately stated as to his allocated shares on the one hand, and as a Named Fiduciary with respect of a portion of the non-directed shares on the other hand. Fractional shares shall be rounded to the nearest 1/100th of a share. 15.2 Tender Offers. Except as otherwise expressly provided in the Plan, the Trustee shall not sell, alienate, encumber, pledge, transfer or otherwise dispose of or tender or withdraw, any shares of NCC Stock held by it under the Plan. All tender or exchange decisions with respect to NCC Stock held by the Plan shall be made only by the Participants and Beneficiaries with respect to shares allocated to their accounts, and Participants and Beneficiaries acting in their capacity as Named Fiduciaries (within the meaning of Section 402 of ERISA) with respect to non-directed shares in accordance with the following provisions of this Section: (1) In the event an offer shall be received by the Trustee (including a tender offer for shares of NCC Stock subject to Section 14(d)(1) of the Securities Exchange Act of 1934 or 126 subject to Rule 13e-4 promulgated under that Act, as those provisions may from time to time be amended) to purchase or exchange any shares of NCC Stock held by the Plan, the Trustee shall advise each Participant who has shares of NCC Stock credited to such Participant's Account in writing of the terms of the offer as soon as practicable after its commencement and shall furnish each Participant with a form by which he may separately instruct the Trustee confidentially whether or not to tender or exchange shares allocated to such Participant's Account and (based on any NCC Stock allocated to such Participant's Account) a proportionate share of any non-directed shares (including fractional shares to 1/1000th of a share). The materials furnished to the Participants shall include: (a) a notice from the Trustee explaining Participants' rights to instruct the Trustee with respect to allocated and non-directed shares as provided herein; and (b) such related documents as are prepared by any person and provided to the shareholders of the Company pursuant to the Securities Exchange Act of 1934. The Committee and the Trustee may also provide Participants with such other material concerning the tender or exchange offer as the Trustee or the Committee in its discretion determine to be appropriate; provided, however, that prior to any distribution of materials by the Committee, the Trustee shall be furnished with complete copies of all such materials. The Company and the 127 Committee shall cooperate with the Trustee to ensure that Participants receive the requisite information in a timely manner. (2) The Trustee shall tender or not tender shares or exchange shares of NCC Stock allocated to the Accounts of any Participant (including fractional shares to 1/1000th of a share), only as and to the extent instructed by the Participant. With respect to shares of NCC Stock allocated to the Account of a deceased Participant, such Participant's Beneficiary shall be entitled to direct the Trustee whether or not to tender or exchange such shares as if such Beneficiary were the Participant. The instructions received by the Trustee from Participants or Beneficiaries shall be held by the Trustee in strict confidence and shall not be divulged or released to any person, including directors, officers or employees of the Company, or of any other Employer, except as otherwise required by law. (3) Each Participant who has been allocated NCC Stock in his Account and who is entitled to direct the Trustee whether or not to tender or exchange shares of NCC Stock allocated to his Accounts also shall direct the Trustee, as a Named Fiduciary, with respect to the tender or exchange of a portion of the shares of NCC Stock for which no timely instructions are received. Such direction shall apply to such number of non-directed shares multiplied by a fraction, the numerator of which is the number of shares of NCC Stock allocated to the Participant's Account and the denominator of which is the total number of shares of NCC Stock allocated to the Accounts of such Participants who have provided 128 directions to the Trustee with respect to non-directed shares under this Subsection. Each Participant's directions shall be separately stated as to his allocated shares on the one hand and as a Named Fiduciary with respect to a portion of the non- directed shares on the other hand. Fractional shares shall be rounded to the nearest 1/1000th of a share. (4) In the event, under the terms of a tender offer or otherwise, any shares of NCC Stock tendered for sale, exchange or transfer pursuant to such offer may be withdrawn from such offer, the Trustee shall follow such instructions respecting the withdrawal of such securities from such offer in the same manner and the same proportion as shall be timely received by the Trustee from the Participants entitled under this Section to give instructions as to the sale, exchange or transfer of securities pursuant to such offer. (5) In the event that an offer for fewer than all of the shares of NCC Stock held by the Trustee shall be received by the Trustee, each Participant who has been allocated any NCC Stock subject to such offer shall be entitled to direct the Trustee as to the acceptance or rejection of such offer (as provided by Subsections (1)-(4) of this Section) with respect to the largest portion of such NCC Stock as may be possible given the total number or amount of shares of Stock the Plan may sell, exchange or transfer pursuant to the offer based upon the instructions received by the Trustee from all other Participants who shall timely instruct the Trustee pursuant to this Section to sell, 129 exchange or transfer such shares pursuant to such offer, each on a pro rata basis in accordance with the number or amount of such shares allocated to his Accounts. (6) In the event an offer shall be received by the Trustee and instructions shall be solicited from Participants pursuant to Subsections (1)-(4) of this Section regarding such offer, and prior to termination of such offer, another offer is received by the Trustee for the securities subject to the first offer, the Trustee shall use its best efforts under the circumstances to solicit instructions from the Participants to the Trustee: (a) with respect to securities tendered for sale, exchange or transfer pursuant to the first offer, whether to withdraw such tender, if possible, and, if withdrawn, whether to tender any securities so withdrawn for sale, exchange or transfer pursuant to the second offer and (b) with respect to securities not tendered for sale, exchange or transfer pursuant to the first offer, whether to tender or not to tender such securities for sale, exchange or transfer pursuant to the second offer. The Trustee shall follow all such instructions received in a timely manner from Participants in the same manner and in the same proportion as provided in Subsections (1)-(4) of this Section. With respect to any further offer for any NCC Stock received by the Trustee and subject to any earlier offer (including successive 130 offers from one or more existing offerors), the Trustee shall act in the same manner as described above. (7) A Participant's instructions to the Trustee to tender or exchange shares of NCC Stock shall not be deemed a withdrawal or suspension from the Plan or a forfeiture of any portion of the Participant's interest in the Plan. Funds received in exchange for tendered shares shall be credited to the Account of the Participant whose shares were tendered and shall be used by the Trustee to purchase NCC Stock, as soon as practicable. In the interim, the Trustee shall invest such funds in obligations or instruments which are appropriate investments for the Money Market Fund. (8) Subject to any provisions of this Plan to the contrary, in the event the Company initiates a tender or exchange offer, the Trustee may, in its sole discretion, enter into an agreement with the Company not to tender or exchange any shares of NCC Stock in such offer, in which event, the foregoing provisions of this Section shall have no effect with respect to such offer and the Trustee shall not tender or exchange any shares of NCC Stock in such offer. 131 ARTICLE XVI. - APPENDICES 16.1 Rules Governing Construction of Appendices. Each Appendix attached hereto contains terms and conditions governing the application of the Plan to the group of Employees described therein. In the event of an inconsistency between the other provisions of the Plan and such terms and conditions set forth in an Appendix, the latter shall control as to the Employees (or former Employees) covered by such Appendix; provided, however, that if such inconsistency results from changes made in the provisions of the Plan to comply with applicable law, then such provisions of the Plan shall control as to the Employees (or former Employees) covered by such Appendix. The terms and provisions of the Appendices that were adopted before the effective date of this amendment and restatement of the Plan shall remain in effect until changed or superceded. Any reference in any Appendix to provisions of the Plan as in effect at the time such Appendix became effective shall be deemed to refer to the comparable provisions of the Plan as later amended or restated. 16.2 Appendices of Prior Plan. The provisions of Appendices A through K of the Prior Plan shall continue to apply, as applicable, to those amounts held under this Plan that were spun off from the Prior Plan as of January 1, 1992 and that were immediately prior to such date subject to the provisions of any such Appendices A through K. 16.3 Appendix A -- Ohio Citizens Bank Profit-Sharing Retirement Plan and Declaration of Trust -- Spin Off and Transfer 132 to this Plan and Trust. Attached hereto and made a part of this Plan and Trust is Appendix A relating to and providing for the spin off and transfer of certain assets and liabilities of the Ohio Citizens Bank Profit-Sharing Retirement Plan and Declaration of Trust as of April 30, 1992. 16.4 Appendix B -- Conversion to Daily Access System. Attached hereto and made a part of this Plan is Appendix B relating to and providing for the conversion of the Plan and Trust to a daily access system (originally identified as "Appendix M" and added by "Amendment No. 3 to the National City Savings and Investment Plan No. 2 and Trust" executed October 12, 1993). 133 This amendment and restatement of the National City Savings and Investment Plan No. 2 is hereby executed at Cleveland, Ohio, this 30th day of December 1994 but effective as otherwise herein set forth. NATIONAL CITY BANK, TRUSTEE NATIONAL CITY CORPORATION By R. KENT LUDWIG By DAVID A. DABERKO ------------------------ ---------------------- Title: Vice President Title: And J. M. BUCHAGEN And SHELLEY J. SEIFERT ----------------------- ---------------------- Title: Vice President Title: EX-10.26 11 NATIONAL CITY CORP 10-K EXHIBIT 10.26 1 Exhibit 10.26 CENTRAL INDIANA BANCORP STOCK OPTION PLAN 1. Purpose. The purpose of the Central Indiana Bancorp Stock Option Plan (the "Plan") is to provide to directors, officers and other key employees of Central Indiana Bancorp (the "Holding Company") and its majority-owned and wholly-owned subsidiaries (individually a "Subsidiary" and collectively the "Subsidiaries"), including, but not limited to, First Federal Savings Bank of Kokomo upon its conversion to stock form ("First Federal"), who are materially responsible for the management or operation of the business of the Holding Company or a Subsidiary and have provided valuable service to the Holding Company or a Subsidiary, a favorable opportunity to acquire Common Stock, without par value ("Common Stock"), of the Holding Company, thereby providing them with an increasing incentive to work for the success of the Holding Company and its Subsidiaries and better enabling each such entity to attract and retain capable directors and executive personnel. 2. Administration of the Plan. The Plan shal be administered, construed and interpreted by a committee (the "Committee") consisting of at least two members of the Board of Directors of the Holding Company, each of whom is a "disinterested person" within the meaning of the definition of that term contained in Reg. Section 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "1934 Act"). The members of the Committee shall be designated from time to time by the Board of Directors of the Holding Company. The decision of a majority of the members of the Committee shall constitute the decision of the Committee, and the Committee may act either at a meeting at which a majority of the members of the Committee is present or by a written consent signed by all members of the Committee. The Committee shall have the sole, final and conclusive authority to determine, consistent with and subject to the provisions of the Plan: (a) the individuals (the "Optionees") to whom options or successive options or cash awards shall be granted under the Plan; (b) the time when options or cash awards shall be granted hereunder; (c) the number of shares of Common Stock to be covered under each option and the amount of any cash awards; (d) the option price to be paid upon the exercise of each option; (e) the period within which each such option may be exercised; (f) the extent to which an option is an incentive stock option or a non-qualified stock option; and (g) the terms and conditions of the respective agreements by which options granted or cash awards shall be evidenced. The Committee shall also have authority to prescribe, amend, waive, and rescind rules and regulations relating to the Plan, to accelerate the vesting of any stock options or cash awards made hereunder, and to make all other determinations necessary or advisable in the administration of the Plan. 3. Eligibility. The Committee may, consistent with the purposes of the Plan, grant options and cash awards to officers and other key employees of the Holding Company or of a Subsidiary who in the opinion of the Committee are from time to time materially responsible for the management or operation of the business 2 of the Holding Company or of a Subsidiary and have provided valuable services to the Holding Company or a Subsidiary; provided, however, that in no event may any employee who owns (after application of the ownership rules in Section 425(d) of the Internal Revenue Code of 1986, as amended (the "Code")) shares of stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Holding Company or any of its Subsidiaries be granted an incentive stock option hereunder unless at the time such option is granted the option price is at least 110% of the fair market value of the stock subject to the option and such option by its terms is not exercisable after the expiration of five (5) years from the date such option is granted. Directors of the Holding Company who are not employees of the Holding Company or its Subsidiaries, and the Chairman Emeritus of First Federal, an advisory director ("Outside Directors"), who are serving as such on the date First Federal converts (the "Conversion") from mutual to stock form (the "Conversion Date") shall each be granted on such date a non-qualified option to purchase the number of whole shares of Common Stock of the Holding Company determined by multiplying the total number of shares issued by the Holding Company on the Conversion Date by .44%. Such options shall have an exercise price per share equal to the purchase price per share paid for shares issued in such conversion. Each person who is elected for the first time to be an Outside Director (other than persons who were previously employees of the Holding Company or of any of its Subsidiaries) after the Conversion Date shall be granted at the date he or she first becomes an Outside Director a non-qualified stock option to acquire the number of shares of Common Stock of the Holding Company determined by multiplying the total number of shares issued by the Holding Company on the Conversion Date by .44% (subject to adjustment pursuant to the antidilution provisions of Section 7 hereof) at an option price per share equal to the fair market value of a share of such Common Stock, as determined by the Committee, consistent with Treas. Reg. Section 20.2031-2, on the date he or she first becomes an Outside Director, or on the next preceding trading day if such date was not a trading date. If on any date in any given year the number of shares of Common Stock available for awards under the Plan is insufficient to grant each such Outside Director entitled thereto such a non-qualified stock option, the shares available for the non-qualified stock options shall be awarded ratably (to the nearest whole share) to each such Outside Director on such date. Outside Directors are not entitled to receive any other awards under this Plan. Subject to the foregoing and the provisions of Section 4 hereof, an individual who has been granted an option under the Plan (an "Optionee"), if he is otherwise eligible, may be granted an additional option or options if the Committee shall so determine. 4. Stock Subject to the Plan. There shall be reserved for issuance upon the exercise of options granted under the Plan, shares of Common Stock of the Holding Company equal to 10% of the total number of shares of Common Stock issued by the Holding Company upon the conversion of First Federal from mutual to stock form, which may be authorized but unissued shares or treasury shares of the Holding Company. Subject to Section 7 hereof, the shares for which options may be granted under the Plan shall not exceed that number. If any option shall expire or terminate or be surrendered for any reason without having been exercised in full, the unpurchased shares subject thereto shall (unless the Plan shall have terminated) become available for other options under the Plan. 5. Terms of Options. Each option granted under the Plan shall be subject to the following terms and conditions and to such other terms and conditions not inconsistent therewith as the Committee may deem appropriate in each case: (a) Option Price. The price to be paid for shares of stock upon the exercise of each option shall be determined by the Committee at the time such option is granted, but such price in no event shall be less than the fair market value, as determined by the Committee consistent with Treas. Reg. Section 20.2031-2 and any requirements of Section 422A of the Code, of such stock on the date on which such option is granted; provided, however, that the Committee shall have discretion to award non-qualified stock options to eligible employees of the Holding Company or a Subsidiary at a price no less than A-2 3 75% of the fair market value of the Common Stock on the date of grant, as determined by the Committee consistent with Treas. Reg. Section 20.2031-2. (b) Period for Exercise of Option. An option shall not be exercisable after the expiration of such period as shall be fixed by the Committee at the time of the grant thereof, but such period in no event shall exceed ten (10) years and one day from the date on which such option is granted; provided, that incentive stock options granted hereunder shall have terms not in excess of ten (10) years and options issued to Outside Directors shall be for a period of ten (10) years and one day from the date of grant thereof. Options shall be subject to earlier termination as hereinafter provided. (c) Exercise of Options. The option price of each share of stock purchased upon exercise of an option shall be paid in full at the time of such exercise. Payment may be in (i) cash, (ii) if the Optionee may do so without violating Section 16(b) of the 1934 Act, by delivering a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Holding Company the total option price in cash and, if desired, the amount of any taxes to be withheld from the Optionee's compensation as a result of any withholding tax obligation of the Holding Company or any of its Subsidiaries, as specified in such notice, or (iii) beginning on a date which is three years following First Federal's conversion from mutual to stock form and with the approval of the Committee, by tendering whole shares of the Holding Company's Common Stock owned by the Optionee and cash having a fair market value equal to the cash exercise price of the shares with respect to which the option is being exercised. For this purpose, any shares so tendered by an Optionee shall be deemed to have a fair market value equal to the mean between the highest and lowest quoted selling prices for the shares on the date of exercise of the option (or if there were no sales on such date the weighted average of the means between the highest and lowest quoted selling prices on the nearest date before and the nearest date after the date of exercise of the option as prescribed by Treas. Reg. Section 20.2031-2)), as reported in The Wall Street Journal or a similar publication selected by the Committee. The Committee shall have the authority to grant options exercisable in full at any time during their term, or exercisable in such installments at such times during their term as the Committee may determine; provided, however, that options shall not be exercisable prior to a date which is six months after the date of shareholder approval of the Plan or during the first six (6) months of their term, and provided further that options granted to Outside Directors shall be fully exercisable following the first six (6) months of their term. Installments not purchased in earlier periods shall be cumulated and be available for purchase in later periods. Subject to the other provisions of this Plan, an option may be exercised at any time or from time to time during the term of the option as to any or all whole shares which have become subject to purchase pursuant to the terms of the option or the Plan, but not at any time as to fewer than one hundred (100) shares unless the remaining shares which have become subject to purchase are fewer than one hundred (100) shares. An option may be exercised only by written notice to the Holding Company, mailed to the attention of its Secretary, signed by the Optionee (or such other person or persons as shall demonstrate to the Holding Company his or their right to exercise the option), specifying the number of shares in respect of which it is being exercised, and accompanied by payment in full in either cash or by check in the amount of the aggregate purchase price therefor, by delivery of the irrevocable broker instructions referred to above, or, if the Committee has approved the use of the stock swap feature provided for above, followed as soon as practicable by the delivery of the option price for such shares. (d) Certificates. The certificate or certificates for the shares issuable upon an exercise of an option shall be issued as promptly as practicable after such exercise. An Optionee shall not have any rights of a shareholder in respect to the shares of stock subject to an option until the date of issuance of a stock certificate to him for such shares. In no case may a fraction of a share be purchased or A-3 4 issued under the Plan, but if, upon the exercise of an option, a fractional share would otherwise be issuable, the Holding Company shall pay cash in lieu thereof. (e) Termination of Option. If an Optionee (other than an Outside Director) ceases to be an employee of the Holding Company and the Subsidiaries for any reason other than retirement, permanent and total disability (within the meaning of Section 22(e)(3) of the Code), or death, any option granted to him shall forthwith terminate. Leave of absence approved by the Committee shall not constitute cessation of employment. If an Optionee (other than an Outside Director) ceases to be an employee of the Holding Company and the Subsidiaries by reason of retirement, any option granted to him may be exercised by him in whole or in part at any time after his retirement until the expiration of the option term fixed by the Committee in accordance with Subsection (b) above, whether or not the option was otherwise exercisable at the date of his retirement. (The term "retirement" as used herein means such termination of employment as shall entitle such individual to early or normal retirement benefits under any then existing pension plan of the Holding Company or a Subsidiary.) If an Optionee (other than an Outside Director) ceases to be an employee of the Holding Company and the Subsidiaries by reason of permanent and total disability (within the meaning of Section 22(e)(3) of the Code), any option granted to him may be exercised by him in whole or in part within one (1) year after the date of his termination of employment by reason of such disability whether or not the option was otherwise exercisable at the date of such termination. Options granted to Outside Directors shall cease to be exercisable six (6) months after the date such Outside Director is no longer a director or advisory director of the Holding Company or of First Federal for any reason. In the event of the death of an Optionee while in the employ or service as a director or advisory director of the Holding Company or a Subsidiary, or, if the Optionee is not an Outside Director, after the date of his retirement or within one (1) year after the termination of his employment by reason of permanent and total disability (within the meaning of Section 22(e)(3) of the Code), or, if the Optionee is an Outside Director, within six (6) months after he is no longer a director or advisory director of the Holding Company or of First Federal, any option granted to him may be exercised in whole or in part at any time within one (1) year after the date of such death by the executor or administrator of his estate or by the person or persons entitled to the option by will or by applicable laws of descent and distribution until the expiration of the option term as fixed by the Committee, whether or not the option was otherwise exercisable at the date of his death. Notwithstanding the foregoing provisions of this subsection (e), no option shall in any event be exercisable after the expiration of the period fixed by the Committee in accordance with subsection (b) above. (f) Nontransferability of Option. No option may be transferred by the Optionee otherwise than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder, and during the lifetime of the Optionee options shall be exercisable only by the Optionee or his guardian or legal representative. (g) No Right to Continued Service. Nothing in this Plan or in any agreement entered into pursuant hereto shall confer on any person any right to continue in the employ or service of the Holding Company or its Subsidiaries or affect any rights of the Holding Company, a Subsidiary, or the shareholders of the Holding Company may have to terminate his service at any time. (h) Maximum Incentive Stock Options. The aggregate fair market value of stock with respect to which incentive stock options (within the meaning of Section 422A of the Code) are exercisable for the first time by an Optionee during any calendar year under the Plan or any other plan of the Holding Company or its Subsidiaries shall not exceed $100,000. For this purpose, the fair market value of such shares shall be determined as of the date the option is granted and shall be computed in such A-4 5 manner as shall be determined by the Committee, consistent with the requirements of Section 422A of the Code. (i) Agreement. Each option shall be evidenced by an agreement between the Optionee and the Holding Company which shall provide, among other things, that, with respect to incentive stock options, the Optionee will advise the Holding Company immediately upon any sale or transfer of the shares of Common Stock received upon exercise of the option to the extent such sale or transfer takes place prior to the later of (a) two (2) years from the date of grant or (b) one (1) year from the date of exercise. 6. Incentive Stock Options and Non-Qualified Stock Options. Options granted under the Plan may be incentive stock options under Section 422A of the Code or non-qualified stock options, provided, however, that Outside Directors shall be granted only non-qualified stock options. All options granted hereunder will be clearly identified as either incentive stock options or non-qualified stock options. In no event will the exercise of an incentive stock option affect the right to exercise any non-qualified stock option, nor shall the exercise of any non-qualified stock option affect the right to exercise any incentive stock option. Nothing in this Plan shall be construed to prohibit the grant of incentive stock options and non-qualified stock options to the same person, provided, further, that incentive stock options and non-qualified stock options shall not be granted in a manner whereby the exercise of one non-qualified stock option or incentive stock option affects the exercisability of the other. 7. Adjustment of Shares. In the event of any change after the effective date of the Plan in the outstanding stock of the Holding Company by reason of any reorganization, recapitalization, stock split, stock dividend, combination of shares, exchange of shares, merger or consolidation, liquidation, or any other change after the effective date of the Plan in the nature of the shares of stock of the Holding Company, the Committee shall determine what changes, if any, are appropriate in the number and kind of shares reserved under the Plan, and the Committee shall determine what changes, if any, are appropriate in the option price under and the number and kind of shares covered by outstanding options granted under the Plan. Any determination of the Committee hereunder shall be conclusive. 8. Cash Awards. Except as otherwise provided in Section 3 hereof, the Committee may, at any time and in its discretion, grant to any Optionee who is granted a non-qualified stock option the right to receive, at such times and in such amounts as determined by the Committee in its discretion, a cash amount ("cash award") which is intended to reimburse the Optionee for all or a portion of the federal, state and local income taxes imposed upon such Optionee as a consequence of the exercise of a non-qualified stock option and the receipt of a cash award. 9. Replacement and Extension of the Terms of Options and Cash Awards. The Committee from time to time may permit an Optionee (other than an Outside Director) under the Plan or any other stock option plan heretofore or hereafter adopted by the Holding Company or any Subsidiary to surrender for cancellation any unexercised outstanding stock option and receive from his employing corporation in exchange therefor an option for such number of shares of Common Stock as may be designated by the Committee. Such Optionees also may be granted related cash awards as provided in Section 8 hereof. 10. Change in Control. In the event of a Change in Control, all options previously grnated and still outstanding under the Plan regardless of their terms, shall become exercisable. For this purpose, "Change in Control" shall mean a change in control of the Holding Company or First Federal, within the meaning of 12 C.F.R. Section 574.4(a) (other than a change of control resulting from a trustee or other fiduciary holding shares of Common Stock under an employee benefit plan of the Holding Company or any of its Subsidiaries), not approved in advance by the Holding Company's Board of Directors. A-5 6 11. Tax Withholding. Whenever the Holding Company proposes or is required to issue or transfer shares of Common Stock under the Plan, the Holding Company shall have the right to require the Optionee or his or her legal representative to remit to the Holding Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery of any certificate or certificates for such shares, and whenever under the Plan payments are to be made in cash, such payments shall be net of an amount sufficient to satisfy any federal, state and/or local withholding tax requirements. If permitted by the Committee and pursuant to procedures established by the Committee, an Optionee who is not an Outside Director may make a written election to have shares of Common Stock having an aggregate fair market value, as determined by the Committee, consistent with the requirements of Treas. Reg. Section 20.2031-2, sufficient to satisfy the applicable withholding taxes, withheld from the shares otherwise to be received upon the exercise of a non-qualified option. Elections by Optionees to have shares withheld for this purpose will be subject to the following restrictions: (1) they must be made prior to the date as of which the amount of tax withheld is determined (the "Tax Date"), (2) they will be irrevocable, (3) they will be subject to the disapproval of the Committee, and (4) if an Optionee is an officer or director of the Holding Company within the meaning of Section 16 of the 1934 Act and the Common Stock is registered under Section 12 of the 1934 Act, such elections (a) may not be made within six months of the grant of the option, (b) must be made either more than six months prior to the Tax Date or in the ten day "window period" beginning on the third day following the release of the Holding Company's quarterly or annual financial statements, and (c) may not be made until the Holding Company shall have been subject to the reporting requirements of the 1934 Act for at least one year and shall have filed all reports and statements required to be filed under the 1934 Act during such year. 12. Amendment. The Board of Directors of the Holding Company may amend the Plan from time to time and, with the consent of the Optionee, the terms and provisions of his option or cash award, except that without the approval of the holders of at least a majority of the shares of the Holding Company voting in person or by proxy at a duly constituted meeting or adjournment thereof: (a) the number of shares of stock which may be reserved for issuance under the Plan may not be increased except as provided in Section 7 hereof; (b) the period during which an option may be exercised may not be extended beyond ten (10) years and one day from the date on which such option was granted; (c) the class of persons to whom options or cash awards may be granted under the Plan shall not be modified materially; (d) amendments will not be made which would cause the Plan or transactions by officers and directors thereunder to cease to comply with Rule 16b-3 promulgated under the 1934 Act, or any successor rule, unless the Holding Company at the time has ceased to have its Common Stock registered under Section 12 of the 1934 Act; and (e) the number of shares subject to options to be granted to Outside Directors or the date of grant or the exercise price and other terms thereof shall not be changed except as provided in Section 7 hereof unless the Holding Company at the time has ceased to have its Common Stock registered under Section 12 of the 1934 Act; provided further that in any event any such provisions in the Plan governing outside director options may not be amended more than once every six (6) months other than to comport with changes in the Code or the rules thereunder. No amendment of the Plan, however, may, without the consent of the Optionees, make any changes in any outstanding options or cash awards theretofore granted under the Plan which would adversely affect the rights of such Optionees. A-6 7 13. Termination. The Board of Directors of the Holding Company may terminate the Plan at any time and no option or cash award shall be granted thereafter. Such termination, however, shall not affect the validity of any option or cash award theretofore granted under the Plan. In any event, no incentive stock option may be granted under the Plan after the date which is ten (10) years from the effective date of the Plan. 14. Successors. This Plan shall be binding upon the successors and assigns of the Holding Company. 15. Governing Law. The terms of any options granted hereunder and the rights and obligations hereunder of the Holding Company, the Optionees and their successors in interest shall, except to the extent governed by federal law, be governed by Indiana law. 16. Government and Other Regulations. The obligations of the Holding Company to issue or transfer and deliver shares under options granted under the Plan or make cash awards shall be subject to compliance with all applicable laws, governmental rules and regulations, and administrative action. 17. Effective Date. The Plan shall become effective if and when First Federal becomes a federal stock savings bank; provided, however, that any grant of options pursuant to the Plan shall be subject to the approval of the Plan by the holders of at least a majority of the shares of the Holding Company voting in person or by proxy at a duly constituted meeting, or adjournment thereof, held within 12 months after such effective date of the Plan, and any options granted pursuant to the Plan may not be exercised until the Board of Directors of the Holding Company has been advised by counsel that such approval has been obtained and all other applicable legal requirements have been met. A-7 EX-10.27 12 NATIONAL CITY CORP 10-K EXHIBIT 10.27 1 Exhibit 10.27 ------------- CENTRAL INDIANA BANCORP 1993 STOCK OPTION PLAN 1. Purpose. The purpose of the Central Indiana Bancorp 1993 Stock Option Plan (the "Plan") is to provide to directors, advisory directors, officers and other key employees of Central Indiana Bancorp (the "Holding Company") and its majority-owned and wholly-owned subsidiaries (individually a "Subsidiary" and collectively the "Subsidiaries"), including, but not limited to, First Federal Savings Bank of Kokomo ("First Federal"), who are materially responsible for the management or operation of the business of the Holding Company or a Subsidiary and have provided valuable service to the Holding Company or a Subsidiary, a favorable opportunity to acquire Common Stock, without par value ("Common Stock"), of the Holding Company, thereby providing them with an increased incentive to work for the success of the Holding Company and its Subsidiaries and better enabling each such entity to attract and retain capable directors, advisory directors, and executive personnel. 2. Administration of the Plan. The Plan shall be administered, construed and interpreted by a committee (the "Committee") consisting of at least two members of the Board of Directors of the Holding Company, each of whom is a "disinterested person" within the meaning of the definition of that term contained in Reg. Section 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "1934 Act"). The members of the Committee shall be designated from time to time by the Board of Directors of the Holding Company. The decision of a majority of the members of the Committee shall constitute the decision of the Committee, and the Committee may act either at a meeting at which a majority of the members of the Committee is present or by a written consent signed by all members of the Committee. The Commmittee shall have the sole, final and conclusive authority to determine, consistent with and subject to the provisions of the Plan: (a) the individuals (the "Optionees") to whom options or successive options or cash awards shall be granted under the Plan; (b) the time when options or cash awards shall be granted hereunder; (c) the number of shares of Common Stock to be covered under each option and the amount of any cash awards; (d) the option price to be paid upon the exercise of each option; (e) the period within which each such option may be exercised; (f) the extent to which an option is an incentive stock option or a non-qualified stock option; and (g) the terms and conditions of the respective agreements by which options granted or cash awards shall be evidenced. The Committee shall also have authority to prescribe, amend, waive, and rescind rules and regulations relating to the Plan, to accelerate the vesting of any stock options or cash awards made hereunder, and to make all other determinations necessary or advisable in the administration of the Plan. 3. Eligibility. The Committee may, consistent with the purpose of the Plan, grant options and cash awards to officers and other key employees of the Holding Company or of a Subsidiary who in the opinion of the Committee are from time to time materially responsible for the management or operation of the business A-1 2 of the Holding Company or of a Subsidiary and have provided valuable services to the Holding Company or a Subsidiary; provided, however, that in no event may any employee who owns (after application of the ownership rules in Section 425(d) of the Internal Revenue Code of 1986, as amended (the "Code")) shares of stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Holding Company or any of its Subsidiaries be granted an incentive stock option hereunder unless at the time such option is granted the option price is at least 110% of the fair market value of the stock subject to the option and such option by its terms is not exercisable after the expiration of five (5) years from the date such option is granted. Advisory directors of First Federal who are serving as advisors to the Peru division of First Federal and who are not employees of the Holding Company or its Subsidiaries ("Outside Advisory Directors"), on the date (the "Merger Conversion Date") First Federal Savings and Loan Association of Peru merges into First Federal and simultaneously converts (the "Merger Conversion") from mutual to stock from shall each be granted on such date a non-qualified option to purchase the number of whole shares of Common Stock of the Holding Company determined by multiplying the total number of shares issued by the Holding Company on the Merger Conversion Date by 1.275%. Such options shall have an exercise price per share equal to the purchase price per share paid for shares issued in such Merger Conversion. Outside Advisory Directors are not entitled to receive any other awards under this Plan. Subject to the foregoing and the provisions of Section 7 hereof, an individual who has been granted an option under the Plan (an "Optionee"), if he is otherwise eligible, may be granted an additional option or options if the Committee shall so determine. 4. Stock Subject to the Plan. There shall be reserved for issuance upon the exercise of options granted under the Plan, shares of Common Stock of the Holding Company equal to 10% of the total number of shares of Common Stock issued by the Holding Company in the Merger Conversion, which may be authorized but unissued shares or treasury shares of the Holding Company. Subject to Section 7 hereof, the shares for which options may be granted under the Plan shall not exceed that number. If any option shall expire or terminate or be surrendered for any reason without having been exercised in full, the unpurchased shares subject thereto shall (unless the Plan shall have terminated) become available for other options under the Plan. 5. Terms of Options. Each option granted under the Plan shall be subject to the following terms and conditions and to such other terms and conditions not inconsistent therewith as the Committee may deem appropriate in each case: (a) Option Price. The price to be paid for shares of stock upon the exercise of each option shall be determined by the Committee at the time such option is granted, but such price int he case of an incentive stock option shall not be less than the fair market value, as determined by the Committee consistent with Treas. Reg. Section 20.2031-2 and any requirements of Section 422A of the Code, of such stock on the date on which such option is granted; and provided, further, that the Committee may in no event award non-qualified stock options at a price less than 85% of the fair market value of the Common Stock on the date of grant, as determined by the Committee consistent with Treas. Reg. Section 20.2031-2. (b) Period for Exercise of Options. An option shall not be exercisable after the expriation of such period as shall be fixed by the Committee at the time of the grant thereof, but such period in no event shall exceed ten (10) years and one day from the date on which such option is granted; provided, that incentive stock options granted hereunder shall have terms not in excess of ten (10) years and options issued to Outside Advisory Directors shall be for a period of ten (10) years from the date of grant thereof. Options shall be subject to earlier termination as hereinafter provided. (c) Exercise of Options. The option price of each share of stock purchased upon exercise of an option shall be paid in full at the time of such exercise. Payment may be in (i) cash, (ii) if the Optionee may do so in conformity with Regulation T (12 C.F.R. Section 220.3(e)(4)) without violating Section 16(b) or A-2 3 Section 16(c) of the 1934 Act, pursuant to a broker's cashless exercise procedure, by delivering a properly executed exercise notice together with irrevocable instructions to a broker or promptly deliver to the Holding Company the total option price in cash and, if desired, the amount of any taxes to be withheld from the Optionee's compensation as a result of any withholding tax obligation of the Holding Company or any of its Subsidiaries, as specified in such notice, or (iii) beginning on a date which is three years following the Merger Conversion and with the approval of the Committee, by tendering whole shares of the Holding Company's Common Stock owned by the Optionee and cash having a fair market value equal to the cash exercise price of the shares with respect to which the option is being exercised. For this purpose, any shares so tendered by an Optionee shall be deemed to have a fair market value equal to the mean between the highest and lowest quoted selling prices for the shares on the date of exercise of the option (or if there were no sales on such date the weighted average of the means between the highest and lowest quoted selling prices on the nearest date before and the nearest date after the date of exercise of the options as prescribed by Treas. Reg. Section 20.2031-2)), as reported in The Wall Street Journal or a similar publication selected by the Committee. The Committee shall have the authority to grant options exercisable in full at any time during their term, or exercisable in such installments at such times during their term as the Committee may determine; provided, however, that options shall not be exercisable prior to a date which is six months after the date of shareholder approval of the Plan, if any, or during the first six (6) months of their term, and provided further that options granted to Outside Advisory Directors shall be fully exercisable following a six-month period beginning on the date of grant of the options or, if later, the date on which the Plan is approved by the Holding Company's shareholders, if such approval is obtained. Installments not purchased in earlier periods shall be cumulated and be available for purchase in later periods. Subject to the other provisions of this Plan, an option may be exercised at any time for from time to time during the term of the option as to any or all whole shares which have become subject to purchase pursuant to the terms of the options or the Plan, but not at any time as to fewer than one hundred (100) shares unless the remaining shares which have become subject to purchase are fewer than one hundred (100) shares. An option may be exercised only by written notice to the Holding Company, mailed to the attention of its Secretary, signed by the Optionee (or such other person or persons as shall demonstrate to the Holding Company his or their right to exercise the option), specifying the number of shares in respect of which it is being exercised, and accompanied by payment in full in either cash or by check in the amount of the aggregate purchase price therefor, by delivery of the irrevocable broker instructions referred to above, or, if the Committee has approved the use of the stock swap feature provided for above, followed as soon as practicable by the delivery of the option price for such shares. (d) Certificates. The certificate or certificates for the shares issuable upon an exercise of an option shall be issued as promptly as practicable after such exercise. An Optionee shall not have any rights of a shareholder in respect to the shares of stock subject to an option until the date of issuance of a stock certificate to him for such shares. In no case may a fraction of a share be purchased or issued under the Plan, but if, upon the exercise of an option, a fractional shares would otherwise be issuable, the Holding Company shall pay cash in lieu thereof. (e) Termination of Option. If an Optionee (other than an Outside Advisory Director) cease to be an employee of the Holding Company and the Subsidiaries for any reason other than retirement, permanent and total disability (within the meaing of Section 22(e)(3) of the Code), or death, any option granted to him shall forthwith terminate. Leave of absence approved by the Committee shall not constitute cessation of employment. If an Optionee (other than an Outside Advisory Director) ceases to be an employee of the Holding Company and the Subsidiaries by reason of retirement, any option granted to him may be exercised by him in whole or in part at any time after his retirement until the expiration of the option term fixed by the Committee in accordance with subsection (b) above, A-3 4 whether or not the option was otherwise exercisable at the date of his retirement. (The term "retirement" as used herein means such termination of employment as shall entitle such individual to early or normal retirement benefits under any then existing pension plan of the Holding Company or a Subsidiary.) If an Optionee (other than an Outside Advisory Director) ceases to be an employee of the Holding Company and the Subsidiaries by reason of permanent and total disability (within the meaning of Section 22(e)(3) of the Code), any option granted to him may be exercised by him in whole or in part within one (1) year after the date of his termination of employment by reason of such disability whether or not the option was otherwise exercisable at the date of such termination. Options granted to Outside Advisory Directors shall cease to be exercisable six (6) months after the date such Outside Advisory Director is no longer a director or advisory director of the Holding Company or of First Federal for any reason. In the event of the death of an Optionee while in the employ or service as an advisory director or director of the Holding Company or a Subsidiary, or, if the Optionee is not an Outside Advisory Director, after the date of his retirement or within one (1) year after the termination of his employment by reason of permanent and total disability (within the meaning of Section 22(e)(3) of the Code), or, if the Optionee is an Outside Advisory Director, within six (6) months after he is no longer a director or advisory director of the Holding Company or of First Federal, any option granted to him may be exercised in whole or in part at any time within one (1) year after the date of such death by the executor or administrator of his estate or by the person or persons entitled to the option by will or by applicable laws of descent and distribution until the expiration of the option term as fixed by the Committee, whether or not the option was otherwise exercisable at the date of his death. Notwithstanding the foregoing provisions of this subsection (e), no option shall in any event be exercisable after the expiration of the period fixed by the Committee in accordance with subsection (b) above. (f) Nontransferability of Option. No option may be transfered by the Optionee otherwise than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974 (as amended), or the rules and regulations thereunder, and during the lifetime of the Optionee options shall be exercisable only by the Optionee or his guardian or legal representative. (g) No Right to Continued Service. Nothing in this Plan or in any agreement entered into pursuant hereto shall confer on any person any right to continue in the employ or service of the Holding Company or its Subsidiaries or affect any rights of the Holding Company, a Subsidiary, or the shareholders of the Holding Company may have to terminate his service at any time. (h) Maximum Incentive Stock Options. The aggregate fair market value of stock with respect to which incentive stock options (within the meaning of Section 422A of the Code) are exercisable for the first time by an Optionee during any calendar year under the Plan or any other plan of the Holding Company or its Subsidiaries shall not exceed $100,000. For this purpose, the fair market value of such shares shall be determined as of the date the option is granted and shall be computed in such manner as shall be determined by the Committee, consistent with the requirements of Section 422A of the Code. (i) Agreement. Each option shall be evidenced by an agreement between the Optionee and the Holding Company which shall provide, among other things, that, with respect to incentive stock options, the Optionee will advise the Holding Company immediately upon any sale or transfer of the shares of Common Stock received upon exercise of the option to the extent such sale or transfer takes place prior to the later of (a) two (2) years from the date of grant or (b) one (1) year from the date of exercise. A-4 5 (j) Investment Representations. Unless the shares subject to an option are registered under applicable federal and state securities laws, each Optionee by accepting an option shall be deemed to agree for himself and his legal representatives that any option granted to him and any and all shares of Common Stock purchased upon the exercise of the option shall be acquired for investment and not with a view to, or for the sale in connection with, any distribution thereof, and each notice of the exercise of any portion of an option shall be accompanied by a representation in writing, signed by the Optionee or his legal representatives, as the case may be, that the shares of Common stock are being acquired in good faith for investment and not with a view to, or for sale in connection with, any distribution thereof (except in case of the Optionee's legal representatives for distribution, but not for sale, to his legal heirs, legatees and other testamentary beneficiaries). Any shares issued pursuant to an exercise of an option may bear a legend evidencing such representations and restrictions. 6. Incentive Stock Options and Non-Qualified Stock Options. Options granted under the Plan may be incentive stock options under Section 422A of the Code or non-qualified stock options, provided, however, that Outside Advisory Directors shall be granted only non-qualified stock options. All options granted hereunder will be clearly identified as either incentive stock options or non-qualified stock options. In no event will the exercise of an incentive stock option affect the right to exercise any non-qualified stock option, nor shall the exercise of any non-qualified stock option affect the right to exercise any incentive stock option. Nothing in this Plan shall be construed to prohibit the grant of incentive stock options and non-qualified stock options to the same person, provided, further, that incentive stock options and non-qualified stock optons shall not be granted in a manner whereby the exercise of one non-qualified stock option or incentive stock option affects the exercisability of the other. 7. Adjustment of Shares. In the event of any change after the effective date of the Plan in the outstanding stock of the Holding Company by reason of any reorganization, recapitalization, stock split, stock dividend, combination of shares, exchange of shares, merger or consolidation, liquidation, or any other change after the effective date of the Plan in the nature of the shares of stock of the Holding Company, the Committee shall determine what changes, if any, are appropriate in the number and kind of shares reserved under the Plan, and the Committee shall determine what changes, if any, are appropriate in the option price under and the number and kind of shares covered by outstanding options granted under the Plan. Any determination of the Committee hereunder shall be conclusive. 8. Cash Awards. Except as otherwise provided in Section 4 hereof, the Committee may, at any time and in its discretion, grant to any Optionee who is granted a non-qualified stock option the right to receive, at such times and in such amounts as determined by the Committee in its discretion, a cash amount ("cash award") which is intended to reimburse the Optionee for all or a portion of the federal, state and local income taxes imposed upon such Optionee as a consequence of the exercise of a non-qualified stock option and the receipt of a cash award. 9. Replacement and Extension of the Terms of Options and Cash Awards. The Committee from time to time may permit an Optionee (other than an Outside Advisory Director) under the Plan or any other stock option plan heretofore or hereafter adopted by the Holding Company or any Susidiary to surrender for cancellation any unexercised outstanding stock option and receive from his employing corporation in exchange therefor an option for such number of shares of Common Stock as may be designated by the Committee. Such Optionees also may be granted related cash awards as provided in Section 8 hereof. 10. Change in Control. In the event of a Change in Control, all options previously granted and still outstanding under the Plan regardless of their terms, shall become exercisable. For this purpose, "Change in Control" shall mean a change in control of the Holding Company or First Federal, within the meaning of 12 C.F.R. Section 574.4(a) (other than a change of control resulting from a trustee or other fiduciary holding shares A-5 6 of Common Stock under an employee benefit plan of the Holding Company or any its Subsidiaries), not approved in advance by the Holding Company's Board of Directors. 11. Tax Withholding. Whenever the Holding Company proposes or is required to issue or transfer shares of Common Stock under the Plan, the Holding Company shall have the right to require the Optionee or his or her legal representative to remit to the Holding Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery of any certificate or certificates for such shares, and whenever under the Plan payments are to be made in cash, such payments shall be net of an amount sufficient to satisfy and federal, state and/or local withholding tax requirements. If permitted by the Committee and pursuant to procedures established by the Committee, an Optionee who is not an Outside Advisory Director may make a written election to have shares of Common Stock having an aggregate fair market value, as determined by the Committee, consistent with requirements of Treas. Reg. Section 20.2031-2, sufficient to satisfy the applicable withholding taxes, withheld from the shares otherwise to be received upon the exercise of a non-qualified option. Elections by Optionees to have shares withheld for this purpose will be subject to the following restrictions: (1) they must be made prior to the date as of which the amount of tax withheld is determined (the "Tax Date"), (2) they will be irrevocable, (3) they will be subject to the disapproval of the Committee, and (4) if an Optionee is an officer or director of the Holding Company within the meaning of Section 16 of the 1934 Act and the Common Stock is registered under Section 12 of the 1934 Act, such elections (a) may not be made within six months of the grant of the option, (b) must be made either more than six months prior to the Tax Date or in the ten day "window period" beginning on the third day following the release of the Holding Company's quarterly or annual financial statements, and (c) may not be made until the Holding Company shall have been subject to the reporting requirements of the 1934 Act for at least one year and shall have filed all reports and statements required to be filed under the 1934 Act during such year. 12. Amendment. The Board of Directors of the Holding Company may amend the Plan from time to time and, with the consent of the Optionee, the terms and provisions of his option or cash award, except that without the approval of the holders of at least a majority of the shares of the Holding Company voting in person or by proxy at a duly constituted meeting or adjournment thereof: (a) the number of shares of stock which may reserved for issuance under the Plan may not be increased except as provided in Section 7 thereof; (b) the period during which an option may be exercise may not be extended beyond ten (10) years and one day from the date on which such option was granted; (c) the class of persons to whom options or cash awards may be granted under the Plan shall not be modified materially; (d) amendments will not be made which would cause the Plan or transactions by officers and directors thereunder to cease to comply with Rule 16b-3 promulgated under the 1934 Act, or any successor rule, unless the Holding Company at the time has ceased to have its Common Stock registered under Section 12 of the 1934 Act; and (e) the number of shares subject to options to be granted to Outside Advisory Directors or the date of grant or the exercise price and other terms thereof shall not be changed except as provided in Section 7 hereof unless the Holding Company at the time has ceased to have its Common Stock registered under Section 12 of the 1934 Act; provided further than in any event any such provisions in the Plan governing Outside Advisory Director options may not be amended more than once every six (6) months other than to comport with changes in the Code or the rules thereunder. A-6 7 No amendment of the Plan, however, may, without the consent of the Optionees, make any changes in any outstanding options or cash awards theretofore granted under the Plan which would adversly affect the rights of such Optionees. 13. Termination. The Board of Directors of the Holding Company may terminate the Plan at any time and option or cash award shall be granted thereafter. Such termination, however, shall not affect the validity of any option or cash award theretofore granted under the Plan. In any event, no incentive stock option may be granted under the Plan after the date which is ten (10) years from the effective date of the Plan or, if earlier, the date the Plan is approved by the Holding Company's shareholders. 14. Successors. This Plan shall be binding upon the successors and assigns of the Holding Company. 15. Governing Law. The terms of any options granted hereunder and the rights and obligations hereunder of the Holding Company, the Optionees and their successors in interest shall, except to the extent governed by federal law, be governed by Indiana law. 16. Government and Other Regulations. The obligations of the Holding Company to issue to transfer and deliver shares under options granted under the Plan or make cash awards shall be subject to compliance with all applicable laws, governmental rules and regulations, and administrative action. 17. Effective Date. The Plan shall become effective on the effective date of the Merger Conversion, and any options granted pursuant to the Plan may not be exercised until the Board of Directors of the Holding Company has been advised by counsel that such approval has been obtained and all other applicable legal requirements have been met. A-7 EX-10.28 13 NATIONAL CITY CORP 10-K EXHIBIT 10.28 1 Exhibit 10.28 29-3854-25 (8/89) CORPORATE WHOLE LIFE POLICY II WITH ADDITIONAL PROTECTION I/R 4400.00 THIS IS A REPRESENTATIVE SAMPLE OF NORTHWESTERN MUTUAL LIFE'S NN SERIES CORPORATE WHOLE LIFE POLICY II WITH ADDITIONAL PROTECTION. POLICY BENEFITS AND WORDING MAY VARY TO COMPLY WITH STATE REGULATIONS. ================================================================================ The Northwestern Mutual Life Insurance Company agrees to pay the benefits provided in this policy, subject to its terms and conditions. Signed at Milwaukee, Wisconsin on the Date of Issue. PRESIDENT AND C.E.O. SECRETARY SPECIMEN COPY CORPORATE WHOLE LIFE POLICY II WITH ADDITIONAL PROTECTION ELIGIBLE FOR ANNUAL DIVIDENDS. Basic Amount plus Additional Protection payable on death of Insured. Premiums payable for period shown on page 3. RIGHT TO RETURN POLICY -- Please read this policy carefully. The policy may be returned by the Owner for any reason within ten days after it was received. The policy may be returned to your agent or to the Home Office of the Company at 720 East Wisconsin Avenue, Milwaukee, WI 53202. If returned, the policy will be considered void from the beginning. Any premium paid will then be returned. NN.21 [NORTHWESTERN MUTUAL LIFE LOGO] ================================================================================ INSURED JOHN J DOE AGE AND SEX 35 MALE POLICY DATE AUGUST 1, 1987 POLICY NUMBER 2 000 021 PLAN CORPORATE WHOLE LIFE II BASIC AMOUNT $ 32,387 WITH ADDITIONAL PROTECTION ADDITION PROTECTION 66,514 TOTAL INSURANCE AMOUNT 98,901 NN 21 2 THIS POLICY IS A LEGAL CONTRACT BETWEEN THE OWNER AND THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY. READ YOUR POLICY CAREFULLY. GUIDE TO POLICY PROVISIONS BENEFITS AND PREMIUMS SECTION 1. THE CONTRACT Life Insurance Benefit payable on death of Insured. Incontestability. Suicide. Definition of dates. SECTION 2. OWNERSHIP Rights of the Owner. Assignment as collateral. SECTION 3. ADDITIONAL PROTECTION Description of Additional Protection. Reduction of Additional Protection. SECTION 4. PREMIUMS AND REINSTATEMENT Payment of premiums. Grace period of 31 days to pay premium. Refund of unused premium at death. How to reinstate the policy. SECTION 5. DIVIDENDS Annual dividends. Use of dividends. Dividend at death. SECTION 6. CASH VALUES AND PAID-UP INSURANCE Cash surrender value. What happens if premium is not paid. Basis of values. SECTION 7. LOANS Policy loans. Premium loans. Effect of policy debt. Interest on loans. SECTION 8. CHANGE OF POLICY SECTION 9. BENEFICIARIES Naming and change of beneficiaries. Marital deduction provision for spouse of Insured. Succession in interest of beneficiaries. SECTION 10. PAYMENT OF POLICY BENEFITS Payment of surrender or death proceeds. Payment plans for policy proceeds. Right to increase income under payment plans. Guaranteed payment tables. ADDITIONAL BENEFITS (if any) APPLICATION NN.21 3 BENEFITS AND PREMIUMS DATE OF ISSUE - AUGUST 1, 1987 ANNUAL PAYABLE PLAN AND ADDITIONAL BENEFITS AMOUNT PREMIUM FOR CORPORATE WHOLE LIFE II $ 1,156.62 55 YEARS BASIC AMOUNT $ 32,387 ADDITIONAL PROTECTION 66,514* TOTAL INSURANCE AMOUNT 98,901 * THE AMOUNT OF ADDITIONAL PROTECTION IS GUARANTEED FOR THE FIRST POLICY YEAR. TO CONTINUE THE ADDITIONAL PROTECTION SCHEDULED FOR THE SECOND AND SUBSEQUENT POLICY YEARS, AN INCREASED PREMIUM MAY BE REQUIRED UNDER SECTION 3.2. A PREMIUM IS PAYABLE ON AUGUST 1, 1987 AND EVERY AUGUST 1 AFTER THAT. THE FIRST PREMIUM IS $1,156.62 WHICH INCLUDES A SCHEDULED ADDITIONAL PREMIUM OF $453.58 USED TO PURCHASE PAID UP INSURANCE OF $1,667. EACH SUBSEQUENT ANNUAL PREMIUM ALSO INCLUDES A SCHEDULED ADDITIONAL PREMIUM OF $453.58. THE OWNER MAY ELECT THE SPECIFIED RATE OR THE VARIABLE RATE LOAN INTEREST OPTION. SEE SECTIONS 7.4 THROUGH 7.6 OF THE POLICY. THE SPECIFIED RATE LOAN INTEREST OPTION WAS ELECTED ON THE APPLICATION. THIS POLICY IS ISSUED IN A SELECT PREMIUM CLASS. DIRECT BENEFICIARY JANE M DOE, WIFE OF THE INSURED OWNER XYZ CORPORATION INSURED JOHN J DOE AGE AND SEX 35 MALE POLICY DATE AUGUST 1, 1987 POLICY NUMBER 2 000 021 PLAN CORPORATE WHOLE LIFE II BASIC AMOUNT $32,387 WITH ADDITIONAL PROTECTION ADDITIONAL PROTECTION 66,514 TOTAL INSURANCE AMOUNT 98,901 NN 21 PAGE 3 4 TABLE OF INSURANCE AMOUNTS DURING POLICY YEAR BEGINNING BASIC ADDITIONAL TOTAL AUGUST 1, AMOUNT PROTECTION* INSURANCE 1987 $32,387 $66,514 $98,901 1988 32,387 66,115 98,502 1989 32,387 65,830 98,217 1990 32,387 65,692 98,079 1991 32,387 65,704 98,091 1992 32,387 65,868 98,255 1993 32,387 66,157 98,544 1994 32,387 66,571 98,958 1995 32,387 67,155 99,542 1996 32,387 67,915 100,302 1997 32,387 68,861 101,248 1998 32,387 70,002 102,389 1999 32,387 71,349 103,736 2000 32,387 72,912 105,299 2001 32,387 74,705 107,092 2002 32,387 76,741 109,128 2003 32,387 79,035 111,422 2004 32,387 81,603 113,990 2005 32,387 84,463 116,850 2006 32,387 87,631 120,018 2007 32,387 91,130 123,517 2008 32,387 94,981 127,368 2009 32,387 99,207 131,594 2010 32,387 103,836 136,223 2011 32,387 108,894 141,281 2012 32,387 114,411 146,798 2013 32,387 120,421 152,808 2014 32,387 126,957 159,344 2015 32,387 134,060 166,447 2016 32,387 141,768 174,155 2017 32,387 289,733 322,120 2018 32,387 310,739 343,126 2019 32,387 333,092 365,479 2020 32,387 356,876 389,263 2021 32,387 382,184 414,571 2022 32,387 409,112 441,499 2023 32,387 437,762 470,149 2024 32,387 468,249 500,636 2025 32,387 500,690 533,077 2026 32,387 535,212 567,599 CONTINUED ON PAGE 3B INSURED JOHN J DOE AGE AND SEX 35 MALE POLICY DATE AUGUST 1, 1987 POLICY NUMBER 2 000 021 PLAN CORPORATE WHOLE LIFE II BASIC AMOUNT $32,387 WITH ADDITIONAL PROTECTION ADDITIONAL PROTECTION 66,514 TOTAL INSURANCE AMOUNT 98,901 NN 21 PAGE 3A 5 TABLE OF INSURANCE AMOUNTS DURING POLICY YEAR BEGINNING BASIC ADDITIONAL TOTAL AUGUST 1, AMOUNT PROTECTION* INSURANCE 2027 $32,387 $ 571,951 $ 604,338 2028 32,387 611,050 643,437 2029 32,387 652,669 685,056 2030 32,387 696,969 729,356 2031 32,387 744,130 776,517 2032 32,387 794,342 826,729 2033 32,387 847,808 880,195 2034 32,387 904,746 937,133 2035 32,387 965,390 997,777 2036 32,387 1,029,987 1,062,374 2037 32,387 1,098,804 1,131,191 2038 32,387 1,172,128 1,204,515 2039 32,387 1,250,264 1,282,651 2040 32,387 1,333,540 1,365,927 2041 32,387 1,422,307 1,454,694 2042 32,387 1,422,307 1,454,694 2043 32,387 1,422,307 1,454,694 2044 32,387 1,422,307 1,454,694 2045 32,387 1,422,307 1,454,964 2046 32,387 1,422,307 1,454,964 2047 32,387 1,422,307 1,454,694 2048 32,387 1,422,307 1,454,694 2049 32,387 1,422,307 1,454,694 2050 32,387 1,422,307 1,454,694 2051 32,387 1,422,307 1,454,694 * THE AMOUNT OF ADDITIONAL PROTECTION IS GUARANTEED FOR THE FIRST POLICY YEAR. TO CONTINUE THE ADDITIONAL PROTECTION SCHEDULED FOR THE SECOND AND SUBSEQUENT POLICY YEARS, AN INCREASED PREMIUM MAY BE REQUIRED UNDER SECTION 3.2. VALUES DO NOT INCLUDE PAID UP INSURANCE PURCHASED BY ADDITIONAL PREMIUMS. INSURED JOHN J DOE AGE AND SEX 35 MALE POLICY DATE AUGUST 1, 1987 POLICY NUMBER 2 000 021 PLAN CORPORATE WHOLE LIFE II BASIC AMOUNT $32,387 WITH ADDITIONAL PROTECTION ADDITIONAL PROTECTION 66,514 TOTAL INSURANCE AMOUNT 98,901 NN 21 PAGE 3B 6 TABLE OF GUARANTEED VALUES FOR $32,387 BASIC AMOUNT END OF POLICY CASH PAID-UP YEAR AUGUST 1, VALUE INSURANCE 1 1988 $ 0 $ 0 2 1989 382 1,392 3 1990 775 2,785 4 1991 1,180 4,080 5 1992 1,595 5,376 6 1993 2,021 6,574 7 1994 2,457 7,740 8 1995 2,903 8,874 9 1996 3,360 9,975 10 1997 3,827 11,011 11 1998 4,304 11,983 12 1999 4,793 12,954 13 2000 5,292 13,894 14 2001 5,802 14,768 15 2002 6,323 15,610 16 2003 6,856 16,452 17 2004 7,397 17,229 18 2005 7,948 17,974 19 2006 8,506 18,719 20 2007 9,071 19,399 AGE 60 2012 11,996 22,476 AGE 65 2017 15,044 24,937 AGE 70 2022 18,086 26,881 VALUES ARE INCREASED BY PAID UP ADDITIONS AND DIVIDEND ACCUMULATIONS AND DECREASED BY POLICY DEBT. VALUES SHOWN AT END OF POLICY YEAR DO NOT REFLECT ANY PREMIUM DUE ON THAT POLICY ANNIVERSARY. INSURED JOHN J DOE AGE AND SEX 35 MALE POLICY DATE AUGUST 1, 1987 POLICY NUMBER 2 000 021 PLAN CORPORATE WHOLE LIFE II BASIC AMOUNT $ 32,387 WITH ADDITIONAL PROTECTION ADDITIONAL PROTECTION 66,514 TOTAL INSURANCE AMOUNT 98,901 NN 21 PAGE 4 7 TABLE OF ANNUAL PREMIUMS PER $1,000 OF TERM INSURANCE USED TO CALCULATE INCREASED PREMIUMS. SEE SECTION 3.2. FOR FOR POLICY YEAR POLICY YEAR BEGINNING BEGINNING AUGUST 1, PREMIUM AUGUST 1, PREMIUM 1987 $ 2.65 2032 $ 96.93 1988 2.65 2033 105.40 1989 2.65 2034 114.98 1990 2.65 2035 125.78 1991 2.74 2036 137.54 1992 2.96 2037 149.99 1993 3.23 2038 162.88 1994 3.49 2039 176.08 1995 3.80 2040 189.53 1996 4.11 2041 203.28 1997 4.46 1998 4.82 1999 5.22 2000 5.63 2001 6.09 2002 6.58 2003 7.16 2004 7.81 2005 8.54 2006 9.38 2007 10.27 2008 11.24 2009 12.25 2010 13.33 2011 14.48 2012 15.77 2013 17.20 2014 18.82 2015 20.65 2016 22.69 2017 24.93 2018 27.31 2019 29.85 2020 32.55 2021 35.47 2022 38.75 2023 42.46 2024 46.73 2025 51.62 2026 57.06 2027 62.95 2028 69.17 2029 75.63 2030 82.28 2031 89.29 INSURED JOHN J DOE AGE AND SEX 35 MALE POLICY DATE AUGUST 1, 1987 POLICY NUMBER 2 000 021 PLAN CORPORATE WHOLE LIFE II BASIC AMOUNT $ 32,387 WITH ADDITIONAL PROTECTION ADDITIONAL PROTECTION 66,514 TOTAL INSURANCE AMOUNT 98,901 NN 21 PAGE 4A 8 TABLE OF CASH VALUES FOR $1.00 OF PAID-UP ADDITIONS END OF END OF POLICY CASH POLICY CASH YEAR AUGUST 1, VALUE YEAR AUGUST 1, VALUE 0 1987 $.25173 1 1988 .26019 31 2018 $.61689 2 1989 .26892 32 2019 .63072 3 1990 .27790 33 2020 .64453 4 1991 .28712 34 2021 .65831 5 1992 .29659 35 2022 .67206 6 1993 .30630 36 2023 .68574 7 1994 .31623 37 2024 .69929 8 1995 .32641 38 2025 .71262 9 1996 .33683 39 2026 .72564 10 1997 .34748 40 2027 .73828 11 1998 .35837 41 2028 .75052 12 1999 .36951 42 2029 .76238 13 2000 .38089 43 2030 .77391 14 2001 .39252 44 2031 .78517 15 2002 .40440 45 2032 .79621 16 2003 .41653 46 2033 .80702 17 2004 .42888 47 2034 .81756 18 2005 .44143 48 2035 .82774 19 2006 .45416 49 2036 .83745 20 2007 .46704 50 2037 .84665 21 2008 .48007 51 2038 .85536 22 2009 .49324 52 2039 .86362 23 2010 .50655 53 2040 .87153 24 2011 .52002 54 2041 .87921 25 2012 .53364 55 2042 .88679 26 2013 .54739 27 2014 .56124 28 2015 .57516 29 2016 .58909 30 2017 .60301 VALUES DURING A POLICY YEAR WILL REFLECT ANY PORTION OF THE YEAR'S PREMIUM PAID AND THE TIME ELAPSED IN THAT YEAR. THESE CASH VALUES ARE NOT GUARANTEED FOR UNSCHEDULED ADDITIONAL PREMIUMS PAID AFTER THE FIRST 20 POLICY YEARS. INSURED JOHN J DOE AGE AND SEX 35 MALE POLICY DATE AUGUST 1, 1987 POLICY NUMBER 2 000 021 PLAN CORPORATE WHOLE LIFE II BASIC AMOUNT $ 32,387 WITH ADDITIONAL PROTECTION ADDITIONAL PROTECTION 66,514 TOTAL INSURANCE AMOUNT 98,901 NN 21 PAGE 4B 9 SECTION 1. THE CONTRACT 1.1 LIFE INSURANCE BENEFIT The Northwestern Mutual Life Insurance Company will pay a benefit on the death of the Insured. Subject to the terms and conditions of the policy: - payment of the death proceeds will be made after proof of the death of the Insured is re- ceived at the Home Office; and - payment will be made to the beneficiary or other payee under Sections 9 and 10. The amount of the death proceeds when all pre- miums due have been paid will be: - the Basic Amount shown on page 3; plus - the amount of Additional Protection then in force under Section 3; plus - the amount of any paid-up additions in force under Section 4.3; plus - the amount of any dividend accumulations (Section 5.2); plus - the amount of any premium refund (Section 4.1) and any dividend at death (Section 5.4); less - the amount of any policy debt (Section 7.3). These amounts will be determined as of the date of death. The amount of the death proceeds when the In- sured dies during the grace period following the due date of an unpaid premium will be: - the amount determined above assuming the overdue premium had been paid; less - the amount of the unpaid premium. The amount of the death proceeds when the In- sured dies while the policy is in force as paid-up insurance will be determined under Section 6.2. 1.2 ENTIRE CONTRACT; CHANGES This policy with the attached application is the en- tire contract. Statements in the application are repre- sentations and not warranties. A change in the policy is valid only if it is approved by an officer of the Company. The Company may require that the policy be sent to it for endorsement to show a change. No agent has the authority to change the policy or to waive any of its terms. 1.3 INCONTESTABILITY The Company will not contest insurance after the insurance has been in force during the lifetime of the Insured for two years from the Date of Issue. In issuing the insurance, the Company has relied on the application. While the insurance is contestable, the Company, on the basis of a misstatement in the appli- cation, may rescind the policy or deny a claim. 1.4 SUICIDE If the Insured dies by suicide within one year from the Date of Issue, the amount payable by the Com- pany will be limited to the premiums paid, less the amount of any policy debt. 1.5 DATES The contestable and suicide periods begin with the Date of Issue. Policy months, years and anniversaries are computed from the Policy Date. Both dates are shown on page 3. The Date of Issue for an increase in insurance that occurs as a result of the Owner regaining the right to continue the amount of Additional Protection (Section 3.2) will be the date that this increase takes effect. 1.6 MISSTATEMENT OF AGE OR SEX If the age or sex of the Insured has been misstated, the amount payable will be the amount which the premiums paid would have purchased at the correct age and sex. 1.7 PAYMENTS BY THE COMPANY All payments by the Company under this policy are payable at its Home Office. SECTION 2. OWNERSHIP 2.1 THE OWNER The Owner is named on page 3. The Owner, his successor or his transferee may exercise policy rights without the consent of any beneficiary. After the death of the Insured, policy rights may be exercised only as provided in Sections 9 and 10. 2.2 TRANSFER OF OWNERSHIP; LIMITATION This policy is designed for ownership by a corpora- tion. The Owner may transfer the ownership of this policy, but only to another corporation. Written proof of transfer satisfactory to the Company must be re- ceived at its Home Office. The transfer will then take effect as of the date that it was signed. The Company may require that the policy be sent to it for endorse- ment to show the transfer. 2.3 COLLATERAL ASSIGNMENT The Owner may assign this policy as collateral secu- rity. The Company is not responsible for the validity or effect of a collateral assignment. The Company will not be responsible to an assignee for any payment or other action taken by the Company before receipt of the assignment in writing at its Home Office. The interest of any beneficiary will be subject to any collateral assignment made either before or after the beneficiary is named. A collateral assignee is not an Owner. A collateral assignment is not a transfer of ownership. Ownership can be transferred only by complying with Section 2.2. 5 10 SECTION 3. ADDITIONAL PROTECTION 3.1 ADDITIONAL PROTECTION DESCRIPTION. Additional Protection consists of one year term insurance and paid-up dividend additions. At first, it is all one year term insurance. Each dividend is used to purchase paid-up additions. These additions reduce the amount of one year term insurance until Additional Protection is all paid-up additions. The amount of one year term insurance may increase if the amount of Additional Protection increases. One year term insurance will generally be in force for the entire policy year; however, as provided in Section 3.2 and in Section 3.3, the one year term insurance may be terminated, or the amount of one year term insurance may be reduced during a policy year. AMOUNT. The amount of Additional Protection for each policy year will be the amount shown on page 3A so long as premiums are paid when due unless: - the amount of Additional Protection is reduced by the Company under Section 3.2; - the amount of Additional Protection is reduced by the Owner under Section 3.3; or - the amount of paid-up dividend additions in force exceeds the amount of Additional Protec- tion shown on page 3A. In that case, the amount of Additional Protection will be the amount of paid-up dividend additions in force. 3.2 REDUCTION BY COMPANY; OWNER'S RIGHT TO CONTINUE EXISTING PROTECTION If, at the end of any policy month after the first policy anniversary, any part of Additional Protection is one year term insurance, the Company may reduce the one year term insurance portion of Additional Protection for the remainder of the policy year. The reduction will cause a like reduction in the amount of Additional Protection, so that the amount of Addi- tional Protection will be less than that shown on page 3A. The Company may do this if it determines that the premium, not including any amount used to purchase paid-up insurance or to pay for any additional benefits, is not large enough to pay for the Basic Amount and the amount of term insurance that would be part of Additional Protection for the remainder of the policy year. The Company will send written notice of the reduction. The Owner may prevent a reduction that would otherwise occur on or before the policy anniversary nearest to the Insured's 89th birthday. This may be done by written request and the payment of an in- creased premium. The amount of the premium in- crease will not be more than: a) the amount of the reduction in one year term insurance; multiplied by b) the premium rate for one year term insurance for the policy year. The premium rates for term insurance are shown on page 4A. The increased premium will be payable for the remainder of the premium paying period. The Owner's request and the premium must be received at the Home Office within 31 days of the date the reduction would take effect. The right of the Owner to continue the amount of Additional Protection will terminate as of the first poli- cy month for which the Owner fails to pay an in- creased premium when due, or, if earlier, when the Owner reduces the Additional Protection under Sec- tion 3.3. If the right to continue the amount of Addi- tional Protection has terminated for failure to pay an increased premium when due, the right will be re- stored the first day of any later policy month on which the Company determines that the amount of Addi- tional Protection in force need not be reduced below the amount shown on page 3A. On or before the policy anniversary nearest the Insured's 75th birthday, the Owner may also regain the right to continue the amount of Additional Protection if: - the increased premium is paid; - evidence of insurability is given that is satisfactory to the Company; and - Company requirements place the Insured in an underwriting ciass that is the same as, or is better than, the one for this policy. The Company may charge a fee for underwriting ex- penses. 3.3 REDUCTION OF ADDITIONAL PROTECTION BY OWNER REDUCTION IF DIVIDEND OPTION CHANGED. If the Own- er directs that dividends be used other than to pur- chase paid-up additions, any one year term insurance in force will terminate. The right to continue the amount of Additional Protection under Section 3.2 will also terminate. The amount of Additional Protection will then be the amount of paid-up additions in force. REDUCTION IF ADDITIONS SURRENDERED. The amount of Additional Protection in force for the remainder of a policy year will be reduced by the amount of dividend additions being surrendered during that year. Also, the amounts of Additional Protection scheduled for future policy years, as shown on page 3A, will be reduced by the amount of dividend additions surrendered, except to the extent that the proceeds of the surrender are used to pay the premium then due on this policy. 6 11 SECTION 4. PREMIUMS AND REINSTATEMENT 4.1 PREMIUMS PAYMENT. All premiums after the first are payable at the Home Office or to an authorized agent. A receipt signed by an officer of the Company will be furnished on request. A premium must be paid on or before its due date. The date when each premium is due and the number of years for which premiums are payable are described on page 3. No premiums may be paid while the policy is in force as paid-up insurance under Section 6.2, except as provided in Reinstatement (Section 4.4). FREQUENCY. Premiums may be paid every 3, 6 or 12 months at the published rates of the Company. A change in premium frequency will take effect when the Company accepts a premium on a new frequency. Premiums may be paid on any other frequency ap- proved by the Company. GRACE PERIOD. A grace period of 31 days will be allowed to pay a premium that is not paid on its due date. The policy will be in full force during this period. If the Insured dies during the grace period, any over- due premium will be paid from the proceeds of the policy. If the premium is not paid within the grace period, the policy will terminate as of the due date unless it continues as paid-up insurance under Section 6.2. PREMIUM REFUND AT DEATH. The Company will refund a portion of a premium which was due and was paid for the policy year in which the Insured dies. The refund will be the amount by which the premium paid is more than that premium on an annual basis multi- plied by the fraction of the policy year that has elapsed at the time of death. Any premium amount used to purchase a paid-up addition will not be in- cluded in determining the refund. The refund will be part of the policy proceeds. 4.2 AMOUNT OF PREMIUM; ADJUSTMENTS The amount of the premium due is shown on page 3. The premium due on the policy may be increased as provided in Section 3.2. Any scheduled additional premium may be decreased as provided in Section 4.3. 4.3 ADDITIONAL PREMIUMS PURCHASE OF PAID-UP ADDITIONS. Additional premiums are used to purchase paid-up additional insurance. The Company will deduct a charge of 7 1/2% for expenses from each additional premium. Each addition will im- mediately increase the death proceeds payable under Section 1.1. Paid-up additions increase the policy's cash value and will share in divisible surplus. They may be surrendered unless used for a loan or for paid-up insurance under Section 6.2. ADDITIONAL PREMIUMS SCHEDULED AT ISSUE. Scheduled additional premiums are level and are payable for the number of years shown on page 3. Each scheduled additional premium paid will be used, as of the due date of the premium, to purchase a paid-up addition. OWNER'S RIGHT TO DECREASE SCHEDULED ADDITIONAL PREMIUMS. The Owner may decrease the scheduled additional premium amount. This may be done at any time by written request sent to the Home Office. A premium decrease will take effect on the first premium due date that follows the receipt at the Home Office of the Owner's written request For change. When the Owner decreases premiums, the Company will send an amendment to the schedule of benefits and pre- miums. UNSCHEDULED ADDITIONAL PREMIUM OPTION. Un- scheduled additional premiums may be paid to the Company at any time before the policy anniversary that is nearest to the Insured's 75th birthday. An unscheduled additional premium may be paid only if, at the time the premium is paid: - the insurance in force after applying the un- scheduled additional premium will be within the Company's issue limits; - evidence of insurability is given that is satisfactory to the Company; - Company requirements place the Insured in an underwriting classification that is the same as, or is better than, the one for this policy; and - the total amount of the unscheduled additional premiums and other premiums paid to the Com- pany under any policy for purchases of paid-up life insurance on the life of the Insured is within the Company's limits for such premiums; how- ever, the Company may not set a limit below $1,000. Each unscheduled premium may not be less than $1,000. Each unscheduled premium will be used, as of the date the premium is paid, to purchase a paid-up addition. 4.4 REINSTATEMENT The policy may be reinstated within five years after the due date of the overdue premium. All unpaid premiums (and interest as required below) must be received by the Company while the Insured is alive. The policy may not be reinstated if the policy was surrendered for its cash surrender value. Any policy debt on the due date of the overdue premium, with interest at the policy loan interest rate from that date, must be repaid or reinstated. In addition, for the policy to be reinstated more than 31 days after the end of the grace period: - evidence of insurability must be given that is satisfactory to the Company; and - all unpaid premiums (except for scheduled addi- tional premiums) must be paid with interest from the due date of each premium. Interest is at an annual effective rate of 6%. 7 12 SECTION 5. DIVIDENDS 5.1 ANNUAL DIVIDENDS This policy will share in the divisible surplus of the Company. This surplus is determined each year. This policy's share will be credited as a dividend on the poiicy anniversary. The dividend will reflect the mor- tality, expense and investment experience of the Com- pany and will be affected by any policy debt during the policy year. 5.2 USE OF DIVIDENDS Annual dividends may be paid in cash or used for one of the following: - PAID-UP ADDITIONS. Dividends will purchase paid- up additional insurance. Paid-up additions share in the divisible surplus. Paid-up additions pur- chased by dividends will be part of Additional Protection. - DIVIDEND ACCUMULATIONS. Dividends will accu- mulate at interest. Interest is credited at an an- nual effective rate of 3 1/2%. The Company may set a higher rate. - PREMIUM PAYMENT. Dividends will be used to reduce premiums. If the balance of a premium is not paid, or if this policy is in force as paid-up insurance, the dividend will purchase paid-up additions. Other uses of dividends may be made available by the Company. If no direction is given for the use of dividends, they will purchase paid-up additions. 5.3 ADDITIONS AND ACCUMULATIONS Paid-up additions and dividend accumulations increase the policy's cash value. They are payable as part of the policy proceeds. Additions may be surrendered and accumulations may be withdrawn unless they are used for a loan or for paid-up insurance. 5.4 DIVIDEND AT DEATH A dividend for the period from the beginning of the policy year to the date of the Insured's death will be payable as part of the policy proceeds. SECTION 6. CASH VALUES AND PAID-UP INSURANCE 6.1 CASH VALUE The cash value for this policy, when all premiums due have been paid, will be the sum of: - the cash value from the Table of Guaranteed Values; - the cash value of any paid-up additions; and - the amount of any dividend accumulations. The cash value within three months after the due date of any unpaid premium will be the cash value on that due date reduced by any later surrender of paid-up additions and by any later withdrawal of dividend accumulations. After that, the cash value will be the cash value of the insurance then in force, including the cash value of any paid-up additions and any dividend accumulations. The cash value of any paid-up insurance or paid-up additions will be the net single premium for that insurance at the attained age of the Insured. 6.2 PAID-UP INSURANCE If any premium is unpaid at the end of the grace period, this policy will be in force as paid-up insurance. The amount of insurance will be determined by using the cash value as a net single premium at the attained age of the Insured. Any policy debt will continue. Paid-up insurance will share in divisible surplus. The amount of the death proceeds when this policy is in force as paid-up insurance will be: - the amount of paid-up insurance determined above; plus - the amount of any in force paid-up additions purchased by dividends after the policy has become paid-up insurance (Section 5.2); plus - the amount of any existing dividend accumulations (Section 5.2); plus - the amount of any dividend at death (Section 5.4); less - the amount of any policy debt (Section 7.3). These amounts will be determined as of the date of death. If paid-up insurance is surrendered within 31 days after a policy anniversary, the cash value will not be less than the cash value on that anniversary reduced by any later surrender of paid-up additions and by any later withdrawal of dividend accumulations. 6.3 CASH SURRENDER The Owner may surrender this policy for its cash surrender value. The cash surrender value is the cash value less any policy debt. A written surrender of all claims, satisfactory to the Company, will be required. The date of surrender will be the date of receipt at the Home Office of the written surrender. The policy will terminate and the cash surrender value will be determined as of the date of surrender. The Company may require that the policy be sent to it. 8 13 6.4 TABLE OF GUARANTEED VALUES Cash values and paid-up insurance for the Basic Amount are shown on page 4 for the end of the policy years indicated. These values assume that all premiums due have been paid for the number of years stated. They do not reflect paid-up additions, dividend accumulations or policy debt. Values during a policy year will reflect any portion of the year's premium paid and the time elapsed in that year. Values for policy years not shown are calculated on the same basis as those on page 4. A list of these values will be furnished on request. A detailed state- ment of the method of calculation of all values has been filed with the insurance supervisory official of the state in which this policy is delivered. The Company will furnish this statement at the request of the Own- er. All values are at least as great as those required by that state. 6.5 BASIS OF VALUES The cash value for each policy year not shown on page 4 equals the reserve for the Basic Amount for that year calculated on the Commissioners Reserve Valuation Method. Cash values and net single pre- miums are based on the Commissioners 1980 Stan- dard Ordinary Mortality Table for the sex of the In- sured. Interest is based on an annual effective rate of 4%. Calculations assume the continuous payment of premiums and the immediate payment of claims. For increases in coverage or premium that occur under Sections 3 or 4 after the twentieth policy year, the Company may base cash values and premiums on the interest rates and mortality tables being used as the basis of values of whole life insurance then being issued by the Company. SECTION 7. LOANS 7.1 POLICY AND PREMIUM LOANS The Owner may obtain a loan from the Company in an amount that is not more than the loan value. POLICY LOAN. The loan may be obtained on written request. The Company may defer making the loan for up to six months unless the loan is to be used to pay premiums due the Company. PREMIUM LOAN. If the premium loan provision is in effect on this policy a loan will be made to pay an overdue premium. If the loan value is not large enough to pay the overdue premium, a premium will be paid for any other frequency permitted by this policy for which the loan value is large enough. The Owner may elect or revoke the premium loan provi- sion by written request received at the Home Office. 7.2 LOAN VALUE The loan value is the smaller of a. or b., less any policy debt and any premium then due or billed; a. and b. are defined as: a. the cash value one year after the date of the loan, assuming all premiums due within that year are paid, less interest to one year from the date of the loan. b. the cash value on the due date of the first premium not yet billed that is due after the date of the loan, less interest from the date of the loan to that premium due date. 7.3 POLICY DEBT Policy debt consists of all outstanding loans and accrued interest. It may be paid to the Company at any time. Policy debt affects dividends under Section 5. Any policy debt will be deducted from the policy proceeds. If the policy debt equals or exceeds the cash value, this policy will terminate. Termination occurs 31 days after a notice has been mailed to the Owner and to any assignee on record at the Home Office. 7.4 LOAN INTEREST Interest accrues and is payable on a daily basis from the date of the loan on policy loans and from the premium due date on premium loans. Unpaid interest is added to the loan. The Specified Rate loan interest option or the Var- iable Rate loan interest option is elected on the appli- cation. CHANGE TO VARIABLE RATE LOAN INTEREST OPTION. The Owner may request a change to the Variable Rate loan interest option at any time, with the change to take effect on the January 1st following receipt of a written request at the Company's Home Office. CHANGE TO SPECIFIED RATE LOAN INTEREST OPTION. The Owner may request a change to the Specified Rate loan interest option if the interest rate set by the Company under Section 7.6 for the year beginning on the next January 1st is less than 8%. The written request to change must be received at the Home Office between November 15th and the last business day of the calendar year; the change will take effect on the January 1st following receipt of the request at the Home Office. 9 14 7.5 SPECIFIED RATE LOAN INTEREST OPTION Interest is payable at an annual effective rate of 8%. 7.6 VARIABLE RATE LOAN INTEREST OPTION Interest is payable at an annual effective rate that is set by the Company annually and applied to new or outstanding policy debt during the year beginning each January 1st. The highest loan interest rate that may be set by the Company is the greater of 5% or a rate based on the Moody's Corporate Bond Yield Averages-Monthly Average Corporates for the imme- diately preceding October. This Average is published by Moody's Investor's Service, Inc. If it is no longer published, the highest loan rate will be based on some other similar average established by the insur- ance supervisory official of the state in which this policy is delivered. The loan interest rate set by the Company will not exceed the maximum rate permitted by the laws of the state in which this policy is delivered. The loan interest rate may be increased only if the increase in the annual effective rate is at least 1/2%. The loan interest rate will be decreased if the decrease in the annual effective rate is at least 1/2%. The Company will give notice: - of the initial loan interest rate in effect at the time a policy or premium loan is made. - of an increase in loan interest rate on outstand- ing policy debt no later than 30 days before the January 1st on which the increase takes effect. This policy will not terminate during a policy year as the sole result of an increase in the loan interest rate during that policy year. SECTION 8. CHANGE OF POLICY 8.1 CHANGE OF PLAN The Owner may change this policy to any perma- nent life insurance plan agreed to by the Owner and the Company by: - paying the required costs; and - meeting any other conditions set by the Com- pany. 8.2 CHANGE OF INSURED CHANGE. The Owner may change the insured under this policy by: - paying the required costs; and - meeting any other conditions set by the Com- pany, including the following: a. on the date of change, the new insured's age may not be more than 69; b. the new insured must have been born on or before the Policy Date of this policy; c. the new insured must be insurable; and d. the Owner must have an insurable interest in the life of the new insured. DATE OF CHANGE. The date of change will be the later of: - the date of the request to change; or - the date of the medical examination (or the non- medical application). TERMS OF POLICY AFTER CHANGE. The policy will cover the new insured starting on the date of change. When coverage on the new insured starts, coverage on the prior insured will terminate. The contestable and suicide periods for the new insured start on the date of change. If the Company contests the new policy or if the new insured dies by suicide, the cash value of the new policy on the date of change will be taken into account in determining any amount payable by the Company. The amount of insurance on the new insured will be set so that there will be no change in the cash value of the policy at the time of change. If the policy has no cash value, the amount will be set so that premiums do not change. Any policy debt or assignment will continue after the change. 10 15 SECTION 9. BENEFICIARIES 9.1 DEFINITION OF BENEFICIARIES The term "beneficiaries" as used in this policy in- cludes direct beneficiaries, contingent beneficiaries and further payees. 9.2 NAMING AND CHANGE OF BENEFICIARIES BY OWNER. The Owner may name and change the beneficiaries of death proceeds: - while the Insured is living. - during the first 60 days after the date of death of the Insured, if the Insured just before his death was not the Owner. No one may change this naming of a direct beneficiary during this 60 days. BY DIRECT BENEFICIARY. A direct beneficiary may name and change the contingent beneficiaries and further payees of his share of the proceeds: - if the direct beneficiary is the Owner; - if, at any time after the death of the Insured, no contingent beneficiary or further payee of that share is living; or - if, after the death of the Insured, the direct beneficiary elects a payment plan. The interest of any other beneficiary in the share of that direct beneficiary will end. These direct beneficiary rights are subject to the Owner's rights during the 60 days after the date of death of the Insured. BY SPOUSE (MARITAL DEDUCTION PROVISION). - POWER TO APPOINT. The spouse of the Insured will have the power alone and in all events to appoint all amounts payable to the spouse under the policy if: a. the Insured just before his death was the Owner; and b. the spouse is a direct beneficiary; and c. the spouse survives the Insured. - TO WHOM SPOUSE CAN APPOINT. Under this power, the spouse can appoint: a. to the estate of the spouse; or b. to any other persons as contingent benefi- ciaries and further payees. - EFFECT OF EXERCISE. As to the amounts appoint- ed, the exercise of this power will: a. revoke any other designation of beneficiaries; b. revoke any election of payment plan as it applies to them; and c. cause any provision to the contrary in Section 9 or 10 of this policy to be of no effect. EFFECTIVE DATE. A naming or change of a beneficiary will be made on receipt at the Home Office of a written request that is acceptable to the Company. The request will then take effect as of the date that it was signed. The Company is not responsible for any payment or other action that is taken by it before the receipt of the request. The Company may require that the policy be sent to it to be endorsed to show the naming or change. 9.3 SUCCESSION IN INTEREST OF BENEFICIARIES DIRECT BENEFICIARIES. The proceeds of this policy will be payable in equal shares to the direct beneficiaries who survive and receive payment. If a direct benefi- ciary dies before he receives all or part of his full share, the unpaid part of his share will be payable in equal shares to the other direct beneficiaries who survive and receive payment. CONTINGENT BENEFICIARIES. At the death of all of the direct beneficiaries, the proceeds, or the present value of any unpaid payments under a payment plan, will be payable in equal shares to the contingent beneficiaries who survive and receive payment. If a contingent beneficiary dies before he receives all or part of his full share, the unpaid part of his share will be payable in equal shares to the other contingent beneficiaries who survive and receive payment. FURTHER PAYEES. At the death of all of the direct and contingent beneficiaries, the proceeds, or the present value of any unpaid payments under a payment plan, will be paid in one sum: - in equal shares to the further payees who survive and receive payment; or - if no further payees survive and receive payment, to the estate of the last to die of all of the direct and contingent beneficiaries. OWNER OR HIS ESTATE. If no beneficiaries are alive when the Insured dies, the proceeds will be paid to the Owner or to his estate. 9.4 GENERAL TRANSFER OF OWNERSHIP. A transfer of ownership of itself will not change the interest of a beneficiary. CLAIMS OF CREDITORS. So far as allowed by law, no amount payable under this policy will be subject to the claims of creditors of a beneficiary. SUCCESSION UNDER PAYMENT PLANS. A direct or contin- gent beneficiary who succeeds to an interest in a payment plan will continue under the terms of the plan. 11 16 SECTION 10. PAYMENT OF POLICY BENEFITS 10.1 PAYMENT OF PROCEEDS Death proceeds will be paid under the payment plan that takes effect on the date of death of the Insured. The Interest Income Plan (Option A) will be in effect if no payment plan has been elected. Interest will accumulate from the date of death until a pay- ment plan is elected or the proceeds are withdrawn in cash. Surrender proceeds will be the cash surrender value as of the date of surrender. These proceeds will be paid in cash or under a payment plan that is elected. The Company may defer paying the surrender pro- ceeds for up to six months from the date of surren- der. If payment is deferred for 30 days or more, interest will be paid on the surrender proceeds from the date of surrender to the date of payment. Interest will be at an annual effective rate of 4%. 10.2 PAYMENT PLANS INTEREST INCOME PLAN (OPTION A). The proceeds will earn interest which may be received each month or accumulated. The first payment is due one month after the date on which the plan takes effect. Interest that has accumulated may be withdrawn at any time. Part or all of the proceeds may be withdrawn at any time. INSTALLMENT INCOME PLANS. Payments will be made each month on the terms of the plan that is elected. The first payment is due on the date that the plan takes effect. - SPECIFIED PERIOD (OPTION B). The proceeds with interest will be paid over a period of from one to 30 years. The present value of any unpaid install- ments may be withdrawn at any time. - SPECIFIED AMOUNT (OPTION D). Payments of not less than $10.00 per $1,000 of proceeds will be made until all of the proceeds with interest have been paid. The balance may be withdrawn at any time. LIFE INCOME PLANS. Payments will be made each month on the terms of the plan that is elected. The first payment is due on the date that the plan takes effect. Proof of the date of birth, acceptable to the Company, must be furnished for each person on whose life the payments are based. - SINGLE LIFE INCOME (OPTION C). Payments will be made for a chosen period and, after that, for the life of the person on whose life the payments are based. The choices for the period are: a. zero years; b. 10 years; c. 20 years; or d. a refund period which continues until the sum of the payments that have been made is equal to the proceeds that were placed under the plan. - JOINT AND SURVIVOR LIFE INCOME (OPTION E). Pay- ments are based on the lives of two persons. Level payments will be made for a period of 10 years and, after that, for as long as one or both of the persons are living. - OTHER SELECTIONS. The Company may offer other selections under the Life Income Plans. - WITHDRAWAL. The present value of any unpaid payments that are to be made for the chosen period (Option C) or the 10 year period (Option E) may be withdrawn only after the death of all of the persons on whose lives the payments are based. - LIMITATIONS. A direct or contingent beneficiary who is a natural person may be paid under a Life Income Plan only if the payments depend on his life. A corporation may be paid under a Life Income Plan only if the payments depend on the life of the Insured or, after the death of the Insured, on the life of his spouse or his depend- ent. PAYMENT FREQUENCY. On request, payments will be made once every 3, 6 or 12 months instead of each month. TRANSFER BETWEEN PAYMENT PLANS. A beneficiary who is receiving payment under a plan which includes the right to withdraw may transfer the amount withdrawa- ble to any other plan that is available. MINIMUM PAYMENT. The Company may limit the elec- tion of a payment plan to one that results in payments of at least $50. If payments under a payment plan are or become less than $50, the Company may change the fre- quency of payments. If the payments are being made once every 12 months and are less than $50, the Company may pay the present value or the balance of the payment plan. 10.3 PAYMENT PLAN RATES INTEREST INCOME AND INSTALLMENT INCOME PLANS. Pro- ceeds will earn interest at rates declared each year by the Company. None of these rates will be less than an annual effective rate of 3 1/2%. Interest of more than 3 1/2% will increase the amount of the payments or, for the Specified Amount Plan (Option D), increase the number of payments. The present value of any unpaid installments will be based on the 3 1/2% rate of interest. The Company may offer guaranteed rates of interest higher than 3 1/2% with conditions on withdrawal. LIFE INCOME PLANS. Payments will be based on rates declared by the Company. These rates will provide at least as much income as would the Company's rates, on the date that the payment plan takes effect, for a single premium immediate annuity contract, with no charge for issue expenses. Payments under these rates will not be less than the amounts that are described in Minimum Payment Rates. 12 17 MINIMUM PAYMENT RATES. The minimum payment rates for the Installment Income Plans (Options B and D) and the Life Income Plans (Options C and E) are shown in the Minimum Payment Rate Tables. The Life Income Plan payment rates in those tables depend on the sex and on the adjusted age of each person on whose life the payments are based. The adjusted age is: - the age on the birthday that is nearest to the date on which the payment plan takes effect; plus - the age adjustment shown below for the number of policy years that have elapsed from the Policy Date to the date that the payment plan takes effect. A part of a policy year is counted as a full year. POLICY POLICY YEARS AGE YEARS AGE ELAPSED ADJUSTMENT ELAPSED ADJUSTMENT 1 to 5 +8 31 to 35 -2 6 to 10 +6 36 to 40 -3 11 to 15 +4 41 to 45 -4 16 to 20 +2 46 to 50 -5 21 to 25 0 51 or more -6 26 to 30 -1 10.4 EFFECTIVE DATE FOR PAYMENT PLAN A payment plan that is elected for death proceeds will take effect on the date of death of the Insured if: - the plan is elected by the Owner; and - the election is received at the Home Office while the Insured is living. In all other cases, a payment plan that is elected will take effect: - on the date the election is received at the Home Office; or - on a later date, if requested. 10.5 PAYMENT PLAN ELECTIONS FOR DEATH PROCEEDS BY OWNER. The Owner may elect payment plans for death proceeds: - while the Insured is living. - during the first 60 days after the date of death of the Insured, if the Insured just before his death was not the Owner. No one may change this election made during those 60 days. FOR DEATH PROCEEDS BY DIRECT OR CONTINGENT BENE- FICIARY. A direct or contingent beneficiary may elect payment plans for death proceeds payable to him if no payment plan that has been elected is in effect. This right is subject to the Owner's rights during the 60 days after the date of death of the Insured. FOR SURRENDER PROCEEDS. The Owner may elect pay- ment plans for surrender proceeds. The Owner will be the direct beneficiary. 10.6 INCREASE OF MONTHLY INCOME A direct beneficiary who is to receive proceeds under a payment plan may increase the amount of the monthly payments. This is done by the payment of an annuity premium to the Company at the time the payment plan elected under Section 10.5 takes effect. The amount that will be applied under the payment plan will be the net premium. The net premium is the annuity premium less a charge of not more than 2% and less any premium tax. The net premium will be applied under the same payment plan and at the same rates as the proceeds. The Company may limit this net premium to an amount that is equal to the direct beneficiary's share of the proceeds payable under this policy. MINIMUM PAYMENT RATE TABLE MINIMUM MONTHLY INCOME PAYMENTS PER $1,000 PROCEEDS
INSTALLMENT INCOME PLANS (OPTIONS B AND D) - ------------------------------------------------------------------------------- PERIOD MONTHLY PERIOD MONTHLY PERIOD MONTHLY (YEARS) PAYMENT (YEARS) PAYMENT (YEARS) PAYMENT - ------------------------------------------------------------------------------- 1 $84.65 11 $9.09 21 $5.56 2 43.05 12 8.46 22 5.39 3 29.19 13 7.94 23 5.24 4 22.27 14 7.49 24 5.09 5 18.12 15 7.10 25 4.96 6 15.35 16 6.76 26 4.84 7 13.38 17 6.47 27 4.73 8 11.90 18 6.20 28 4.63 9 10.75 19 5.97 29 4.53 10 9.83 20 5.75 30 4.45
NN.21 13 18 MINIMUM PAYMENT RATE TABLES MINIMUM MONTHLY INCOME PAYMENTS PER S1,000 PROCEEDS LIFE INCOME PLAN (OPTION C)
- ------------------------------------------------------------------------------- SINGLE LIFE MONTHLY PAYMENTS - ------------------------------------------------------------------------------- MALE CHOSEN PERIOD (YEARS) FEMALE CHOSEN PERIOD (YEARS) ADJUSTED ADJUSTED AGE* ZERO 10 20 REFUND AGE* ZERO 10 20 REFUND 55 $4.99 $4.91 $4.66 $4.73 55 $4.54 $4.51 $4.38 $4.40 56 5.09 5.00 4.72 4.81 56 4.62 4.58 4.44 4.47 57 5.20 5.10 4.78 4.90 57 4.71 4.66 4.51 4.54 58 5.32 5.20 4.85 4.99 58 4.80 4.75 4.57 4.62 59 5.44 5.31 4.91 5.08 59 4.90 4.84 4.64 4.70 60 5.57 5.42 4.97 5.18 60 5.00 4.93 4.70 4.78 61 5.71 5.54 5.04 5.29 61 5.11 5.03 4.77 4.87 62 5.86 5.67 5.10 5.40 62 5.23 5.14 4.84 4.96 63 6.02 5.80 5.16 5.51 63 5.36 5.25 4.91 5.06 64 6.20 5.94 5.22 5.63 64 5.49 5.37 4.98 5.17 65 6.38 6.08 5.28 5.76 65 5.64 5.50 5.05 5.28 66 6.54 6.23 5.33 5.90 66 5.79 5.63 5.12 5.39 67 6.70 6.38 5.38 6.04 67 5.94 5.77 5.19 5.52 68 6.87 6.54 5.43 6.19 68 6.09 5.91 5.25 5.65 69 7.05 6.71 5.48 6.35 69 6.2S 6.07 5.32 5.79 70 7.21 6.87 5.52 6.52 70 6.42 6.23 5.37 5.94 71 7.40 7.05 5.55 6.69 71 6.59 6.40 5.43 6.09 72 7.58 7.21 5.59 6.88 72 6.78 6.58 5.48 6.26 73 7.77 7.40 5.62 7.07 73 6.96 6.76 5.52 6.44 74 7.95 7.57 5.64 7.28 74 7.16 6.95 5.57 6.63 75 8.14 7.75 5.66 7.49 75 7.35 7.14 5.60 6.83 76 8.32 7.92 5.68 7.72 76 7.56 7.34 5.63 7.04 77 8.49 8.09 5.70 7.96 77 7.77 7.54 S.66 7.26 78 8.84 8.26 5.71 8.21 78 7.97 7.74 5.68 7.51 79 9.18 8.42 5.72 8.47 79 8.18 7.94 5.70 7.76 80 9.51 8.57 5.73 8.74 80 8.37 8.13 5.71 8.03 81 9.84 8.71 5.74 9.04 81 8.57 8.32 5.72 8.32 82 10.18 8.85 5.74 9.34 82 8.93 8.50 5.73 8.61 83 10.49 8.97 5.75 9.65 83 9.28 8.67 5.74 8.93 84 10.82 9.09 5.75 9.98 84 9.62 8.83 5.74 9.27 85 and over 11.13 9.20 5.75 10.34 85 and over 9.96 8.97 5.75 9.62
- ------------------------------------------------------------------------------- LIFE INCOME PLAN (OPTION E) - -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- JOINT AND SURVIVOR MONTHLY PAYMENTS - ------------------------------------------------------------------------------- MALE FEMALE ADJUSTED AGE* ADJUSTED ---------------------------------------------------------------- AGE* 55 60 65 70 75 80 85 and over - ------------------------------------------------------------------------------- 55 $4.16 $4.34 $4.51 $4.65 $4.76 $4.84 $4.88 60 4.26 4.51 4.75 4.98 5.16 5.29 5.37 65 4.35 4.65 4.98 5.31 5.61 5.84 5.98 70 4.41 4.76 5.17 5.62 6.07 6.44 6.68 75 4.46 4.84 5.32 5.88 6.48 7.03 7.42 80 4.48 4.89 5.41 6.05 6.79 7.52 8.07 85 and over 4.50 4.92 5.46 6.15 6.99 7.85 8.53 - ------------------------------------------------------------------------------- *See Section 10.3.
14 19
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY No. 0021 MILWAUKEE, WISCONSIN -------- [ ] Companion policies [ ] Life & Disability Insurance LIFE INSURANCE APPLICATION [ ] 1035 Exchange - ------------------------------------------------------------------------------------------------------------------------------------ 1. INSURED John J Doe [X] Male (Print) First Middle Initial Last [ ] Female 2. A. INSURED'S DATE OF BIRTH ______/______/______ B. PLACE OF BIRTH ________________________________________________________ Month Day Year State of Birth (if other than USA, indicate country) 3. APPLICANT, if other than insured Relationship ________________________________________________________________________________ to Insured ___________________________________ First Middle Initial Last IF BUSINESS ORGANIZATION: [ ] Corporation [ ] Partnership [ ] Other type of business _________________________ 4. RESIDENCE OF INSURED 1234 Main Street --------------------------------------------------------------------- Street & No. or RFD Milwaukee Milwaukee WI 53200 This address will be used for --------------------------------------------------------------------- all of the Insured's policies. City County State Zip Code 5. A. PREMIUM PAYER Send premium and other notices regarding this policy B. PAYERS DAYTIME to: [X] Insured [ ] Owner [ ] Applicant TELEPHONE NUMBER: to: [ ] Insurance Service [ ] Other _______________________________________ (414) 778-9999 Account (ISA) or Full Name --------------------------- Payer at [X] Insured's address in 4 or Area Code _________________________________________________ Street & No. or RFD _________________________________________________ City _________________________________________________ State Zip Code 6. Has an application or informal inquiry ever been made to Northwestern Mutual Life for annuity, life or disability insurance on the life of the Insured? [ ] Yes [X] No If yes, the last policy number is __________________________________________ - ------------------------------------------------------------------------------------------------------------------------------------ 7. COMPLETE THIS QUESTION ONLY IF EXERCISING AN ADDITIONAL PURCHASE BENEFIT OPTION. (Smoking questionaire may be required.) A. State the policy number(s) under which the option is being exercised. ________________________________________________________ B. This application is: [ ] Regular Purchase [ ] Advance Purchase (Complete item C. below) C. If this is an Advance Purchase, the event is: [ ] Marriage [ ] Birth of child [ ] Adoption of child [ ] Spouse Date and place _________/_________/________ Name of:[ ] Child ----------------------------- Month Day Year of event: __________________________________________________________________ City State - ------------------------------------------------------------------------------------------------------------------------------------ 8. SPECIAL DATE [ ] Short term -- Policy Date will coincide with ISA Payment Date. Prepaid: [ ] Short term to _______/______/______ [ ] Date to save age [ ] Backdate to _______/______/______ Month Day Year Month Day Year [ ] Specified future date _______/______/______ [ ] Date to save age [ ] Backdate to _______/______/______ Month Day Year Month Day Year - ------------------------------------------------------------------------------------------------------------------------------------ 9. POLICY APPLIED FOR (FOR COMPLIFE PLANS DO NOT COMPLETE A & B. GO ON TO C.) A. PLAN and AMOUNT B. ADDITIONAL BENEFITS (1) (1) [ ] (2) [ ] Waiver of Premium ----------------------------------------------- (1) [ ] (2) [ ] Accidental Death (1) $_________ (2) $__________ Plan (1) [ ] (2) [ ] Additional Purchase (1) $_________ (2) $__________ $ --------------------------------------------- Benefit Amt. per Amt. per Amount option option (2) (1) [ ] (2) [ ] Payor Benefit ----------------------------------------------- (1) [ ] (2) [ ] Indexed Protection Plan (1) [ ] (2) [ ] Other _______________________ $ --------------------------------------------- Amount 90-1 L.I. (0186)
20 9C. FLEXIBLE LIFE PLANS (COMPLIFE) [ ] WHOLE LIFE $___________________ WITH ADDITIONAL PROTECTION $____________________ (CUSTOM COMPLIFE) Amount Amount (1) [ ] Additional initial premium $___________________ Use to: [ ] Reduce term insurance ________% [ ] Increase coverage ________% (2) [ ] Inflation Protection Option [ ] WHOLE LIFE $___________________ WITH A PREMIUM FOR INCREASING INSURANCE OF $____________________ (INCREASING COMPLIFE) Amount Level annual premium [ ] Additional initial premium $___________________ [ ] EXECUTIVE WHOLE LIFE $____________________ WITH ADDITIONAL PROTECTION $_____________________ (EXECUTIVE COMPLIFE) Amount Amount PREMIUM FOR INCREASING INSURANCE $_______________________ Use to: [ ] Convert term insurance________% [ ] Increase coverage ________% [ ] Additional initial premium $___________________ Use to: [ ] Convert term insurance________% [ ] Increase coverage ________% [ ] WHOLE LIFE $__________________ WITH ADJUSTABLE TERM PROTECTION $___________________ (ADJUSTABLE COMPLIFE) Amount Amount (1)a.[ ] Scheduled annual addition premium $_______________________________ [ ] Reduce term insurance_______% Level annual premium Use to: b.[ ] Annual increase in additional premium __________ $________________ [ ] Increase coverage _______% (Not more than 20 years or No. of years Annual increase to age 69, if less) (2)[ ] Additional initial premium $___________________ Use to: [ ] Reduce term insurance _______% [ ] Increase coverage _______% [ ] Inflation Protection Option (3) Only one may be selected: [ ] Scheduled annual increase in term amount __________ $_____________________ (Not more than 20 years, or No. of years Annual increase amt. to age 69, if less) [X] CORPORATE WHOLE LIFE (See attached Supplement) 9D. ADDITIONAL BENEFITS FOR FLEXIBLE LIFE PLANS [ ] Waiver of Premium [ ] Additional Purchase Benefit $__________________________________ Amount per option [ ] Accidental Death $_________________________________ [ ] Other _________________________________________________________ Amount - ------------------------------------------------------------------------------------------------------------------------------------ 10. If an additional benefit cannot be approved, should the Company issue the policy without the benefit? [ ] Yes [ ] No 11. Shall the PREMIUM LOAN provision, if available, become operative according to its terms? [X] Yes [ ] No 12. ANNUAL DIVIDENDS until otherwise directed will: FIRST SECOND POLICY POLICY [ ] [ ] Reduce current premium. If flexible life plan with ADDITIONAL PROTECTION or ADJUSTABLE TERM, additions [X] [ ] Purchase paid-up additions. purchased by eligible dividend will be used to: [ ] Reduce term insurance______% [ ] [ ] Accumulate at interest. [ ] Increase coverage ______% [ ] [ ] Be paid in cash. [ ] [ ] Be used for a combination of options above. (Complete form 18-1364) 13. POLICY LOAN INTEREST RATE OPTION [ ] 8% [X] VARIABLE RATE 14. PREMIUM PAYABLE [X] Annually [ ] Semianually [ ] Quarterly [ ] Single [ ] Monthly (Variable Life only) - ------------------------------------------------------------------------------------------------------------------------------------ (PAGE 2) 90-1 L.I. (0186)
21 INSURED John J. Doe ------------------------------------------------------ First Middle Initial Last - ------------------------------------------------------------------------------- 15. A. DIRECT BENEFICIARY Jane M. Doe Wife ------------------------------------------------------------- First Middle Initial Last Relationship To Insured ------------------------------------------------------------- First Middle Initial Last Relationship To Insured ------------------------------------------------------------- First Middle Initial Last Relationship To Insured B. CONTINGENT BENEFICIARY ------------------------------------------------------------- First Middle Initial Last Relationship To Insured ------------------------------------------------------------- First Middle Initial Last Relationship To Insured Box (1) or (2) may be selected to include all the children or brothers and sisters without naming them, or to add to the contingent beneficiaries named. Box (3) may be selected to provide for the children of a deceased contingent beneficiary; use only if contingent beneficiaries are named and/or box (1) or (2) is checked, NOTE: The word "children" includes child and any legally adopted child. [X] (1) and all (other) children of the Insured. [ ] (2) and all (other) brothers and sisters of the Insured born of the marriage of or legally adopted by______________and______________ before the Insured's death. [ ] (3) any amount that would have been paid to a deceased contingent beneficiary, if living, will be paid in one sum and in equal shares to the children of that contingent beneficiary who survive and receive payment. C. FURTHER PAYEES ------------------------------------------------------------- First Middle Initial Last Relationship To Insured ------------------------------------------------------------- First Middle Initial Last Relationship To Insured [ ] SEE ATTACHED SUPPLEMENT FORM (To be used in place of designations above) - ------------------------------------------------------------------------------- 16. The OWNER will be: (OWNER MUST COMPLETE SUBSTITUTE FORM W-9 15-1272X.) Note: If the Insured is under age 15, consider selecting item D, E or F. SELECT ONLY ONE. [X] A. Insured [ ] B. Applicant [ ] C. Other ________________________________________________ First Middle Initial Last ________________________________________________ Relationship to Insured [ ] D. Applicant. If the Applicant dies before the Insured, the Insured will be the Owner. [ ] E. Applicant. If the Applicant dies before the Insured, the Owner will be: ________________________________________________ First Middle Initial Last ________________________________________________ Relationship to Insured If both die before the Insured, the Insured will be the Owner. [ ] F. The Applicant until the Insured attains the age of ___________ years. If the applicant dies before the Insured, the Owner will be: ________________________________________________ First Middle Initial Last _____________________________________ until the Insured attains Relationship to Insured such age. Upon the Insured attaining such age, or if both die before the Insured, the Insured will be the Owner. [ ] G. SEE ATTACHED SUPPLEMENT FORM. (To be used in place of designations above.) - ------------------------------------------------------------------------------- 17. Has the premium for the policy applied for been paid to the agent in exchange for the CONDITIONAL LIFE INSURANCE AGREEMENT with the same number as this application? [X]Yes [ ]No 18. Will the insurance applied for replace insurance (or annuities) on the Insured's life in this Company or elsewhere? If yes, agent should explain and send required papers. [ ]Yes [X]No - ------------------------------------------------------------------------------- THE INSURED CONSENTS TO THIS APPLICATION AND DECLARES THAT THE ANSWERS AND STATEMENTS IN THIS APPLICATION ARE CORRECTLY RECORDED, COMPLETE AND TRUE TO THE BEST OF HIS KNOWLEDGE AND BELIEF. STATEMENTS IN THIS APPLICATION ARE REPRESENTATIONS AND NOT WARRANTIES. It is agreed that (1) If the premium is not paid when the application is signed, no insurance will be in effect. The insurance will take effect at the time the policy is delivered and the premium is paid, if - the Insured is living at that time; and - the answers and statements in the application are then true to the best of the knowledge and belief of the Insured. (2) If the premium is paid when the application is taken, no life insurance will have been in effect if Section I. of the Conditional Insurance Agreement applies. (3) If the policy is issued in an extra premium class, acceptance of the policy will amend it so that extended term insurance can be in force only if - the Company gives its consent, or - the loan value is not large enough to grant a premium loan. If a premium is not paid within the grace period and extended term insurance cannot be in force, paid-up insurance will be selected. (4) No agent is authorized to make or alter contracts or to waive any of the Company's rights to requirements. _____________________________________ ____________________________________ Signature of INSURED (if other than Signature of APPLICANT Applicant and 15 yrs of age and over) Signed at____________________ Date_____/___/____ ____________________________ City, County & State Month Day Year Signature of LICENSED AGENT 90-1 L.I. (0186) (page 3) 22 SUPPLEMENT TO APPLICATION FOR CORPORATE WHOLE LIFE II NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY INSURED: John J. Doe PLAN: Corporate Whole Life II $32,387 With Additional Protection $66,514 Scheduled Additional Premium $453.58 Additional Initial Premium None Additional Benefits None Policy Loan Interest Rate 8%
Policy Total Policy Total Policy Total Year Insurance Year Insurance Year Insurance - ------ --------- ------ --------- ------ --------- 1 $ 98,901 19 $116,850 37 $ 470,149 2 $ 98,502 20 $120,018 38 $ 500,636 3 $ 98,217 21 $123,517 39 $ 533,077 4 $ 98,079 22 $127,368 40 $ 567,599 5 $ 98,091 23 $131,594 41 $ 604,338 6 $ 98,255 24 $136,223 42 $ 643,437 7 $ 98,544 25 $141,281 43 $ 685,056 8 $ 98,958 26 $146,798 44 $ 729,356 9 $ 99,542 27 $152,808 45 $ 776,517 10 $100,302 28 $159,344 46 $ 826,729 11 $101,248 29 $166,447 47 $ 880,195 12 $102,389 30 $174,155 48 $ 937,133 13 $103,736 31 $322,120 49 $ 997,777 14 $105,299 32 $343,126 50 $1,062,374 15 $107,092 33 $365,479 51 $1,131,191 16 $109,128 34 $389,263 52 $1,204,515 17 $111,422 35 $414,571 53 $1,282,651 18 $113,990 36 $441,499 54 $1,365,927 55 $1,454,694 Values do not include paid up insurance purchased by additional premiums.
DATE: 8/1/87 Signature of Applicant: (Signed) John J. Doe ------------ ---------------------- ---------------------- ---------------------- For Office Use Only Illustration No. 001 90-1 Supp. (0887) Und. Amt: $124,000 Policy No. ----------- 23 IT IS RECOMMENDED THAT YOU ... read your policy. notify your Northwestern Mutual agent or the Company at 720 E. Wisconsin Avenue, Milwaukee, Wis. 53202, of an address change. call your Northwestern Mutual agent for information -- particularly on a suggestion to terminate or exchange this policy for another policy or plan. ELECTION OF TRUSTEES The members of The Northwestern Mutual Life Insurance Company are its policyholders of insurance policies and deferred annuity contracts. The members exercise control through a Board of Trustees. Elections to the Board are held each year at the annual meeting of members. Members are entitled to vote in person or by proxy. CORPORATE WHOLE LIFE POLICY II WITH ADDITIONAL PROTECTION ELIGIBLE FOR ANNUAL DIVIDENDS. Basic Amount plus Additional Protection payable on death of Insured. Premiums payable for period shown on page 3. NN.21 [NORTHWESTERN MUTUAL LIFE LOGO] 24 AMENDMENT THE EFFECTIVE DATE OF THIS AMENDMENT IS THE DATE OF ISSUE OF THE CORPORATE WHOLE LIFE POLICY II WITH ADDITIONAL PROTECTION TO WHICH THIS POLICY IS ATTACHED. SECTION 2.2 TRANSFER OF OWNERSHIP; LIMITATION IS AMENDED TO READ AS FOLLOWS: 2.2 TRANSFER OF OWNERSHIP The Owner may transfer the ownership of this policy. Written proof of transfer satisfactory to the Company must be received at its Home Office. The transfer will then take effect as of the date that it was signed. The Company may require that the policy be sent to it for endorsement to show the transfer. SECTION 4.3 ADDITIOINAL PREMIUMS IS AMENDED BY THE DELETION OF THE SUBSECTION ENTITLED "UNSCHEDULED ADDITIONAL PREMIUM OPTION." SECTION 8. CHANGE OF POLICY IS DELETED. Secretary THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY NN.221F.(0691) EX-11 14 NATIONAL CITY CORP 10-K EXHIBIT 11 1 EXHIBIT (11) -- COMPUTATION OF EARNINGS PER SHARE NATIONAL CITY CORPORATION (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE CALENDAR YEAR ____________________________________________ 1994 1993 1992 ____________ ____________ ____________ PRIMARY: ___________ Net Income $429,434 $403,997 $346,923 Less Preferred Dividend Requirements 15,200 15,966 16,000 ------------ ------------ ------------ Net Income Applicable to Common Stock $414,234 $388,031 $330,923 ============ ============ ============ Average Common Shares Outstanding 153,353,555 161,163,816 158,011,980 ============ ============ ============ Net Income Per Share - Primary $2.70 $2.41 $2.09 ============ ============ ============ ASSUMING FULL DILUTION: _____________________________ Net income $429,434 $403,997 $346,923 ============ ============ ============ Average Common Shares Outstanding 153,353,555 161,163,816 158,011,980 Pro Forma Effect of Assumed Conversion of 8% Cumulative Convertible Preferred Stock 8,941,907 9,455,420 9,535,160 Pro Forma Average Fully Diluted Common Shares Outstanding Assuming Exercise of all Outstanding Stock Options as of the Beginning of Year or Date of Grant, if Later 80,038 64,276 518,232 ------------ ------------ ------------ Pro Forma Fully Diluted Common Shares Outstanding 162,375,500 170,683,512 168,065,372 ============ ============ ============ Pro Forma Fully Diluted Net Income Per Share $2.64 $2.37 $2.06 ============ ============ ============
EX-21 15 NATIONAL CITY CORP 10-K EXHIBIT 21 1 EXHIBIT 21 SUBSIDIARIES The following table sets forth all of National City Corporation's direct or indirect subsidiaries, as of December 31, 1994.
State or Jurisdiction Under the Law % of Voting of which Securities Owned Organized ---------------- -------------- SUBSIDIARIES OF NATIONAL CITY CORPORATION: Buckeye Service Corporation 100% Ohio Circle Equity Leasing Corproation of Michigan 100% Michigan Circle Leasing Corporation 100% Indiana Cortland Bancorp 7.15% Ohio Gem America Realty and Investment Corporaton 100% Ohio Madison Bank & Trust Company 100% Indiana Merchants Capital Management, Inc. 100% Indiana Merchants Mortgage Corporation 100% Indiana Merchants Service Corporation 100% Indiana Money Station, Inc. 100% Ohio Mortgage Company of Indiana, Inc. 100% Indiana National Asset Management Corporation 100% Kentucky National City Bank 100% United States National City Bank, Ashland 99.5% United States National City Bank, Columbus 100% United States National City Bank, Dayton 100% United States National City Bank, Indiana 100% United States National City Bank, Kentucky 100% United States National City Bank, Northeast 100% United States National City Bank, Northwest 100% United States National City Bank, Southern Indiana 100% United States National City Capital Corporation 100% Delaware National City Community Development Corporation 100% Ohio National City Credit Corporation 100% Ohio National City Financial Corporation 100% Ohio National City Holding Company 100% Delaware National City Investments Capital, Inc. 100% Indiana National City Life Insurance Co. 100% Arizona National City Mortgage Company 100% Ohio National City Processing Company 100% Kentucky National City Trust Company 100% United States National City Venture Corporation 100% Delaware NC Acquisition, Inc. 100% Delaware NCC Services, Inc. (pending merger) 100% Ohio Ohio National Corporation of Columbus 100% Ohio Second Premises Corporation 100% Kentucky
2 EXHIBIT (22)--SUBSIDIARIES Page 2 (Continued) SUBSIDIARIES OF NATIONAL CITY BANK: Capstone Realty, Inc. 100% Ohio National City Investments Corporation 100% Kentucky SUBSIDIARY OF NATIONAL CITY BANK, NORTHEAST: AKREO Service Corporation 100% Ohio SUBSIDIARIES OF NATIONAL CITY BANK, COLUMBUS: Buckeye Capital Corp. I (dissolution pending) 100% Delaware Scott Street Properties, Inc. 100% Ohio SUBSIDIARIES OF NATIONAL CITY BANK, KENTUCKY: Churchill Insurance Agency, Inc. 100% Kentucky First National Broadway Corp. 100% Kentucky First Premises Corporation 100% Kentucky FNB Service Corporation 100% Kentucky National Capital Properties, Inc. 100% Kentucky National City Leasing Corporation 100% Kentucky NCBK Holdings, Inc. 100% Delaware SUBSIDIARIES OF NATIONAL CITY PROCESSING COMPANY: B&L Consultants, Inc. 100% Massachusetts NPC Check Cashing, Inc. 100% Delaware NPC Internacional, S.A. de C.V. 100% Mexico SUBSIDIARY OF GEM AMERICA REALTY & INVESTMENT CORP. Gem Financial Insurance Agency, Inc. 100% Ohio SUBSIDIARIES OF NATIONAL CITY BANK, INDIANA Ash Realty Company, Inc. 100% Indiana Bank Service Corporation of Indiana 33 1/3% Indiana MNB Financial Corporation 100% Indiana MNB Trustee Co., (UK) Ltd. 50%* United Kingdom Newcorp, Inc. 100% Indiana SUBSIDIARY OF MADISON BANK & TRUST COMPANY: National City Insurance Agency, Inc. 100% Indiana SUBSIDIARY OF CIRCLE LEASING CORPORATION: Circle Acceptance Leasing Corporation 100% Ohio SUBSIDIARY OF MNB FINANCIAL CORPORATION: Indiana Plaza Leasing, Inc. 100% New York SUBSIDIARY OF ASH REALTY COMPANY, INC.: Sterling Equities Corp. 100% Indiana - --------------- *Additional 50% owned by National City Bank.
EX-23 16 NATIONAL CITY CORP 10-K EXHIBIT 23 1 EXHIBIT (23) CONSENT OF INDEPENDENT AUDITORS - ------------------------------- We consent to the incorporation by reference in Registration Statement No. 33-39479 on Form S-3, Registration Statement No. 33-39480 on Form S-3, Registration Statement No. 33-44209 on Form S-3, Post-Effective Amendment No. 1 (on Form S-8) to Registration Statement No. 33-20267 on Form S-4, Registration Statement No. 33-52271 on Form S-8, Registration Statement No. 33-45363 on Form S-8, Post Effective Amendment No. 1 (on Form S-8) to Registration Statement No. 33-45980 on Form S-4, Post Effective Amendment No. 1 (on Form S-8) to Registration Statement No. 33-56539, Registration Statement No. 33-57045 on Form S-8, and Registration Statement No. 33-54323 on Form S-3 of our report dated January 20, 1995, with respect to the consolidated financial statements of National City Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 1994. ERNST & YOUNG LLP CLEVELAND, OHIO JANUARY 30, 1995 EX-24 17 NATIONAL CITY CORP 10-K EXHIBIT 24 1 Exhibit 24 POWER OF ATTORNEY The undersigned Directors and Officers of National City Corporation, a Delaware corporation (the "Corporation"), which anticipates filing a Form 10-K annual report pursuant to Section 12(g) of the Securities Exchange Act of 1934 for the Corporation's fiscal year ended December 31, 1994, with the Securities and Exchange Commission hereby constitute and appoint David L. Zoeller, Carlton E. Langer and Thomas A. Richlovsky, and each of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for us and in our names, in the capacities indicated below, said Form 10-K, and any and all amendments and exhibits thereto, or other documents to be filed with the Securities and Exchange Commission pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as we could do if personally present, hereby ratifying and approving the acts of said attorneys, and any of them, and any such substitute. EXECUTED this 19th day of December, 1994. /s/ Sandra H. Austin Director - ---------------------------------- Sandra H. Austin Director - ---------------------------------- James M. Biggar /s/ Charles H. Bowman Director - ---------------------------------- Charles H. Bowman /s/ Edward B. Brandon Chairman of the Board and Chief - ---------------------------------- Executive Officer (Principal Edward B. Brandon Executive Officer) /s/ John G. Breen Director - ---------------------------------- John G. Breen /s/ David A. Daberko Director, President and Chief Operating - ---------------------------------- Officer David A. Daberko 2 Director - ---------------------------------- Richard E. Disbrow /s/ Daniel E. Evans Director - ---------------------------------- Daniel E. Evans /s/ Otto N. Frenzel III Director - ---------------------------------- Otto N. Frenzel III /s/ Joseph H. Lemieux Director - ---------------------------------- Joseph H. Lemieux /s/ A. Stevens Miles Director - ---------------------------------- A. Stevens Miles /s/ Burnell R. Roberts Director - ---------------------------------- Burnell R. Roberts /s/ William R. Robertson Director and Deputy Chairman of - ---------------------------------- the Board William R. Robertson Director - ---------------------------------- Stephen A. Stitle /s/ Morry Weiss Director - ---------------------------------- Morry Weiss EX-27.1 18 NATIONAL CITY CORP 10-K EXHIBIT 27.1
9 0000069970 National City Bank 1,000 YEAR DEC-31-1994 JAN-1-1994 DEC-31-1994 2,401,728 96,615 672,945 7,940 3,218,940 1,176,115 1,156,811 23,034,775 469,019 32,114,008 24,471,920 3,713,790 583,575 743,669 590,223 0 187,540 1,823,291 32,114,008 1,765,898 244,548 31,418 2,041,864 592,870 805,055 1,236,809 79,356 10,530 1,403,133 617,688 617,688 0 0 429,434 2.70 2.64 4.65 107,600 27,900 0 0 443,412 120,234 56,756 469,019 236,219 300 232,500
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