BANK ONE CORP/J.P. MORGAN CHASE & CO.
 

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934

Filed by the Registrant [X]

Filed by a Party other than the Registrant [   ]

Check the appropriate box:

             
[  ]
Preliminary Proxy Statement
[  ]
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X]
Definitive Proxy Statement
[  ]
Definitive Additional Materials
[  ]
Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.

BANK ONE CORPORATION


(Name of Registrant as Specified In Its Charter)




(Name of Person(s) Filing Proxy Statement, if other than Registrant)

Payment of Filing Fee (Check the appropriate box):

[X]   No fee required.

[   ]   Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.

  (1) Title of each class of securities to which transaction applies:

   

  (2) Aggregate number of securities to which transaction applies:

   

  (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

   

  (4) Proposed maximum aggregate value of transaction:

   

  (5) Total fee paid:

   

[   ]   Fee paid previously with preliminary materials.
 
[   ]   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

  (1) Amount Previously Paid:

   

  (2) Form, Schedule or Registration Statement No.:

   

  (3) Filing Party:

   

  (4) Date Filed:

   


 

(J.P. MORGAN CHASE LOGO & BANK ONE LOGO)
To the stockholders of J.P. Morgan Chase & Co. and Bank One Corporation
A MERGER PROPOSAL — YOUR VOTE IS VERY IMPORTANT

      The boards of directors of J.P. Morgan Chase & Co. and Bank One Corporation have approved an agreement to merge our two companies. The proposed merger will create one of the largest and most globally diversified financial services companies in the world and will establish the second-largest banking company in the United States based on total assets. The combined company, which will retain the J.P. Morgan Chase & Co. name, will have assets of $1.1 trillion, a strong capital base, 2,300 branches in 17 states and top-tier positions in retail banking and lending, credit cards, investment banking, asset management, private banking, treasury and securities services, middle-market and private equity. We believe the combined company will be well-positioned to achieve strong and stable financial performance and increase stockholder value through its balanced business mix, greater scale and enhanced efficiencies and competitiveness.

      In the proposed merger, Bank One will merge into JPMorgan Chase, and Bank One common stockholders will receive 1.32 shares of JPMorgan Chase common stock for each share of Bank One common stock they own. This exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the closing. Based on the closing price of JPMorgan Chase’s common stock on the New York Stock Exchange (trading symbol “JPM”) on January 13, 2004, the last trading day before public announcement of the merger, the 1.32 exchange ratio represented approximately $51.35 in value for each share of Bank One common stock. Based on JPMorgan Chase’s closing price on April 16, 2004 of $39.26, the 1.32 exchange ratio represented approximately $51.82 in value for each share of Bank One common stock. We urge you to obtain current market quotations of JPMorgan Chase and Bank One common stock.

      We expect the merger will qualify as a reorganization for federal income tax purposes. Accordingly, Bank One stockholders generally will not recognize any gain or loss for federal income tax purposes on the exchange of shares of Bank One common stock for JPMorgan Chase common stock in the merger, except with respect to any cash received instead of fractional shares of common stock of the combined company. Upon completion of the merger, we estimate that Bank One’s former stockholders will own approximately 42% of the common stock of JPMorgan Chase.

      At our respective annual meetings, which will be held on May 25, 2004, in addition to other business, we will each ask our common stockholders to approve the merger. Information about these meetings and the merger is contained in this document. In particular, see “Risk Factors” beginning on page 22. We urge you to read this document carefully and in its entirety.

      Whether or not you plan to attend your annual meeting, please vote as soon as possible to make sure that your shares are represented at the meeting. If you do not vote, it will have the same effect as voting against the merger.

      Each of our boards of directors unanimously recommends that stockholders vote FOR the merger. We strongly support this combination of our companies and join our boards in their recommendations.

     

-s- WILLIAM B. HARRISON, Jr.

William B. Harrison, Jr.
Chairman and Chief Executive Officer
J.P. Morgan Chase & Co.
 
-s- JAMES DIMON

James Dimon
Chairman and Chief Executive Officer
Bank One Corporation

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the merger or determined if this document is accurate or complete. Any representation to the contrary is a criminal offense.

The securities to be issued in connection with the merger are not savings or deposit accounts or other obligations of any bank or non-bank subsidiary of JPMorgan Chase or Bank One, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

      This document is dated April 19, 2004, and is first being mailed to stockholders of JPMorgan Chase and Bank One on or about April 21, 2004.


 

ADDITIONAL INFORMATION

      This document incorporates important business and financial information about JPMorgan Chase and Bank One from other documents that are not included in or delivered with this document. This information is available to you without charge upon your written or oral request. You can obtain the documents incorporated by reference in this document through the Securities and Exchange Commission website at http://www.sec.gov or by requesting them in writing, by e-mail or by telephone at the appropriate address below:

             
  if you are a JPMorgan Chase stockholder:
MacKenzie Partners, Inc.
By Mail: 105 Madison Ave.
                New York, NY 10016
By E-mail: proxy@mackenziepartners.com
By Telephone:
  (212) 929-5500 (call collect)
                or
  (800) 322-2885 (toll free)
    if you are a Bank One stockholder:
Georgeson Shareholder Communications, Inc.
By Mail: 17 State Street, 10th Floor
                New York, NY 10004
By E-mail: BankOne@gscorp.com
By Telephone:                              
  Banks and Brokers Call: (212) 440-9800
  All Others Call Toll Free: (800) 356-1784

      If you would like to request any documents, please do so by May 18, 2004 in order to receive them before the meetings.

      See “Where You Can Find More Information” beginning on page 173.

VOTING ELECTRONICALLY OR

BY TELEPHONE

      JPMorgan Chase stockholders of record may submit their proxies:

  •  through the Internet by visiting a website established for that purpose at http://www.eproxy.com/jpm and following the instructions; or
 
  •  by telephone by calling the toll-free number 1-800-435-6710 in the United States, Puerto Rico or Canada on a touch-tone phone and following the recorded instructions.

      Bank One stockholders of record may submit their proxies:

  •  through the Internet by visiting a website established for that purpose at http://www.ProxyVote.com and following the instructions; or
 
  •  by telephone by calling the toll-free number 800-690-6903 in the United States, Puerto Rico or Canada on a touch-tone phone and following the recorded instructions.


 

(J.P. MORGAN CHASE & CO. LOGO)

J.P. Morgan Chase & Co.

270 Park Avenue
New York, New York 10017

Notice of Annual Meeting of Stockholders

• Date: May 25, 2004

• Time: 9:00 a.m., New York Time
• Place: Auditorium
               One Chase Manhattan Plaza
               New York, New York

To JPMorgan Chase Stockholders:

      We are pleased to notify you of and invite you to the JPMorgan Chase annual meeting of stockholders.

      At the meeting you will be asked to vote on the following matters:

  •  Proposal to adopt a merger agreement between J.P. Morgan Chase & Co. and Bank One Corporation pursuant to which Bank One will merge into JPMorgan Chase as described in this document.
 
 
  •  Election of directors.
 
 
  •  Ratification of the appointment of PricewaterhouseCoopers LLP as our external auditor for 2004.
 
 
  •  Re-approval of the key executive performance plan.
 
 
  •  Adjournment of the annual meeting, if necessary or appropriate, to solicit additional proxies.
 
 
  •  Stockholder proposals included in this document, if they are introduced at the meeting.
 
 
  •  Any other matters that may properly be brought before the meeting.

      Common stockholders of record at the close of business on April 2, 2004 may vote at the annual meeting. In order for the merger agreement to be adopted, the holders of a majority of the outstanding shares of JPMorgan Chase common stock entitled to vote must vote in favor of the merger agreement.

      Holders of JPMorgan Chase’s 6.63% Cumulative Preferred Stock, Series H, and Fixed/ Adjustable Noncumulative Preferred Stock who submit a written demand for appraisal of their shares in connection with the proposed merger and who perfect their appraisal rights by complying with the applicable statutory procedures under Delaware law will be entitled to receive a cash payment for the fair value of their shares as determined by the Delaware Chancery Court. A summary of the applicable requirements of Delaware law is contained in this document under the caption “The Merger — Appraisal Rights” on page 78. In addition, the text of the applicable provisions of Delaware law is attached as Annex F to this document.

      Your vote is important. Whether or not you plan to attend the annual meeting, please complete, sign, date and return your proxy card or voting instruction card in the enclosed envelope promptly, or authorize the individuals named on your proxy card to vote your shares by calling the toll-free telephone number or by using the Internet as described in the instructions included with your proxy card or voting instruction card.

  By Order of the Board of Directors
 
  Anthony J. Horan
  Secretary
April 19, 2004

      Please note that if you attend the annual meeting you will be asked to present photo identification, such as a driver’s license. See “The JPMorgan Chase Annual Meeting — Attending the Annual Meeting” on page 28.


 

(BANK ONE LOGO)
Bank One Corporation
1 Bank One Plaza
Chicago, Illinois 60670
Notice of Annual Meeting of Stockholders

Date:   May 25, 2004

Time:   9:30 a.m., Chicago Time
Place: Bank One Auditorium
Bank One Corporation
1 Bank One Plaza
Chicago, Illinois 60670

To Bank One Stockholders:

      We are pleased to notify you of and invite you to the Bank One annual meeting of stockholders. The purpose of the annual meeting is to consider and vote upon the following matters:

  •  Proposal to adopt a merger agreement between J.P. Morgan Chase & Co. and Bank One Corporation pursuant to which Bank One will merge into JPMorgan Chase as described in this document.
 
  •  Election of directors.
 
  •  Ratification of the appointment of KPMG LLP as our independent auditor for 2004.
 
  •  Any other matters that may properly be brought before the meeting.

      Common stockholders of record at the close of business on April 2, 2004 may vote at the meeting. In order for the merger agreement to be adopted, the holders of a majority of the outstanding shares of Bank One common stock entitled to vote must vote in favor of the merger agreement.

      Your vote is important. Whether or not you plan to attend the annual meeting, please complete, sign, date and return your proxy card or voting instruction card in the enclosed envelope promptly, or authorize the individuals named on your proxy card to vote your shares by calling the toll-free telephone number or by using the Internet as described in the instructions included with your proxy card or voting instruction card.

  By Order of the Board of Directors
 
  Joan Guggenheimer
  Secretary

April 19, 2004

      Please note that if you attend the annual meeting you will be asked to present photo identification, such as a driver’s license. See “The Bank One Annual Meeting — Attending the Annual Meeting” on page 31.


 

TABLE OF CONTENTS

           
Page

QUESTIONS AND ANSWERS ABOUT VOTING PROCEDURES FOR THE ANNUAL MEETINGS
    1  
SUMMARY
    3  
 
THE MERGER
    3  
 
Bank One Common Stockholders to Receive 1.32 Shares of JPMorgan Chase Common Stock for Each Bank One Common Share; JPMorgan Chase Stockholders to Keep Their Shares
    3  
 
Bank One Will Merge With and Into JPMorgan Chase
    3  
 
Exchange Ratio is Fixed and Will Not Be Adjusted in Response to Changes in Our Stock Prices
    3  
 
Merger Generally Tax-Free to Bank One Stockholders
    5  
 
Dividend Policy; Anticipated Share Repurchases; Effect on Anticipated Merger Benefits
    5  
 
Our Boards of Directors Recommend that JPMorgan Chase and Bank One Stockholders Approve the Merger
    7  
 
We Have Received Opinions From Our Financial Advisors that the Merger is Fair
    7  
 
Appraisal Rights for Some JPMorgan Chase Preferred Stockholders But Not for Common Stockholders
    8  
 
Financial Interests of Our Directors and Executive Officers in the Merger
    8  
 
Treatment of Bank One Options and Equity-Based Awards
    9  
 
Directors and Management Following the Merger
    9  
 
Regulatory Approvals We Must Obtain for the Merger
    10  
 
Expected Timing of the Merger
    10  
 
Conditions to Completion of the Merger
    10  
 
Termination of the Merger Agreement; Fees Payable
    10  
 
JPMorgan Chase and Bank One Granted Stock Options to Each Other
    11  
 
THE ANNUAL MEETINGS
    12  
 
JPMorgan Chase Annual Meeting
    12  
 
Bank One Annual Meeting
    12  
 
INFORMATION ABOUT JPMORGAN CHASE AND BANK ONE
    14  
 
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
    16  
 
COMPARATIVE PER SHARE DATA (Unaudited)
    21  
RISK FACTORS
    22  
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
    25  
THE JPMORGAN CHASE ANNUAL MEETING
    27  
 
Date, Time and Place of the Annual Meeting
    27  
 
Purpose of the Annual Meeting
    27  
 
Record Date for the Annual Meeting
    27  
 
Votes Required
    27  
 
Attending the Annual Meeting
    28  
 
Proxies
    28  
 
Voting Electronically or by Telephone
    30  
 
Solicitation of Proxies
    30  
THE BANK ONE ANNUAL MEETING
    31  
 
Date, Time and Place of the Annual Meeting
    31  
 
Purpose of the Annual Meeting
    31  

i


 

           
Page

 
Record Date for the Annual Meeting
    31  
 
Votes Required
    31  
 
Attending the Annual Meeting
    32  
 
Proxies
    32  
 
Voting Electronically or by Telephone
    33  
 
Solicitation of Proxies
    33  
JPMORGAN CHASE PROPOSAL 1 AND BANK ONE PROPOSAL 1: THE MERGER
    34  
 
Effect of the Merger; What Bank One Stockholders Will Receive in the Merger; Increase in Common Stock
    34  
 
Background of the Merger
    34  
 
JPMorgan Chase’s Reasons for the Merger; Recommendation of the Merger by the JPMorgan Chase Board of Directors
    37  
 
Bank One’s Reasons for the Merger; Recommendation of the Merger by the Bank One Board of Directors
    42  
 
Opinions of Financial Advisors
    45  
 
Interests of Directors and Executive Officers in the Merger
    66  
 
Board of Directors and Management After the Merger
    70  
 
Material United States Federal Income Tax Consequences of the Merger
    71  
 
Accounting Treatment
    74  
 
Regulatory Approvals
    74  
 
Exchange of Bank One Stock Certificates
    76  
 
Treatment of Stock Options and Other Equity-Based Awards
    77  
 
Restrictions on Sales of Shares by Affiliates of Bank One
    78  
 
Stock Exchange Listings
    78  
 
Appraisal Rights
    78  
 
Delisting and Deregistration of Bank One Stock After the Merger
    80  
 
The Merger Agreement
    80  
 
Amendments to JPMorgan Chase By-laws
    89  
 
Stock Option Agreements
    90  
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
    94  
DESCRIPTION OF JPMORGAN CHASE CAPITAL STOCK
    103  
 
Common Stock
    103  
 
JPMorgan Chase Preferred Stock
    103  
 
Depositary Shares
    106  
 
Anti-Takeover Considerations
    108  
COMPARISON OF STOCKHOLDER RIGHTS
    109  
 
Capitalization
    109  
 
Voting Rights
    109  
 
Number and Election of Directors
    109  
 
Vacancies on the Board of Directors and Removal of Directors
    110  
 
Amendments to the Certificate of Incorporation
    110  
 
Amendments to By-Laws
    110  
 
Action by Written Consent
    110  
 
Ability to Call Special Meetings
    111  
 
Notice of Stockholder Action
    111  
 
Limitation of Personal Liability of Directors and Officers
    112  

ii


 

           
Page

 
Indemnification of Directors and Officers
    113  
 
State Anti-Takeover Statutes; Business Combinations with Interested Stockholders
    114  
OTHER MATTERS TO BE CONSIDERED AT THE JPMORGAN CHASE ANNUAL MEETING
    116  
 
JPMorgan Chase Proposal 2: Election of Directors
    116  
 
JPMorgan Chase Proposal 3: Appointment of External Auditor
    132  
 
JPMorgan Chase Proposal 4: Re-approval of Key Executive Performance Plan
    134  
 
JPMorgan Chase Proposal 5: Adjournment of Annual Meeting
    135  
 
JPMorgan Chase Proposals 6-13: Stockholder Proposals
    135  
OTHER MATTERS TO BE CONSIDERED AT THE BANK ONE ANNUAL MEETING
    147  
 
Bank One Proposal 2: Election of Directors
    147  
 
Bank One Proposal 3: Ratification of Appointment of Independent Auditor
    168  
LEGAL MATTERS
    171  
EXPERTS
    171  
STOCKHOLDER PROPOSALS
    171  
WHERE YOU CAN FIND MORE INFORMATION
    173  
ANNEX A  — Agreement and Plan of Merger
       
ANNEX B  — Bank One Stock Option Agreement
       
ANNEX C  — JPMorgan Chase Stock Option Agreement
       
ANNEX D  — Opinion of J.P. Morgan Securities Inc.
       
ANNEX E  — Opinion of Lazard Frères & Co. LLC
       
ANNEX F  — Section 262 of the Delaware General Corporation Law
       
ANNEX G — Amendments to JPMorgan Chase’s Certificate of Incorporation and By-laws
       
ANNEX H  — JPMorgan Chase Audit Committee Charter
       
ANNEX I  — Bank One Audit and Risk Management Committee Charter
       
ANNEX J  — Bank One Policy on Shareholder Communications
       
ANNEX K  — Bank One Policy on Director Nominees
       

iii


 

QUESTIONS AND ANSWERS ABOUT VOTING PROCEDURES FOR THE ANNUAL MEETINGS

Q: What do I need to do now?

A: After carefully reading and considering the information contained in this document, please respond by completing, signing and dating your proxy card or voting instruction card and returning it in the enclosed postage-paid envelope, or, if available, by submitting your proxy or voting instruction by telephone or through the Internet, as soon as possible so that your shares may be represented at your meeting.

Q: If my shares are held in “street name” by a broker or bank, will my broker or bank vote my shares for me?

A: If you hold your shares in street name and do not provide voting instructions to your broker or bank, your shares will not be voted on any proposal on which your broker or bank does not have discretionary authority to vote. Your broker or bank does not have discretionary authority to vote on the merger proposal. Accordingly, your broker or bank will vote your shares held by it in “street name” with respect to the merger proposal only if you provide instructions to it on how to vote. You should follow the directions your broker or bank provides. Shares that are not voted for any reason, including because you do not properly instruct your broker or bank, will have the effect of votes against the merger.

Q: What if I don’t vote?

A: If you fail to respond with a vote on the merger proposal, it will have the same effect as a vote against the merger. If you respond but do not indicate in your response how you want to vote on the merger, your proxy will be counted as a vote in favor of the merger. If you respond and indicate that you are abstaining from voting, your proxy will have the same effect as a vote against the merger.

If you are a JPMorgan Chase stockholder and you withhold authority to vote with respect to any director nominee, your proxy will be counted for purposes of establishing a quorum, but will have no effect on the election of that nominee. If you are a JPMorgan Chase stockholder and you abstain from voting on the other proposals, your proxy will be counted as present for purposes of establishing a quorum, and the abstention will have no effect on the outcome of that proposal. If you are a JPMorgan Chase stockholder and you respond without voting instructions, your proxy will be voted “for” each director nominee, “for” the appointment of PricewaterhouseCoopers LLP as external auditor, “for” the re-approval of the key executive performance plan, “for” the adjournment of the annual meeting, if necessary, and “against” the other proposals described in this document.

If you are a Bank One stockholder and you withhold authority to vote with respect to any director nominee, your proxy will be counted for purposes of establishing a quorum, but will have no effect on the election of that nominee. If you are a Bank One stockholder and you abstain from voting on the proposal to ratify the appointment of the independent auditor, your proxy will be counted as present for purposes of establishing a quorum, and the abstention will have no effect on the outcome of that proposal. If you are a Bank One stockholder and you respond without voting instructions, your proxy will be voted “for” each director nominee and “for” the appointment of KPMG LLP as independent auditor.

1


 

Q: Can I change my vote after I have delivered my proxy or voting instruction card?

A: Yes. You can change your vote at any time before your proxy is voted at your meeting. You can do this in one of three ways:

  •  By submitting a written statement that you would like to revoke your proxy to the Secretary of JPMorgan Chase or Bank One, as appropriate, before your annual meeting.
 
  •  By submitting a new proxy before your annual meeting. If you submit your proxy electronically through the Internet or by telephone, you can change your vote by submitting a proxy at a later date, in which case your later-submitted proxy will be recorded and your earlier proxy revoked.
 
  •  If you are a holder of record, you can attend your annual meeting and vote in person.

  If your shares are held in an account at a broker or bank, you should contact your broker or bank to change your vote.

Q: Should I send in my stock certificates now?

A: No. If you are a Bank One stockholder, you will receive written instructions from the exchange agent after the merger is completed on how to exchange your stock certificates for JPMorgan Chase shares. Please do not send in your stock certificates with your proxy. If you are a JPMorgan Chase stockholder, you will keep your existing shares, which will remain outstanding and unchanged following the merger.

Q: Why am I receiving this document?

A: We are delivering this document to you because it is serving as both a joint proxy statement of JPMorgan Chase and Bank One and a prospectus of JPMorgan Chase. It is a joint proxy statement because it is being used by our boards of directors to solicit the proxies of our common stockholders. It is a prospectus because JPMorgan Chase is offering shares of its common stock in exchange for shares of Bank One common stock if the merger is completed.

This document is also being sent to holders of preferred stock of JPMorgan Chase to provide them with notice of the meetings as required by Delaware law. None of those preferred stockholders is entitled to vote at the meetings; however, holders of JPMorgan Chase’s 6.63% Cumulative Preferred Stock, Series H, and Fixed/Adjustable Noncumulative Preferred Stock have appraisal rights in connection with the merger, as described under “The Merger — Appraisal Rights” on page 78.

Q: Who can help answer my questions?

A: If you have any questions about the merger or how to submit your proxy or voting instruction card, or if you need additional copies of this document or the enclosed proxy card or voting instruction card, you should contact:

             
  if you are a JPMorgan Chase stockholder:
MacKenzie Partners, Inc.
By Mail: 105 Madison Ave.
                New York, NY 10016
By E-mail: proxy@mackenziepartners.com
By Telephone:
   (212) 929-5500 (call collect)
               or
   (800) 322-2885 (toll free)
    if you are a Bank One stockholder:
Georgeson Shareholder Communications, Inc.
By Mail: 17 State Street, 10th Floor
                New York, NY 10004
By E-mail: BankOne@gscorp.com
By Telephone:
   Banks and Brokers Call:
   (212) 440-9800
   All Others Call Toll Free:
   (800) 356-1784

2


 

SUMMARY

      This summary highlights selected information in this document and may not contain all of the information that is important to you. You should carefully read this entire document and the other documents we refer you to for a more complete understanding of the matters being considered at the annual meetings. In addition, we incorporate by reference important business and financial information about JPMorgan Chase and Bank One into this document. You may obtain the information incorporated by reference into this document without charge by following the instructions in the section entitled “Where You Can Find More Information” beginning on page 173 of this document.

THE MERGER

Bank One Common Stockholders to Receive 1.32 Shares of JPMorgan Chase Common Stock for Each Bank One Common Share; JPMorgan Chase Stockholders to Keep Their Shares (see page 34)

      Bank One common stockholders will receive 1.32 shares of common stock of JPMorgan Chase for each share of Bank One common stock they own.

      JPMorgan Chase stockholders will keep their shares, which will remain outstanding and unchanged as shares of JPMorgan Chase following the merger.

Bank One Will Merge With and Into JPMorgan Chase (see page 34 and page 97)

      Subject to the terms and conditions of the merger agreement, and in accordance with Delaware law, at the completion of the merger Bank One will merge with and into JPMorgan Chase. JPMorgan Chase will be the surviving corporation. Because JPMorgan Chase does not currently have a sufficient number of authorized but unissued and unreserved shares to complete the merger and related transactions, the merger agreement also provides that, as part of the merger, JPMorgan Chase’s certificate of incorporation will be amended to increase the authorized shares of its common stock from 4,500,000,000 to 9,000,000,000 and, as amended, will be the certificate of incorporation of the combined company. This amendment will not be effected unless the merger is approved by stockholders and completed. JPMorgan Chase’s by-laws, which will be amended to provide for the agreed-upon succession and governance matters described under “The Merger — Amendments to JPMorgan Chase By-Laws” beginning on page 89, will be the by-laws of the combined company.

      Assuming the number of shares of Bank One common stock outstanding at the time of the merger equaled the number of shares outstanding on December 31, 2003 and that the value of JPMorgan Chase common stock at the time of the merger equaled $39.02 per share (the average price from two days prior to two days following the announcement of the merger), the aggregate purchase price for those Bank One shares would be $57.2 billion. Taking into account the additional fair value of vested options that will be converted into JPMorgan Chase stock options upon completion of the merger ($1.1 billion), the aggregate estimated purchase price to complete the proposed merger would be $58.3 billion. As noted below, however, the total value of the shares and options issued upon completion of the merger will fluctuate based on the share price of the JPMorgan Chase common stock and the number of shares of Bank One common stock and options outstanding on the date of the merger.

Exchange Ratio is Fixed and Will Not Be Adjusted in Response to Changes in Our Stock Prices (see page 22)

      Because the exchange ratio is fixed in the merger agreement and neither JPMorgan Chase nor Bank One has the right to terminate the merger agreement based on changes in either

3


 

party’s stock price, the market value of the JPMorgan Chase common stock that Bank One stockholders receive in the merger may vary significantly from its current value.

      The table below shows the closing prices of JPMorgan Chase and Bank One common stock, which trade on the New York Stock Exchange under the symbols “JPM” and “ONE,” respectively, and the pro forma equivalent per share value of Bank One common stock at the close of the regular trading session on January 13, 2004, the last trading day before our public announcement of the merger, and April 16, 2004, the most recent trading day for which that information was available prior to the mailing of this document.

                         
Bank One
JPMorgan Chase Bank One Pro Forma
Date Closing Price Closing Price Equivalent(a)




January 13, 2004
  $ 38.90     $ 44.61     $ 51.35  
April 16, 2004
    39.26       51.68       51.82  


(a)  The pro forma equivalent per share value of Bank One common stock is calculated by multiplying the JPMorgan Chase closing price by the exchange ratio of 1.32.

      Because the 1.32 exchange ratio is fixed and will not be adjusted as a result of changes in the market price of JPMorgan Chase common stock, the implied value of the merger consideration will fluctuate with the market price of JPMorgan Chase common stock. The merger agreement does not include a price-based termination right or provisions that would compensate for increases or decreases in the market price of JPMorgan Chase common stock. You should obtain current market quotations for the shares of both companies from a newspaper, the Internet or your broker. In addition, set forth below is a table showing the implied value of the merger consideration to Bank One stockholders based on a range of hypothetical JPMorgan Chase common stock prices. This table is for illustrative purposes only, and the actual prices at which shares of JPMorgan Chase common stock may trade between the date of this document and the closing of the merger and thereafter may be above or below the range set forth below.

             
Hypothetical Value of Implied Value of
JPMorgan Chase Bank One
Common Stock Common Stock


$ 32.50     $ 42.90  
   35.00       46.20  
   37.50       49.50  
   40.00       52.80  
   42.50       56.10  
   45.00       59.40  
   47.50       62.70  

      The following table sets forth, for the periods indicated, the high and low sale prices per share of JPMorgan Chase common stock and Bank One common stock as reported on the New York Stock Exchange Composite Tape. Bank One high and low share prices presented in

4


 

historical periodic filings are based on close of business prices. The information presented below is based on intra-day prices.
                                 
JPMorgan Chase Bank One
Common Stock Common Stock


Calendar Quarter High Low High Low





2001
                               
First Quarter
  $ 57.33     $ 37.58     $ 41.56     $ 32.50  
Second Quarter
    50.60       39.21       39.80       32.90  
Third Quarter
    46.01       29.04       39.10       27.00  
Fourth Quarter
    40.95       31.85       40.00       28.92  
2002
                               
First Quarter
    39.68       26.70       42.88       33.85  
Second Quarter
    38.75       30.15       42.75       35.61  
Third Quarter
    33.68       17.86       41.55       31.60  
Fourth Quarter
    26.14       15.26       40.75       32.54  
2003
                               
First Quarter
    28.29       20.13       38.98       33.14  
Second Quarter
    36.52       23.75       40.01       34.30  
Third Quarter
    38.26       32.40       40.51       36.80  
Fourth Quarter
    36.99       34.45       45.79       38.61  
2004
                               
First Quarter
    43.84       36.30       57.49       44.14  
Second Quarter (through April 16, 2004)
    42.57       38.24       55.70       50.20  

Merger Generally Tax-Free to Bank One Stockholders (see page 71)

      The merger has been structured to qualify as a reorganization for federal income tax purposes, and it is a condition to our respective obligations to complete the merger that JPMorgan Chase and Bank One each receive a legal opinion to the effect that the merger will so qualify. In addition, in connection with the filing of the registration statement of which this document is a part, JPMorgan Chase and Bank One will each receive a legal opinion to the same effect. Accordingly, holders of Bank One common stock generally will not recognize any gain or loss for federal income tax purposes on the exchange of their Bank One common stock for JPMorgan Chase common stock in the merger, except for any gain or loss that may result from the receipt of cash instead of a fractional share of JPMorgan Chase common stock.

      You should be aware that the tax consequences to you of the merger may depend upon your own situation. In addition, you may be subject to state, local or foreign tax laws that are not discussed in this document. You should therefore consult with your own tax advisor for a full understanding of the tax consequences to you of the merger.

Dividend Policy; Anticipated Share Repurchases; Effect on Anticipated Merger Benefits

      The merger agreement permits each of us to continue to pay regular quarterly cash dividends to our stockholders. The merger agreement also permits Bank One to increase its regular quarterly cash dividend prior to the completion of the merger to 44.875 cents per share, which is an amount approximately equal to the current JPMorgan Chase quarterly dividend times the exchange ratio. On January 20, 2004, Bank One announced that it increased its quarterly dividend payable on April 1, 2004 to Bank One stockholders of record on March 12, 2004 to 44.875 cents per share. JPMorgan Chase expects to continue to pay quarterly dividends on the common stock of JPMorgan Chase after completion of the merger in an amount equal to

5


 

JPMorgan Chase’s current dividend of 34 cents per share per quarter. The payment of dividends by JPMorgan Chase or Bank One on their common stock in the future, before or after the merger is completed, is subject to the discretion of our respective boards of directors and will depend on business conditions, our financial condition and earnings, regulatory considerations and other factors.

      We have agreed in the merger agreement to coordinate dividend declarations and the related record dates and payment dates so that our stockholders will not receive two dividends, or fail to receive one dividend, for any single calendar quarter. Accordingly, prior to the merger we may coordinate and amend our record dates and payment dates in order to effect this policy.

      JPMorgan Chase and Bank One have announced their intention to repurchase shares in an aggregate amount of approximately $3.5 billion in each of 2004, 2005 and 2006 (in addition to shares repurchased to provide common stock required for our respective dividend reinvestment and employee equity based plans). The announcement was made based on our respective managements’ determinations that, based upon current market conditions and our current business plans and expectations for the combined company, stock repurchases currently present the most attractive use of the excess capital anticipated to result from the merger. We believe that the repurchases will tend to increase earnings per share, enhance the liquidity of the stock of the combined company, return excess capital to stockholders in a tax efficient manner and provide a flexible means of capital management.

      The actual amount of shares repurchased will be subject to the discretion of the combined company’s board of directors and may be more or less than anticipated due to various factors, including: market conditions; legal considerations affecting the amount and timing of repurchase activity; the combined company’s capital position (taking into account purchase accounting adjustments); internal capital generation; and alternative potential investment opportunities over that time frame. If the actual amount of shares repurchased is less than anticipated, the merger could be less accretive or dilutive to JPMorgan Chase’s stockholders. See “Risk Factors” beginning on page 22.

      Set forth below is an accretion/dilution sensitivity analysis reflecting, under various illustrative buyback scenarios, the potential impact of the merger on Institutional Brokers Estimate System, or I/B/E/S, earnings per JPMorgan Chase share estimates for 2005. This is more fully discussed beginning on page 37 under the caption “JPMorgan Chase’s Reasons for the Merger; Recommendation of the Merger by the JPMorgan Chase Board of Directors”:

         
65% of Cost
2005E GAAP EPS Savings Realized


$3.5 billion of stock repurchases in 2004 and 2005
    (3.2) %
$1.0 billion more of stock repurchases in 2004
    (2.6) %
$1.0 billion less of stock purchases in 2004
    (3.8) %
No stock repurchases in 2004 or 2005; related excess capital reinvested at 7% after-tax return1
    (3.1) %
No stock repurchases in 2004 or 2005; no reinvestment of related excess capital
    (6.1) %

6


 

         
65% of Cost
2005E CASH EPS Savings Realized


$3.5 billion of stock repurchases in 2004 and 2005
    1.5 %
$1.0 billion more of stock repurchases in 2004
    3.8 %
$1.0 billion less of stock purchases in 2004
    (0.6 )%
No stock repurchases in 2004 or 2005; related excess capital reinvested at 7% after-tax return1
    1.3 %
No stock repurchases in 2004 or 2005; no reinvestment of related excess capital
    (1.6 )%


Assumes excess capital not used for anticipated share repurchases is invested in a portfolio of investment securities that earns a 1.00% pre-tax net interest spread and leverages capital 11x. These assumptions are for illustrative purposes only.

Our Boards of Directors Recommend that JPMorgan Chase and Bank One Stockholders Approve the Merger (see pages 37 and 42)

      JPMorgan Chase Stockholders. The JPMorgan Chase board of directors has determined that the merger agreement and related agreements are advisable and in the best interests of JPMorgan Chase and its stockholders and unanimously recommends that the JPMorgan Chase stockholders vote FOR the adoption of the merger agreement.

      Bank One Stockholders. The Bank One board of directors has determined that the merger agreement and related agreements are advisable and in the best interests of Bank One and its stockholders and unanimously recommends that the Bank One stockholders vote FOR the adoption of the merger agreement.

      Factors Considered by Our Boards. In determining whether to approve the merger, our boards of directors each consulted with our respective senior managements and legal and financial advisors and considered the respective strategic, financial and other considerations referred to under “The Merger — JPMorgan Chase’s Reasons for the Merger; Recommendation of the Merger by the JPMorgan Chase Board of Directors” beginning on page 37 and “The Merger — Bank One’s Reasons for the Merger; Recommendation of the Merger by the Bank One Board of Directors” beginning on page 42.

We Have Received Opinions From Our Financial Advisors that the Merger is Fair (see page 45)

      Opinion of JPMorgan Chase’s Financial Advisor. JPMorgan Chase’s financial advisor, J.P. Morgan Securities Inc., has provided its opinion to the JPMorgan Chase board of directors dated as of January 14, 2004 that, as of that date, and subject to and based on the qualifications and assumptions set forth in its opinion, the exchange ratio in the merger was fair, from a financial point of view, to JPMorgan Chase. The full text of JPMorgan Securities’ opinion is attached as Annex D to this document. JPMorgan Chase urges its stockholders to read that opinion in its entirety. The opinion of JPMorgan Securities will not reflect any developments that may occur or may have occurred after the date of its opinion and prior to the completion of the merger. JPMorgan Chase does not currently expect that it will request an updated opinion from JPMorgan Securities.

      JPMorgan Chase has agreed to allocate a fee of $40 million to JPMorgan Securities in consideration for its services as financial advisor.

      Opinion of Bank One’s Financial Advisor. Bank One’s financial advisor, Lazard Frères & Co. LLC, has provided its opinion to the Bank One board of directors dated as of January 14, 2004 that, as of that date, and subject to and based on the considerations referred to in its opinion, the exchange ratio in the merger was fair, from a financial point of view, to Bank One’s common stockholders. The full text of Lazard’s opinion is attached as Annex E to this document. Bank One urges its stockholders to read that opinion in its entirety. The opinion of Lazard will

7


 

not reflect any developments that may occur or may have occurred after the date of its opinion and prior to the completion of the merger. Bank One does not currently expect that it will request an updated opinion from Lazard.

      Bank One has agreed to pay a fee of $20 million to Lazard in consideration for its services as financial advisor, a portion of which is payable upon completion of the merger.

      JPMorgan Chase’s Financial Advisor is an Affiliate of JPMorgan Chase and May be Deemed to Have Conflicts of Interest. JPMorgan Chase decided to engage its subsidiary investment bank as its financial advisor. As a result of its affiliation with JPMorgan Chase, JPMorgan Securities may be deemed to have had potential conflicts of interest in performing its duties as financial advisor. JPMorgan Chase’s board of directors considered this potential conflict of interest when making its decision to engage JPMorgan Securities. JPMorgan Chase’s board concluded that it was appropriate and in the best interests of JPMorgan Chase and its stockholders to approve the engagement of JPMorgan Securities based on the investment bank’s global standing, extensive experience in merger transactions on behalf of unaffiliated parties and familiarity with the businesses in which JPMorgan Chase and Bank One operate, as well as its involvement in the discussions and due diligence that led to the merger agreement. The board also noted that in previous business combinations involving major financial institutions, including the merger of JPMorgan Chase’s predecessor institutions, The Chase Manhattan Corporation and J.P. Morgan & Co. Incorporated, one or both of the merging parties had relied on its affiliated investment bank as its financial advisor. See “Risk Factors” beginning on page 22 and “The Merger — Opinions of Financial Advisors — Decision by JPMorgan Chase Board to Engage Affiliated Financial Advisor” on page 45.

Appraisal Rights for Some JPMorgan Chase Preferred Stockholders But Not for Common Stockholders (see page 78)

      Under Delaware law, the common stockholders of JPMorgan Chase and Bank One are not entitled to appraisal rights in connection with the merger. Holders of JPMorgan Chase’s 6.63% Cumulative Preferred Stock, Series H, and Fixed/ Adjustable Noncumulative Preferred Stock who submit a written demand for appraisal of their shares and who perfect their appraisal rights by complying with the applicable statutory procedures required by Delaware law will be entitled to receive payment in cash for the fair value of their shares as determined by the Delaware Chancery Court. Holders of other series of preferred stock of JPMorgan Chase are not entitled to appraisal rights in connection with the merger.

Financial Interests of Our Directors and Executive Officers in the Merger (see page 66)

      Some of the directors and executive officers of JPMorgan Chase and Bank One have interests in the merger that are different from, or are in addition to, the interests of stockholders of JPMorgan Chase and Bank One. These interests include:

  •  rights of Bank One’s Chairman and Chief Executive Officer, James Dimon, under an employment agreement with JPMorgan Chase for a term of employment to commence upon the completion of the merger, including the right to receive an annual base salary of $1 million and annual bonuses and equity-based awards no less than 90% of the value of the annual bonuses and equity-based awards provided to Mr. Harrison for the same period, which future bonuses and awards have not been determined at this time. Mr. Dimon’s current employment agreement with Bank One provides for an annual base salary of $1 million, a target annual bonus of 250% of his base salary and annual equity-based awards with a value of at least $7 million;
 
  •  rights of JPMorgan Chase’s Chairman and Chief Executive Officer, William B. Harrison, Jr., under JPMorgan Chase’s severance policy;

8


 

  •  the agreed-upon appointment of various members of senior management of JPMorgan Chase and Bank One to senior management positions at JPMorgan Chase after the merger;
 
  •  rights of Bank One executive officers under stock-based benefit programs and awards (including programs and awards of Bank One under which an aggregate of 5,789,588 options held by current executive officers of Bank One may become exercisable and 869,090 other stock-based awards held by current executive officers of Bank One may be required to be distributed upon completion of the merger or in connection with qualifying terminations of employment after the merger);
 
  •  rights of Bank One executive officers under existing and contemplated severance arrangements or retirement arrangements;
 
  •  rights of Bank One executive officers and directors to continued indemnification and insurance coverage by JPMorgan Chase after the merger for acts or omissions occurring prior to the merger; and
 
  •  compensation of persons designated by Bank One to serve on the combined company’s board of directors under JPMorgan Chase’s standard director compensation policy.

      Our boards of directors were aware of these respective interests when deciding to approve the merger.

Treatment of Bank One Options and Equity-Based Awards (see page 77)

      In the merger, JPMorgan Chase will assume all Bank One employee stock options and other equity-based awards and those options and awards will become options and awards exercisable for or based upon JPMorgan Chase common stock. The number of shares issuable under those options and awards, and the exercise prices for those options and awards, will be adjusted to take into account the exchange ratio.

      For financial accounting purposes, the fair value of all Bank One employee stock options will be revalued at the closing of the merger, as further described under “Treatment of Stock Options and Other Equity-Based Awards” beginning on page 77.

Directors and Management Following the Merger (see page 70)

      Following the merger, the board of directors of JPMorgan Chase will consist of sixteen directors. The board will include Mr. Harrison, currently the Chairman and Chief Executive Officer of JPMorgan Chase, and seven other directors to be designated by JPMorgan Chase. It will also include Mr. Dimon, currently the Chairman and Chief Executive Officer of Bank One, and seven other directors to be designated by Bank One. Other than Messrs. Harrison and Dimon, none of the directors to be designated by JPMorgan Chase or Bank One will be employees of the combined company. Directors who serve on the combined company’s board of directors are expected to be compensated for their services in that capacity in accordance with JPMorgan Chase’s standard director compensation policy.

      Following the merger, Mr. Harrison will continue to serve as Chairman and Chief Executive Officer of JPMorgan Chase and Mr. Dimon will become President and Chief Operating Officer of JPMorgan Chase. As part of the merger, the parties have agreed that as of the second anniversary of the completion of the merger (or, if earlier, when Mr. Harrison ceases for any reason to serve in the position of Chief Executive Officer), Mr. Dimon will become Chief Executive Officer of JPMorgan Chase. Mr. Harrison will continue to serve as Chairman of JPMorgan Chase following the date of Mr. Dimon’s succession as Chief Executive Officer. In

9


 

addition, the parties have agreed that various members of senior management from each company will be appointed to senior management positions of the combined company following the merger, as further described in “The Merger — Board of Directors and Management After the Merger” beginning on page 70.

Regulatory Approvals We Must Obtain for the Merger (see page 74)

      To complete the merger, we must obtain the approval of the Board of Governors of the Federal Reserve System. In addition, we need to obtain approvals or consents from, or make filings with, a number of U.S. federal and state bank, insurance and other regulatory authorities as well as regulatory authorities in various foreign jurisdictions.

Expected Timing of the Merger

      We expect to complete the merger by mid-2004 if we have received the stockholder and regulatory approvals required to do so.

Conditions to Completion of the Merger (see page 80)

      We may not complete the merger unless the following conditions are satisfied or, where permitted, waived:

  •  the merger agreement must be adopted by the common stockholders of both JPMorgan Chase and Bank One;
 
  •  the JPMorgan Chase common stock to be issued in, or in connection with, the merger must be approved for listing on the New York Stock Exchange;
 
  •  we must obtain all necessary regulatory approvals of the merger from domestic and foreign governmental authorities, and none of those approvals may contain a condition or restriction that would have a material adverse effect on JPMorgan Chase after the merger;
 
  •  the registration statement of which this document is part must be declared effective by the Securities and Exchange Commission and not be subject to a stop order or proceedings seeking a stop order;
 
  •  no legal prohibition to completion of the merger may be in effect;
 
  •  our respective representations and warranties in the merger agreement must be true and correct, subject to exceptions that would not have a material adverse effect on JPMorgan Chase or Bank One, as the case may be, or on the combined company following the completion of the merger;
 
  •  we must each be in compliance in all material respects with our respective covenants in the merger agreement;
 
  •  we must each receive an opinion of our respective tax counsel that the merger will qualify as a tax-free reorganization; and
 
  •  in the case of Bank One’s obligation to complete the merger, JPMorgan Chase’s by-laws must have been amended to provide for the agreed-upon structure of the board of directors and Chief Executive Officer succession arrangements after the merger.

Termination of the Merger Agreement; Fees Payable (see page 84)

      We may jointly agree to terminate the merger agreement at any time. Either of us may also terminate the merger agreement if:

  •  a governmental authority that must grant a material regulatory approval denies approval of the merger, or a governmental authority permanently restrains or prohibits the merger, and

10


 

  in either case that denial or action is final and nonappealable (although this termination right is not available to a party whose failure to comply with the merger agreement resulted in those actions by a governmental authority);
 
  •  the merger is not completed on or before January 14, 2005 (although this termination right is not available to a party whose failure to comply with the merger agreement resulted in the failure to complete the merger by that date);
 
  •  the other party’s board of directors adversely changes its recommendation that its stockholders vote in favor of the merger or takes any other action inconsistent with such recommendation, or the other party breaches its obligation to hold its stockholders’ meeting to vote on adoption of the merger agreement;
 
  •  the other party is in breach of its representations, warranties, covenants or agreements set forth in the merger agreement and the breach rises to a level that would excuse the terminating party’s obligation to complete the merger and is either incurable or is not cured within 60 days; or
 
  •  the stockholders of either party do not approve the merger at their respective stockholders’ meeting.

      The merger agreement provides that in several circumstances described more fully beginning on page 84 involving a change in recommendation in favor of the merger agreement or failure to hold a stockholders’ meeting to vote on the merger or a third party acquisition proposal, either of us may be required to pay termination fees to the other of up to $2.30 billion. The termination fees and the stock option agreements described below could discourage other companies from seeking to acquire or merge with either JPMorgan Chase or Bank One.

JPMorgan Chase and Bank One Granted Stock Options to Each Other (see page 90)

      Each of us has issued to the other an option to purchase up to 19.9% of our respective outstanding shares of common stock. The exercise price of the option issued by Bank One is $44.61 per Bank One share, which represented the closing price of Bank One common stock on January 13, 2004, the trading day prior to the announcement of the merger. The exercise price of the option issued by JPMorgan Chase is $38.90 per JPMorgan Chase share, which represented the closing price of JPMorgan Chase common stock on that same day.

      Each option becomes exercisable only if one of the following events occurs:

  •  prior to termination of the merger agreement, without the consent of the option holder, the option issuer enters into an agreement with any person relating to a competing acquisition proposal as described in the stock option agreement;
 
  •  prior to termination of the merger agreement, any person other than the option holder acquires beneficial ownership of, or a right to acquire beneficial ownership of, voting securities representing 20% or more of the voting power of the option issuer or any of its significant subsidiaries; or
 
  •  the full $2.30 billion termination fee under the merger agreement, as described above, becomes payable by the option issuer.

      Under the circumstances described in the stock option agreements, the option holder may require the option issuer to repurchase the option and any shares purchased under the option for a price specified in the stock option agreement.

      The option holder’s profit under the applicable stock option agreement, together with any termination fees paid under the merger agreement, may not exceed $2.87 billion.

11


 

THE ANNUAL MEETINGS

JPMorgan Chase Annual Meeting (see page 27)

      The JPMorgan Chase annual meeting will be held at the auditorium of J.P. Morgan Chase & Co., One Chase Manhattan Plaza, New York, New York on May 25, 2004, starting at 9:00 a.m., New York time. At the JPMorgan Chase meeting, JPMorgan Chase’s common stockholders will be asked to vote on the following matters:

  •  adoption of the merger agreement;
 
  •  election of directors;
 
  •  ratification of the appointment of PricewaterhouseCoopers LLP as JPMorgan Chase’s external auditor for 2004;
 
  •  re-approval of the key executive performance plan;
 
  •  adjournment of the meeting, if necessary or appropriate;
 
  •  stockholder proposals included in this document, if they are introduced at the meeting; and
 
  •  any other matters that may be properly brought before the meeting.

      You may vote at the JPMorgan Chase annual meeting if you owned shares of JPMorgan Chase common stock at the close of business on April 2, 2004. On that date there were 2,081,783,154 shares of JPMorgan Chase common stock outstanding, less than 1% of which were owned and entitled to be voted by JPMorgan Chase directors and executive officers and their affiliates. We currently expect that JPMorgan Chase’s directors and executive officers will vote their shares in favor of the merger, although none of them has entered into any agreements obligating them to do so.

      You may cast one vote for each share of JPMorgan Chase common stock you own. The proposals require different percentages of votes in order to approve them:

  •  The affirmative vote of a majority of the shares of JPMorgan Chase common stock outstanding on the record date is required to adopt the merger agreement.
 
  •  The affirmative vote of a plurality of the votes cast at the annual meeting is required to approve the election of each director nominee.
 
  •  The affirmative vote of a majority of the shares of JPMorgan Chase common stock represented at the annual meeting and entitled to vote is required to ratify the appointment of the external auditor.
 
  •  The affirmative vote of a majority of the shares of JPMorgan Chase common stock represented at the annual meeting and entitled to vote is required to re-approve the key executive performance plan.
 
  •  The affirmative vote of a majority of the shares of JPMorgan Chase common stock represented at the annual meeting and entitled to vote is required to adjourn the meeting.
 
  •  The affirmative vote of a majority of the shares of JPMorgan Chase common stock represented at the annual meeting and entitled to vote is required to adopt the stockholder proposals described in this document.

Bank One Annual Meeting (see page 31)

      The Bank One annual meeting will be held at the auditorium of Bank One Corporation, 1 Bank One Plaza, Chicago, Illinois on May 25, 2004, starting at 9:30 a.m., Chicago time. At the

12


 

Bank One meeting, Bank One’s common stockholders will be asked to vote on the following matters:

  •  adoption of the merger agreement;
 
  •  election of directors;
 
  •  ratification of the appointment of KPMG LLP as Bank One’s independent auditor for 2004; and
 
  •  any other matters that may be properly brought before the meeting.

      You may vote at the Bank One annual meeting if you owned shares of Bank One common stock at the close of business on April 2, 2004. On that date there were 1,125,809,564 shares of Bank One common stock outstanding, less than 1.25% of which were owned and entitled to be voted by Bank One directors and executive officers and their affiliates. We currently expect that Bank One’s directors and executive officers will vote their shares in favor of the merger, although none of them has entered into any agreements obligating them to do so.

      You can cast one vote for each share of Bank One common stock you own. The proposals require different percentages of votes in order to approve them:

  •  The affirmative vote of a majority of the shares of Bank One common stock outstanding on the record date is required to adopt the merger agreement.
 
  •  The affirmative vote of a plurality of the votes cast at the annual meeting is required to approve the election of each director nominee.
 
  •  The affirmative vote of a majority of the shares of Bank One common stock represented at the annual meeting and entitled to vote is required to ratify the appointment of the independent auditor.

13


 

INFORMATION ABOUT JPMORGAN CHASE AND BANK ONE

J.P. Morgan Chase & Co.

     270 Park Avenue
     New York, New York 10017
     (212) 270-6000

      JPMorgan Chase is a financial holding company incorporated under Delaware law in 1968. JPMorgan Chase is one of the largest banking institutions in the United States, with approximately $771 billion in assets and approximately $46 billion in stockholders’ equity as of December 31, 2003.

      JPMorgan Chase is a leading global financial services firm with operations in more than 50 countries and more than 30 million retail customers nationwide as of December 31, 2003. Its principal bank subsidiaries are JPMorgan Chase Bank, a New York banking corporation headquartered in New York City, and Chase Manhattan Bank USA, National Association, headquartered in Delaware. JPMorgan Chase’s principal nonbank subsidiary is its investment banking subsidiary, JPMorgan Securities. The bank and nonbank subsidiaries of JPMorgan Chase operate nationally as well as through overseas branches and subsidiaries, representative offices and affiliated banks.

      JPMorgan Chase’s activities are internally organized, for management reporting purposes, into five major business segments: Investment Bank; Treasury & Securities Services; Investment Management & Private Banking; JPMorgan Partners; and Chase Financial Services. The following is a brief description of those businesses.

      Investment Bank. The Investment Bank is one of the world’s leading investment banks, as evidenced by the breadth of its client relationships and product capabilities. The Investment Bank, which includes JPMorgan Securities, has extensive relationships with corporations, financial institutions, governments and institutional investors worldwide. The Investment Bank provides a full range of investment banking and commercial banking products and services including advising on corporate strategy and structure, capital raising in equity and debt markets, sophisticated risk management and market-making in cash securities and derivative instruments in all major capital markets. The Investment Bank also commits JPMorgan Chase’s own capital to proprietary investing and trading activities.

      Treasury & Securities Services. Treasury & Securities Services, a global leader in transaction processing and information services to wholesale clients, is composed of three businesses. Institutional Trust Services provides a range of services to debt and equity issuers and broker-dealers, from traditional trustee and paying-agent functions to global securities clearance. Investor Services provides securities custody and related functions, such as securities lending, investment analytics and reporting, to mutual funds, investment managers, pension funds, insurance companies and banks worldwide. Treasury Services provides treasury and cash management, as well as payment, liquidity management and trade finance services, to a diversified global client base of corporations, financial institutions and governments.

      Investment Management & Private Banking. Investment Management & Private Banking provides investment management services to institutional investors, high net worth individuals and retail customers, and it provides personalized advice and solutions to wealthy individuals and families.

      JPMorgan Partners. JPMorgan Partners, the global private equity organization of JPMorgan Chase, provides equity and mezzanine capital financing to private companies. It is a diversified investor, investing in buyouts and in growth equity and venture opportunities across a variety of industry sectors, with the objective of creating long-term value for JPMorgan Chase and third-party investors.

14


 

      Chase Financial Services. Chase Financial Services is a major provider of banking, investment and financing products and services to consumers and small and middle market businesses throughout the United States. The majority of its revenues and earnings are produced by its national consumer credit businesses, Chase Home Finance, Chase Cardmember Services and Chase Auto Finance. It also serves as a full-service bank for consumers and small-and medium-sized businesses through Chase Regional Banking and Chase Middle Market.

      On December 31, 2000, J.P. Morgan & Co. Incorporated merged with and into The Chase Manhattan Corporation, which changed its name to “J.P. Morgan Chase & Co.” upon completion of the merger. The merger was accounted for as a pooling of interests. As a result, the financial information provided or incorporated by reference in this document presents the combined results of The Chase Manhattan Corporation and J.P. Morgan & Co. Incorporated as if the merger had been in effect for all periods presented. In addition, certain prior-period amounts for the predecessor institutions’ financial statements have been reclassified to conform to the current presentation.

Bank One Corporation

     1 Bank One Plaza
     Chicago, Illinois 60670
     (312) 732-4000

      Bank One Corporation is a financial holding company and a multibank bank holding company registered under the Bank Holding Company Act of 1956, and is headquartered in Chicago, Illinois. Bank One was incorporated in Delaware in 1998 to effect the merger of Banc One Corporation and First Chicago NBD Corporation.

      Bank One provides domestic retail banking, finance and credit card services; worldwide commercial banking services; and trust and investment management services. Bank One operates banking offices in Arizona, Colorado, Florida, Illinois, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin and in selected international markets. Bank One also engages in other businesses related to banking and finance, including credit card and merchant processing, consumer and education finance, real estate-secured lending and servicing, insurance, venture capital, investment and merchant banking, trust, brokerage, investment management, leasing, community development and data processing. These activities are conducted through bank subsidiaries and nonbank subsidiaries. Prior to 2001, the bank subsidiaries were operated under separate national or state charters in the 14 states in which the banking offices are located. Since 2001, most of the bank subsidiaries have been consolidated into Bank One, National Association, headquartered in Chicago, Illinois and Bank One, National Association, headquartered in Columbus, Ohio.

15


 

SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

      The following financial information is to aid you in understanding the financial aspects of the merger. The following tables present (1) selected historical financial data of JPMorgan Chase, (2) selected historical financial data of Bank One and (3) selected unaudited pro forma combined financial data reflecting the merger. The historical financial data show the financial results actually achieved by JPMorgan Chase and Bank One for the periods indicated. The pro forma unaudited combined financial data show financial results as if the merger had taken place at the beginning of the earliest period presented and assuming the merger is accounted for as a purchase of Bank One by JPMorgan Chase.

Selected Historical Financial Data of JPMorgan Chase

(in millions, except per share and ratio data)

      The selected historical financial data of JPMorgan Chase have been derived from the historical consolidated financial statements and related notes of JPMorgan Chase filed by JPMorgan Chase with the Securities and Exchange Commission. On December 31, 2000, J.P. Morgan & Co. Incorporated merged with and into The Chase Manhattan Corporation, which changed its name to “J.P. Morgan Chase & Co.” The merger was accounted for as a pooling of interests and accordingly the amounts below include the consolidated results of The Chase Manhattan Corporation and J.P. Morgan & Co. Incorporated prior to that merger. See “Where You Can Find More Information” beginning on page 173.

                                           
Years Ended December 31,

2003 2002 2001 2000 1999





Income Statement
                                       
Net interest income
  $ 12,337     $ 11,526     $ 10,802     $ 9,512     $ 10,285  
Noninterest revenue
    20,919       18,088       18,542       23,674       20,861  
Total revenue
    33,256       29,614       29,344       33,186       31,146  
Provision for credit losses
    1,540       4,331       3,182       1,380       1,446  
Noninterest expense(e)
    21,688       22,764 (a)     23,596       23,073       18,211  
Income before income tax expense
    10,028       2,519       2,566       8,733       11,489  
Income tax expense
    3,309       856       847       3,006       3,988  
Net effect of change in accounting principle
                (25 )            
Net income
    6,719       1,663       1,694       5,727       7,501  
Average common shares outstanding:
                                       
 
Basic
    2,009       1,984       1,972       1,884       1,913  
 
Diluted
    2,055       2,009       2,024       1,969       2,005  
     
     
     
     
     
 
Performance Ratios
                                       
Return on average assets
    0.87 %     0.23 %     0.23 %     0.85 %     1.19 %
Return on average common equity
    15.5 %     3.9 %     3.9 %     15.6 %     22.5 %
Total equity to total assets at December 31
    6.0 %     5.6 %     5.9 %     5.9 %     5.3 %
Total average equity to total average assets
    5.7 %     5.8 %     5.8 %     5.6 %     5.5 %
Dividend payout ratio
    43 %     171 %     168 %     42 %     28 %
Per Common Share
                                       
Net income — Basic
  $ 3.32     $ 0.81     $ 0.83 (d)   $ 2.99     $ 3.87  
Net income — Diluted
    3.24       0.80       0.80 (d)     2.86       3.69  
Cash dividends per common share
    1.36       1.36       1.36       1.28       1.08  
Book value at December 31
    22.10       20.66       20.32       21.17       18.07  
     
     
     
     
     
 

16


 

                                         
Years Ended December 31,

2003 2002 2001 2000 1999





Selected Balance Sheet Items
                                       
Loans
  $ 219,518     $ 216,364     $ 217,444     $ 216,050     $ 203,008  
Total assets
    770,912       758,800       693,575       715,348       667,003  
Deposits
    326,492       304,753       293,650       279,365       287,064  
Long-term debt(b)
    54,782       45,190       43,622       47,238       45,540  
Common stockholders’ equity
    45,145       41,297       40,090       40,818       33,434  
     
     
     
     
     
 
Capital Ratios
                                       
Risk-based capital:
                                       
Tier-1
    8.5 %     8.2 %     8.3 %     8.5 %     8.5 %
Total
    11.8 %     12.0 %     11.9 %     12.0 %     12.3 %
Leverage
    5.6 %     5.1 %     5.2 %     5.4 %     5.9 %
     
     
     
     
     
 
Market Price Per Share of
Common Stock(c)
                                       
Closing
  $ 36.73     $ 24.00     $ 36.35     $ 45.44     $ 51.79  
High
    38.26       39.68       59.19       67.17       60.75  
Low
    20.13       15.26       29.04       32.38       43.88  
     
     
     
     
     
 

(a)   Includes a $1.3 billion charge in connection with the settlement of the Enron-related surety litigation and the establishment of a reserve related to material litigations, proceedings and investigations.
 
(b)   Includes junior subordinated deferrable interest debentures held by trusts that issued guaranteed preferred beneficial interests and excludes long-term debt classified as Beneficial interests issued by consolidated variable interest entities.

(c)   JPMorgan Chase’s common stock is listed and traded on the New York Stock Exchange, the London Stock Exchange Limited and the Tokyo Stock Exchange. The high, low and closing prices of JPMorgan Chase’s common stock are from the New York Stock Exchange composite transaction tape. Share-related data have been restated to reflect a three-for-two stock split effective as of the close of business on June 9, 2000.

(d)   Basic and diluted earnings per share have been reduced by $0.01 in 2001 because of the impact of the adoption of SFAS 133 relating to the accounting for derivative financial instruments and hedging activities.
 
(e)   Includes merger and restructuring charges of $1,210 million in 2002, $2,523 million in 2001, $1,431 million in 2000 and $23 million in 1999.

17


 

Selected Historical Financial Data of Bank One

(in millions, except per share and ratio data)

      The selected historical financial data of Bank One have been derived from the historical consolidated financial statements and related notes of Bank One filed by Bank One with the Securities and Exchange Commission. See “Where You Can Find More Information” beginning on page 173.

                                           
Years Ended December 31,

2003 2002 2001 2000 1999





Income Statement
                                       
Net interest income
  $ 8,149     $ 8,555     $ 8,605     $ 8,806     $ 8,993  
Noninterest revenue
    8,063       8,180       7,143       5,004       8,609  
Total revenue
    16,212       16,735       15,748       13,810       17,602  
Provision for credit losses
    2,045       2,487       2,510       3,398       1,249  
Noninterest expense
    9,777       9,546       9,490       11,531       11,421  
Income (loss) from continuing operations, net of taxes
    3,125       3,256       2,649       (536 )     3,453  
Income from discontinued operations, net of taxes
    410       39       33       25       26  
Net effect of change in accounting principle
                (44 )            
Net income (loss)
    3,535       3,295       2,638       (511 )     3,479  
Average common shares outstanding:
                                       
 
Basic
    1,126       1,162       1,166       1,154       1,168  
 
Diluted
    1,135       1,172       1,174       1,154       1,178  
     
     
     
     
     
 
 
Performance Ratios
                                       
Return (loss) on average assets
    1.27 %     1.25 %     0.98 %     (0.19 %)     1.36 %
Return (loss) on average common stockholders’ equity
    15.6 %     15.2 %     13.4 %     (2.7 %)     17.1 %
Total equity to total assets (period end)
    7.2 %     8.1 %     7.5 %     6.9 %     7.5 %
Total average equity to total average assets
    8.1 %     8.2 %     7.3 %     7.2 %     8.0 %
Dividend payout ratio
    30 %     30 %     38 %     NM       57 %
 
Per Common Share Data
                                       
Basic earnings per share:
                                       
 
Income (loss) from continuing operations, (net of taxes)
  $ 2.78     $ 2.80     $ 2.25     $ (0.47 )   $ 2.95  
 
Income from discontinued operations, (net of taxes)
    0.36       0.03       0.03       0.02       0.02  
 
Net income (loss)
    3.14       2.83       2.25 (3)     (0.45 )     2.97  
Diluted earnings per share:
                                       
 
Income (loss) from continuing operations, (net of taxes)
    2.75       2.77       2.25       (0.47 ) (1)     2.93  
 
Income from discontinued operations, (net of taxes)
    0.36       0.03       0.03       0.02   (1)     0.02  
 
Net income (loss)
    3.11       2.80       2.24 (3)     (0.45 ) (1)     2.95  
Cash dividends per common share
    0.92       0.84       0.84       1.26       1.68  
Book value at December 31
    20.92       19.28       17.33       15.90       17.34  
     
     
     
     
     
 


                                         
NM = not meaningful.
                                       

18


 

                                         
Years Ended December 31,

2003 2002 2001 2000 1999





Selected Balance Sheet Items
                                       
Loans
  $ 138,147     $ 148,125     $ 156,733     $ 174,251     $ 163,877  
Total assets
    326,563       277,985       269,507       269,774       269,767  
Total deposits
    164,621       170,008       167,530       167,077       162,278  
Long-term debt(2)
    46,764       43,234       43,418       40,911       35,435  
Common stockholders’ equity
    23,419       22,440       20,226       18,445       19,900  
     
     
     
     
     
 
Capital Ratios
                                       
Risk-based capital:
                                       
Tier-1
    10.0 %     9.9 %     8.6 %     7.3 %     7.7 %
Total
    13.7 %     13.7 %     12.2 %     10.8 %     10.7 %
Leverage
    8.8 %     8.9 %     8.2 %     7.3 %     7.7 %
     
     
     
     
     
 
Market Price Per Share of Common Stock
                                       
Closing
  $ 45.59     $ 36.55     $ 39.05     $ 36.63     $ 32.00  
High(4)
    45.70       42.53       39.85       38.81       63.13  
Low(4)
    33.94       32.59       28.00       24.25       29.98  
     
     
     
     
     
 

(1)  Common equivalent shares and related income were excluded from the computation of diluted loss per share for the year-ended December 31, 2000, as they are antidilutive.
 
(2)  Includes trust preferred capital securities and excludes long-term debt classified as Beneficial interests issued by consolidated variable interest entities.
 
(3)  Basic and diluted earnings per share have been reduced by $0.03 and $0.04, respectively, in 2001 because of the impact of the adoption of SFAS 133 relating to the accounting for derivative financial instruments and hedging activities.
 
(4)  Bank One high and low share prices presented in historical periodic filings are based on close of business prices. The information presented above is based on intra-day prices.

19


 

Selected Unaudited Pro Forma Combined Financial Data of JPMorgan Chase and Bank One

(in millions)

      The following table shows information about our financial condition and results of operations, including per share data and financial ratios, after giving effect to the merger. This information is called pro forma financial information in this document. The information under “Selected Combined Balance Sheet Items at Period End” in the table below assumes the merger was completed on December 31, 2003. The information under “Combined Income Statement” in the table below gives effect to the merger as if the merger had been completed on January 1, 2003. This pro forma financial information assumes that the merger is accounted for using the purchase method of accounting and represents a current estimate of the financial information based on available financial information of JPMorgan Chase and Bank One. See “The Merger — Accounting Treatment” on page 74.

      The pro forma financial information includes adjustments to record the assets and liabilities of Bank One at their estimated fair values and is subject to further adjustment as additional information becomes available and as additional analyses are performed. The pro forma financial information is presented for illustrative purposes only and does not indicate the financial results of the combined company had the impact of possible revenue enhancements, expense efficiencies, asset dispositions and share repurchases, among other factors, been considered.

      The information presented below should be read together with the historical consolidated financial statements of JPMorgan Chase and Bank One, including the related notes, filed by each of them with the Securities and Exchange Commission and together with the consolidated historical financial data for JPMorgan Chase and Bank One and the other pro forma financial information, including the related notes, appearing elsewhere in this document. See “Where You Can Find More Information” beginning on page 173 and “Unaudited Pro Forma Combined Financial Information” beginning on page 94. The pro forma financial data are not necessarily indicative of results that actually would have occurred had the merger been completed on the dates indicated or that may be obtained in the future.

         
As of or for the
Year Ended
December 31,
2003

Combined Income Statement:
       
Net Interest Income
  $ 20,902  
Provision for Credit Losses
    3,585  
Noninterest Revenue
    29,212  
Noninterest Expense
    33,161  
Income from Continuing Operations Before Income Tax Expense
    13,368  
Income Tax Expense
    4,174  
Income from Continuing Operations
  $ 9,194  
Selected Combined Balance Sheet Items at Period End:
       
Loans, Net of Allowance
  $ 345,801  
Total Assets
    1,135,234  
Deposits
    489,795  
Long-Term Debt and Other Capital Securities(a)
    100,876  
Total Stockholders’ Equity
    104,457  

(a)  Excludes long-term debt of consolidated variable interest entities.

20


 

COMPARATIVE PER SHARE DATA

(Unaudited)

      We present below for JPMorgan Chase and Bank One historical, unaudited pro forma combined and pro forma equivalent per share financial data for the year ended December 31, 2003. You should read the information below together with the financial statements and related notes of JPMorgan Chase and Bank One that are incorporated by reference in this document and with the unaudited pro forma combined financial data included under “Unaudited Pro Forma Combined Financial Information” beginning on page 94.

             
As of or for the
Year Ended
December 31,
2003

JPMORGAN CHASE COMMON STOCK:
       
Income from continuing operations per common share:
       
 
Basic:
       
   
Historical
  $ 3.32  
   
Pro Forma Combined
  $ 2.62  
 
Diluted:
       
   
Historical
  $ 3.24  
   
Pro Forma Combined
  $ 2.57  
Cash Dividends Per Common Share:
       
   
Historical
  $ 1.36  
   
Pro Forma Combined(a)
  $ 1.36  
Book Value Per Share at December 31, 2003
       
   
Historical
  $ 22.10  
   
Pro Forma Combined(b)
  $ 29.49  
BANK ONE COMMON STOCK:
       
Income from continuing operations per common share:
       
 
Basic:
       
   
Historical
  $ 2.78  
   
Pro Forma Equivalent(c)
  $ 3.46  
 
Diluted:
       
   
Historical
  $ 2.75  
   
Pro Forma Equivalent(c)
  $ 3.39  
Cash Dividends Per Common Share:
       
   
Historical
  $ 0.92  
   
Pro Forma Equivalent(c)
  $ 1.80  
Book Value Per Share at December 31, 2003
       
   
Historical
  $ 20.92  
   
Pro Forma Equivalent(c)
  $ 38.93  

(a)  The JPMorgan Chase pro forma combined dividends per common share represent historical dividends per share for JPMorgan Chase.
 
(b)  The JPMorgan Chase pro forma combined book value was calculated by dividing total combined pro forma equity excluding JPMorgan Chase preferred stock by pro forma equivalent shares outstanding as of December 31, 2003.

(c)  The Bank One pro forma equivalent per share amounts are calculated by multiplying the JPMorgan Chase pro forma combined per common share amounts by the exchange ratio of 1.32.

21


 

RISK FACTORS

      In addition to the other information contained in or incorporated by reference into this document, you should carefully consider the following risk factors relating to the merger in deciding whether to vote for adoption of the merger agreement.

Because the market price of JPMorgan Chase common stock may fluctuate, you cannot be sure of the market value of the common stock issued in the merger.

      Upon completion of the merger, each share of Bank One common stock you hold will be converted into 1.32 shares of common stock of JPMorgan Chase. This exchange ratio will not be adjusted for changes in the market price of either JPMorgan Chase common stock or Bank One common stock. Changes in the price of JPMorgan Chase common stock prior to the merger will affect the value that Bank One common stockholders will receive on the date of the merger. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in our businesses, operations and prospects and regulatory considerations, many of which factors are beyond our control. Neither of us is permitted to terminate the merger agreement or resolicit the vote of our stockholders solely because of changes in the market price of either of our common stocks.

      The prices of JPMorgan Chase common stock and Bank One common stock at the closing of the merger may vary from their respective prices on the date the merger agreement was executed, on the date of this document and on the date of the meetings. As a result, the value represented by the exchange ratio will also vary. For example, based on the range of closing prices of JPMorgan Chase common stock during the period from January 13, 2004, the last trading day before public announcement of the merger, through April 16, 2004, the exchange ratio represented a value ranging from a high of $57.87 to a low of $50.48 for each share of Bank One common stock. Because the date that the merger is completed will be later than the date of the meetings, at the time of your meeting, you will not know the exact market value of the JPMorgan Chase common stock that Bank One stockholders will receive upon completion of the merger.

JPMorgan Chase and Bank One have not obtained updated fairness opinions from JPMorgan Securities and Lazard, respectively, reflecting changes in circumstances that may have occurred since the signing of the merger agreement.

      JPMorgan Chase and Bank One have not obtained updated opinions as of the date of this document from JPMorgan Securities and Lazard, which are JPMorgan Chase’s and Bank One’s respective financial advisors. Changes in the operations and prospects of JPMorgan Chase or Bank One, general market and economic conditions and other factors which may be beyond the control of JPMorgan Chase and Bank One, and on which the fairness opinions were based, may have altered the value of JPMorgan Chase or Bank One or the prices of shares of JPMorgan Chase common stock and shares of Bank One common stock as of the date of this document, or may alter such values and prices by the time the merger is completed. The opinions do not speak as of any date other than the dates of those opinions. For a description of the opinions that JPMorgan Chase and Bank One received from their respective financial advisors, please refer to “The Merger — Opinions of Financial Advisors” beginning on page 45. For a description of the other factors considered by JPMorgan Chase’s board of directors in determining to approve the merger, please refer to “The Merger — JPMorgan Chase’s Reasons for the Merger; Recommendation of the Merger by the JPMorgan Chase Board of Directors” beginning on page 37. For a description of the other factors considered by Bank One’s board of directors in determining to approve the merger, please refer to “The Merger — Bank One’s Reasons for the Merger; Recommendation of the Merger by the Bank One Board of Directors” beginning on page 42.

22


 

If we fail to realize the anticipated cost savings and other benefits of the merger, the merger could be dilutive to JPMorgan Chase’s earnings per share or otherwise adverse to our stockholders.

      The success of the merger will depend, in part, on our ability to realize the anticipated cost savings from combining the businesses of JPMorgan Chase and Bank One. Our managements have estimated that approximately $2.2 billion of annual pre-tax cost savings, to be phased in between 2004 and 2007, would be realized from the merger. However, to realize the anticipated benefits from the merger, we must successfully combine the businesses of JPMorgan Chase and Bank One in a manner that permits those cost savings to be realized. If we are not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected. Such a failure could result in dilution to JPMorgan Chase’s earnings per share.

      In addition, JPMorgan Chase and Bank One have operated and, until the completion of the merger, will continue to operate, independently. It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with clients and employees or our ability to achieve the anticipated benefits of the merger or could reduce our earnings.

If we do not effect the anticipated stock repurchases and do not otherwise utilize excess capital in an accretive manner, the merger could be dilutive to JPMorgan Chase’s earnings per share.

      In considering whether to approve the proposed merger, our boards of directors and our financial advisors considered various analyses of the potential impact of the merger on the financial performance of the combined company. These analyses were based on earnings per share estimates from the Institutional Brokers Estimate System, or I/B/E/S, and various assumptions as to the timing and amount of cost savings and other matters. These analyses indicated that the combined company would be expected to generate significant amounts of excess capital and, in evaluating the potential impact of the merger on the future earnings per share of the combined company, it was assumed that approximately $9.5 to $11.5 billion of the anticipated excess capital was used to repurchase shares in 2004 – 2006. To the extent the anticipated excess capital is not generated (due to a failure to achieve anticipated merger cost savings or otherwise) or, if generated, is not used to repurchase our shares or otherwise reinvested in an accretive manner, the merger may be less accretive or dilutive to earnings per share of the combined company. For example, based on the pro forma earnings assumptions discussed on pages 39 and 53 below, if no shares are repurchased and the excess capital is simply retained by the combined company without being reinvested, the merger would be dilutive to I/B/E/S earnings per share estimates for 2005 by 6.1% on a GAAP basis and by 1.6% on a cash basis. (For more information regarding these analyses, as well as the differences between GAAP earnings per share and cash earnings per share, see pages 39 and 40 below.)

The market price of the JPMorgan Chase shares after the merger may be affected by factors different from those affecting the shares of Bank One or JPMorgan Chase currently.

      The businesses of JPMorgan Chase and Bank One differ and, accordingly, the results of operations of the combined company and the market price of the combined company’s shares of common stock may be affected by factors different from those currently affecting the independent results of operations of each of JPMorgan Chase or Bank One. For a discussion of the businesses of JPMorgan Chase and Bank One and of factors to consider in connection with those businesses, see the documents incorporated by reference in this document and referred to under “Where You Can Find More Information” beginning on page 173.

23


 

JPMorgan Chase may be subject to adverse regulatory conditions after the merger.

      Before the merger may be completed, various approvals or consents must be obtained from the Board of Governors of the Federal Reserve System and various bank regulatory, antitrust, insurance and other authorities in the United States and in foreign jurisdictions. The governmental entities from which these approvals are required, including the Federal Reserve Board, may impose conditions on the completion of the merger or require changes to the terms of the merger. These conditions or changes could have the effect of delaying completion of the merger or imposing additional costs on or limiting the revenues of JPMorgan Chase following the merger, any of which might have a material adverse effect on JPMorgan Chase following the merger.

24


 

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

      This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be made directly in this document or they may be made a part of this document by appearing in other documents filed with the Securities and Exchange Commission by JPMorgan Chase and Bank One and incorporated by reference in this document. These statements may include statements regarding the period following completion of the merger.

      Words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “objective,” “goal” and words and terms of similar substance used in connection with any discussion of future operating or financial performance of JPMorgan Chase, Bank One, the surviving company or the merger identify forward-looking statements. All forward-looking statements are management’s present expectations or forecasts of future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. In addition to the factors relating to the merger discussed under the caption “Risk Factors” beginning on page 22, the following risks related to the businesses of JPMorgan Chase and Bank One could cause actual results to differ materially from those described in the forward-looking statements:

  •  the risk of adverse movements or volatility in domestic or foreign debt and equity securities markets or in interest or foreign exchange rates or indices;
 
  •  the risk of adverse impact from an economic downturn or other downturn in trading conditions or markets;
 
  •  the risks associated with increased competition;
 
  •  the risks associated with unfavorable political and diplomatic developments;
 
  •  the risks associated with acts of terrorism or the outbreak of armed hostilities;
 
  •  the risks associated with adverse changes in domestic or foreign governmental or regulatory policies, including adverse interpretations of regulatory guidelines;
 
  •  the risk that material litigation or investigations will be determined adversely to the company;
 
  •  the risk that a downgrade in the company’s credit ratings will adversely affect the company’s businesses or investor sentiment;
 
  •  the risk that management’s assumptions and estimates used in applying the company’s critical accounting policies prove unreliable, inaccurate or not predictive of actual results;
 
  •  the risk that the company’s business continuity plans or data security systems prove inadequate;
 
  •  the risk that external vendors are unable to fulfill their contractual obligations to the company;
 
  •  the risk that the design of the company’s disclosure controls and procedures or internal controls prove inadequate, or are circumvented, thereby causing losses or errors in information or a delay in the detection of fraud;
 
  •  the risk that the credit, market, liquidity, private equity, operational and business risks associated with the various businesses of the company are not successfully managed; or
 
  •  other factors affecting business plans.

      We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this document in the case of forward-looking statements contained in this

25


 

document, or the dates of the documents incorporated by reference in this document in the case of forward-looking statements made in those incorporated documents. Neither JPMorgan Chase nor Bank One has any obligation to update these forward-looking statements.

      For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please see the reports that JPMorgan Chase and Bank One have filed with the Securities and Exchange Commission as described under “Where You Can Find More Information” beginning on page 173.

      We expressly qualify in their entirety all forward-looking statements attributable to either of us or any person acting on our behalf by the cautionary statements contained or referred to in this section.

26


 

THE JPMORGAN CHASE ANNUAL MEETING

Date, Time and Place of the Annual Meeting

      This document is being furnished to you in connection with the solicitation of proxies by JPMorgan Chase in connection with JPMorgan Chase’s 2004 annual meeting of stockholders. The JPMorgan Chase annual meeting is scheduled to be held as follows:

May 25, 2004

9:00 a.m., New York time
Auditorium
One Chase Manhattan Plaza
New York, New York

Purpose of the Annual Meeting

      At the JPMorgan Chase annual meeting, JPMorgan Chase’s stockholders will be asked to consider and vote upon the following proposals:

  •  the proposal to adopt the merger agreement (JPMorgan Chase Proposal 1);
 
  •  the proposal to elect nominees to the JPMorgan Chase board of directors (JPMorgan Chase Proposal 2);
 
  •  the proposal to ratify the appointment of PricewaterhouseCoopers LLP as JPMorgan Chase’s external auditor for 2004 (JPMorgan Chase Proposal 3);
 
  •  the proposal to re-approve the JPMorgan Chase key executive performance plan (JPMorgan Chase Proposal 4);
 
  •  the proposal to approve the adjournment of the annual meeting, if necessary or appropriate, to solicit additional proxies (JPMorgan Chase Proposal 5);
 
  •  the stockholder proposals described under “Other Matters to be Considered at the JPMorgan Chase Annual Meeting — JPMorgan Chase Proposals 6-13: Stockholder Proposals”, if they are introduced at the meeting (JPMorgan Chase Proposals 6-13); and
 
  •  any other matters that may be properly brought before the meeting.

Record Date for the Annual Meeting

      The board of directors of JPMorgan Chase has fixed the close of business on April 2, 2004 as the record date for determination of stockholders entitled to notice of and to vote at the annual meeting of stockholders. On the record date, there were 2,081,783,154 shares of JPMorgan Chase common stock outstanding, held by approximately 126,350 holders of record.

Votes Required

      A majority of the shares of JPMorgan Chase common stock outstanding on the record date must be present, either in person or by proxy, to constitute a quorum at the JPMorgan Chase annual meeting. The proposals require different percentages of votes in order to approve them:

  •  The affirmative vote of a majority of the shares of JPMorgan Chase common stock outstanding on the record date is required to adopt the merger agreement.
 
  •  The affirmative vote of a plurality of the votes cast at the annual meeting is required to approve the election of each director nominee.

27


 

  •  The affirmative vote of a majority of the shares of JPMorgan Chase common stock represented at the annual meeting and entitled to vote is required to ratify the appointment of the external auditor.
 
  •  The affirmative vote of a majority of the shares of JPMorgan Chase common stock represented at the annual meeting and entitled to vote is required to re-approve the key executive performance plan.
 
  •  The affirmative vote of a majority of the shares of JPMorgan Chase common stock represented at the annual meeting and entitled to vote is required to adjourn the meeting.
 
  •  The affirmative vote of a majority of the shares of JPMorgan Chase common stock represented at the annual meeting and entitled to vote is required to adopt the stockholder proposals described in this document.

      At the JPMorgan Chase annual meeting, each share of JPMorgan Chase common stock is entitled to one vote on all matters properly submitted to the JPMorgan Chase stockholders.

      As of the record date, JPMorgan Chase directors and executive officers and their affiliates owned and were entitled to vote approximately 1,759,306 shares of JPMorgan Chase common stock, representing less than 1% of the outstanding shares of JPMorgan Chase common stock. We currently expect that JPMorgan Chase’s directors and executive officers will vote their shares in favor of the merger, although none of them has entered into any agreements obligating them to do so.

Attending the Annual Meeting

      If you are a holder of record of JPMorgan Chase common stock and plan to attend the JPMorgan Chase annual meeting, please indicate this when you vote. The lower portion of the proxy card is your admission ticket. When you arrive at the JPMorgan Chase annual meeting, you will be asked to present photo identification, such as a driver’s license. If you are a beneficial owner of JPMorgan Chase common stock held by a broker, bank, or other nominee, you will need proof of ownership to be admitted to the meeting. A recent brokerage statement or a letter from a bank or broker are examples of proof of ownership. If you want to vote your JPMorgan Chase common stock held in nominee name in person, you must get a written proxy in your name from the broker, bank, or other nominee that holds your shares.

      The auditorium in which JPMorgan Chase’s annual meeting will be held offers access for people using wheelchairs and headsets for the hearing-impaired.

      You may listen to JPMorgan Chase’s annual meeting over the Internet. Please go to JPMorgan Chase’s website, www.jpmorganchase.com, early to download any necessary audio software.

Proxies

      All shares of JPMorgan Chase common stock represented by properly executed proxy cards or voting instruction cards (including those given through electronic voting through the Internet or by telephone) received before or at the annual meeting will, unless revoked, be voted in accordance with the instructions indicated on those proxy cards or voting instruction cards. If no instructions are indicated on a properly executed proxy card, the shares will be voted:

  •  FOR adoption of the merger agreement as presented in JPMorgan Chase Proposal 1;
 
  •  FOR election of all nominees for directors presented in JPMorgan Chase Proposal 2;

28


 

  •  FOR ratification of the appointment of PricewaterhouseCoopers LLP as JPMorgan Chase’s external auditor for 2004 as presented in JPMorgan Chase Proposal 3;
 
  •  FOR re-approval of the key executive performance plan as presented in JPMorgan Chase Proposal 4;
 
  •  FOR adjournment of the annual meeting, if necessary or appropriate, as presented in JPMorgan Chase Proposal 5; and
 
  •  AGAINST the stockholder proposals described under “Other Matters to be Considered at the JPMorgan Chase Annual Meeting — JPMorgan Chase Proposals 6-13: Stockholder Proposals”.

If you return a properly executed proxy card or voting instruction card and have indicated that you have abstained from voting, your JPMorgan Chase common stock represented by the proxy will be considered present at the annual meeting or any adjournment thereof for purposes of determining a quorum.

      If your shares are held in an account at a broker or bank, you must instruct the broker or bank on how to vote your shares. If you do not provide voting instructions to your broker or bank, your shares will not be voted on any proposal on which your broker or bank does not have discretionary authority to vote. Under applicable New York Stock Exchange rules, your broker or bank does not have discretionary authority to vote on the merger proposal, the proposal to re-approve the key executive performance plan or any stockholder proposals at the JPMorgan Chase annual meeting. If an executed proxy card returned by a broker or bank holding shares indicates that the broker or bank does not have discretionary authority to vote on a particular matter, the shares will be considered present at the meeting for purposes of determining the presence of a quorum, but will not be voted with respect to that matter. This is called a broker non-vote. Your broker or bank will vote your shares only if you provide instructions on how to vote by following the instructions provided to you by your broker or bank. If you hold shares through a JPMorgan Chase 401(k) plan or other stock ownership plan, your shares in these plans may be voted even if you do not instruct the trustee how to vote, as explained in your voting instruction card or plan description.

      Because approval of the merger requires the affirmative vote of a majority of the outstanding shares of JPMorgan Chase common stock, abstentions, failures to vote and broker non-votes will have the same effect as votes against the merger. Accordingly, we urge you to mark each applicable box on the proxy card or voting instruction card to indicate how to vote your shares.

      JPMorgan Chase does not expect that any matter or proposal other than the proposals described in this document will be brought before its annual meeting or any adjournment thereof. If, however, other matters are properly presented, the persons named as proxies will vote in accordance with their judgment with respect to those matters.

      If you are a JPMorgan Chase stockholder of record, you may revoke your proxy at any time before it is voted by:

  •  filing a written notice of revocation with the Secretary of JPMorgan Chase, 270 Park Avenue, New York, NY 10017;
 
  •  granting a subsequently dated proxy; or
 
  •  appearing in person and voting at the JPMorgan Chase annual meeting if you are a holder of record.

      If you hold your shares of JPMorgan Chase common stock through an account at a broker or bank, you should contact your broker or bank to change your vote.

29


 

      Attendance at the annual meeting will not in and of itself constitute revocation of a proxy. If the annual meeting is postponed or adjourned, it will not affect the ability of stockholders of record as of the record date to exercise their voting rights or to revoke any previously-granted proxy using the methods described above.

Voting Electronically or by Telephone

      JPMorgan Chase stockholders of record and many stockholders who hold their shares through a broker or bank will have the option to submit their proxy cards or voting instruction cards electronically through the Internet or by telephone. Please note that there are separate arrangements for using the Internet and telephone depending on whether your shares are registered in JPMorgan Chase’s stock records in your name or in the name of a broker, bank or other holder of record. If you hold your shares through a broker, bank or other holder of record, you should check your proxy card or voting instruction card forwarded by your broker, bank or other holder of record to see which options are available.

      JPMorgan Chase stockholders of record may submit their proxies:

  •  through the Internet by visiting a website established for that purpose at http://www.eproxy.com/jpm and following the instructions; or
 
  •  by telephone by calling the toll-free number 1-800-435-6710 in the United States, Puerto Rico or Canada on a touch-tone phone and following the recorded instructions.

Solicitation of Proxies

      JPMorgan Chase and Bank One will share equally the expenses incurred in connection with the printing and mailing of this document. To assist in the solicitation of proxies, JPMorgan Chase has retained MacKenzie Partners, Inc. for a fee of $40,000 plus expenses for their services. JPMorgan Chase and its proxy solicitor will also request banks, brokers and other intermediaries holding shares of JPMorgan Chase common stock beneficially owned by others to send this document to, and obtain proxies from, the beneficial owners and will, if requested, reimburse the record holders for their reasonable out-of-pocket expenses in so doing. Solicitation of proxies by mail may be supplemented by telephone and other electronic means, advertisements and personal solicitation by the directors, officers or employees of JPMorgan Chase. No additional compensation will be paid to our directors, officers or employees for solicitation.

      You should not send in any JPMorgan Chase stock certificates with your proxy card or voting instruction card. JPMorgan Chase stockholders should retain their stock certificates and will not need to surrender them for exchange.

30


 

THE BANK ONE ANNUAL MEETING

Date, Time and Place of the Annual Meeting

      This document is being furnished to you in connection with the solicitation of proxies by Bank One in connection with Bank One’s 2004 annual meeting of stockholders. The Bank One annual meeting is scheduled to be held as follows:

May 25, 2004

9:30 a.m., Chicago time
Auditorium
Bank One Corporation
1 Bank One Plaza
Chicago, Illinois 60670

Purpose of the Annual Meeting

      At the Bank One annual meeting, Bank One’s stockholders will be asked to consider and vote upon the following proposals:

  •  the proposal to adopt the merger agreement (Bank One Proposal 1);
 
  •  the proposal to elect directors (Bank One Proposal 2);
 
  •  the proposal to ratify the appointment of KPMG LLP as Bank One’s independent auditor (Bank One Proposal 3); and
 
  •  any other matters that may be properly brought before the meeting.

Record Date for the Annual Meeting

      The board of directors of Bank One has fixed the close of business on April 2, 2004 as the record date for determination of stockholders entitled to notice of and to vote at the annual meeting of stockholders. On the record date, there were 1,125,809,564 shares of Bank One common stock outstanding, held by approximately 98,109 holders of record.

Votes Required

      A majority of the shares of Bank One common stock outstanding on the record date must be present, either in person or by proxy, to constitute a quorum at the Bank One annual meeting. The proposals require different percentages of votes in order to approve them:

  •  The affirmative vote of the holders of a majority of the shares of Bank One common stock outstanding on the record date is required to adopt the merger agreement.
 
  •  The affirmative vote of a plurality of the votes cast at the annual meeting is required to approve the election of each director nominee.
 
  •  The affirmative vote of a majority of the shares of Bank One common stock represented at the annual meeting and entitled to vote is required to ratify the appointment of the independent auditor.

      At the Bank One annual meeting, each share of Bank One common stock is entitled to one vote on all matters properly submitted to the Bank One stockholders.

      As of the record date, Bank One directors and executive officers and their affiliates owned and were entitled to vote approximately 12,963,365 shares of Bank One common stock, representing less than 1.25% of the outstanding shares of Bank One common stock. We currently expect that Bank One’s directors and executive officers will vote their shares in favor of the merger, although none of them has entered into any agreements obligating them to do so.

31


 

Attending the Annual Meeting

      If you are a holder of record of Bank One common stock and plan to attend the Bank One annual meeting, please indicate this on your proxy card when you vote. The lower portion of the proxy card is your admission ticket. When you arrive at the Bank One annual meeting, you will be asked to present photo identification, such as a driver’s license. If you are a beneficial owner of Bank One common stock held by a broker, bank, or other nominee, you will need proof of ownership to be admitted to the meeting. A recent brokerage statement or a letter from a bank or broker are examples of proof of ownership. If you want to vote your Bank One common stock held in nominee name in person, you must get a written proxy in your name from the broker, bank, or other nominee that holds your shares.

      The Bank One Auditorium, in which the annual meeting will be held, offers access for people using wheelchairs and headsets for the hearing-impaired. Stockholders who wish to arrange for either of these services are invited to call (312) 732-8208 by May 21, 2004.

      You may listen to the Bank One annual meeting over the Internet. Please go to the Bank One website, www.bankone.com, early to download any necessary audio software.

Proxies

      All shares of Bank One common stock represented by properly executed proxy cards or voting instruction cards (including those given through electronic voting through the Internet or by telephone) received before or at the annual meeting will, unless revoked, be voted in accordance with the instructions indicated on those proxy cards or voting instruction cards. If no instructions are indicated on a properly executed proxy card, the shares will be voted:

  •  FOR adoption of the merger agreement as presented in Bank One Proposal 1;
 
  •  FOR election of all nominees for directors presented in Bank One Proposal 2; and
 
  •  FOR ratification of the appointment of KPMG LLP as Bank One’s independent auditor for 2004 as presented in Bank One Proposal 3.

      If you return a properly executed proxy card or voting instruction card and have indicated that you have abstained from voting, your Bank One common stock represented by the proxy will be considered present at the annual meeting for purposes of determining a quorum.

      If your shares are held in an account at a broker or bank, you must instruct the broker or bank on how to vote your shares. If an executed proxy card or voting instruction card returned by a broker or bank holding shares indicates that the broker or bank does not have discretionary authority to vote on a particular matter, the shares will be considered present at the meeting for purposes of determining the presence of a quorum, but will not be voted with respect to that matter. This is called a broker non-vote. Your broker or bank will vote your shares only if you provide instructions on how to vote by following the instructions provided to you by your broker or bank. If you hold shares through a Bank One 401(k) plan or other stock ownership plan, your shares in these plans may be voted even if you do not instruct the trustee how to vote, as explained in your voting instruction card or plan description.

      Because approval of the merger requires the affirmative vote of a majority of the outstanding shares of Bank One common stock, abstentions, failures to vote and broker non-votes will have the same effect as a vote against the merger. We urge you to mark each applicable box on the proxy card or voting instruction card to indicate how to vote your shares.

      Bank One does not expect that any matter or proposal other than the proposals described in this document will be brought before its annual meeting. If, however, other matters are properly presented, the persons named as proxies will vote in accordance with their judgment with respect to those matters.

32


 

      If you are a Bank One stockholder of record, you may revoke your proxy at any time before it is voted by:

  •  filing a written notice of revocation with the Secretary of Bank One, Bank One Corporation, 1 Bank One Plaza, Mail Code IL1-0276, Chicago, IL 60670-0276;
 
  •  granting a subsequently dated proxy; or
 
  •  appearing in person and voting at the Bank One annual meeting if you are a holder of record.

      If you hold your shares of Bank One common stock through an account at a broker or bank, you should contact your broker or bank to change your vote.

      Attendance at the Bank One annual meeting will not in and of itself constitute revocation of a proxy. If the annual meeting is postponed or adjourned, it will not affect the ability of stockholders of record as of the record date to exercise their voting rights or to revoke any previously-granted proxy using the methods described above.

Voting Electronically or by Telephone

      Bank One stockholders of record and most stockholders who hold their shares through a broker or bank will have the option to submit their proxies or voting instruction cards electronically through the Internet or by telephone. Please note that there are separate arrangements for using the Internet and telephone depending on whether your shares are registered in Bank One’s stock records in your name or in the name of a broker, bank or other holder of record. If you hold your shares through a broker, bank or other holder of record, you should check your proxy card or voting instruction card forwarded by your broker, bank or other holder of record to see which options are available.

      Bank One stockholders of record may submit their proxies:

  •  through the Internet by visiting a website established for that purpose at http://www.ProxyVote.com and following the instructions; or
 
  •  by telephone by calling the toll-free number 800-690-6903 in the United States, Puerto Rico or Canada on a touch-tone phone and following the recorded instructions.

Solicitation of Proxies

      JPMorgan Chase and Bank One will share equally the expenses incurred in connection with the printing and mailing of this document. To assist in the solicitation of proxies, Bank One has retained Georgeson Shareholder Communications, Inc., for a fee of $35,000 plus expenses for their services. Bank One and its proxy solicitor will also request banks, brokers and other intermediaries holding shares of Bank One common stock beneficially owned by others to send this document to, and obtain proxies from, the beneficial owners and will, if requested, reimburse the record holders for their reasonable out-of-pocket expenses in so doing. Solicitation of proxies by mail may be supplemented by telephone and other electronic means, advertisements and personal solicitation by the directors, officers or employees of Bank One. No additional compensation will be paid to our directors, officers or employees for solicitation.

      You should not send in any Bank One stock certificates with your proxy card or voting instruction card. The exchange agent for the combined company will mail a transmittal letter with instructions for the surrender of stock certificates to Bank One stockholders as soon as practicable after completion of the merger.

33


 

JPMORGAN CHASE PROPOSAL 1 AND BANK ONE PROPOSAL 1:

 
THE MERGER

      This section of the document describes material aspects of the proposed merger, including the merger agreement and the stock option agreements. This summary may not contain all of the information that is important to you. You should carefully read this entire document and the other documents we refer you to for a more complete understanding of the merger. In addition, we incorporate important business and financial information about each of us into this document by reference. You may obtain the information incorporated by reference into this document without charge by following the instructions in the section entitled “Where You Can Find More Information” beginning on page 173.

Effect of the Merger; What Bank One Stockholders Will Receive in the Merger; Increase in Common Stock

      Upon completion of the merger, Bank One will merge with and into JPMorgan Chase, with JPMorgan Chase as the surviving corporation in the merger.

      In the merger, each outstanding share of Bank One common stock will be converted into 1.32 shares of common stock of JPMorgan Chase. No fractional shares will be issued, and cash will be paid instead of fractional shares. The exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the date of the merger.

      As part of the merger, JPMorgan Chase’s authorized common stock will be increased from 4,500,000,000 to 9,000,000,000 shares. This increase will be automatically reflected in an amendment to JPMorgan Chase’s certificate of incorporation to be adopted as part of the certificate of merger only if and when the merger is completed. Without an increase, JPMorgan Chase would not have sufficient unissued and unreserved shares to issue and reserve for issuance the shares of common stock required to be issued and reserved for issuance under the merger agreement, the stock option agreement issued by JPMorgan Chase to Bank One, and under JPMorgan Chase’s and Bank One’s equity plans. In determining that an increase in authorized common stock of the surviving corporation to 9,000,000,000 authorized shares was appropriate, JPMorgan Chase considered historical issuance patterns; the desire for flexibility to effect any stock splits in the future based on market conditions; and a comparison of the ratio of outstanding shares to authorized shares among other public companies deemed comparable for purposes of this analysis. JPMorgan Chase also considered that the proposed 9,000,000,000 authorized shares was less than the combination of the existing authorized common stock capitalization of JPMorgan Chase and Bank One (in other words, the product of Bank One’s 4,000,000,000 authorized shares of common stock multiplied by the exchange ratio of 1.32 plus JPMorgan Chase’s 4,500,000,000 authorized shares of common stock).

Background of the Merger

      The board of directors and senior management of JPMorgan Chase have regularly discussed JPMorgan Chase’s business and strategic direction in the context of competitive developments, including the long-term trend of consolidation in the financial services industry, and have considered ways to enhance JPMorgan Chase’s competitive position. Over the past decade, JPMorgan Chase has, through a combination of strategic acquisitions and internal growth, significantly expanded its domestic and global presence and client base. During the latter part of that decade, it focused on broadening its wholesale and investment banking businesses to create one of the world’s leading global wholesale financial services franchises.

      In more recent years, JPMorgan Chase’s management and board have discussed possible ways of reducing the volatility of JPMorgan Chase’s earnings by increasing revenues from retail

34


 

financial services and broadening JPMorgan Chase’s retail client base. JPMorgan Chase’s management and board have considered acquisitions and strategic combinations with a variety of financial institutions and the potential benefits and risks of those transactions. A potential business combination with Bank One appeared to offer a superior strategic fit, complementary business strengths, competitive positions and prospects and compatible senior management strengths.

      The Bank One board of directors has also regularly discussed the state of Bank One’s business and strategic direction and objectives and its performance and prospects in the context of competitive developments in the financial services industry, and has considered ways to enhance Bank One’s competitive position in light of continuing industry trends, including the long-term trend of consolidation. The Bank One board of directors has also discussed with senior management various potential strategic alternatives, including some involving possible acquisitions, dispositions and strategic business combinations with a variety of financial institutions along with the potential benefits and risks of those transactions.

      William B. Harrison, Jr., Chairman and Chief Executive Officer of JPMorgan Chase, and James Dimon, Chairman and Chief Executive Officer of Bank One, have known each other for many years. From time to time they have had informal discussions about their respective institutions and trends in the financial services industry, including the increasing need for scale and diverse revenue bases.

      During November 2003, Mr. Harrison and Mr. Dimon had several discussions concerning the possibility of more seriously considering the merits of a business combination between JPMorgan Chase and Bank One. During these conversations, Messrs. Harrison and Dimon preliminarily discussed the possible structure of such a transaction. Based on these discussions, Messrs. Harrison and Dimon concluded that a transaction between the two companies could offer strategic benefits to the companies and their stockholders and that further discussions could be productive. Mr. Dimon and Mr. Harrison periodically updated members of their respective boards of directors about these contacts. At a meeting of the JPMorgan Chase board of directors on November 18, 2003, Mr. Harrison briefed the board on his discussions with Mr. Dimon and was authorized to continue discussions regarding a possible business combination with Bank One. Mr. Dimon, based on his conversations with members of the Bank One board of directors, likewise was encouraged to continue discussions regarding a possible business combination with JPMorgan Chase. In November 2003, each party retained legal and financial advisors in the event that discussions about a possible transaction progressed further.

      Discussions between Messrs. Harrison and Dimon continued in late November and into December. In addition, in December meetings commenced between the parties’ respective financial advisers. During these discussions, the parties began considering in more detail the potential financial and other terms and conditions of such a transaction, and concluded that the contemplated merger would be for stock consideration based on a fixed exchange ratio. The parties also began exchanging information regarding each company’s businesses, structure and management teams. Each of Mr. Harrison and Mr. Dimon continued to brief members of their respective boards of directors in early and mid-December and updated their respective boards regarding the status of discussions at board meetings in mid-December. At these meetings, the boards endorsed continued discussions.

      The chief financial officers of each company met in late December 2003 to hold additional discussions regarding a possible business combination. In connection with the ongoing discussions, Bank One and JPMorgan Chase entered into a confidentiality agreement on December 23, 2003. Messrs. Dimon and Harrison also continued to discuss the possible key terms of a transaction, including possible financial terms and a framework for the combined company’s board of directors and senior management.

35


 

      In early January 2004, senior management of JPMorgan Chase and Bank One authorized their respective legal and financial advisors to discuss possible timeframes for a transaction and arrangements to facilitate broader mutual due diligence and negotiations between the parties regarding a possible transaction.

      The parties and their legal and financial advisors met in New York City beginning on January 8, 2004, to undertake mutual confidential due diligence and management discussions and to organize a broader series of due diligence sessions, while counsel for the parties commenced discussions regarding the legal documentation for the transaction. Due diligence continued over the course of the next several days as the parties and their counsel continued to negotiate the terms of the definitive merger agreement and other related agreements, as well as terms of post-closing employment arrangements with Mr. Dimon and with several other key Bank One executives.

      A special meeting of the board of directors of JPMorgan Chase was held on January 11, 2004, and special meetings of the board of directors of Bank One were held on both January 8 and 12, 2004. At these special meetings, the board of each company and their respective senior management and legal counsel reviewed and discussed strategic considerations relating to the transaction, the status of discussions regarding the terms of the proposed merger and governance arrangements and the status of each company’s due diligence review of the other. In addition, each company’s financial advisors presented financial information to their respective boards regarding the potential transaction. Following the completion of these meetings, negotiations between the parties and their respective counsel continued, and the parties continued their reviews of information obtained during due diligence. At a special meeting of the Bank One compensation committee on January 13, 2004, members of the committee reviewed the terms of the proposed employment agreement with Mr. Dimon and proposed severance and other senior management arrangements described under “— Interests of Directors and Executive Officers in the Merger” below. Mr. Dimon and members of senior management of Bank One discussed various aspects of the proposed transaction with individual members of the Bank One board of directors on January 13, 2004.

      During the morning of Wednesday, January 14, 2004, the JPMorgan Chase board of directors held a special meeting to consider the proposed transaction, which was also attended by members of JPMorgan Chase’s senior management and JPMorgan Chase’s financial and legal advisors. At this meeting, JPMorgan Chase’s senior management reviewed with the board of directors strategic considerations relating to the transaction and the progress of the negotiations regarding the terms of the transaction and apprised the board of the results of its due diligence review of Bank One. In addition, JPMorgan Chase’s legal advisors discussed with the board of directors the legal standards applicable to its decisions with respect to the proposed transaction, reviewed the legal terms of the proposed definitive merger agreement and stock option agreements, and responded to questions from directors. JPMorgan Chase’s Director of Human Resources also summarized for the board the terms of the proposed employment agreement with Mr. Dimon and the proposed severance and other senior management arrangements described under “— Interests of Directors and Executive Officers in the Merger” below. JPMorgan Chase’s financial advisor, JPMorgan Securities, presented a summary of its financial analyses relating to the proposed merger, responded to questions posed by directors and, at the conclusion of its presentation, noted that it would be prepared to deliver its opinion that the proposed exchange ratio in the merger was fair to JPMorgan Chase from a financial point of view. During the January 11 and January 14 meetings, the JPMorgan Chase board discussed the proposed transaction and related agreements and asked questions of JPMorgan Chase’s senior management and JPMorgan Chase’s legal and financial advisors. At the conclusion of the various presentations on January 14 and after further discussion, the directors determined to adjourn the meeting in order to provide management and JPMorgan Chase’s legal advisors with the opportunity to finalize details of the merger agreement and related matters with

36


 

Bank One and to reconvene later that day to formally consider approval of the merger agreement.

      In the afternoon of Wednesday, January 14, 2004, the Bank One board of directors held a special meeting to consider the proposed transaction, which was also attended by members of Bank One’s senior management and Bank One’s outside legal and financial advisors. At this meeting, Bank One senior management reviewed with the board of directors strategic considerations relating to the transaction and the progress of the negotiations regarding the terms of the transaction and apprised the board of the results of its due diligence review of JPMorgan Chase. Lazard reviewed its financial analyses relating to the proposed merger, responded to questions posed by directors, and rendered to the Bank One board of directors its opinion that, as of that date and based on and subject to the considerations in its opinion, the proposed exchange ratio was fair, from a financial point of view, to holders of Bank One common stock. Bank One’s legal advisors discussed with the board of directors the legal standards applicable to its decisions with respect to the proposed transaction, reviewed the legal terms of the proposed definitive merger agreement, proposed stock option agreements and proposed employment arrangements, and responded to questions from directors. During these discussions, the Bank One board discussed the proposed transaction and related agreements and asked questions of Bank One senior management and Bank One’s legal and financial advisors. Following further review and discussion among the members of the Bank One board of directors, the board of directors voted unanimously to approve the merger and merger agreement with JPMorgan Chase and the related agreements and the transactions contemplated by those agreements, and resolved to recommend that its stockholders vote to adopt the merger agreement.

      In the late afternoon of January 14, 2004, the JPMorgan Chase board of directors, with one director absent, reconvened its meeting. JPMorgan Chase’s senior management and JPMorgan Chase’s legal and financial advisors provided updates regarding the final terms of the proposed merger agreement and related agreements. JPMorgan Securities delivered its opinion that, as of that date and based on and subject to the considerations in its opinion, the exchange ratio in the merger was fair, from a financial point of view, to JPMorgan Chase. Following deliberations, the JPMorgan Chase board of directors, by unanimous vote of all directors present, and having been advised that the absent director concurred in the decision, approved the merger agreement and the related agreements and the transactions contemplated by those agreements, and resolved to recommend that its stockholders vote to adopt the merger agreement.

      Shortly following approval of each board of directors, the parties executed the merger agreement and related agreements. The parties announced the transaction via a joint press release issued in the early evening of January 14, 2004.

JPMorgan Chase’s Reasons for the Merger; Recommendation of the Merger by the JPMorgan Chase Board of Directors

      Strategic Considerations. JPMorgan Chase’s board believes that the merger will provide a number of significant strategic opportunities and benefits, including the following:

  •  Enhanced Positions in Retail Financial Services

  •  On a pro forma basis, the combined company will rank second in the United States in terms of total assets as of September 30, 2003, fourth in terms of number of branches as of June 30, 2003 and will have the highest market share position in some of the most important U.S. banking markets, including New York, Chicago, Houston and Dallas.
 
  •  The merger will strengthen JPMorgan Chase’s leadership positions in a number of national consumer credit businesses. The combined company will be the second

37


 

  largest U.S. credit card issuer based on amounts outstanding as of June 30, 2003, the largest non-captive provider of auto financing, the fourth largest originator and servicer of mortgage loans and the second largest provider of home equity lines of credit.

  •  More Balanced Business Mix and Greater Geographic Diversification

  •  The businesses of the combined company following the merger will be more evenly balanced between retail and institutional financial services. JPMorgan Chase’s board noted that approximately 39% of its pre-tax income came from retail businesses during the first nine months of 2003, compared to approximately 54% for the combined company on a pro forma basis. The JPMorgan Chase board believes that this kind of balance between retail and institutional financial services will reduce the volatility of the combined company’s earnings compared to JPMorgan Chase on its own.
 
  •  The merger will also result in greater geographic diversity of the retail customer base. The combined company will have approximately 2,300 branches in 17 states compared to JPMorgan Chase’s existing network of 514 branches in 4 states.

  •  Enhanced Opportunities for Wholesale and Other Financial Services Businesses

  •  JPMorgan Chase’s board also believes that the combined company will benefit from the ability to sell its wholesale financial services to a larger combined client base. The board noted that Bank One’s middle-market client base of approximately 20,000 customers will provide a promising new market for JPMorgan Chase’s financial advisory, investment banking, cash management and securities processing services.
 
  •  JPMorgan Chase’s board also noted that the combined company will have strong investment management and private banking operations, with over $700 billion in assets under active management, a mutual fund family with over $200 billion in assets under management, $300 billion of assets in the private bank, and the leading position in U.S. private banking.
 
  •  In addition, the combined company will retain and strengthen its leadership positions in key corporate and investment banking businesses and will have leading positions in a number of treasury and securities services businesses, including the top ranking, based on Thompson Financial Securities Data as of September 30, 2003, in U.S. dollar clearing; U.S. corporate trust services; and CHIPs, Fedwire and ACH origination.

  •  Expected Financial Synergies

  •  JPMorgan Chase’s board considered management’s estimate of annual pre-tax cost savings of approximately $2.2 billion from the merger. Savings are expected to come primarily from eliminating duplicative technology and operations functions, and from facility consolidations and staffing reductions, and are expected to be phased in over three years following completion of the merger. Management’s estimates were based on their review of the business and operations of JPMorgan Chase and Bank One, including an assessment of the two companies’ computer systems, personnel, premises and service contracts to determine where redundancies exist, and their experience in managing business integrations in prior mergers.
 
  •  JPMorgan Chase’s board noted that, while management’s forecasted synergies did not include any revenue enhancements, management believes the merger will create opportunities for incremental revenues from, among other things, cross-marketing of an expanded range of products and services.
 
  •  Applying the potential cost savings and other assumptions (including assumed amortization of intangibles and repurchases of $3.5 billion of stock in both 2004 and

38


 

  2005, but excluding estimated merger-related costs) would result in earnings per share accretion to Institutional Brokers Estimate System, or I/B/E/S, earnings per share estimates for 2005 for JPMorgan Chase stockholders of 1% on a GAAP basis and 5.6% on a cash basis (assuming full realization of anticipated annual cost savings in 2005). Although the anticipated cost savings from the merger are expected to be phased in over the three years following the merger, the JPMorgan Chase board concluded that the foregoing analysis reflecting the full realization of the anticipated cost savings was useful in assessing the potential benefits of the merger once the anticipated cost savings are fully realized. Assuming 65% realization of anticipated cost savings in 2005 (as currently contemplated by our integration plans), the merger would be dilutive to those GAAP earnings per share estimates by 3.2% but accretive to cash earnings per share estimates by 1.5%. Earnings per share on a cash basis equal GAAP earnings per share adjusted to add back the amortization of the after-tax amount of core deposit intangibles and the amortization of purchased credit card relationships that are deducted in arriving at GAAP earnings per share. In light of the potential for significant variation in amortization levels between financial services companies and across reporting periods, JPMorgan Chase believes that an assessment of the pro forma impact of the proposed merger on a cash basis as well as a GAAP basis facilitates consistent and meaningful comparisons between the effects of the proposed merger and the effects of other comparable financial services mergers on a basis unaffected by those company-specific variations and facilitates trend analysis between reporting periods on a basis unaffected by variations in amortization levels. A reconciliation of the foregoing analysis on a GAAP basis to the analysis on a cash basis is set forth below:
                                         
With 65% cost
savings With full cost savings1
JPMorgan

Chase
stand-alone Pro forma Acc/(dil) Pro forma Acc/(dil)





               2005E GAAP EPS
    3.46       3.35       (3.2 )%     3.50       1.0 %
               Per share adjustments
                                       
               Add: JPMorgan Chase stand-alone amortization
    0.09       0.06               0.06          
               Add: New intangible amortization from merger
          0.20               0.20          
     
     
             
         
               Total
    0.09       0.26               0.26          
     
     
             
         
               2005E Cash EPS
    3.55       3.61       1.5 %     3.75       5.6 %

                          Note: All numbers shown on an after-tax basis.

                              


  Presented solely for illustrative purposes. Management does not anticipate full realization of cost savings until 2007.

•  The JPMorgan Chase board considered a sensitivity analysis showing the impact that repurchasing an additional $1.0 billion of stock and repurchasing $1.0 billion less of stock in 2004 would have on the accretion and dilution to 2005 earnings per share estimates as a result of the merger. In addition to the matters considered by the JPMorgan Chase board prior to announcement of the merger, the table below also sets forth supplemental analyses reflecting the potential impact on 2005 I/B/E/S earnings per share estimates on a GAAP basis and on a cash basis of (1) the excess capital allocated to the anticipated share repurchases being reinvested in the operations of the combined company, rather than being used to repurchase shares or (2) such excess capital not being used to repurchase shares and not being reinvested (in each case assuming 65% of the anticipated cost savings from the merger are realized in 2005).

39


 

            2005E GAAP EPS accretion/(dilution)

                 
65% of cost
savings Cost savings fully
realized in 2005 realized in 20051


               $3.5 billion of stock repurchases in each of 2004 and 2005
    (3.2)%       1.0%  
               $1.0 billion more of stock repurchases in 2004
    (2.6)%       1.7%  
               $1.0 billion less of stock repurchases in 2004
    (3.8)%       0.4%  
No stock repurchases in 2004 or 2005; related excess capital reinvested at 7% after-tax return2
    (3.1)%          
No stock repurchases in 2004 or 2005; no reinvestment of related excess capital
    (6.1)%          

            2005E Cash EPS accretion/(dilution)

                 
65% of cost
savings Cost savings fully
realized in 2005 realized in 20051


               $3.5 billion of stock repurchases in each of 2004 and 2005     1.5%       5.6%  
               $1.0 billion more of stock repurchases in 2004
    3.8%       8.0%  
               $1.0 billion less of stock repurchases in 2004
    (0.6)%       3.3%  
No stock repurchases in 2004 or 2005; related excess capital reinvested at 7% after-tax return2
    1.3%          
No stock repurchases in 2004 or 2005; no reinvestment of related excess capital
    (1.6)%          

                              


  1  Presented solely for illustrative purposes. Management does not anticipate full realization of cost savings until 2007.
  2  Assumes excess capital not used for anticipated share repurchases is invested in a portfolio of investment securities that earns a 1.00% pre-tax net interest spread and leverages capital 11x. These assumptions are for illustrative purposes only.

     The actual amount of shares repurchased will be subject to the discretion of the combined company’s board of directors and may be more or less than anticipated due to various factors, including: market conditions; legal considerations affecting the amount and timing of repurchase activities; the combined company’s capital position (taking into account purchase accounting adjustments); internal capital generation; and alternative potential investment opportunities over time.

      Other Factors Considered by the JPMorgan Chase Board. In addition to considering the strategic and financial factors outlined above, the JPMorgan Chase board considered the following additional factors, all of which it viewed as supporting its decision to approve the merger:

  •  historical information concerning JPMorgan Chase’s and Bank One’s respective businesses, financial performance and condition, operations, management, competitive positions and stock performance, which comparisons generally informed the board’s determination as to the relative values of JPMorgan Chase, Bank One and the combined company;
 
  •  the results of the due diligence review of Bank One’s businesses and operations;
 
  •  management’s assessment that the proposed merger was likely to meet each of the criteria they deemed necessary for a successful merger — strategic fit, acceptable execution risk, and financial benefits to JPMorgan Chase and JPMorgan Chase’s stockholders;
 
  •  the current and prospective competitive environment in which financial institutions such as JPMorgan Chase operate, including the continuing consolidation in the financial services industry and the likely effect of that competitive environment on JPMorgan Chase in light of, and in the absence of, the proposed merger;
 
  •  the alternatives reasonably available to JPMorgan Chase if it did not pursue the merger with Bank One, including the possibility of pursuing an acquisition of or merger with another financial institution, and the conclusion that a merger with Bank One

40


 

  offered the best strategic fit and opportunity and that other alternatives should accordingly not be pursued at that time;
 
  •  the possible risk of loss of current merger opportunities if JPMorgan Chase were to delay consideration of a transaction;
 
  •  the financial analyses and presentations of JPMorgan Chase’s financial advisor and its opinion that the exchange ratio was fair, from a financial point of view, to JPMorgan Chase (see “— Opinions of Financial Advisors — Opinion of JPMorgan Chase’s Financial Advisor” below);
 
  •  the terms and conditions of the merger agreement and the stock option agreements, including the fact that the merger agreement is not subject to termination, regardless of any change in the trading prices of either company’s stock between signing of the merger agreement and closing;
 
  •  the fact that the exchange ratio represented a premium of 8% based on the average closing prices of JPMorgan Chase and Bank One common stock during the one month prior to announcement of the merger and a premium of 14% over the closing price of Bank One common stock on the date of announcement of the merger;
 
  •  the determination that an exchange ratio that is fixed and not subject to adjustment is appropriate to reflect the strategic purpose of the merger and consistent with market practice for mergers of this type and that a fixed exchange ratio fairly captures the respective ownership interests of the JPMorgan Chase and Bank One stockholders based on fundamental valuation assessments and avoids fluctuations caused by near-term market volatility;
 
  •  the corporate governance provisions established for the transaction, including the post-merger board composition, the Chief Executive Officer succession arrangements, the employment agreement with Mr. Dimon and the designation of key senior management of the combined company, which the JPMorgan Chase board considered to be of significant importance in assuring certainty with respect to Chief Executive Officer succession, continuity of senior management and an effective and timely integration of the two companies’ operations;
 
  •  the provisions of the merger agreement and stock option agreements designed to restrict the ability of the parties to entertain third party acquisition proposals, and the provisions of the merger agreement providing for the payment of termination fees; the JPMorgan Chase board concluded that those provisions were appropriate and reasonable means to increase the likelihood that the transaction will be completed;
 
  •  the likelihood that the merger will be completed on a timely basis, including the likelihood that the merger will receive all necessary regulatory approvals without unacceptable conditions; and
 
  •  JPMorgan Chase management’s experience in implementing previous strategic merger transactions.

      JPMorgan Chase’s board of directors also considered the potential risks of the merger and potential conflicts of interest, including the following:

  •  the challenges of combining the operations of two major financial services businesses;
 
  •  the possible disruptions from anticipated workforce reductions to be implemented as part of the merger integration plan; the JPMorgan Chase board believed, however, that such disruptions would be mitigated by the fact that they would impact only a relatively small percentage of the total combined workforce (6% according to preliminary management estimates) and would be implemented in part through normal attrition;

41


 

  •  the risk that anticipated cost savings will not be achieved;
 
  •  the estimated $3 billion (pre-tax) in costs expected to be incurred to combine the operations of JPMorgan Chase and Bank One;
 
  •  the potential dilution to JPMorgan Chase’s stockholders if the forecast annual cost savings of $2.2 billion pre-tax are not achieved or the anticipated levels of excess capital expected to support the planned post-merger share repurchases described under “Summary — Dividend Policy; Anticipated Share Repurchases; Effect on Anticipated Merger Benefits” beginning on page 5 are not generated;
 
  •  the potential conflicts of interest of JPMorgan Chase officers and directors in connection with the merger (see “— Interests of Directors and Executive Officers in the Merger” below); and
 
  •  the risk of diverting management’s attention from other strategic priorities to implement merger integration efforts.

      JPMorgan Chase’s board of directors took into account the allocation of eight of sixteen (or 50%) of the seats on the board of the combined company to Bank One directors, which is greater than the pro forma percentage ownership of the combined company by Bank One common stockholders (approximately 42%) and the percentage contributions of Bank One to the combined company based on various financial metrics, including tangible equity (approximately 37%) and estimated 2004 GAAP net income based on Institutional Brokers Estimate System, or I/B/E/S, estimates (approximately 37%). JPMorgan Chase’s board understood that board participation at this level was a condition to the willingness of Bank One to enter into the merger agreement and deemed it appropriate given the strategic importance of the transaction to JPMorgan Chase.

      In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the JPMorgan Chase board did not find it useful, and did not attempt, to quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, individual members of the JPMorgan Chase board may have given different weight to different factors. The JPMorgan Chase board conducted an overall analysis of the factors described above, including thorough discussions with, and questioning of, JPMorgan Chase’s management and JPMorgan Chase’s legal and financial advisors, and considered the factors overall to be favorable to, and to support, its determination. The JPMorgan Chase board also relied on the experience and expertise of JPMorgan Securities, its financial advisor, for quantitative analyses of the financial terms of the merger. See “— Opinions of Financial Advisors — Opinion of JPMorgan Chase’s Financial Advisor” below.

      The JPMorgan Chase board of directors unanimously determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of JPMorgan Chase and its stockholders and unanimously approved the merger agreement. The JPMorgan Chase board unanimously recommends that JPMorgan Chase stockholders vote “FOR” adoption of the merger agreement.

Bank One’s Reasons for the Merger; Recommendation of the Merger by the Bank One Board of Directors

      The Bank One board of directors consulted with Bank One management as well as financial and legal advisors and unanimously determined that the merger and the related transactions are advisable and in the best interests of Bank One and Bank One’s stockholders. In reaching its conclusion to approve the merger and the related transactions and to recommend that the stockholders of Bank One adopt the merger agreement, the Bank One board considered the following factors as generally supporting its decision to enter into the merger agreement and related agreements:

  •  its understanding of Bank One’s businesses, operations, financial condition, earnings and prospects and of JPMorgan Chase’s businesses, operations, financial condition, earnings

42


 

  and prospects (including the report of Bank One management of the results of Bank One’s due diligence review of JPMorgan Chase);
 
  •  its understanding of the current and prospective economy and market and industry environment in which Bank One and JPMorgan Chase operate, including global, national and local economic conditions, the competitive landscape for financial institutions generally, the trend toward consolidation in the financial services industry, and the likely effect of these factors on Bank One in light of, and in absence of, the proposed transaction;
 
  •  the reports of Bank One management and the financial presentation by Lazard to Bank One’s board of directors concerning the business, operations, financial condition, earnings and prospects of JPMorgan Chase and the expected financial impact of the merger on the combined company, including pro forma assets, earnings, deposits and regulatory capital ratios;
 
  •  the value of the exchange ratio provided for in the merger agreement relative to the current and historical trading prices of the common stock of each of Bank One and JPMorgan Chase and relative to the analyses prepared by Lazard of comparative valuations for JPMorgan Chase and Bank One and the contributions that each company would make to the combined company in terms of earnings, assets, deposits and other key measures;
 
  •  the opinion delivered to the Bank One board of directors by Lazard to the effect that, as of the date of the opinion and based upon and subject to the considerations in its opinion, the exchange ratio was fair from a financial point of view to the holders of shares of Bank One common stock;
 
  •  the scale, scope, strength and diversity of operations, product lines and delivery systems that could be achieved by combining Bank One and JPMorgan Chase, and its expectation that a combination would solidify and enhance market leadership in retail financial services, as measured by such key indicators as credit card issuances, core deposits, and retail branches;
 
  •  JPMorgan Chase’s market leadership in wholesale financial services, and the board’s understanding of the opportunities, risks and character of JPMorgan Chase’s business mix relative to Bank One’s;
 
  •  the complementary nature of the respective customer bases, business products and skills of Bank One and JPMorgan Chase, which could be expected to result in opportunities to obtain synergies as products are cross-marketed and distributed over broader customer bases and best practices are compared and applied across businesses;
 
  •  the fact that Bank One’s and JPMorgan Chase’s branch franchises operate principally in different geographic markets, with the exception of Texas, and the prospect of combined branch operations reaching nearly 50% of the U.S. population, including a significant concentration in important urban areas;
 
  •  the potential cost saving opportunities, currently estimated to be approximately $2.2 billion pre-tax annually when fully phased-in, and the related potential impact on the combined company’s earnings;
 
  •  the review by the Bank One board of directors with Bank One’s legal and financial advisors of the structure of the merger and the financial and other terms of the merger agreement, including the exchange ratio, the expectation of Bank One’s legal advisors that the merger will qualify as a transaction of a type that is generally tax-free to stockholders for U.S. federal income tax purposes and Bank One’s ability under the merger agreement to increase the regular quarterly Bank One dividend after executing the merger agreement to a level approximately equivalent, on a pro forma per share basis adjusted for the exchange ratio, to the current regular quarterly JPMorgan Chase common dividend;

43


 

  •  the likelihood that the regulatory approvals needed to complete the transaction will be obtained without unacceptable conditions;
 
  •  the governance arrangements providing for equal representation on the board of directors of the combined company for appointees from each of Bank One and JPMorgan Chase after completion of the merger, and the agreement that the key leadership of the combined company after completion of the merger will be drawn from senior executives from each of Bank One and JPMorgan Chase;
 
  •  the arrangements providing for Mr. Harrison of JPMorgan Chase to serve as Chairman and Chief Executive Officer of the combined company and Mr. Dimon of Bank One to serve as President and Chief Operating Officer after the merger, and for Mr. Dimon to succeed as Chief Executive Officer on the second anniversary of the completion of the merger (or earlier if Mr. Harrison ceases for any reason to serve in the position of Chief Executive Officer), which the Bank One board considered to be of significant importance in assuring continuity of management and an effective and timely integration of the two companies’ operations;
 
  •  the agreement of the parties as to the extent of the combined company’s commitment to the Chicago metropolitan area, as reflected in the merger agreement; and
 
  •  the grant by each party to the other of an option to acquire stock exercisable under the circumstances and on the conditions described under “— Stock Option Agreements”, together with the termination fee provisions of the merger agreement described under “— The Merger Agreement” below.

      The Bank One board of directors also considered potential risks associated with the merger in connection with its deliberations of the proposed transaction, including:

  •  the challenges of integrating the businesses, operations and workforce of the two companies, both of which are large and complex financial institutions, and the risk that the anticipated cost savings and other expected synergies may not be achieved as and when planned;
 
  •  the pre-tax merger-related costs of $3 billion that are expected to be incurred by the combined company in connection with completing the merger, reflecting a number of costs and expenses expected to be incurred as a result of the transaction and the integration of the two companies;
 
  •  that the fixed exchange ratio, by its nature, would not adjust upwards to compensate for declines, or downwards to compensate for increases, in JPMorgan Chase’s stock price prior to completion of the merger, and that the terms of the merger agreement did not include “collar” provisions or stock-price-based termination rights that would be triggered by a decrease in the value of the merger consideration implied by the JPMorgan Chase stock price;
 
  •  the interests of Bank One executive officers and directors with respect to the merger apart from their interests as holders of Bank One common stock, and the risk that these interests might influence their decision with respect to the merger. See “— Interests of Directors and Executive Officers in the Merger” below;
 
  •  the risk that the terms of the merger agreement, including provisions relating to the payment of a termination fee under specified circumstances, and the stock option granted to JPMorgan Chase in connection with the merger agreement, while required by JPMorgan Chase as a condition to its willingness to enter into the merger agreement, could have the effect of discouraging other parties that might be interested in a transaction with Bank One from proposing such a transaction; and

44


 

  •  the different earnings, business and litigation risk profile of JPMorgan Chase as compared to Bank One.

      In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the Bank One board did not find it useful, and did not attempt, to quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, individual members of the Bank One board may have given different weight to different factors. The Bank One board conducted an overall analysis of the factors described above, including thorough discussions with, and questioning of, Bank One management and Bank One’s legal and financial advisors, and considered the factors overall to be favorable to, and to support, its determination. The Bank One board also relied on the experience and expertise of Lazard, its financial advisor, for quantitative analyses of the financial terms of the merger. See “— Opinions of Financial Advisors — Opinion of Bank One’s Financial Advisor” below.

      The Bank One board of directors unanimously determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of Bank One and its stockholders and unanimously approved the merger agreement. The Bank One board unanimously recommends that Bank One stockholders vote “FOR” adoption of the merger agreement.

Opinions of Financial Advisors

      Decision by JPMorgan Chase Board to Engage Affiliated Financial Advisor. As a result of its affiliation with JPMorgan Chase, JPMorgan Securities may be deemed to have had potential conflicts of interest in performing its duties as financial advisor. JPMorgan Chase’s board of directors considered this potential conflict of interest, as well as its responsibilities under applicable law, when making its decision to engage JPMorgan Securities. The board of JPMorgan Chase concluded that JPMorgan Securities was experienced and knowledgeable in financial advisory engagements of this size and complexity and that reliance upon its reports and opinions was appropriate and in the best interests of JPMorgan Chase and its stockholders. JPMorgan Chase noted that JPMorgan Securities ranked among the top five financial advisors in the world for global announced M&A advisory transactions during 2003. In addition, JPMorgan Chase also considered JPMorgan Securities’ detailed knowledge of the parties based in part upon its involvement in the discussions and due diligence that led to the merger agreement. The board also was aware that in previous business combinations involving major financial institutions, including the merger of JPMorgan Chase’s predecessor institutions, The Chase Manhattan Corporation and J.P. Morgan Co. Incorporated, one or both of the merging parties had relied on its affiliated investment bank as its financial advisor. In addition, under the laws of Delaware, which is the state in which JPMorgan Chase is incorporated, the board of directors of a company is not required to obtain a fairness opinion or an outside valuation report prior to approving a business combination as long as the directors have adequate information upon which a proper exercise of business judgment can be made. Delaware law also permits directors to rely upon information, opinions, reports and other statements presented by any of the company’s officers or employees.

      Opinion of JPMorgan Chase’s Financial Advisor. At a meeting of the board of directors of JPMorgan Chase on January 14, 2004, JPMorgan Securities rendered its oral opinion to the board of directors of JPMorgan Chase that, as of that date and based upon and subject to the factors and assumptions set forth in its opinion, the exchange ratio in the proposed merger of 1.32 shares of JPMorgan Chase common stock for each share of Bank One common stock was fair, from a financial point of view, to JPMorgan Chase. JPMorgan Securities confirmed its oral opinion by delivering to the board of directors of JPMorgan Chase a written opinion dated January 14, 2004. JPMorgan Chase’s board of directors did not limit the investigations made or the procedures followed by JPMorgan Securities in giving its oral or written opinion.

45


 

      JPMorgan Securities’ opinion is directed to the board of directors of JPMorgan Chase and addresses only the fairness, from a financial point of view, of the exchange ratio to JPMorgan Chase. JPMorgan Securities’ opinion does not address any other aspect of the merger and does not constitute an opinion as to the underlying business decision by JPMorgan Chase to engage in the merger. Moreover, JPMorgan Securities has expressed no opinion as to the price at which JPMorgan Chase’s or Bank One’s common stock will trade at any future time. The summary of JPMorgan Securities’ opinion set forth in this document is qualified in its entirety by reference to the full text of the written opinion attached to this document.

      In arriving at its opinion, JPMorgan Securities, among other things:

  •  reviewed the merger agreement;
 
  •  reviewed certain publicly available business and financial information concerning JPMorgan Chase and Bank One and the industries in which they operate;
 
  •  compared the proposed financial terms of the merger with the publicly available financial terms of certain transactions involving companies that JPMorgan Securities deemed relevant and the consideration paid for those companies;
 
  •  compared the financial and operating performance of JPMorgan Chase and Bank One with publicly available information concerning certain other companies that JPMorgan Securities deemed relevant and reviewed the current and historical market prices of JPMorgan Chase common stock and Bank One common stock and certain publicly traded securities of those other companies;
 
  •  reviewed certain internal financial analyses and forecasts prepared by the managements of JPMorgan Chase and Bank One relating to their respective businesses, as well as the estimated amount and timing of cost savings and related expenses expected to result from the merger; and
 
  •  performed such other financial studies and analyses, and reviewed and considered such other information, as JPMorgan Securities deemed appropriate for the purposes of its opinion.

      JPMorgan Securities also held discussions with certain members of the managements of JPMorgan Chase and Bank One with respect to certain aspects of the merger, and the past and current business operations of JPMorgan Chase and Bank One, the historical financial condition and operations and future prospects of JPMorgan Chase and Bank One, the effects of the merger on the financial condition and future prospects of JPMorgan Chase, and other matters that JPMorgan Securities believed necessary or appropriate to its inquiry.

      JPMorgan Securities relied upon and assumed, without independent verification, the accuracy and completeness of all information that was publicly available or that was furnished to it by JPMorgan Chase or Bank One or otherwise reviewed by JPMorgan Securities, and JPMorgan Securities has not assumed any responsibility or liability for that information. JPMorgan Securities is not an expert in the evaluation of loan and lease portfolios for purposes of assessing the adequacy of the allowances for losses with respect to them, and accordingly, JPMorgan Securities has assumed that such allowances for losses are in the aggregate adequate to cover such losses. JPMorgan Securities did not review individual credit files, and did not make any independent evaluation or appraisal of the assets or liabilities (including any derivative or off-balance sheet assets and liabilities) of JPMorgan Chase or Bank One or any of their respective subsidiaries, and JPMorgan Securities was not furnished with any such evaluations or appraisals. In relying on financial analyses and forecasts provided to it, JPMorgan Securities assumed that those analyses and forecasts were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by the managements of JPMorgan Chase and Bank One as to the expected future results of operations and financial

46


 

condition of JPMorgan Chase and Bank One to which those analyses and forecasts relate. JPMorgan Securities also assumed that the merger will qualify as a tax-free reorganization for United States federal income tax purposes, and that the other transactions contemplated by the merger agreement will be consummated as described in the merger agreement. JPMorgan Securities relied as to all legal matters relevant to rendering its opinion upon the advice of counsel. JPMorgan Securities further assumed that all material governmental, regulatory or other consents and approvals necessary for the completion of the merger will be obtained without any adverse effect on JPMorgan Chase or Bank One or on the contemplated benefits of the merger.

      JPMorgan Securities based its opinions on economic, market and other conditions as in effect on, and the information made available to JPMorgan Securities, as of the date of its opinion. Subsequent developments may affect its opinion, and its opinion will not reflect any developments that may occur or may have occurred after the date of its opinion and prior to the completion of the merger.

      In accordance with customary investment banking practice, JPMorgan Securities employed generally accepted valuation methods in reaching its opinion. The following is a summary of the material financial analyses that JPMorgan Securities used in providing its opinion. Some of the summaries of financial analyses are presented in tabular format. In order to understand the financial analyses used by JPMorgan Securities more fully, you should read the tables together with the text of each summary. The tables alone do not constitute a complete description of JPMorgan Securities’ financial analyses, including the methodologies and assumptions underlying the analyses, and if viewed in isolation could create a misleading or incomplete view of the financial analyses performed by JPMorgan Securities.

      Summary of Selected Analyses. The summary table provided below sets forth summary data with respect to the ranges of implied values per share of Bank One common stock as of January 12, 2004 derived from the comparable companies analysis, comparable transactions analysis and dividend discount analysis performed by JPMorgan Securities in connection with its opinion, together with the implied value of the merger consideration per share of Bank One common stock based on the closing price of JPMorgan Chase common stock on January 12, 2004.

      The summary data set forth below do not represent and should not be viewed by anyone as constituting conclusions reached by JPMorgan Securities with respect to any of the analyses performed by it in connection with its opinion. In arriving at its opinion, JPMorgan Securities considered all of the financial analyses it performed and did not attribute any particular weight to any individual analysis it considered or reach any specific conclusion with respect to any such analysis. Rather, JPMorgan Securities made its determination as to the fairness to JPMorgan Chase of the exchange ratio, from a financial point of view, on the basis of its experience and professional judgment after considering the results of all of the analyses in the summary table below as well as the other analyses described in the following pages. Accordingly, the data included in the summary table should be considered as a whole and in the context of the full narrative description of all of the financial analyses set forth in the following pages, including the assumptions underlying these analyses. Considering the data included in the summary table without considering the full narrative description of all of the financial analyses, including the assumptions underlying these analyses, could create a misleading or incomplete view of the financial analyses performed by JPMorgan Securities. The ranges of implied values per share of

47


 

Bank One common stock set forth in the summary table is not an opinion as to the price at which JPMorgan Chase’s or Bank One’s common stock will trade at any future time.
             
Implied Values of
Bank One
Common Stock as
of January 12,
Analyses 2004


Implied value analysis:
       
   
Value of merger consideration based on closing price of JPMorgan Chase common stock on January 12, 2004 ($38.79)
  $ 51.20  
Comparable companies analysis
  $ 40 – 54  
Comparable transactions analysis
  $ 49 – 63  
Dividend discount analysis:
       
 
Without cost savings
  $ 44 – 54  
 
With cost savings
  $ 54 – 66  

      Implied Value and Multiple Analysis. Based upon the exchange ratio of 1.32 and the $38.79 closing market price of JPMorgan Chase common stock on January 12, 2004 (the last practicable date when presentation materials were prepared and distributed to the JPMorgan Chase board), JPMorgan Securities calculated that the implied value of the merger consideration was $51.20 per share of Bank One common stock. This implied value represents approximately a 15% premium to $44.56 (the prior trading day’s closing price per share of Bank One common stock on January 9, 2004) and approximately a 14% premium to $44.73 (the one-week average closing price per share of Bank One common stock). JPMorgan Securities also calculated that based on the exchange ratio of 1.32 and on JPMorgan Chase’s number of fully diluted shares of common stock, Bank One stockholders would own on a pro forma basis approximately 42.2% of the combined company.

      JPMorgan Securities also determined the multiple of the implied offer price to I/B/E/S median estimated 2004 earnings per share of Bank One common stock as of January 12, 2004 and the stated and tangible book values per share of Bank One common stock as of September 30, 2003. I/ B/ E/ S is a database owned and operated by Thompson Financial, which contains estimated and actual earnings, cash flows, dividends and other data for U.S. and foreign markets. The results of this analysis are summarized as follows:

         
Multiples

2004E EPS
    15.3 x
Book value per share
    2.6  
Tangible book value per share
    2.9  

      Comparable Companies Analysis. Using publicly available information, JPMorgan Securities compared selected financial and market data of JPMorgan Chase and Bank One with similar data for the following companies:

         
Large Banks Mid-Size Banks Credit Cards



Bank of America Corporation
  BB&T Corporation   MBNA Corporation
Citigroup Inc.
  Fifth Third Bancorp    
U.S. Bancorp
  The PNC Financial Services Group, Inc.    
Wachovia Corporation
  KeyCorp    
Wells Fargo & Company
  National City Corporation    
    SunTrust Banks, Inc.    

      JPMorgan Securities calculated and compared various financial multiples and ratios based on publicly available financial data as of September 30, 2003, information it obtained from filings

48


 

with the Securities and Exchange Commission and I/B/E/S estimates. The multiples and ratios of JPMorgan Chase and Bank One were calculated using the closing price of JPMorgan Chase common stock and Bank One common stock, respectively, as of January 12, 2004. The multiples and ratios for each of the selected companies were based on the most recent publicly available information. With respect to the selected companies, JPMorgan Securities presented:

  •  price as a percentage of the selected company’s 52-week high,
 
  •  multiple of price to 2003 and 2004 I/B/E/S median estimated earnings per share,
 
  •  multiple of price to stated book value and tangible book value per share,
 
  •  premium to core deposits,
 
  •  ratio of tangible common equity to tangible assets (TCE/TA),
 
  •  rate of return on average equity (ROAE), and
 
  •  consensus long-term EPS growth rate.

      The results of this analysis are set forth below:

                                                         
Large Banks Mid-Sized Banks


Credit Bank JPMorgan
Range Median Range Median Cards One Chase







% of 52-week high
    93%-100%       98%       94%-99%       96%       97%       97%       99%  
2003E EPS
    11.1x-15.6x       14.0x       10.7x-19.6x       13.9x       14.5x       14.7x       12.4x  
2004E EPS
    11.1x-13.9x       12.7x       11.3x-17.4x       13.0x       12.9x       13.3x       12.3x  
Book value
    1.6x-2.9x       2.3x       1.8x-3.9x       2.1x       3.3x       2.2x       1.8x  
Tangible book value
    2.3x-4.6x       3.6x       2.1x-4.5x       2.9x       4.7x       2.5x       2.3x  
Core deposit premium
    23%-127%       34%       16%-58%       23%       N/A       23%       30%  
Dividend yield
    2.8%-4.1%       3.3%       1.9%-4.2%       3.6%       1.5%       2.2%       3.5%  
TCE/TA
    4.5%-6.4%       5.4%       5.9%-8.6%       6.8%       12.6%       7.0%       4.5%  
ROAE through September 30, 2003
    14%-21%       19%       13%-22%       17%       26%       15%       15%  
Consensus long-term growth
    10%-12%       10%       7%-12%       9%       14%       10%       10%  

      The analysis implied a range of values for Bank One common stock of approximately $40 to $54 per share.

      Historical Market Performance Analysis. JPMorgan Securities reviewed and compared the historical stock performance of Bank One and JPMorgan Chase to each other and to the historical stock performance of the same large banks, as a group, and mid-sized banks, as a group, identified above under “Comparable Companies Analysis” and the S&P 500 Index over various periods ranging from a 1-week period to a 5-year period ending January 12, 2004. The analysis indicated that Bank One common stock outperformed JPMorgan Chase common stock in certain periods and underperformed JPMorgan Chase’s stock in other periods. The analysis also indicated that both Bank One and JPMorgan Chase common stocks outperformed the comparable banks and the S&P 500 Index in certain periods and underperformed the comparable banks and the S&P 500 Index in other periods. JPMorgan Securities also noted that the during the 52-week period ended January 12, 2004, the market price for Bank One common stock ranged from a high of $45.79 to a low of $33.14, and the market price for JPMorgan Chase common stock ranged from a high of $39.15 to a low of $20.13.

      In addition, based on I/B/E/S data, JPMorgan Securities reviewed and compared the price to estimated forward twelve-month earnings per share (P/E) ratios over time of Bank One to those of JPMorgan Chase. Based on I/B/E/S data, JPMorgan Securities also reviewed and compared Bank One’s premium (or discount) to the median forward P/E ratios of its peer group of banks consisting of JPMorgan Chase and the same large banks and mid-sized banks identified above under “Comparable Companies Analysis” over a period from January 2000 to

49


 

January 12, 2004. The analysis indicated that JPMorgan Chase’s forward P/E ratio ranged from an average 0.3x premium to Bank One’s forward P/E ratio in 2000 to discounts of (0.3x), (2.5x), and (0.9x) in 2001, 2002, and 2003, respectively. In addition, the analysis indicated that Bank One’s forward P/E ratio ranged from an average (0.6x) discount to its bank peer group in 2000 to premiums of 0.2x, 1.6x and 0.5x in 2001, 2002 and 2003, respectively. JPMorgan Securities noted that Bank One’s forward P/E ratio was at a 1.0x premium to JPMorgan Chase and a 0.6x premium to its bank peer group as of January 12, 2004. The foregoing historical market performance analysis was presented to the board of directors to provide it with background information and perspective with respect to the relative historical market prices, trading patterns and I/B/E/S estimated forward P/E ratios of Bank One and JPMorgan Chase common stock.

      Comparable Transactions. Using publicly available information, JPMorgan Securities examined the following transactions involving U.S. banks with transaction values greater than $10 billion since 1997:

         
Announcement
Date Acquiror Target



October 2003
  Bank of America Corporation   FleetBoston Financial Corporation
April 2001
  First Union Corporation   Wachovia Corporation
October 2000
  Firstar Corporation   U.S. Bancorp
September 2000
  The Chase Manhattan Corporation   J.P. Morgan & Co. Incorporated
May 1999
  Firstar Corporation   Mercantile Bancorporation
March 1999
  Fleet Financial Group, Inc.    BankBoston Corporation
June 1998
  Norwest Corporation   Wells Fargo & Company
April 1998
  Bank One Corporation   First Chicago NBD Corporation
April 1998
  NationsBank Corporation   BankAmerica Corporation
April 1998
  Travelers Group, Inc.    Citicorp
November 1997
  First Union Corporation   CoreStates Financial Corp.
August 1997
  NationsBank Corporation   Barnett Banks, Inc.

      For each of these transactions, JPMorgan Securities analyzed the premium to the market price one day and five days prior to announcement and price as a multiple to the estimated twelve-months forward projected earnings, book value and tangible book value and the premium to core deposits. Set forth below are the results of this analysis for the transactions reviewed, based on information available as of January 12, 2004:

                         
High/Low JPMorgan Chase/
Range Median Bank One



1-day premium to market
    0%-42%       11%       15%  
5-day premium to market
    0%-44%       22%       13%  
12-month forward EPS
    12.4x-24.1x       17.3x       15.3x  
Book value
    2.1x-5.3x       3.3x       2.6x  
Tangible book value
    2.6x-9.0x       4.2x       2.9x  
Core deposit premium
    20%-62%       39%       28%  

      The analysis implied an acquisition value of Bank One common stock ranging from approximately $49 to $63 per share.

      Dividend Discount Analysis. JPMorgan Securities performed a dividend discount analysis to determine a range of equity values of Bank One common stock, assuming Bank One continued to operate as a stand-alone entity. The range was determined by adding the present value of an estimated future dividend stream for Bank One over a five-year period from 2004 through 2008,

50


 

and the present value of an estimated terminal value of Bank One common stock at the end of 2008. In performing its analysis, JPMorgan Securities made the following assumptions, among others:

  •  earnings per share in 2003 and 2004 based on I/B/E/S median estimated earnings per share,
 
  •  an earnings per share growth at an annual rate of 10% from 2005 through 2008,
 
  •  a targeted tangible common equity/tangible managed assets (TCE/TMA) ratio of 5.75%,
 
  •  a terminal value of Bank One common stock at the end of 2008 based on price to earnings multiples of 11.0x, 12.0x and 13.0x to year 2009 projected earnings, assuming 10% growth in earnings from 2008 to 2009;
 
  •  discount rates from 10.0% to 12.0% to calculate the present value of the dividend stream and terminal values,
 
  •  5% total managed asset growth, and
 
  •  a 35% tax rate.

      This analysis implied a fully diluted equity value of $43.63 to $53.65 per share of Bank One common stock, on a stand-alone basis, as illustrated by the following table:

                         
Terminal Multiple

Discount Rate 11.0x 12.0x 13.0x




10.0%
  $ 47.19     $ 50.42     $ 53.65  
11.0%
    45.36       48.45       51.53  
12.0%
    43.63       46.58       49.53  

      JPMorgan Securities also tested the sensitivity of the values by varying the targeted TCE/TMA ratio from 5.25% to 6.25%, assuming a fixed terminal price to earnings multiple of 12.0x and keeping constant the other assumptions discussed above. This analysis indicated a fully diluted equity value of $45.24 to $51.94 per share of Bank One common stock, on a stand-alone basis.

      JPMorgan Securities also performed a dividend discount analysis to determine a range of equity values of JPMorgan Chase common stock, assuming JPMorgan Chase continued to operate as a stand-alone entity. Using a discount rate of 11.0% to 13.0%, a targeted tangible common equity/tangible managed risk-weighted assets (TCE/TMRWA) ratio of 6.50% and otherwise the same assumptions as above, this analysis indicated a fully diluted value of $36.53 to $45.41 per share of JPMorgan Chase common stock, on a stand-alone basis, as illustrated by the following table:

                         
Terminal Multiple

Discount Rate 10.0x 11.0x 12.0x




11.0%
  $ 39.51     $ 42.46     $ 45.41  
12.0%
    37.98       40.80       43.62  
13.0%
    36.53       39.22       41.92  

      JPMorgan Securities also tested the sensitivity of the values by varying the targeted TCE/TMRWA ratio from 6.0% to 7.0%, assuming a fixed terminal price to earnings multiple of 11.0x. This analysis implied a fully diluted stand-alone value of JPMorgan Chase common stock ranging from approximately $38.18 to $43.68 per share.

      Dividend Discount Analysis With Cost Savings. JPMorgan Securities also performed a dividend discount analysis to determine a range of equity values of Bank One common stock that included the expected cost savings from the merger. In performing its analysis, JPMorgan

51


 

Securities made the following assumptions in addition to the assumptions described under “Dividend Discount Analysis” above, among others:

  •  cost savings of $2.2 billion, phased in 33% in 2004, 65% in 2005, 85% in 2006, and 100% in 2007,
 
  •  3% annual cost savings growth post 2007, and
 
  •  total merger related pre-tax costs of $3 billion.

      This analysis indicated a fully diluted equity value of $53.82 to $66.42 per share of Bank One common stock, on a pro forma basis, as illustrated by the following table:

                         
Terminal Multiple

Discount Rate 11.0x 12.0x 13.0x




10.0%
  $ 58.31     $ 62.37     $ 66.42  
11.0%
    56.01       59.88       63.76  
12.0%
    53.82       57.53       61.24  

      In addition, JPMorgan Securities tested the sensitivity of the values by varying the amount of cost savings from $2.0 billion to $2.4 billion (representing a range of 20.9% to 25.1% of Bank One’s estimated run-rate cash expenses), assuming a terminal multiple of 12.0x and keeping constant the other assumptions discussed above. This analysis indicated an equity value of $56.53 to $63.45 per share of Bank One common stock, on a pro forma basis.

      Historical Exchange Ratio Analysis. JPMorgan Securities calculated the exchange ratio of JPMorgan Chase common stock and Bank One common stock as of January 12, 2004 and the average exchange ratios for a range of periods from a five-day period to a twelve-month period ending on January 12, 2004 (calculated by dividing the Bank One stock price for each day in such period by the corresponding JPMorgan Chase stock price, and then averaging the exchange ratios determined for each day during the applicable period) and also determined the implied fully diluted ownership of the combined company that Bank One stockholders would have acquired based on those average exchange ratios. JPMorgan Securities also calculated the premiums that the exchange ratio of 1.32 for the merger represents over the average exchange ratios calculated throughout those periods.

      These results are shown in the following table:

                         
Implied
Bank One
Average Fully Diluted Exchange Ratio
Exchange Ratio Ownership Premium



January 12, 2004
    1.148 x     38.6 %     15 %
5-day
    1.167       39.0       13  
1-month
    1.226       40.3       8  
3-month
    1.211       40.0       9  
6-month
    1.174       39.2       12  
12-month
    1.264       41.0       4  

      Contribution Analysis. JPMorgan Securities compared the 42.2% pro forma equity ownership of the combined company that Bank One’s stockholders would hold based on the exchange ratio of 1.32 to the expected relative contributions of JPMorgan Chase and Bank One to the pro forma combined company in terms of estimated GAAP and cash net income for 2004 (based on I/B/E/S median estimated earnings per share), tangible equity as of September 30, 2003 and

52


 

market value as of January 12, 2004. JPMorgan Securities also calculated the implied exchange ratio implied by these contributions. The results of this analysis are set forth below:
                         
Pro Forma Pro Forma
Ownership by Ownership by
JPMorgan Chase Bank One Actual Exchange
Stockholders Stockholders Ratio in Merger



      57.8 %     42.2 %     1.320  
                         
Implied Exchange
Contribution by Contribution by Ratio from
JPMorgan Chase Bank One Contribution



2004 GAAP net income
    63.3 %     36.7 %     1.056  
2004 cash net income
    63.5       36.5       1.051  
Tangible equity
    63.0       37.0       1.073  
Market value
    61.4       38.6       1.148  

      Pro Forma Merger Analysis. JPMorgan Securities analyzed the pro forma impact of the merger on projected earnings per share for JPMorgan Chase for 2005 and 2006, based upon median estimates provided by I/B/E/S, annual pre-tax cost savings as described below, and assuming, among other factors, JPMorgan Chase repurchases $3.5 billion of common stock per year from 2004 through 2006. The pro forma results were calculated based on publicly available I/B/E/S estimates of GAAP earnings per share and information provided by managements of JPMorgan Chase and Bank One regarding expected cost savings and synergies from the merger.

      Assuming annual pre-tax cost savings of $2.2 billion are fully realized by 2005, the analysis showed that the merger would be accretive to GAAP earnings per share by 1.0% and cash earnings per share by 5.6%. If 65% of cost savings are realized by 2005, the merger would be dilutive to GAAP earnings per share by 3.2% but accretive to cash earnings per share by 1.5%. The analysis also indicated that the merger would be accretive to GAAP and cash earnings per share in 2006.

      For further analyses prepared by JPMorgan Chase (in addition to those presented by JPMorgan Securities to the JPMorgan Chase board) showing the effect on earnings per share accretion/dilution assuming different levels of share buybacks and/or reinvestment of excess capital, see pages 39 and 40.

      JPMorgan Securities also calculated the potential incremental market value of the combined company from the merger for JPMorgan Chase stockholders by adding the fully-diluted market capitalizations of JPMorgan Chase and Bank One as of January 12, 2004 and the potential value of cost savings from the merger. The potential value of cost savings was calculated based on the annual pre-tax cost savings, a 35% tax rate and a 12.0x P/E multiple less the after-tax value of $3 billion in pre-tax merger related costs. Using these assumptions, JPMorgan Securities estimated the potential value of cost savings to be $15 billion. Based on these calculations, JPMorgan Securities estimated the potential market value of the combined company to be $146 billion, or $40.79 per share, after giving effect to the estimated number of shares that JPMorgan Chase would issue to Bank One stockholders in the merger.

      The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by JPMorgan Securities. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. JPMorgan Securities believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. No single factor or analysis was determinative of JPMorgan Securities’ fairness determination. Rather, JPMorgan Securities considered the totality of the factors and analyses performed in determining its

53


 

opinion. JPMorgan Securities based its analyses on assumptions that it deemed reasonable, including those concerning general business and economic conditions and industry-specific factors. The other principal assumptions upon which JPMorgan Securities based its analysis have been described under the description of each analysis in the foregoing summary. Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by JPMorgan Securities are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, JPMorgan Securities’ analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be bought or sold. None of the selected companies reviewed as described in the above summary is identical to JPMorgan Chase or Bank One, and none of the selected transactions reviewed was identical to the merger. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of JPMorgan Securities’ analysis, may be considered similar to those of JPMorgan Chase and Bank One. The transactions selected were similarly chosen because their participants, size and other factors, for purposes of JPMorgan Securities’ analysis, may be considered similar to the merger. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to JPMorgan Chase and Bank One and the transactions compared to the merger.

      As a part of its investment banking business, JPMorgan Securities and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for estate, corporate and other purposes. JPMorgan Securities is a wholly-owned subsidiary of JPMorgan Chase. JPMorgan Securities and its affiliates have provided, and in the future may continue to provide, for compensation, investment banking and other services to JPMorgan Chase and its affiliates, including serving as underwriter or agent with respect to securities offerings by JPMorgan Chase and acting as financial advisor with respect to acquisitions and divestitures. JPMorgan Securities and its affiliates have provided, and in the future may continue to provide, for compensation, trading, treasury and other services to Bank One and its affiliates, including providing credit, corporate finance and investment management services. In the ordinary course of business, JPMorgan Securities or its affiliates may actively trade in the debt and equity securities of Bank One and, subject to applicable regulatory constraints, JPMorgan Chase for their own accounts and for the accounts of their customers, and accordingly, may at any time hold a long or short position in those securities.

      JPMorgan Chase selected JPMorgan Securities to advise it and deliver a fairness opinion with respect to the merger on the basis of its experience and its familiarity with JPMorgan Chase and for the reasons described under “— Decision by JPMorgan Chase Board to Engage Affiliated Financial Advisor” above. JPMorgan Chase has agreed to allocate JPMorgan Securities a fee of $40 million in connection with its engagement upon the completion of the merger. In addition, JPMorgan Chase has agreed to reimburse JPMorgan Securities for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify JPMorgan Securities against certain liabilities, including liabilities arising under federal securities laws.

      The full text of the written opinion of JPMorgan Securities, dated January 14, 2004, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by JPMorgan Securities in connection with the opinion, is attached to this document as Annex D and is incorporated in this document by reference. Holders of JPMorgan Chase common stock are urged to, and should, read this opinion carefully and in its entirety. JPMorgan Securities provided its opinion for the information and assistance of

54


 

the JPMorgan Chase board of directors in connection with its consideration of the transaction contemplated by the merger agreement. The JPMorgan Securities opinion is not a recommendation as to how any holder of JPMorgan Chase common stock should vote with respect to the merger or any other matter. The opinion of JPMorgan Securities will not reflect any developments that may occur or may have occurred after the date of its opinion and prior to the completion of the merger. JPMorgan Securities has no obligation to update, revise or reaffirm its opinion, and JPMorgan Chase does not currently expect that it will request an updated opinion from JPMorgan Securities.
 
Opinion of Bank One’s Financial Advisor

      Lazard acted as Bank One’s exclusive investment banker in connection with the merger. Bank One selected Lazard based on Lazard’s qualifications, expertise and reputation. In connection with Lazard’s engagement, Bank One requested that Lazard evaluate the fairness, from a financial point of view, to the holders of shares of Bank One common stock of the exchange ratio provided for in the merger agreement. On January 14, 2004, at a meeting of the Bank One board of directors held to evaluate the merger, Lazard rendered to Bank One’s board an oral opinion, which opinion was confirmed by delivery of a written opinion dated January 14, 2004, the date of the merger agreement, to the effect that, as of that date and based on and subject to the matters described in its opinion, the exchange ratio was fair, from a financial point of view, to the holders of shares of Bank One common stock.

      In connection with its opinion, Lazard:

  •  reviewed the financial terms and conditions of a draft of the merger agreement dated January 13, 2004, which was substantially in the form of the agreement executed by Bank One and JPMorgan Chase on January 14, 2004;
 
  •  analyzed certain publicly available financial statements and historical business information relating to Bank One and JPMorgan Chase, respectively;
 
  •  reviewed various internal financial forecasts and other data prepared by the managements of Bank One and JPMorgan Chase, respectively, with respect to the businesses and prospects of Bank One and JPMorgan Chase, respectively, the strategic objectives of each, and their estimates of synergies and other anticipated strategic, financial and operational benefits of the merger to the combined company;
 
  •  held discussions with members of the senior managements of Bank One and JPMorgan Chase with respect to the businesses and prospects of Bank One and JPMorgan Chase, respectively, the strategic objectives of each, and their estimates of synergies and other anticipated strategic, financial and operational benefits of the merger to the combined company;
 
  •  compared the financial performance of Bank One and JPMorgan Chase and the prices and trading activity of Bank One common stock and JPMorgan Chase common stock with that of certain other publicly-traded companies it believed to be generally comparable with Bank One and JPMorgan Chase, respectively, and their securities;
 
  •  reviewed the financial terms, to the extent publicly available, of certain business combinations involving companies in lines of businesses it believed to be generally comparable to those of Bank One and JPMorgan Chase, and in other industries generally;
 
  •  reviewed the historical stock prices and trading volumes of Bank One common stock and JPMorgan Chase common stock; and
 
  •  conducted such other financial studies, analyses and investigations as it deemed appropriate.

55


 

      In performing its review, Lazard relied upon the accuracy and completeness of the foregoing information, and did not assume any responsibility for and did not conduct any independent verification of such information. In addition, it did not review individual credit files nor did it conduct any independent valuation or appraisal of the assets or liabilities (including any hedge, swaps, foreign exchange, derivative or off-balance-sheet assets and liabilities) of Bank One or JPMorgan Chase or any of their respective subsidiaries, or concerning the solvency or fair value of any of the foregoing entities, and was not furnished with any such valuation or appraisal. With respect to financial forecasts, including projected synergies and other anticipated strategic, financial and operational benefits of the merger, Lazard assumed with Bank One’s consent that such forecasts were reasonably prepared on bases reflecting the best currently available estimates and judgments of management of Bank One and JPMorgan Chase as to the future financial performance of Bank One, JPMorgan Chase and the combined company, as the case may be, and it also assumed that such forecasts and projections will be realized in the amounts and at the times contemplated thereby. The financial forecasts provided by each of Bank One and JPMorgan Chase covered only 2004 (and Lazard was informed that no other forecasts were available), and, with Bank One’s permission, in analyzing the exchange ratio, Lazard used certain earnings estimates and consensus estimates published by certain financial analysts and databases, respectively. Lazard assumed no responsibility for and expressed no view as to any such forecasts and projections or the assumptions on which they were based. In addition, Lazard is not an expert in the evaluation of loan portfolios or the allowances for losses with respect thereto, and, accordingly, it assumed with Bank One’s consent that such allowances for losses for Bank One, JPMorgan Chase or any of their respective subsidiaries were in the aggregate adequate to cover such losses.

      Further, Lazard’s opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to it as of, the date of such opinion. Lazard assumed no responsibility for updating or revising its opinion based on circumstances or events occurring after the date thereof.

      In rendering its opinion, Lazard assumed that the merger will be consummated on the terms described in the draft merger agreement reviewed by Lazard, including, among other things, that the merger will be treated as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended, and that the merger will be consummated without any waiver of any material terms or conditions. Lazard also assumed that the executed merger agreement would conform in all material respects to the draft merger agreement reviewed by Lazard. In addition, Lazard assumed that obtaining the necessary regulatory and third party approvals for the merger will not have a material adverse effect on the combined company.

      Lazard’s opinion is directed to the Bank One board of directors and relates only to the fairness to the holders of shares of Bank One common stock of the exchange ratio from a financial point of view, and does not address any other aspect of the merger, the merits of the underlying decision by Bank One or JPMorgan Chase to engage in the merger or the relative merits of the merger as compared to other business strategies that might be available to Bank One or JPMorgan Chase. Lazard was not authorized to, and did not, solicit third party indications of interest in acquiring all or a part of Bank One or engaging in a business combination or any other strategic transaction with Bank One. Lazard did not express any opinion as to the price at which shares of Bank One common stock or shares of JPMorgan Chase common stock may trade subsequent to the announcement of the merger or as to the price at which shares of JPMorgan Chase common stock may trade subsequent to the consummation of the merger.

      In its analyses, Lazard considered industry performance, regulatory, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Bank One and JPMorgan Chase. No company, transaction or business used in Lazard’s analyses as a comparison is identical to Bank One or JPMorgan Chase or the proposed merger, and an evaluation of the results of those analyses is not entirely mathematical. Rather,

56


 

the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the merger, public trading or other values of the companies, business segments or transactions being analyzed.

      The estimates contained in Lazard’s analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. Accordingly, Lazard’s analyses and estimates are inherently subject to substantial uncertainty.

      Lazard’s opinion and financial analyses were only one of many factors considered by Bank One’s board of directors in its evaluation of the proposed merger and should not be viewed as determinative of the views of the Bank One board of directors or management with respect to the merger or the exchange ratio.

      The following is a summary of the material financial analyses underlying Lazard’s opinion dated January 14, 2004 delivered to Bank One’s board of directors in connection with the merger. In preparing its opinion to the Bank One board of directors, Lazard performed a variety of financial and comparative analyses, including those described below. The summary of Lazard’s analyses described below is not a complete description of the analyses underlying Lazard’s opinion. The preparation of a fairness opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analyses and the application of those methods to the particular circumstances, and, therefore, is not readily susceptible to summary description. In arriving at its opinion, Lazard considered the results of all the analyses and did not attribute any particular weight to any factor or analysis considered by it; rather, Lazard made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of the analyses. The financial analyses summarized below include information presented in tabular format. In order to fully understand Lazard’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Lazard’s financial analyses.

      Summary of Selected Analyses. The two tables below set forth summary data with respect to:

  •  the reference range of implied exchange ratios derived from the contribution analysis and exchange ratio analysis performed by Lazard in connection with its opinion, together with the exchange ratio implied by the January 13, 2004 market prices of Bank One and JPMorgan chase common stock and the exchange ratio in the merger, and
 
  •  the implied equity value reference ranges per share of Bank One common stock derived from the comparable companies analysis and dividend discount analysis performed by Lazard in connection with its opinion, together with the market price per share of Bank One common stock and the implied value of the merger consideration per share of Bank One common stock, each as of January 13, 2004.

      The summary data set forth below do not represent and should not be viewed by investors as constituting conclusions reached by Lazard with respect to any of the analyses performed by it in connection with its opinion. In arriving at its opinion, Lazard considered all of the financial analyses it performed and did not attribute any particular weight to any individual analysis it considered or reach specific conclusions with respect to any such analysis. Rather, Lazard made its determination as to the fairness of the exchange ratio, from a financial point of view, on the basis of its experience and professional judgment after considering the results of all of the

57


 

analyses in the below summary as well as the other analyses described in the following pages. Accordingly, the data included in the tables below should be considered as a whole and in the context of the full narrative description of all of the financial analyses set forth on the following pages, including the assumptions underlying those analyses. Considering the data in the tables below without also considering the full narrative description of all of the financial analyses, including the assumptions underlying these analyses, could create a misleading or incomplete view of the financial analyses performed by Lazard. Lazard did not present to the Bank One board of directors summary data in the form set forth below, but, rather, Lazard reviewed and discussed individually with the Bank One board each of the analyses described on the following pages. The equity value reference ranges per share of Bank One common stock set forth in the table below are not an opinion as to the price at which Bank One’s common stock will trade at any future time.
                         
Exchange
Ratio Implied Exchange
Implied by January 13, Ratio in
Exchange Ratio 2004 Market the
Reference Range Prices Merger
Analysis


Exchange Ratio
    0.947 to 1.292       1.147       1.320  
Contribution
    0.677 to 1.097       1.147       1.320  
                         
As of January 13, 2004
Implied Equity
Value Implied Value
Reference of Merger
Range per Market Price Consideration
Bank One per Bank One per Bank
share share One share
Analysis


Comparable Companies
  $ 40.00-60.00     $ 45.22     $ 51.35  
Dividend Discount
     42.31-54.33       45.22       51.35  

      Transaction Multiple Analysis. Lazard calculated an implied transaction value per share of Bank One common stock of $51.35, based on the exchange ratio of 1.320x and the $38.90 closing price per share of JPMorgan Chase common stock on January 13, 2004. The implied value per share represented a premium to the closing price per share of Bank One common stock on January 13, 2004 of 15.1%. The implied value per share also represented a premium to the 52-week high and 52-week low closing price per share of Bank One common stock of 12.4% and 51.3%, respectively.

      Lazard also calculated the implied transaction value per share of $51.35 as a multiple of:

  •  Bank One’s last twelve months (“LTM”) earnings per share (“EPS”) from continuing operations through September 30, 2003;
 
  •  median EPS estimates for Bank One for 2003 and 2004 based on I/B/E/S estimates; and
 
  •  reported and tangible book value per share as of September 30, 2003.

      The results of these calculations are as follows:

     
Implied Transaction Value per Share as a Multiple of:
   
LTM EPS from continuing operations
  17.5x
Estimated 2003 EPS-I/B/E/S median
  16.9
Estimated 2004 EPS-I/B/E/S median
  15.3
Reported book value per share
  2.56
Tangible book value per share
  2.93

      Exchange Ratio Analysis. Lazard reviewed the ratio of the closing price of Bank One common stock divided by the closing price of JPMorgan Chase common stock on January 13, 2004, the last day of trading before the date of Lazard’s opinion, referred to as the current

58


 

market, and the ratio of average closing prices of Bank One common stock divided by average closing prices of JPMorgan Chase computed over various periods ended January 13, 2004. Lazard then calculated (i) the fully diluted ownership of Bank One stockholders in the combined company implied by these ratios, and (ii) the premium implied by these ratios over the various periods relative to the 1.147x exchange ratio implied by the current market.

      The analysis indicated a range of exchange ratios from 0.947x to 1.292x over the various periods compared to the 1.320x exchange ratio in the merger, and a range of pro forma ownership of Bank One’s stockholders in the combined company of 34.0% to 41.4% compared to 42.2% in the merger, as indicated in the following table:

                         
Implied Bank One Implied
Implied Fully Diluted Premium to
Exchange Ratio Ownership Bank One



As of January 13, 2004
  (current market)
    1.147 x     38.6 %      
Exchange Ratio in the merger of 1.320x
    1.320 x     42.2 %     15.1 %
 
Period:
                       
5 day average
    1.163 x     38.9 %     1.4 %
One-month average
    1.221       40.1       6.5  
Three-month average
    1.208       39.9       5.4  
Six-month average
    1.172       39.1       2.2  
One-year average
    1.237       40.4       7.9  
Two-year average
    1.292       41.4       12.7  
Three-year average
    1.108       37.7       (3.4 )
Five-year average
    0.947       34.0       (17.4 )

      Lazard also noted that average exchange ratios for the various periods represented a range of premiums/(discounts) of approximately (17.4)% to 12.7% compared to the 1.147x exchange ratio implied by the current market.

      Contribution Analysis. Lazard analyzed the relative contributions of Bank One and JPMorgan Chase to the combined company of (i) estimated 2003 and 2004 net income based on generally accepted accounting principles and on a cash earnings basis and (ii) total assets, risk-weighted assets, loans, deposits, common stockholders’ equity, tangible common stockholders’ equity and Tier 1 capital (which includes common equity, certain qualifying cumulative and noncumulative perpetual preferred stock and related surplus, and minority interests in equity accounts of consolidated subsidiaries) as of September 30, 2003. Estimated GAAP and cash net income for 2003 and 2004 for Bank One and JPMorgan Chase was based on median I/B/E/S estimates as of January 13, 2004. Cash earnings were determined by adding amortization of intangibles to estimated earnings.

      Lazard then computed, for each of these items (i) the relative contributions of Bank One and JPMorgan Chase to the combined company, (ii) the resulting implied exchange ratios and (iii) the premium/ (discount) implied by the resulting exchange ratios relative to the 1.147x exchange ratio implied by the current market.

      The analysis indicated a range of contribution percentages from 26.8% to 37.5% as compared to the pro forma ownership resulting from the 1.320x exchange ratio of 42.2% in the

59


 

merger and a range of implied exchange ratios of 0.677x to 1.097x as compared to the 1.320x exchange ratio in the merger, as set forth in the following table:
                                   
Implied

Bank One JPMorgan Exchange Premium/ (Discount)
% Chase % Ratio to Bank One




Income Statement
                               
GAAP (I/ B/ E/ S)
                               
 
Estimated 2003
    34.6 %     65.4 %     0.973 x     (15.1 )%
 
Estimated 2004
    36.7       63.3       1.060       (7.5 )
Cash Earnings (I/ B/ E/ S)
                               
 
Estimated 2003
    34.6 %     65.4 %     0.972 x     (15.3 )%
 
Estimated 2004
    36.6       63.4       1.057       (7.8 )
Balance Sheet (as of September 30, 2003)
                               
Total Assets
    26.8 %     73.2 %     0.677 x     (41.0 )%
Risk-Weighted Assets
    33.1       66.9       0.912       (20.4 )
Loans
    37.5       62.5       1.097       (4.3 )
Deposits
    34.3       65.7       0.958       (16.4 )
Common Stockholders’ Equity
    33.3       66.7       0.918       (20.0 )
Tangible Common Stockholders’ Equity
    36.3       63.7       1.044       (8.9 )
Tier 1 Capital
    35.8       64.2       1.023       (10.8 )
Ownership at 1.320x exchange ratio
    42.2 %     57.8 %     1.320 x     15.1 %

      Lazard also noted that the exchange ratios implied by the contribution analysis represented a range of discounts of approximately 4.3% to 41.0% compared to the 1.147x exchange ratio implied by the current market.

60


 

      Precedent Transaction Analysis. Lazard reviewed nine stock-for-stock merger transactions since 1995 involving companies in the financial services industry. We refer to those transactions as the “group 1 transactions.” Lazard calculated the premium implied by the exchange ratio in each of the group 1 transactions to the closing stock price for the parties in the group 1 transactions on the day prior to the announcement of the transaction and calculated the resulting ownership percentages of the constituent stockholders in the combined company. Lazard then compared the results of this analysis to corresponding data for the merger. This indicated a range of premiums in the group 1 transactions of approximately 0% to 16%, as compared to the implied premium for Bank One’s common stock of 15.1% based on the 1.320x exchange ratio in the merger, as indicated in the following table:

                                                 
1-Day Board Holding
Announcement Premium Ownership Composition Chairman CEO Company
Date (%) (%) (%) Position Position Name HQ City








 
JPMorgan Chase/ Bank One
    1/14/04       15       58/42       50/50     JPMorgan Chase   JPMorgan Chase(1)   JPMorgan Chase   JPMorgan Chase(2)
Travelers Property Casualty Corp. / The St. Paul Companies, Inc.
    11/17/03       1       66/34       52/48     Travelers   St. Paul   St. Paul Travelers   St. Paul
 
First Union Corporation / Wachovia Corporation
    4/15/01       7       73/27       50/50     Wachovia   First Union   Wachovia   First Union
 
Fleet Financial Group, Inc./ BankBoston Corporation
    3/14/99       16       62/38       55/45     Fleet   Fleet(3)   FleetBoston Financial   Same
 
Norwest Corporation/ Wells Fargo & Company
    6/8/98       9       47/53       50/50     Wells Fargo   Norwest   Wells Fargo   Wells Fargo
 
NationsBank Corporation / BankAmerica Corporation
    4/13/98       0       54/46       55/45     NationsBank   NationsBank   Bank of America   NationsBank
 
Banc One Corporation / First Chicago NBD Corporation
    4/13/98       6       60/40       50/50     First Chicago   Banc One   Bank One   First Chicago
 
Travelers Group Inc. / Citicorp
    4/6/98       8       50/50       50/50     Co-Chairmen   Co-CEOs   Citigroup   Same
 
Dean Witter, Discover & Co. / Morgan Stanley Group Inc.
    2/5/97       11       55/45       50/50     Dean Witter   Dean Witter   Morgan Stanley
Dean Witter
  Same
 
Chemical Banking Corporation / The Chase Manhattan Corporation
    8/28/95       7       58/42       57/43     Chemical   Chemical   Chase Manhattan   Same


  1. Chief Executive Officer succession commitment provides for change of Chief Executive Officer in 2006.
 
  2. Retail financial services business, which includes consumer banking, small business, middle market and consumer lending will be headquartered in Chicago.
 
  3. Chief Executive Officer succession commitment for BankBoston executive.

     As indicated in the table above, Lazard also reviewed the group 1 transactions to determine the composition of the board of directors of the combined company, the affiliation of the chairman and the chief executive officer of the combined company, the name of the combined company and the headquarters of the combined company.

61


 

      Lazard also reviewed publicly available financial information for the following fourteen bank merger and acquisition transactions announced since 1995 which had an announced transaction value greater than $10 billion: Bank of America Corporation/ FleetBoston Financial Corporation, First Union Corporation/ Wachovia Corporation, Firstar Corporation/ U.S. Bancorp, The Chase Manhattan Corporation/ J.P. Morgan & Co. Incorporated, Firstar Corporation/ Mercantile Bancorporation Inc., Fleet Financial Group, Inc./ BankBoston Corporation, Norwest Corporation/ Wells Fargo & Company, NationsBank Corporation/ BankAmerica Corporation, Banc One Corporation/ First Chicago NBD Corporation, Travelers Group Inc./ Citicorp, First Union Corporation/ CoreStates Financial Corp, NationsBank Corporation/ Barnett Banks, Inc., Wells Fargo & Company/ First Interstate Bancorp, and Chemical Banking Corporation/ The Chase Manhattan Corporation. Lazard calculated and compared the following multiples and premiums with respect to the fourteen transactions and the Bank One/ JPMorgan Chase merger:

                         
Bank Range for Median for
One/JPMorgan Selected Selected
Chase Merger Transactions Transactions



Premium of implied transaction value to closing stock price one day prior to announcement
    15%       0%-43%       12%  
Premium of implied transaction value to closing stock price one month prior to announcement
    16%       3%-52%       26%  
Multiple of implied transaction value to last twelve-months (“LTM”) EPS
    17.5x       11.9x-32.5x       22.1x  
Multiple of implied transaction value to reported book value per share
    2.56x       1.33x-5.39x       3.13x  
Multiple of implied transaction value to tangible book value per share
    2.93x       1.52x-8.22x       4.14x  

      Comparable Companies Analysis. Lazard compared trading and operating data of Bank One, JPMorgan Chase and the following publicly traded companies, organized by business focus:

         
Retail Focus: Wholesale Focus: Monoline Card:



Bank of America
  Citigroup   MBNA
Wells Fargo
  Bank of America   Capital One
Wachovia
       
U.S. Bancorp
       
FleetBoston
       
Fifth Third
       
BB&T
       
National City
       
SunTrust
       
PNC Financial
       
KeyCorp
       

62


 

      These companies were selected for comparison purposes through a review of publicly traded financial institutions with similar operating characteristics and size. In general, financial data used was as of September 30, 2003 and market data was as of January 13, 2004. Projected earnings per share and long term growth rates were based on median I/ B/ E/ S estimates as of January 13, 2004.

                                           
Retail Wholesale Monoline
Bank JPMorgan Focus Focus Card
One Chase Medians Medians Medians





Multiple of stock price to(1):
                                       
 
Estimated 2003 GAAP EPS
    14.7 x     12.5 x     13.7 x     12.8 x     14.0 x
 
Estimated 2004 GAAP EPS
    13.3       12.4       12.7       12.0       12.4  
 
Reported book value per share
    2.23       1.80       2.18       2.52       2.95  
 
Tangible book value per share
    2.54       2.30       3.17       3.72       3.75  
Current dividend yield
    2.24 %     3.50 %     3.49 %     3.45 %     0.85 %
Long term growth rate
    10.0       10.0       10.0       11.0       14.3  
Last twelve months profitability(2):
                                       
 
Return on assets
    1.21 %     0.74 %     1.56 %     1.40 %     3.44 %
 
Return on equity
    15.35       13.08       16.38       18.97       23.37  
 
Net interest margin
    3.50       2.11       3.80       3.81       8.98  
 
Efficiency ratio
    56.8       65.5       55.6       54.1       39.2  
 
Ratio of non-interest income to net revenues
    49.4       62.2       43.6       45.7       35.5  
Asset quality:
                                       
 
Ratio of non-performing assets to loans and real estate owned
    2.2 %     1.7 %     1.2 %     1.9 %      
 
Ratio of reserves to loans
    3.1       2.0       1.7       2.2       5.7  
 
Ratio of reserves to non-performing loans
    147.8       128.2       155.0       131.4        
Capital Adequacy:
                                       
 
Tier 1 ratio
    9.8 %     8.7 %     8.3 %     8.9 %     15.7 %
 
Leverage ratio
    8.2       5.4       7.2       5.9       16.5  

(1)  FleetBoston excluded from trading statistics.
 
(2)  Excludes non-recurring items, including merger and restructuring charges.

      Lazard also reviewed the history of the reported trading prices of Bank One’s common stock and JPMorgan Chase’s common stock and the relationship between the movements in the prices of Bank One’s common stock and JPMorgan Chase’s common stock, respectively, to movements in indices composed of each of the three peer group stocks. The results of the one-year and three-year indexed comparisons are as follows.

                 
Beginning Index Value Ending Index Value
January 13, 2003 January 13, 2004


Bank One
    100       119  
JPMorgan Chase
    100       149  
Retail Focus
    100       118  
Wholesale Focus
    100       129  
Monoline Card
    100       140  

63


 

                 
Beginning Index Value Ending Index Value
January 13, 2001 January 13, 2004


Bank One
    100       125  
JPMorgan Chase
    100       83  
Retail Focus
    100       139  
Wholesale Focus
    100       121  
Monoline Card
    100       105  

      Lazard then estimated reference ranges based on the median of certain trading multiples of the companies listed above (other than the monoline card companies) and used such reference ranges to calculate ranges of implied values per share of Bank One common stock. The results of this analysis are set forth below.

         
Estimated
Reference Implied Value per Share
Range of Bank One


P/ E, based on estimated 2003 GAAP EPS (I/ B/ E/ S)
  14.0x - 16.0x   $43 - $49
P/ E, based on estimated 2004 GAAP EPS (I/ B/ E/ S)
  12.5  - 14.0    42 -  47
Price per share/reported book value per share
   2.0  -  3.0    40 -  60

      Dividend Discount Analysis. Lazard performed a dividend discount analysis to generate reference ranges for the implied present value per share of Bank One and JPMorgan Chase common stock assuming that each continued to operate as a stand-alone company. These ranges were calculated using median I/ B/ E/ S EPS estimates for 2004 and were determined in each case by calculating a “present value” of the estimated future dividends of Bank One and JPMorgan Chase, respectively, through 2009, plus a “present value” of the estimated “terminal value” of the common stock of Bank One and JPMorgan Chase, respectively, as of the end of calendar year 2009. “Terminal value” refers to the value of a particular asset at a specified future time. “Present value” refers to the current value of future cash flows or amounts and is obtained by discounting such future cash flows or amounts by an interest rate that takes into account risk, the opportunity cost of capital, expected returns and other appropriate factors.

      Lazard first estimated alternative terminal value ranges for Bank One and JPMorgan Chase common stock at the end of 2009 using (i) a long-term EPS growth rate of 10% for both Bank One and JPMorgan Chase and (ii) a range of terminal value multiples of 11.0x to 13.0x in the case of Bank One, and 10.0x to 12.0x in the case of JPMorgan Chase. Lazard assumed a rate of total asset growth of 5% per year for each of Bank One and JPMorgan Chase and a ratio of tangible common equity to tangible assets of 7.0% and 4.5%, respectively.

      The estimated future dividends and terminal values resulting from the calculations described above were discounted to present values using discount rates of 10.0%, 11.0% and 12.0% in the case of Bank One, and 11.0%, 12.0% and 13.0% in the case of JPMorgan Chase. Lazard viewed these ranges as appropriate for companies with Bank One’s and JPMorgan Chase’s respective risk characteristics.

      The results of this analysis are set forth in the following tables:

                                                             
Bank One JPMorgan Chase


Discount Terminal Value Multiple Discount Terminal Value Multiple
Rate 11.0x 12.0x 13.0x Rate 10.0x 11.0x 12.0x








  10%     $ 48.08     $ 51.21     $ 54.33       11%     $ 40.47     $ 43.30     $ 46.11  
  11%       46.25       49.26       52.24       12%       38.93       41.68       44.37  
  12%       44.51       47.39       50.26       13%       37.44       40.11       42.71  

      Lazard also calculated reference ranges of implied per share values for Bank One and JPMorgan Chase common stock assuming (i) a discount rate of 11.0% for Bank One and 12.0% for JPMorgan Chase, (ii) a range of EPS growth rates of 7.0% to 10.0% for each of Bank One and JPMorgan Chase, and (iii) a range of terminal value multiples of 11.0x to 13.0x in the case

64


 

of Bank One, and 10.0x to 12.0x in the case of JPMorgan Chase. The results of this analysis are set forth in the following tables:
                                                             
Bank One JPMorgan Chase


EPS Terminal Value Multiple EPS Terminal Value Multiple
Growth Rate 11.0x 12.0x 13.0x Growth Rate 10.0x 11.0x 12.0x








   7%     $ 42.31     $ 45.00     $ 47.69       7%     $ 35.53     $ 38.03     $ 40.52  
   8%       43.59       46.38       49.18       8%       36.63       39.23       41.78  
   9%       44.90       47.80       50.70       9%       37.77       40.45       43.06  
  10%       46.25       49.26       52.24       10%       38.93       41.68       44.37  

      Pro Forma Merger Analysis. In order to evaluate the estimated ongoing impact of the merger, Lazard analyzed the potential pro forma effect of the merger on Bank One’s and JPMorgan Chase’s estimated earnings per share for calendar years 2004 through 2006 and estimated cash earnings per share for calendar years 2004 through 2006, using median I/ B/ E/ S EPS estimates for Bank One and JPMorgan Chase, and applying the following assumptions:

  •  June 30, 2004 closing of the merger;
 
  •  2005 and 2006 EPS estimates based on median I/ B/ E/ S EPS long-term growth rates of 10% for Bank One and JPMorgan Chase;
 
  •  total cost synergies of $2.2 billion (16.5% phased-in in 2004, 65.0% in 2005 and 85.0% in 2006);
 
  •  amortization of core deposit and purchased credit card receivables intangible using the usage method over 10 years; and
 
  •  common stock repurchases of $3.5 billion per year at a price per share of 12.0x forward earnings per share (2% pre-tax cost of funding).

      Based on the 1.320x exchange ratio, this analysis indicated the following accretion/(dilution) to Bank One’s and JPMorgan Chase’s estimated earnings per share:

                           
2004 2005 2006



Impact to Bank One:
                       
 
Accretion — GAAP
    16.8 %     20.1 %     25.5 %
 
Accretion — Cash
    21.4       26.3       30.8  
Impact to JPMorgan Chase:
                       
 
Accretion/(Dilution) — GAAP
    (5.8 %)     (3.1 %)     1.3 %
 
Accretion/(Dilution) — Cash
    (2.4 )     1.7       5.3  

      Although not part of the analyses presented by Lazard to the Bank One board, for further analyses prepared by JPMorgan Chase showing the effect on earnings per JPMorgan Chase share accretion/dilution assuming different levels of share buybacks and/or reinvestment of excess capital, see pages 39 and 40.

      Lazard also calculated the accretion in dividends per share to Bank One stockholders based on JPMorgan Chase’s current dividend per share of $1.36 and the 1.320x exchange ratio in the merger as follows:

                         
Current Pro Forma % Change



Bank One
  $ 1.00     $ 1.795       79.5 %
JPMorgan Chase
    1.36              

      General. Bank One has agreed to pay Lazard for its investment banking services in connection with the merger a fee of $20 million, a substantial portion of which is contingent, and payable, upon closing of the merger. Bank One also has agreed to reimburse Lazard for its out-

65


 

of-pocket expenses, including reasonable fees and expenses of legal counsel and any other advisor retained by Lazard, and to indemnify Lazard and its members, employees, agents, affiliates and controlling persons, if any, against liabilities, including liabilities under the federal securities laws, arising out of its engagement. As described in the fairness opinion to the Bank One board of directors, Lazard in the past has provided investment banking and financial advisory services to Bank One and an affiliate of JPMorgan Chase, for which services Lazard has received customary fees. Lazard received no such fees from either Bank One (excluding the fee in connection with the merger as described above) or JPMorgan Chase or their respective affiliates within the last two years.

      Lazard provides a full range of financial advisory and other services and, in the course of its business, may from time to time effect transactions and hold securities, including derivative securities, of Bank One and JPMorgan Chase for its own account and for the account of clients and customers, and, accordingly, may hold a long or short position in such securities, and may provide advisory and other services in the future.

      The full text of the written opinion of Lazard, dated January 14, 2004, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Lazard in connection with the opinion, is attached to this document as Annex E and is incorporated in this document by reference. Holders of Bank One common stock are urged to, and should, read this opinion carefully and in its entirety. Lazard provided its opinion for the information and assistance of the Bank One board of directors in connection with its consideration of the transaction contemplated by the merger agreement. The Lazard opinion is not a recommendation as to how any holder of Bank One common stock should vote with respect to the merger or any other matter. The opinion of Lazard will not reflect any developments that may occur or may have occurred after the date of its opinion and prior to the completion of the merger. Lazard has no obligation to update, revise or reaffirm its opinion. Bank One does not currently expect that it will request an updated opinion from Lazard.

Interests of Directors and Executive Officers in the Merger

      Interests of JPMorgan Chase Directors and Executive Officers. In considering the recommendation of the board of directors of JPMorgan Chase to vote for the proposal to adopt the merger agreement, stockholders of JPMorgan Chase should be aware that some members of the JPMorgan Chase board of directors and of JPMorgan Chase’s executive management have agreements or arrangements that provide them with interests in the merger that may differ from those of JPMorgan Chase’s stockholders. The JPMorgan Chase board of directors was aware of these agreements and arrangements during its deliberations on the merits of the merger and in making its decision to recommend to the JPMorgan Chase stockholders that they vote to adopt the merger agreement.

      JPMorgan Chase Management Positions. The merger agreement provides that Mr. Harrison, JPMorgan Chase’s current Chairman and Chief Executive Officer, will remain Chairman and Chief Executive Officer of JPMorgan Chase until the second anniversary of the completion of the merger, at which time (or any earlier time that Mr. Harrison ceases to serve as Chief Executive Officer) Mr. Dimon will succeed him as Chief Executive Officer, and Mr. Harrison will thereafter continue to serve as Chairman. The merger agreement provides for the JPMorgan Chase by-laws to be amended upon consummation of the merger to reflect these arrangements and to provide that a 75% vote of the entire board will be required to alter these arrangements prior to the time that Mr. Dimon succeeds Mr. Harrison. In addition, other members of JPMorgan Chase management will serve in senior management positions at the combined company. For further information, see “— Board of Directors and Management After the Merger” below.

      Harrison Severance Arrangements. JPMorgan Chase maintains a severance policy that provides for severance in case of involuntary termination, except for cause, under which severance

66


 

paid to named executive officers would be in an amount equal to two times (three times in the case of Mr. Harrison) current base salary, plus two times (three times in the case of Mr. Harrison) such officer’s three-year average annual cash performance bonus. In connection with the merger, the parties have agreed that the policy will be amended, effective upon completion of the merger, so that Mr. Harrison’s severance will be the greater of (a) $22.2 million or (b) the amount described in the preceding sentence if he is terminated involuntarily without cause prior to the second anniversary of the completion of the merger. Under the policy as currently in effect, Mr. Harrison could receive severance payments of approximately $18.7 million if his employment were terminated involuntarily at this time. The amendment to the policy is intended to provide consistency with Mr. Dimon’s employment agreement described below.

      JPMorgan Chase Outside Directors. Under JPMorgan Chase’s deferred compensation and pension liquidation plans for non-employee directors, payments of cash and/or stock compensation that otherwise had been deferred would begin following such time as the director ceases to serve. In accordance with these plans, payments will be made to those directors of JPMorgan Chase who do not become directors of JPMorgan Chase after the merger in accordance with the director’s election under the plans, and may be made in a lump sum or in periodic payments over a specified number of years.

      Interests of Bank One Directors and Executive Officers. In considering the recommendation of the board of directors of Bank One to vote for the proposal to adopt the merger agreement, stockholders of Bank One should be aware that members of the Bank One board of directors and members of Bank One’s management team have agreements or arrangements that provide them with interests in the merger that may differ from those of Bank One stockholders. The Bank One board of directors was aware of these agreements and arrangements during its deliberations on the merits of the merger and in making its decision to recommend to the Bank One stockholders that they vote to adopt the merger agreement.

      Bank One Management Positions. The merger agreement provides that Mr. Dimon, Bank One’s current Chairman and Chief Executive Officer, will become President and Chief Operating Officer of JPMorgan Chase upon the completion of the merger, and on its second anniversary (or at any earlier time that Mr. Harrison ceases to serve as Chief Executive Officer), Mr. Dimon will succeed Mr. Harrison as Chief Executive Officer. In addition, other members of Bank One management will serve in senior management positions at the combined company. For further information, see “— Board of Directors and Management After the Merger” below.

      Dimon Employment Agreement. JPMorgan Chase entered into an employment agreement with Mr. Dimon dated as of January 14, 2004, for a term of employment commencing upon the completion of the merger. If the merger is completed, this employment agreement will supersede the employment agreement Mr. Dimon executed with Bank One in March of 2000 that would have entitled Mr. Dimon to receive while employed by Bank One, an annual base salary of $1 million, a target annual bonus of 250% of base salary and annual equity awards with a value of at least $7 million, and upon a qualifying termination of employment following a change of control, (a) a payment of approximately $20.8 million consisting of (i) a pro-rata bonus (assuming the merger is completed on June 30, 2004) based upon his target bonus for 2004, and (ii) 2.5 times the sum of his base salary and the average annual bonus earned by him in the prior three years; and, in addition, (b) three years of welfare benefits continuation. The merger would constitute a change of control under Mr. Dimon’s employment agreement with Bank One. The term of Mr. Dimon’s new employment agreement with JPMorgan Chase will end on the first annual meeting of the stockholders of JPMorgan Chase that occurs following the second anniversary of the completion of the merger. Mr. Dimon will serve as JPMorgan Chase’s President and Chief Operating Officer from the completion of the merger until the earlier of the second anniversary of the completion of the merger and the date Mr. Harrison ceases to be JPMorgan Chase’s Chief Executive Officer. After that date, and for the remainder of the term of employment, Mr. Dimon will serve as JPMorgan Chase’s President and Chief Executive Officer.

67


 

      While serving as President and Chief Operating Officer, Mr. Dimon will receive an annual base salary, annual bonus and equity-based awards no less than ninety percent (90%) of the value of the annual base salary, annual bonus and equity-based awards provided to Mr. Harrison as determined at the discretion of the JPMorgan Chase board (but in no event will Mr. Dimon’s annual base salary be less than $1 million). As JPMorgan Chase’s President and Chief Executive Officer, Mr. Dimon will be entitled to an annual base salary, annual bonus and equity-based awards as determined by JPMorgan Chase’s board of directors, provided that the annual base salary will be no less than his annual base salary as the President and Chief Operating Officer.

      If Mr. Dimon’s employment is terminated by JPMorgan Chase without cause (as defined in the agreement) or Mr. Dimon resigns with good reason (as defined below), Mr. Dimon will be entitled, subject to execution of a release in favor of JPMorgan Chase, to receive:

  •  The greater of (i) $20 million and (ii) three times 90% of the sum of Mr. Harrison’s annual base salary and average cash bonus for the three years preceding the date of termination;
 
  •  Accelerated vesting of equity-based awards and five years (or full term, if shorter) to exercise vested options; and
 
  •  Continued medical and dental benefits for three years and eligibility to participate in JPMorgan Chase’s post-termination welfare benefit programs.

      For purposes of the employment agreement, “good reason” means (i) the failure of JPMorgan Chase to appoint Mr. Dimon to the position of Chief Executive Officer upon the earlier of the second anniversary of the completion of the merger or the date Mr. Harrison ceases to be JPMorgan Chase’s Chief Executive Officer, (ii) the assignment to Mr. Dimon of duties inconsistent with, or any diminution of, the position, authority, duties or responsibilities called for by the employment agreement, (iii) the failure to pay Mr. Dimon his compensation under the agreement, (iv) Mr. Dimon’s relocation outside of New York, New York, (v) failure of JPMorgan Chase to require the assumption of the employment agreement by a successor or (vi) the failure to elect or reelect Mr. Dimon to JPMorgan Chase’s board of directors.

      If Mr. Dimon’s employment is terminated due to his death or disability, Mr. Dimon (or his estate) will be entitled to receive a pro-rata bonus for the year of termination, accelerated vesting of equity-based awards and five years (or full term, if shorter) to exercise vested options and continued medical and dental benefits (in the case of disability, until age 65 and, upon his death, to his eligible dependents for three years) and eligibility to participate in JPMorgan Chase’s post-termination welfare benefit programs.

      Under the employment agreement, Mr. Dimon is restricted from revealing confidential information of JPMorgan Chase and, following Mr. Dimon’s termination of employment for any reason, neither JPMorgan Chase nor Mr. Dimon may disparage the other party. In addition, for a period of one year following Mr. Dimon’s termination of employment for any reason, Mr. Dimon may not solicit for employment any employees of JPMorgan Chase. In the event that any payments to Mr. Dimon are subject to an excise tax under Section 4999 of the Internal Revenue Code, Mr. Dimon will be entitled to an additional payment so that he remains in the same after-tax economic position he would have been in had the excise tax not been imposed.

      Bank One Key Executive Compensation and Severance Arrangements with JPMorgan Chase. In consideration for waiving change of control protections under Bank One’s Key Executive Change of Control Plan (the material terms of which are described below), it is currently contemplated that, effective upon completion of the merger (or with respect to two executive officers, seven months following the merger) executive officers of Bank One selected by Bank One and JPMorgan Chase (other than Mr. Dimon) will be provided a restricted stock unit award, guaranteed levels of compensation through calendar year 2005 (provided the executive officer remains employed) and severance protection for three years following the merger. The restricted

68


 

stock unit awards will generally have a value equal to 1.5 times the sum of the executive officer’s 2003 base salary and 2003 total annual incentive award consisting of cash and restricted stock units. The restricted stock units will vest on the second anniversary of the completion of the merger, but will become immediately vested if the executive officer’s employment is terminated without cause or if the executive officer resigns with good reason. If the executive officer is terminated without cause or resigns with good reason prior to the third anniversary of the completion of the merger, the executive officer, subject to executing a release in favor of JPMorgan Chase, will be entitled to:

  •  Two times the sum of the executive officer’s 2005 guaranteed base salary and cash bonus;
 
  •  Accelerated vesting of all equity incentive awards and at least three years (or full term, if shorter) to exercise vested options granted prior to the merger; and
 
  •  All other benefits provided to similarly situated employees under the JPMorgan Chase Executive Severance Policy.

      For purposes of these arrangements, “good reason” means (i) the failure of JPMorgan Chase to provide the executive officer the guaranteed compensation described above or (ii) the relocation of the executive officer’s principal place of employment following the merger.

      If the executive officer’s employment is terminated due to death or disability, the executive officer (or his estate) will be entitled to accelerated vesting of all equity incentive awards and at least three years (or full term, if shorter) to exercise vested options granted prior to the merger. If the executive officer resigns without good reason, the outstanding options granted prior to the merger will become fully vested and the executive officer will be provided with at least three years (or full term, if shorter) to exercise such options. In the event that any payments to an executive officer are subject to an excise tax under Section 4999 of the Internal Revenue Code, the executive officer will be entitled to an additional payment so that he or she remains in the same after-tax economic position he or she would have been in had the excise tax not been imposed, if the net after-tax benefit of the additional payment to the executive officer exceeds $100,000.

      Bank One Key Executive Change of Control Plan. Bank One maintains the Key Executive Change of Control Plan in which each of the Bank One executive officers (other than Mr. Dimon) is eligible to participate. Under the terms of the plan, upon a termination of a participant’s employment by the employer other than for cause or by the executive for “good reason” (as defined in the plan) within two years after a change of control of Bank One or by the executive for any reason during the 60-day period after a change of control of Bank One, the participant would be entitled to a pro-rata annual bonus for the year of termination plus a severance payment of 2.5 times the participant’s base salary and annual bonus. In addition, the executive would be entitled to continued medical and life insurance coverage for 30 months after the date of termination; the value of 30 months of additional accruals under Bank One’s tax-qualified and supplemental defined benefit pension plans; full vesting of all options and restricted stock awards and a minimum of three years to exercise options following termination of employment, subject to the original term of the option; and $50,000 for outplacement. The merger would constitute a change of control under this plan. In the event that any payments to a participant are subject to the excise tax under Section 4999 of the Code, the participant would be entitled to an additional payment such that the participant will be placed in the same after-tax economic position as if no excise tax had been imposed, if the net after-tax benefit of the additional payment to the executive officer exceeds $100,000.

      Bank One Personal Pension Account Plan and Supplemental Plan. Pursuant to the terms of the Bank One Personal Pension Account Plan and the supplemental plan thereto, the accrued benefits of plan participants will vest upon a change of control of Bank One. The merger would constitute a change of control for purposes of vesting under this plan.

69


 

      Bank One Employee Stock Options and Restricted Shares. Depending on the terms of the award agreements pursuant to which options and other stock-based awards held by Bank One executive officers were granted, each such option or other stock-based award will become vested as of completion of the merger or upon qualifying terminations of employment or services, as applicable, within a specified period following completion of the merger. Assuming that no restorative options are granted in 2004, the merger is completed on June 30, 2004 and JPMorgan Chase terminates the employment of each executive officer of Bank One immediately following completion of the merger, the number of unvested options and other stock-based awards granted by Bank One that would vest in connection with the merger is approximately 5,789,588 and 869,090, respectively.

      For additional information about options and other stock-based awards held by named Bank One directors and executives, see “Other Matters to be Considered at the Bank One Annual Meeting” beginning on page 147 of this document and for additional information on the effect of the merger on stock options and other stock-based awards, see “— Treatment of Stock Options and Other Equity-Based Awards” below.

      Bank One Outside Directors. Under Bank One’s deferred compensation plan for non-employee directors, payments of cash and/or stock compensation that otherwise had been deferred would begin following such time as the director ceases to serve. In accordance with this plan, payments will be made to those directors of Bank One who do not become directors of JPMorgan Chase after the merger in accordance with the director’s election under the plan, and may be made in a lump sum or in periodic payments over a specified number of years.

      Indemnification and Insurance. The merger agreement provides that, upon completion of the merger, JPMorgan Chase will, to the fullest extent permitted by law, indemnify and hold harmless, and provide advancement of expenses to, all past and present officers, directors and employees of Bank One and its subsidiaries to the same extent those persons were entitled to indemnification or advancement of expenses under Bank One’s certificate of incorporation, by-laws and indemnification agreements.

      The merger agreement also provides that JPMorgan Chase will maintain for a period of six years after completion of the merger the current directors’ and officers’ liability insurance policies maintained by Bank One, or policies with a substantially comparable insurer of at least the same coverage and amounts containing terms and conditions that are no less advantageous to the insured, with respect to claims arising from facts or events that occurred on or before the completion of the merger, although JPMorgan Chase will not be required to make annual premium payments in excess of 250% of the annual premiums currently paid by Bank One for directors’ and officers’ liability insurance. After the merger, JPMorgan Chase may satisfy this requirement through self-insurance to the extent JPMorgan Chase does so for its officers and directors.

Board of Directors and Management After the Merger

      Board of Directors. The board of directors of JPMorgan Chase after the merger will have sixteen members, consisting of eight directors from JPMorgan Chase, including Mr. Harrison, and eight directors from Bank One, including Mr. Dimon. No directors other than Messrs Harrison and Dimon will be employees of JPMorgan Chase. Until Mr. Dimon succeeds Mr. Harrison as Chief Executive Officer of JPMorgan Chase, (i) the number of directors that comprises the full board of directors will be sixteen, and (ii) all vacancies on the board of directors created by the cessation of service of a director will be filled by a nominee proposed by the Governance Committee of the board of directors, which will be co-chaired by one Bank One director and one JPMorgan Chase director and will be comprised of an equal number of Bank One directors and JPMorgan Chase directors. The arrangements described above will be included in the amendments to the by-laws of JPMorgan Chase to become effective no later than

70


 

the completion of the merger that are described under “— Amendments to JPMorgan Chase By-laws” below.

      As of the date of this document, neither the board of directors of JPMorgan Chase nor the board of directors of Bank One has made a determination as to which directors (other than Messrs. Harrison and Dimon) will be appointed to the board of directors of JPMorgan Chase after the merger. Biographical information with respect to the nominees for director of Bank One, from whom the designees to the board of directors of JPMorgan Chase after the merger will be selected, is set forth under “Other Matters to be Considered at the Bank One Annual Meeting — Bank One Proposal 2: Election of Directors” beginning on page 147. Biographical information with respect to the current directors of JPMorgan Chase, from whom the JPMorgan Chase designees to the board of directors of JPMorgan Chase after the merger will be selected, is set forth under “Other Matters to be Considered at the JPMorgan Chase Annual Meeting — JPMorgan Chase Proposal 2: Election of Directors” beginning on page 116.

      Other Management. JPMorgan Chase’s senior management team after the merger will include an Office of the Chairman, comprised of Messrs. Harrison and Dimon; Donald H. Layton, Vice Chairman (Finance, Risk & Technology); and David A. Coulter, Vice Chairman (Investment Banking and Investment Management & Private Banking).

      Other senior executives who will serve on the combined company’s Executive Committee after the merger, and their areas of responsibility, include: Austin Adams, Technology; Linda Bammann, Risk — Deputy; Steven D. Black, Equities; James S. Boshart III, Middle Market and Investment Bank Integration; William Campbell, Card Chairman; David E. Donovan, Retail Branches; Ina R. Drew, Treasury; Dina Dublon, Finance; John J. Farrell, Human Resources; Walter A. Gubert, Europe, Middle East and Africa; Joan Guggenheimer, Legal; James B. Lee, Jr., Investment Banking; Jay Mandelbaum, Strategy; William H. McDavid, Legal; Heidi Miller, Treasury and Securities Services; Stephen J. Rotella, Mortgage; Charles W. Scharf, Retail Banking and Lending; Richard J. Srednicki, Card CEO; James E. Staley, Investment Management & Private Bank; Jeffrey C. Walker, Private Equity; Don M. Wilson III, Risk; and William T. Winters, Credit & Rates.

Material United States Federal Income Tax Consequences of the Merger

      General. The following discussion (including the opinions set forth herein) sets forth the material United States federal income tax consequences of the merger to U.S. holders (as defined below) of Bank One common stock. This discussion does not address the tax consequences to JPMorgan Chase stockholders because they are not exchanging stock in the merger. This discussion also does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction. This discussion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), the regulations of the U.S. Treasury Department and court and administrative rulings and decisions in effect on the date of this document. These laws may change, possibly retroactively, and any change could affect the continuing validity of this discussion.

      For purposes of this discussion, we use the term “U.S. holder” to mean:

  •  a citizen or resident of the United States;
 
  •  a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States or any of its political subdivisions;
 
  •  a trust if it (i) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (ii) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person; or

71


 

  •  an estate that is subject to United States federal income tax on its income regardless of its source.

      If a partnership holds Bank One common stock, the tax treatment of a partner will generally depend on the status of the partners and the activities of the partnership. If you are a partner of a partnership holding Bank One common stock, you should consult your tax advisors.

      This discussion only addresses Bank One stockholders that hold their shares of Bank One common stock as a capital asset within the meaning of section 1221 of the Code. Further, this discussion does not address all aspects of U.S. federal income taxation that may be relevant to a Bank One stockholder in light of such holder’s particular circumstances or that may be applicable if a holder is subject to special treatment under the United States federal income tax laws, including if a holder is:

  •  a financial institution;
 
  •  a tax-exempt organization;
 
  •  an S corporation or other pass-through entity;
 
  •  an insurance company;
 
  •  a mutual fund;
 
  •  a dealer in securities or foreign currencies;
 
  •  a trader in securities who elects the mark-to-market method of accounting for your securities;
 
  •  a Bank One stockholder subject to the alternative minimum tax provisions of the Code;
 
  •  a Bank One stockholder who received your Bank One common stock through the exercise of employee stock options or through a tax-qualified retirement plan;
 
  •  a person that has a functional currency other than the U.S. dollar;
 
  •  a holder of options granted under any Bank One benefit plan; or
 
  •  a Bank One stockholder who holds Bank One common stock as part of a hedge, straddle or a constructive sale or conversion transaction.

      The Merger. JPMorgan Chase and Bank One have structured the merger to qualify as a reorganization within the meaning of Section 368(a) of the Code. As described below, it is a condition to each party’s respective obligations to complete the merger that JPMorgan Chase and Bank One each receive a legal opinion that the merger will so qualify. In addition, based on representations contained in representation letters provided by JPMorgan Chase and Bank One and on customary factual assumptions, all of which must continue to be true and accurate in all material respects as of the effective time of the merger, and subject to the qualifications and limitations set forth under “— General”, it is the opinion of Simpson Thacher & Bartlett LLP, counsel to JPMorgan Chase, and Wachtell, Lipton, Rosen & Katz, counsel to Bank One, that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code and that the material United States federal income tax consequences of the merger are as follows:

  •  no gain or loss will be recognized by Bank One or JPMorgan Chase as a result of the merger;
 
  •  a Bank One stockholder will not recognize gain or loss on the exchange of Bank One common stock solely for JPMorgan Chase common stock, except with respect to any cash received instead of a fractional share of JPMorgan Chase;
 
  •  a Bank One stockholder’s aggregate tax basis in the JPMorgan Chase common stock received in the merger (including any fractional share interest deemed to be received and exchanged for cash) will equal the holder’s aggregate tax basis in the Bank One common stock surrendered; and

72


 

  •  a Bank One stockholder’s holding period for the JPMorgan Chase common stock received in the merger (including any fractional share interest deemed to be received and exchanged for cash) will include the holder’s holding period for the shares of Bank One common stock surrendered.

If a Bank One stockholder acquired different blocks of Bank One common stock at different times and at different prices, such holder’s tax basis and holding period in its JPMorgan Chase common stock may be determined with reference to each block of Bank One common stock.

      Cash Instead of Fractional Shares. A Bank One stockholder will generally recognize capital gain or loss on any cash received instead of a fractional share of JPMorgan Chase common stock equal to the difference between the amount of cash received and the tax basis allocated to such fractional share. Any capital gain or loss will constitute long-term capital gain or loss if the Bank One stockholder’s holding period in Bank One common stock surrendered in the merger is greater than one year as of the date of the merger.

      Closing Condition Tax Opinions. It is a condition to the closing of the merger that JPMorgan Chase and Bank One will receive opinions from Simpson Thacher & Bartlett LLP and Wachtell, Lipton, Rosen & Katz, respectively, dated as of the effective date of the merger, to the effect that the merger will qualify as a reorganization within the meaning of section 368(a) of the Code. These opinions will be based on updated representation letters provided by JPMorgan Chase and Bank One to be delivered at the time of closing, and on customary factual assumptions. Although the merger agreement allows us to waive this condition to closing, we currently do not anticipate doing so. If either of us does waive this condition and the tax consequences of the merger are materially different from those described in this document, we will inform you of this decision and ask you to vote on the merger taking this into consideration.

      Neither of these tax opinions will be binding on the Internal Revenue Service. JPMorgan Chase and Bank One have not and do not intend to seek any ruling from the Internal Revenue Service regarding any matters relating to the merger, and as a result, there can be no assurance that the Internal Revenue Service will not disagree with or challenge any of the conclusions described herein.

      Backup Withholding. If you are a non-corporate holder of Bank One common stock you may be subject to information reporting and backup withholding on any cash payments received instead of a fractional share interest in JPMorgan Chase common stock. You will not be subject to backup withholding, however, if you:

  •  furnish a correct taxpayer identification number and certify that you are not subject to backup withholding on the substitute Form W-9 or successor form included in the letter of transmittal to be delivered to you following the completion of the merger; or
 
  •  are otherwise exempt from backup withholding.

      Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against your United States federal income tax liability, provided you furnish the required information to the Internal Revenue Service.

      Reporting Requirements. If a Bank One stockholder receives JPMorgan Chase common stock as a result of the merger, such holder will be required to retain records pertaining to the merger and will be required to file with such holder’s United States federal income tax return for the year in which the merger takes place a statement setting forth facts relating to the merger.

      This discussion does not address tax consequences that may vary with, or are contingent on, individual circumstances. Moreover, it does not address any non-income tax or any foreign, state or local tax consequences of the merger. Tax matters are very complicated, and the tax consequences of the merger to you will depend upon the facts of your particular situation. Accordingly, we strongly urge you to consult with a tax advisor to determine the

73


 

particular federal, state, local or foreign income or other tax consequences to you of the merger.

Accounting Treatment

      The merger will be accounted for as a “purchase,” as that term is used under generally accepted accounting principles, for accounting and financial reporting purposes. Under purchase accounting, the assets and liabilities of Bank One as of the effective time of the merger will be recorded at their respective fair values and added to those of JPMorgan Chase. Any excess of the purchase price over the net fair value of Bank One’s assets and liabilities is recorded as goodwill. Financial statements of JPMorgan Chase issued after the merger will reflect these fair values and will not be restated retroactively to reflect the historical financial position or results of operations of Bank One. See “Unaudited Pro Forma Combined Financial Information” beginning on page 94.

Regulatory Approvals

      To complete the merger, we need to obtain approvals or consents from, or make filings with, a number of U.S. federal and state bank, antitrust, insurance and other regulatory authorities as well as regulatory authorities in various foreign jurisdictions. These approvals and filings are described below.

      Federal Reserve Board Approval. On February 9, 2004, we filed the required application with the Board of Governors of the Federal Reserve System requesting approval of the merger. Copies of the application were provided to the U.S. Department of Justice and the appropriate state regulatory agencies. The application describes the terms of the merger and the parties involved and provides other financial and managerial information. In evaluating the application, the Federal Reserve Board will consider the financial and managerial resources and prospects of the existing and combined institutions and the convenience and needs of the communities to be served by our insured depository institution subsidiaries, as well as our effectiveness in combatting money-laundering activities. Among other things, the Federal Reserve Board will also evaluate the capital adequacy of JPMorgan Chase after the merger.

      The Federal Reserve Board must deny an application if it determines that the transaction would result in a monopoly or be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize a given business activity in any part of the United States. The Federal Reserve Board must also deny an application if it determines that the transaction would substantially lessen competition or would tend to create a monopoly in any section of the country, or would in any other manner result in a restraint of trade, unless the Federal Reserve Board finds that the anti-competitive effects of the transaction are clearly outweighed by the probable effects of the transaction in providing benefits to the public.

      Under the Community Reinvestment Act, or CRA, the Federal Reserve Board must take into account the record of performance of each of us in meeting the credit needs of the entire community, including low and moderate income neighborhoods, served by our depository institution subsidiaries. As part of the review process in merger transactions, the Federal Reserve Board frequently receives protests from community groups and others. All of our insured depository institution subsidiaries required to have ratings under the CRA have received either an outstanding or satisfactory CRA rating in their most recent CRA examinations by their respective federal regulators. Applicable federal law provides for the publication of notice and public comment on the application filed by us with the Federal Reserve Board. Under current law, the merger may not be completed until the Federal Reserve Board has approved the merger and a period of 30 days, which may be reduced to 15 days by the Federal Reserve Board with the concurrence of the Attorney General of the United States, following the date of approval by the Federal Reserve Board, has expired.

74


 

      Our rights to acquire stock under the stock option agreements entered into in connection with the merger agreement are also subject to the prior approval of the Federal Reserve Board to the extent the exercise would result in either of us owning more than 5% of the outstanding shares of common stock of the other. In considering whether to approve the exercise of an option, the Federal Reserve Board will generally apply the same statutory criteria as it would apply to its consideration of approval of the merger.

      U.S. Antitrust Clearance. JPMorgan Chase’s acquisition of Bank One’s U.S. nonbanking business was subject to review by the Antitrust Division of the United States Department of Justice, which we refer to as the Antitrust Division, or the United States Federal Trade Commission, which we refer to as the FTC, to determine whether it complies with applicable antitrust law. Under the provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and its related rules, the merger cannot be completed until both JPMorgan Chase and Bank One file notification of the proposed transaction with the Antitrust Division and the FTC and the specified waiting periods have expired or been terminated. On February 6, 2004, JPMorgan Chase and Bank One filed their pre-merger notification and report forms pursuant to the Hart-Scott-Rodino Act and the waiting period expired on March 8, 2004 at 11:59 p.m.

      At any time before the merger is completed, the Antitrust Division or the FTC could take action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the merger or seeking divestiture of substantial assets of JPMorgan Chase or Bank One or their subsidiaries. Private parties also may seek to take legal action under the antitrust laws under some circumstances. Based upon an examination of information available relating to the businesses in which the companies are engaged, JPMorgan Chase and Bank One believe that the completion of the merger will not violate U.S. antitrust laws. However, we can give no assurance that a challenge to the merger on antitrust grounds will not be made, or, if such a challenge is made, that we will prevail.

      In addition, the merger may be reviewed by the state attorneys general in the various states in which JPMorgan Chase and Bank One operate. While we believe there are substantial arguments to the contrary, these authorities may claim that there is authority under the applicable state and federal antitrust laws and regulations, to investigate and/or disapprove the merger under the circumstances and based upon the review set forth in the particular state laws and regulations. There can be no assurance that one or more state attorneys general will not attempt to file an antitrust action to challenge the merger.

      Competition Approvals Abroad. The merger may require that we comply with notification requirements in a number of countries outside the United States. We are currently in the process of reviewing whether any such notifications will be required or advisable, and intend to make the appropriate regulatory filings if we determine that these filings are required or advisable. Based upon an examination to date of information available relating to the businesses in which the companies are engaged, we believe that the completion of the merger will not violate the laws of any other country. However, we can give no assurance that all required approvals will be obtained.

      The local procedural rules in these countries differ from country to country as do the legal tests against which mergers are reviewed to determine if the local competition authority can issue a decision clearing the transaction. Local authorities may have the power to block mergers which breach the substantive test set out in the local jurisdiction, and in some countries, JPMorgan Chase and Bank One may need to obtain approval of the merger prior to closing.

      In most cases, the applicable filings generally require the disclosure of financial and transaction information, which is then reviewed by the competition authority. In most reviews, the competition authority will contact other industry participants, such as customers, suppliers and competitors of the merging parties, to confirm that the information provided is correct and to canvass their opinions on the transaction.

75


 

      In reaching its decision, each competition authority will usually consider if the merger results in a market concentration which is likely to breach the test for acceptable mergers in its jurisdiction. In the majority of countries this test usually relates either to the creation of a dominant position or market power sufficient to operate against the proper functioning of the market.

      Other Approvals. In addition, the merger will require the approval of, or notification to, various state banking and other regulatory authorities, as well as various regulatory authorities in foreign jurisdictions where JPMorgan Chase or Bank One are engaged in business. The change in control of Bank One’s subsidiaries that act as insurance underwriters or agencies is subject to the receipt of necessary approvals from, or notice to, various U.S. state insurance regulatory authorities. Ownership changes regarding registered broker-dealers controlled by Bank One are subject to review by the various regulatory and self-regulatory organizations, including the Securities and Exchange Commission and the National Association of Securities Dealers. JPMorgan Chase and Bank One are in the process of filing the required notices and applications in these various jurisdictions or with these various organizations.

      The approval of an application means only that the regulatory criteria for approval have been satisfied or waived. It does not mean that the approving authority has determined that the consideration to be received by Bank One stockholders is fair. Regulatory approval does not constitute an endorsement or recommendation of the merger.

      While we believe that we will receive the requisite regulatory approvals for the merger, there can be no assurances regarding the timing of the approvals, our ability to obtain the approvals on satisfactory terms or the absence of litigation challenging such approvals. There can likewise be no assurance that U.S. or foreign regulatory authorities will not attempt to challenge the merger on antitrust grounds or for other reasons, or, if such a challenge is made, as to the result thereof. Our obligation to complete the merger is conditioned upon the receipt of all necessary consents, approvals and actions of governmental authorities (without imposition of any condition or restriction that would reasonably be expected to have a material adverse effect on the combined company) and the filing of all other notices with such authorities, which would reasonably be expected to have a material adverse effect on JPMorgan Chase after the merger if they were not received or filed. See “— The Merger Agreement — Conditions to Completion of the Merger” below.

Exchange of Bank One Stock Certificates

      Promptly after the merger is completed, if you are a Bank One stockholder, the combined company’s exchange agent will mail to you a letter of transmittal and instructions for use in surrendering your Bank One stock certificates in exchange for stock of JPMorgan Chase (and cash in lieu of any fractional shares of JPMorgan Chase common stock). When you deliver your Bank One stock certificates to the exchange agent along with a properly executed letter of transmittal and any other required documents, your stock certificates will be canceled.

      Bank One common stockholders will receive statements indicating book-entry ownership of JPMorgan Chase stock and may request stock certificates representing the number of full shares of JPMorgan Chase stock to which they are entitled under the merger agreement. Bank One common stockholders will receive a cash payment, without interest, instead of any fractional shares of JPMorgan Chase common stock that would have been otherwise issuable to them as a result of the merger. In accordance with the merger agreement, the amount of cash payable to a Bank One stockholder will be determined by multiplying the fractional number of shares that that stockholder would otherwise receive times the closing price per share of JPMorgan Chase common stock as reported by the New York Stock Exchange on the last trading day immediately preceding the completion of the merger.

76


 

      PLEASE DO NOT SUBMIT YOUR BANK ONE STOCK CERTIFICATES FOR EXCHANGE UNTIL YOU RECEIVE THE TRANSMITTAL INSTRUCTIONS AND LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.

      If you own Bank One common stock in book entry form or through a broker, bank or other holder of record, you will not need to obtain stock certificates to submit for exchange to the exchange agent.

      If you hold Bank One stock certificates, you are not entitled to receive any dividends or other distributions on JPMorgan Chase stock until the merger is completed and you have surrendered your Bank One stock certificates in exchange for JPMorgan Chase stock. If there is any dividend or other distribution on JPMorgan Chase stock with a record date occurring after the time that the merger is completed and a payment date prior to the date you surrender your Bank One stock certificates in exchange for JPMorgan Chase stock, you will receive the dividend or distribution, without interest, with respect to the whole shares of JPMorgan Chase stock issued to you promptly after you surrender your Bank One stock certificates and the JPMorgan Chase shares are issued in exchange. If there is any dividend or other distribution on JPMorgan Chase stock with a record date after the date on which the merger is completed and a payment date after the date you surrender your Bank One stock certificates in exchange for JPMorgan Chase stock, you will receive the dividend or distribution, without interest, with respect to the whole shares of JPMorgan Chase stock issued to you on that payment date.

      If your Bank One stock certificate has been lost, stolen or destroyed, you may receive shares of JPMorgan Chase common stock upon the making of an affidavit of that fact. JPMorgan Chase may require you to post a bond in a reasonable amount as an indemnity against any claim that may be made against JPMorgan Chase with respect to the lost, stolen or destroyed Bank One stock certificate.

      JPMorgan Chase will only issue stock (or cash instead of a fractional share) in a name other than the name in which a surrendered Bank One stock certificate is registered if you present the exchange agent with all documents required to show and effect the unrecorded transfer of ownership and show that you paid any applicable stock transfer taxes.

      There is no need for JPMorgan Chase stockholders to submit their JPMorgan Chase stock certificates to JPMorgan Chase, Bank One, the exchange agent or to any other person in connection with the merger or otherwise take any action as a result of the completion of the merger.

Treatment of Stock Options and Other Equity-Based Awards

      When the merger is completed, JPMorgan Chase will assume each outstanding Bank One employee stock option, and each option will be deemed to constitute an option to acquire the same number of shares of JPMorgan Chase common stock that the holder of the option would have been entitled to receive if the holder had exercised the option in full immediately prior to the effective time of the merger, rounded, if necessary, to the nearest whole share. The exercise price per share for the assumed options will be the exercise price per share under the Bank One stock options divided by the exchange ratio. Holders of outstanding Bank One stock appreciation rights will be entitled to a number of JPMorgan Chase stock appreciation rights determined in the same manner. Holders of outstanding Bank One restricted stock units will be entitled to a number of JPMorgan Chase restricted stock units determined by multiplying the number of Bank One restricted stock units by the exchange ratio. Holders of other outstanding Bank One equity-based awards will be entitled to equivalent JPMorgan Chase equity-based awards determined in the same manner as the restricted stock units. The other terms of all Bank One options, stock appreciation rights, restricted stock or restricted stock units and other equity-based awards referred to above will continue to apply.

77


 

      For financial accounting purposes, the fair value of all Bank One employee stock options will require revaluation at the closing of the merger. The fair value of the vested portion of the replacement awards will be included in the calculation of the purchase price for Bank One. The fair value of unvested replacement awards will be recognized as a compensation expense over their respective remaining vesting periods after the closing date of the merger.

      JPMorgan Chase will file a registration statement covering the issuance of the shares of JPMorgan Chase common stock subject to each Bank One equity award and will maintain the effectiveness of that registration statement for as long as any of the equity awards remain outstanding.

Restrictions on Sales of Shares by Affiliates of Bank One

      The shares of JPMorgan Chase common stock to be issued in connection with the merger will be registered under the Securities Act of 1933 and will be freely transferable under the Securities Act, except for shares issued to any person who is deemed to be an “affiliate” of Bank One at the time of its annual meeting. Bank One expects that each of those affiliates will agree with JPMorgan Chase that the affiliate will not transfer any shares of stock received in the merger except in compliance with the Securities Act. This document does not cover resales of JPMorgan Chase common stock by affiliates of Bank One or JPMorgan Chase.

Stock Exchange Listings

      JPMorgan Chase will use all reasonable efforts to cause the following shares of JPMorgan Chase to be approved for listing on the New York Stock Exchange, subject to official notice of issuance, before the completion of the merger:

  •  JPMorgan Chase common stock to be issued in the merger; and
 
  •  JPMorgan Chase common stock reserved for issuance upon exercise of Bank One stock options, restricted stock units or other equity-based awards.

In addition, JPMorgan Chase plans to apply to the London and Tokyo stock exchanges to list the JPMorgan Chase common stock to be issued in the merger and reserved for the Bank One stock options.

Appraisal Rights

      The following summary of the provisions of Section 262 of the Delaware General Corporation Law is not intended to be a complete statement of the provisions of that section and is qualified in its entirety by reference to the full text of Section 262 of the Delaware General Corporation Law, a copy of which is attached to this document as Annex F and is incorporated into this summary by reference.

      Under Delaware law, the common stockholders of JPMorgan Chase and Bank One are not entitled to appraisal rights in connection with the merger. However, holders of JPMorgan Chase’s 6.63% Cumulative Preferred Stock, Series H, and Fixed/ Adjustable Noncumulative Preferred Stock are entitled to appraisal rights under Delaware law. Those series of preferred stock are referred to below as the “appraisal stock.” A holder of depositary receipts evidencing depositary shares representing interests in shares of JPMorgan Chase’s 6.63% Cumulative Preferred Stock, Series H held by the depositary must withdraw the shares of JPMorgan Chase’s 6.63% Cumulative Preferred Stock, Series H underlying such receipts in order to become a record holder of such shares and comply with the procedures for demanding appraisal described below in order to perfect appraisal rights with respect to the holder’s shares of JPMorgan Chase’s 6.63% Cumulative Preferred Stock, Series H.

78


 

      If the merger is completed, each holder of appraisal stock who (1) files written notice with JPMorgan Chase of an intention to exercise rights of appraisal of his, her or its shares prior to the applicable meeting and (2) follows the procedures set forth in Section 262, will be entitled to be paid by JPMorgan Chase after the merger the fair value in cash of the shares of appraisal stock. The fair value of appraisal stock will be determined by the Delaware Court of Chancery, exclusive of any element of value arising from the merger. The shares of appraisal stock with respect to which holders have perfected their appraisal rights in accordance with Section 262 and have not effectively withdrawn or lost their appraisal rights are referred to in this document as the “dissenting shares.”

      Within ten days after the effective date of the merger, JPMorgan Chase must mail a notice to all stockholders who have complied with clause (1) above notifying those stockholders of the effective date of the merger. Within 120 days after the effective date of the merger, holders of appraisal stock may file a petition in the Delaware Court of Chancery for the appraisal of their shares, although they may, within 60 days of the effective date, withdraw their demand for appraisal. Within 120 days of the effective date of the merger, the holders of dissenting shares may also, upon written request, receive from JPMorgan Chase a statement setting forth the aggregate number of shares with respect to which demands for appraisal have been received.

      Appraisal rights are available only to the record holder of shares. If you wish to exercise appraisal rights but have a beneficial interest in shares held of record by or in the name of another person, such as a broker, bank or nominee, you should act promptly to cause the record holder to follow the procedures set forth in Section 262 to perfect your appraisal rights.

      A demand for appraisal should be signed by or on behalf of the stockholder exactly as the stockholder’s name appears on the stockholder’s stock certificates. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, the demand should be executed in that capacity, and if the shares are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including one or more joint owners, may execute a demand for appraisal on behalf of a record holder; however, in the demand the agent must identify the record holder or holders and expressly disclose that the agent is executing the demand as an agent for the record holder or holders. A record holder such as a broker or nominee who holds shares as nominee for several beneficial owners may exercise appraisal rights for the shares held for one or more beneficial owners and not exercise rights for the shares held for other beneficial owners. In this case, the written demand should state the number of shares for which appraisal rights are being demanded. When no number of shares is stated, the demand will be presumed to cover all shares of a particular beneficial owner that are held of record by the broker or nominee.

      Dissenting shares lose their status as dissenting shares if:

  •  the merger is abandoned;
 
  •  the dissenting stockholder fails to make a timely written demand for appraisal;
 
  •  neither JPMorgan Chase nor the stockholder files a complaint or intervenes in a pending action within 120 days after the effective date of the merger; or
 
  •  the stockholder delivers to JPMorgan Chase, within 60 days of the effective date of the merger, or thereafter with JPMorgan Chase’s approval, a written withdrawal of the stockholder’s demand for appraisal of the dissenting shares, although no appraisal proceeding in the Delaware Court of Chancery may be dismissed as to any stockholder without the approval of the court.

      FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE

79


 

LOSS OF APPRAISAL RIGHTS, IN WHICH EVENT A STOCKHOLDER WILL BE ENTITLED TO RETAIN THE SHARES FOLLOWING THE EFFECTIVE TIME OF THE MERGER. IN VIEW OF THE COMPLEXITY OF THE PROVISIONS OF SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW, STOCKHOLDERS WHO ARE CONSIDERING EXERCISING APPRAISAL RIGHTS SHOULD CONSULT THEIR OWN LEGAL ADVISORS.

Delisting and Deregistration of Bank One Stock After the Merger

      When the merger is completed, the Bank One common stock currently listed on the New York Stock Exchange and the Chicago Stock Exchange will be delisted from those exchanges and deregistered under the Securities Exchange Act of 1934.

      The Bank One employee stock purchase plan will continue until June 30, 2004 (which is the termination of the current offering period). No further offering periods will begin thereafter. The optional cash purchase (but not the dividend reinvestment) feature of the Bank One dividend reinvestment and stock purchase plan will be terminated within 30 days of a written request by JPMorgan Chase unless all such optional cash purchases are satisfied through open market purchases of Bank One common stock and not through new issuances.

The Merger Agreement

      This section of the document describes the material terms of the merger agreement. The following summary is qualified in its entirety by reference to the complete text of the merger agreement, which is incorporated by reference and attached as Annex A to this document. We urge you to read the full text of the merger agreement.

      Completion of the Merger. The merger will be completed when we file a certificate of merger with the Delaware Secretary of State. However, we may agree to a later time for completion of the merger and specify that time in the certificate of merger. We will file the certificate of merger as soon as practicable after the satisfaction or waiver of the closing conditions in the merger agreement, which are described below.

      We expect to complete the merger by mid-2004 if we have received the stockholder and regulatory approvals required to do so.

      Possible Alternative Merger Structure. The merger agreement provides that we may agree to change the structure of the merger. No such change will alter the kind or amount of consideration to be issued to Bank One’s stockholders, or the treatment of Bank One options, units, restricted shares or other equity-based awards; adversely affect the tax consequences to them in the merger; materially delay any required regulatory approval; or otherwise cause any closing condition not to be capable of being fulfilled (unless waived by the party entitled to its benefits).

      Conditions to Completion of the Merger.

      Conditions to Both Parties’ Obligations. We may not complete the merger unless each of the following conditions is satisfied or waived:

  •  the merger agreement has been adopted by the affirmative vote of:

  •  the holders of a majority of the outstanding shares of Bank One common stock; and
 
  •  the holders of a majority of the outstanding shares of JPMorgan Chase common stock;

  •  the shares of JPMorgan Chase common stock to be issued in the merger or reserved for issuance upon exercise of Bank One stock options have been authorized for listing on the New York Stock Exchange, subject to official notice of issuance;

80


 

  •  all regulatory approvals necessary for the completion of the merger have been obtained, other than approvals the failure of which to obtain would not reasonably be expected to have a material adverse effect on completion of the merger or on JPMorgan Chase after the merger, and none of those approvals contains a condition or restriction that would reasonably be expected to have a material adverse effect after the merger on the present or prospective financial condition, business or operating results of JPMorgan Chase after the merger;
 
  •  the registration statement of which this document is a part has been declared effective by the Securities and Exchange Commission and is not subject to any stop order or proceedings seeking a stop order; and
 
  •  no restraining order or injunction prohibiting completion of the merger is in effect and completion of the merger is not illegal under any applicable law.

      Conditions to Each Party’s Obligations. Each party’s obligation to complete the merger is also subject to the satisfaction or waiver of the following additional conditions:

  •  the representations and warranties of the other party must be true and correct as of the date of the merger agreement and, except for representations and warranties that speak as of an earlier date, must also be true and correct as of the closing date of the merger, subject to any exceptions that do not have, and would not reasonably be expected to have, a material adverse effect on the other party or JPMorgan Chase after the merger;
 
  •  the other party must have performed in all material respects all obligations that it is required by the merger agreement to perform on or prior to the closing date; and
 
  •  each party must have received an opinion from its tax counsel that the merger will be treated as a tax-free reorganization for U.S. federal income tax purposes.

      In addition, Bank One is not obligated to consummate the merger if the following condition is not satisfied or waived by it.

  •  JPMorgan Chase’s bylaws must have been amended in the manner described under “— Amendments to JPMorgan Chase By-laws” below to provide for the composition of the board of directors, the succession of Mr. Dimon as Chief Executive Officer of JPMorgan Chase two years after the merger and other related governance matters.

      For purposes of the merger agreement, the term “material adverse effect” means, with respect to either of us, a material adverse effect on the financial condition, properties, assets, liabilities, businesses or results of operations of that company and its subsidiaries taken as a whole or on its ability to perform its obligations under the merger agreement or the stock option agreements on a timely basis. However, any change or event caused by or resulting from the following will not be deemed to have a material adverse effect:

  •  changes in prevailing interest rates, currency exchange rates or other economic or monetary conditions in the United States or elsewhere;
 
  •  changes in United States or foreign securities markets, including changes in price levels or trading volumes;
 
  •  changes or events affecting the financial services industry generally and not specifically relating to either of us or our respective subsidiaries, as the case may be;
 
  •  changes in generally accepted accounting principles or regulatory accounting requirements applicable to banks or savings associations and their holding companies generally;
 
  •  changes in laws, rules or regulations of general applicability or interpretations of those laws, rules or regulations by any governmental entity;

81


 

  •  actions or omissions of either party taken with the prior written consent of the other party or required pursuant to the merger agreement;
 
  •  the execution and delivery of the merger agreement or the completion of the transactions contemplated by the merger agreement or the announcement of those transactions; or
 
  •  any outbreak of major hostilities in which the United States is involved or any act of terrorism within the United States or directed against its facilities or citizens, wherever located.

In addition, the merger agreement specifically provides that a change in the trading prices of either of our capital stocks, by itself, will not be considered material or constitute a material adverse effect.

      Reasonable Best Efforts to Obtain Required Stockholder Vote. Each party has agreed to take all lawful action to call, give notice of, convene and hold a meeting of its stockholders as promptly as practicable for the purpose of obtaining the required stockholder vote to approve the transactions contemplated by the merger agreement. In addition, each party has agreed that its board of directors will use its reasonable best efforts to obtain from its stockholders the required stockholder vote in favor of adoption of the merger agreement. Nothing in the merger agreement is intended to relieve the parties of their respective obligations to submit the merger agreement to their stockholders for a vote on its adoption.

      No Solicitations of Alternative Transactions. The merger agreement contains detailed provisions prohibiting each of us from seeking an alternative transaction to the merger. Under these “no solicitation” provisions, we have agreed that neither of us may:

  •  initiate, solicit, encourage or knowingly facilitate any inquires or the making of an acquisition proposal, as described below;
 
  •  have any discussions with, or provide any confidential information or data to, any person relating to an acquisition proposal, or engage in any negotiations concerning an acquisition proposal, or knowingly facilitate any effort or attempt to make or implement an acquisition proposal;
 
  •  approve or recommend, or propose publicly to approve or recommend, any acquisition proposal; or
 
  •  approve or recommend, or propose to approve or recommend, or execute or enter into, any letter of intent, agreement in principle, merger agreement, asset purchase or share exchange agreement, option agreement or other similar agreement related to any acquisition proposal or propose or agree to do any of the foregoing.

      For purposes of the merger agreement, the term “acquisition proposal” means, with respect to either of us, any proposal or offer with respect to, or a transaction to effect:

  •  a merger, reorganization, share exchange, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving either of us or any of our respective significant subsidiaries, other than acquisitions permitted by the terms of the merger agreement;
 
  •  any purchase or sale of 20% or more of the consolidated assets of either of us and our respective subsidiaries, including stock of our subsidiaries, taken as a whole; or
 
  •  any purchase or sale of, or tender or exchange offer for, the voting securities of either of us that, if completed, would result in any person beneficially owning securities representing 20% or more of the total voting power of either of us or of the total voting power of the surviving parent entity in the transaction, or any of our significant subsidiaries.

82


 

      The merger agreement permits us to comply with Rule 14d-9 and Rule 14e-2 under the Securities Exchange Act with regard to an acquisition proposal that either of us may receive. In addition, if either of us receives an unsolicited bona fide written acquisition proposal, the party receiving that proposal may engage in discussions with or provide nonpublic information to the person making that acquisition proposal only if:

  •  the board of directors of the party receiving the acquisition proposal receives the acquisition proposal prior to that party’s stockholders meeting;
 
  •  the board of directors of the party receiving the acquisition proposal concludes in good faith that the acquisition proposal constitutes or would be reasonably likely to result in a superior proposal, as described below;
 
  •  the board of directors of the party receiving the acquisition proposal, after consultation with outside counsel, determines in good faith that the failure to engage in those discussions or provide that confidential information would likely be inconsistent with the board’s fiduciary duties under applicable law;
 
  •  the party receiving the acquisition proposal enters into a confidentiality agreement with the person making the inquiry or proposal having terms that are no less favorable to the party providing the information than those in the confidentiality agreement between JPMorgan Chase and Bank One; and
 
  •  the party receiving the acquisition proposal notifies the other party to the merger agreement promptly, and in any event within 24 hours of that party’s receipt of any acquisition proposal or any request for nonpublic information relating to that party by any third party considering making, or that has made, an acquisition proposal, of the identity of such third party, the material terms and conditions of any inquiries, proposals or offers, and updates on the status of the terms of any such proposals, offers, discussions or negotiations on a current basis.

      For purposes of the merger agreement, “superior proposal” means a bona fide written acquisition proposal made to a party to the merger agreement to acquire a majority of the assets or voting power of that party, which the board of directors of that party concludes in good faith, after consultation with its financial and legal advisors, taking into account all legal, financial, regulatory and other aspects of the proposal and the person making the proposal:

  •  is more favorable to the stockholders of that party from a financial point of view than the merger; and
 
  •  is fully financed or reasonably capable of being financed, reasonably likely to receive all required governmental approvals on a timely basis and otherwise reasonably capable of being completed on the terms proposed.

      Each of us has agreed in the merger agreement that:

  •  we will immediately terminate any activities, discussions or negotiations existing as of the date of the merger agreement with any parties conducted before that date with respect to any acquisition proposal;
 
  •  we will not release any third party from, or waive any provisions of, any confidentiality or standstill agreement relating to a possible acquisition proposal; and
 
  •  we will use reasonable best efforts to inform our respective directors, officers and key employees of the foregoing restrictions in the merger agreement.

      Nothing contained in the “no solicitation” provisions of the merger agreement will permit either of us to terminate the merger agreement or affect any of our other obligations under the

83


 

merger agreement, including our obligations to call and hold meetings of our respective stockholders to vote on the merger agreement.

      Termination. We may terminate the merger agreement at any time prior to the completion of the merger, whether before or after the stockholder approvals have been obtained, by mutual consent.

      In addition, either of us may terminate the merger agreement by written notice to the other party:

  •  if any governmental entity of competent jurisdiction:

  •  that must grant a material regulatory approval has denied approval of the merger and the denial has become final and nonappealable; or
 
  •  issues an order, decree or ruling or takes any other action permanently restraining, enjoining or otherwise prohibiting the merger, and the order, decree, ruling or other action has become final and nonappealable;

  •  except that this right to terminate will not be available to a party whose failure to comply with the merger agreement has been the cause of, or resulted in, that action;
 
  •  if the merger is not completed on or before January 14, 2005, except that this right to terminate will not be available to a party whose failure to comply with any provision of the merger agreement has been the cause of, or resulted in, the failure of the merger to be completed by that date;
 
  •  the other party’s board of directors adversely changes its recommendation that its stockholders vote in favor of the merger, takes any other action inconsistent with that recommendation, or the other party breaches its obligation to hold its stockholders’ meeting to vote on adoption of the merger agreement;
 
  •  the other party is in material breach of its representations, warranties, covenants or agreements set forth in the merger agreement, the breach would prevent satisfaction by the other party of the relevant closing condition and such breach if curable, is not cured within 60 days; or
 
  •  if the stockholders of either party do not approve the merger at their respective stockholders’ meeting.

      Termination Fees. The merger agreement provides that each of us may be required to pay a termination fee to the other of up to $2.30 billion in the following circumstances:

  •  If a party terminates the merger agreement due to (1) the failure of the other party’s board to recommend the merger, the withdrawal or adverse change in the other party’s board of director’s recommendation of the merger to the other party’s stockholders, or the taking of any other action inconsistent with that recommendation, or (2) the material breach by the other party of its obligation under the merger agreement to call a meeting of, and use its reasonable best efforts to obtain the approval of, that other party’s stockholders, the other party must pay the full termination fee on the business day following the termination.
 
  •  If (1) the merger agreement is terminated by either party because the required stockholder vote of a party was not obtained at that party’s stockholders’ meeting, and (2) a competing acquisition proposal for that party was publicly announced before its stockholders’ meeting, then the party whose stockholders failed to approve the merger agreement will owe the other party one-third of the termination fee. If, within 18 months after this termination of the merger agreement, the party whose stockholders failed to approve the merger agreement enters into an agreement for, or completes, an acquisition

84


 

  proposal, the remaining two-thirds of the termination fee will become payable to the other party.
 
  •  If (1) the merger agreement is terminated by either party because the merger has not been consummated by January 14, 2005 or by one party because of a material breach by the other party that causes a condition to the merger to not be satisfied, (2) a competing acquisition proposal for a party was made before the merger agreement was terminated, and (3) after the announcement of the competing acquisition proposal, the party for which the competing acquisition proposal was made intentionally breached any of its representations, warranties, covenants or agreements and the breach materially contributed to the failure of the merger to become effective, then the party that committed the breach will owe the other party one-third of the termination fee. If within 18 months after this termination of the merger agreement the breaching party enters into an agreement for, or completes, an acquisition proposal, the remaining two-thirds of the termination fee will become payable to the other party.

      The termination and termination fee provisions described above, the provisions described under “— No Solicitations of Alternative Transactions” above, and the terms of the stock option agreements described under “— Stock Option Agreements” below, could discourage other companies from seeking to acquire or merge with either JPMorgan Chase or Bank One.

      Conduct of Business Pending the Merger. Under the merger agreement, each of us has agreed that, during the period before completion of the merger, except as expressly contemplated or permitted by the merger agreement and the stock option agreements described under “— Stock Option Agreements” below, or to the extent that the other party consents in writing, we will carry on our respective businesses in the usual, regular and ordinary course consistent with past practice, and will use all reasonable efforts to preserve intact our present business organizations, maintain our rights and authorizations and preserve our relationships with customers, suppliers and others so that our goodwill and ongoing businesses are not impaired in any material respect. Each of us has agreed not to, and not to permit our subsidiaries to, enter into any new material line of business or to change our or our subsidiaries’ lending, investment, underwriting, risk and asset-liability management or other material banking or operating policies in any respect that is material to it, except as required by law or policies of a governmental entity. Each of us has also agreed that we will not, and will not permit any of our subsidiaries to, incur or commit to any capital expenditures or any obligations or liabilities in connection with capital expenditures, other than in the ordinary course of business consistent with past practice. Each of us has further agreed not to, and not to permit our subsidiaries to, enter into, terminate or change any material leases, contracts or agreements except in the ordinary course of business consistent with past practice.

      In addition to the above agreements regarding the conduct of business generally, each of us has agreed to various specific restrictions relating to the conduct of our businesses, including the following (in each case subject to exceptions specified in the merger agreement):

  •  the declaration or payment of dividends and changes in capital stock, other than regular cash dividends, except that Bank One may increase its regular quarterly cash dividend for any quarter prior to the effective date of the merger to an amount not in excess of $0.44875 per share (or to pay the equivalent of the aggregate amount of such incremental increase in any one or more payments);
 
  •  the repurchase or redemption of capital stock;
 
  •  the issuance or sale of capital stock, voting debt or other equity interests;
 
  •  the amendment of our respective certificates of incorporation or by-laws;
 
  •  the acquisition of assets or other entities;

85


 

  •  the disposition of assets;
 
  •  the incurrence or the guarantee of long-term debt;
 
  •  the taking of actions that would result, or might reasonably be expected to result, in a breach of any representations and warranties in the merger agreement or in any conditions to the merger not being satisfied;
 
  •  changes in accounting methods;
 
  •  the taking of actions that would disqualify the merger as a tax-free reorganization for U.S. federal income tax purposes;
 
  •  changes in employee benefit plans and compensation of its directors, executive officers and employees;
 
  •  material changes in its investment securities portfolio, hedging strategy or gap position or material changes in the credit or risk concentrations associated with its underwriting, market-making and other investment banking businesses; and
 
  •  the liquidation or recapitalization of significant subsidiaries.

      Governance. In the merger agreement, JPMorgan Chase agreed to adopt the amendments to the by-laws of JPMorgan Chase described in the section entitled “— Amendments to JPMorgan Chase By-laws” below, to be effective not later than the completion of the merger.

      JPMorgan Chase agreed in the merger agreement to cause its board of directors to be constituted as provided in the section “— Amendments to JPMorgan Chase By-laws” below. In particular, of the sixteen members of the board of directors of JPMorgan Chase following completion of the merger, half will be comprised of seven current independent JPMorgan Chase directors designated by JPMorgan Chase plus Mr. Harrison, and half will be comprised of seven current independent Bank One directors designated by Bank One plus Mr. Dimon. No other directors or employees of JPMorgan Chase or Bank One will be designated to serve on the initial board of directors upon the completion of the merger.

      On or prior to the effectiveness of the merger, JPMorgan Chase will cause the persons indicated in the section entitled “— Board of Directors and Management After the Merger” above to be elected or appointed to the offices of JPMorgan Chase specified in that section, effective as of the completion of the merger.

      Operations Following the Merger. We have agreed in the merger agreement that, following the merger:

  •  The headquarters of JPMorgan Chase will be located in New York, New York. Chicago will serve has the headquarters for the retail financial services business, which includes consumer banking, small businesses, middle market and consumer lending, and these businesses will maintain a significant presence in the Chicago metropolitan area;
 
  •  the retail financial services business will continue to use both the Chase brand and the Bank One brand while research is conducted to determine the best long-term branding strategy;
 
  •  the credit card business will be based in Wilmington, Delaware and will continue to use both the JPMorgan Chase brand and the Bank One brand; and
 
  •  JPMorgan Chase will maintain its strong commitment to charitable giving in the greater Chicago metropolitan area and to increasing the annual level of charitable giving beyond the current levels of Bank One contributions in that area.

86


 

      Additional Agreements. Each of us has agreed to cooperate with the other and to use our reasonable best efforts to:

  •  take all actions necessary to comply promptly with all legal requirements which may be imposed on either of us with respect to the merger and to consummate the merger as promptly as practicable; and
 
  •  obtain any consent, authorization, order or approval of, or any exemption by, any governmental entity or any other third party which is required to be obtained in connection with the merger or transactions related to the merger

unless in each case it will result in a condition or restriction on JPMorgan Chase or its subsidiaries following the merger that would reasonably be expected to have a material adverse effect after completion of the merger on JPMorgan Chase.

      The merger agreement also contains covenants relating to cooperation between us in the preparation of this document and additional agreements between us relating to, among other things, consultation regarding transition matters, access to information, mutual notice of specified matters and public announcements.

      Coordination of Dividends. We have agreed in the merger agreement to coordinate the payment of dividends and the designation of record and payment dates relating to JPMorgan Chase and Bank One common stock so that holders of our common stocks will not receive two dividends, or fail to receive one dividend, for any calendar quarter.

      Benefits Matters. We have agreed that our respective retirement and other employee benefit plans will remain in effect after completion of the merger with respect to employees covered by those plans. We have also agreed to negotiate in good faith to formulate benefit plans for JPMorgan Chase after the effective time of the merger on a basis that does not discriminate between employees who were covered by the benefit plans of JPMorgan Chase and employees who were covered by the benefit plans of Bank One. The Bank One employee stock purchase plan will remain in effect until June 30, 2004.

      In connection with the approval of the merger, the Bank One board of directors approved amendments to the Bank One Corporation Personal Pension Account Plan and the Bank One Corporation Supplemental Personal Pension Account Plan to provide that the “change of control” provisions of the plans will be inapplicable with respect to the merger, other than the provisions of such plans that provide for accelerated vesting of accrued benefits thereunder upon a change of control. JPMorgan Chase will adopt a resolution providing that the receipt by Bank One officers and directors of shares of JPMorgan Chase common stock to be issued in connection with the merger and subject to Section 16(b) of the Securities Exchange Act of 1934 are intended to be exempt from liability pursuant to Section 16(b).

      Amendment, Extension and Waiver. We may amend the merger agreement by action taken or authorized by our respective boards of directors, at any time before or after adoption of the merger agreement by our respective stockholders. After adoption of the merger agreement by our respective stockholders, no amendment may be made which by law requires further approval by those stockholders, unless we obtain that further approval. All amendments to the merger agreement must be in writing signed by both of us.

      At any time before the completion of the merger, we may, by written action taken or authorized by our respective boards of directors, to the extent legally allowed:

  •  extend the time for the performance of any of the obligations or other acts provided for in the merger agreement;
 
  •  waive any inaccuracies in the representations and warranties contained in the merger agreement or in any document delivered pursuant to the merger agreement; and

87


 

  •  waive compliance with any of the agreements or conditions contained in the merger agreement.

      Fees and Expenses. Whether or not the merger is completed, all costs and expenses incurred in connection with the merger agreement, the stock option agreements described under “— Stock Option Agreements” below and the merger will be paid by the party incurring the expense, except as otherwise provided in the merger agreement or stock option agreements and except that:

  •  if the merger is completed, JPMorgan Chase will pay any property or transfer taxes imposed on either party in connection with the merger; and
 
  •  all expenses and fees incurred in connection with the filing, printing and mailing of this document and the registration statement of which it is a part will be shared equally by JPMorgan Chase and Bank One.

      Representations and Warranties. The merger agreement contains customary and substantially reciprocal representations and warranties by each of us relating to, among other things:

  •  corporate organization and similar corporate matters;
 
  •  capital structure;
 
  •  authorization of the merger agreement and stock option agreements and absence of conflicts;
 
  •  documents filed with the Securities and Exchange Commission, financial statements included in those documents, regulatory reports filed with governmental entities and the absence of material undisclosed liabilities;
 
  •  information supplied in connection with this document and the registration statement of which it is a part;
 
  •  compliance with applicable laws and reporting requirements;
 
  •  legal proceedings;
 
  •  taxes;
 
  •  material agreements;
 
  •  employee benefits;
 
  •  subsidiaries;
 
  •  agreements with regulators;
 
  •  absence of specified changes or events;
 
  •  board approval and applicable state takeover laws;
 
  •  the stockholder vote required to adopt the merger agreement;
 
  •  ownership and leasehold interests in properties;
 
  •  intellectual property;
 
  •  brokers and finders;
 
  •  opinion of financial advisor; and
 
  •  investment adviser subsidiaries, funds and clients.

88


 

Amendments to JPMorgan Chase By-laws

      This section of the document describes the material terms of the amendments to JPMorgan Chase’s by-laws as agreed to in the merger agreement. The following summary is qualified in its entirety by reference to the complete text of the amendments to JPMorgan Chase’s by-laws, which are incorporated by reference and attached as Annex G to this document. We urge you to read the full text of these amendments.

      The by-laws of JPMorgan Chase will be amended, effective not later than the completion of the merger, to add a new by-law providing the following:

  •  that the board of directors has resolved that, effective as of the completion of the merger, Mr. Harrison will continue to serve as Chairman of the Board and Chief Executive Officer of JPMorgan Chase and Mr. Dimon will become the President and Chief Operating Officer of JPMorgan Chase; and that Mr. Dimon will be the successor to Mr. Harrison as the Chief Executive Officer of JPMorgan Chase, effective on the second anniversary of the completion of the merger or any such earlier date as of which Mr. Harrison ceases for any reason to serve in the position of Chief Executive Officer of JPMorgan Chase, and that Mr. Harrison will continue to serve as Chairman of the Board following that succession;
 
  •  that on the effective date of the merger, the board of directors will be comprised of eight Bank One directors, including Mr. Dimon, and eight JPMorgan Chase directors, including Mr. Harrison;
 
  •  that until the date of Mr. Dimon’s succession as Chief Executive Officer of JPMorgan Chase, the number of directors that comprises the full board of directors of JPMorgan Chase will be sixteen; and
 
  •  that until Mr. Dimon’s succession as Chief Executive Officer of JPMorgan Chase, all vacancies on the board of directors created by the cessation of service of a director will be filled by a nominee proposed by the governance committee of the board of directors, which will be co-chaired by one former Bank One director and one former JPMorgan Chase director and comprised of an equal number of former Bank One directors and former JPMorgan Chase directors (any deadlocks on the governance committee will be resolved in good faith by the nonmanagement members of the board of directors in a manner intended to preserve the principles of representation reflected in the new by-law).

      The by-laws will provide that the affirmative vote of at least 75% of the full board of directors will be required for any of the following:

  •  the removal of Mr. Dimon from, or the failure to appoint or re-elect Mr. Dimon to, any of the positions specifically provided for above and in his employment agreement with JPMorgan Chase, and any amendment to or termination of his employment agreement, prior to Mr. Dimon’s succession as Chief Executive Officer of JPMorgan Chase, or any determination not to appoint, or any failure to appoint, Mr. Dimon as Chief Executive Officer of JPMorgan Chase on that date of succession,
 
  •  the removal of Mr. Harrison from, or the failure to appoint or reelect Mr. Harrison to, the position of Chairman of the Board and Chief Executive Officer of JPMorgan Chase prior to Mr. Dimon’s succession as Chief Executive Officer of JPMorgan Chase,
 
  •  any determination not to nominate Mr. Harrison or Mr. Dimon as a director of JPMorgan Chase prior to Mr. Dimon’s succession as Chief Executive Officer of JPMorgan Chase, and
 
  •  any modification, amendment or repeal of, or any adoption of any bylaw provision inconsistent with, the provisions of the by-law amendments described above.

89


 

Stock Option Agreements

      This section of the document describes the material terms of the reciprocal stock options that JPMorgan Chase and Bank One granted to each other at the time we entered into the merger agreement.

      The following summary is qualified in its entirety by reference to the complete text of the stock option agreements, which are incorporated by reference and attached as Annexes B and C to this document. We urge you to read the full text of the stock option agreements.

      In connection with the execution and delivery of the merger agreement, we entered into:

  •  the JPMorgan Chase stock option agreement, under which JPMorgan Chase granted to Bank One an irrevocable option to purchase, in whole or in part, an aggregate of up to 406,481,383 shares, or up to 19.9% of the then-issued and outstanding shares (other than shares issued pursuant to this option), of JPMorgan Chase common stock at a price of $38.90 per share, exercisable as described below; and
 
  •  the Bank One stock option agreement, under which Bank One granted to JPMorgan Chase an irrevocable option to purchase, in whole or in part, an aggregate of up to 222,796,825 shares, or up to 19.9% of the then-issued and outstanding shares (other than shares issued pursuant to this option), of Bank One common stock at a price of $44.61 per share, exercisable as described below.

      The exercise price for each option was the closing stock price of the option issuer on the New York Stock Exchange on January 13, 2004, the last trading day before we announced the merger.

      When the Options May be Exercised. The option holder under a stock option agreement may exercise the option to purchase shares of common stock of the option issuer, in whole or in part, at any time following the occurrence of any of the following events:

  •  if prior to termination of the merger agreement, without the consent of the option holder, the option issuer enters into an agreement to effect, or effects, in a single transaction or series of related transactions, any acquisition proposal;
 
  •  if prior to the termination of the merger agreement, any third party or group acquires beneficial ownership of 20% or more of the voting power of the option issuer or any of its significant subsidiaries; or
 
  •  if an event occurs the result of which is that the entire termination fee required to be paid by the option issuer under the merger agreement, as described under “— The Merger Agreement — Termination Fees” above is required to be paid.

      The right of the option holder to purchase shares of common stock under the applicable stock option agreement will expire on the first to occur of:

  •  the completion of the merger;
 
  •  the termination of the merger agreement, provided that no event has occurred or could occur in the future that would entitle the option holder to purchase common stock under the applicable stock option agreement;
 
  •  the date on which the option holder has received $2.87 billion in “total profit,” as calculated under the stock option agreement, from, in the aggregate, the exercise or sale of the option or shares issued upon exercise of the option and from the receipt of termination fees under the merger agreement; and
 
  •  six months after an event has occurred that would entitle the option holder to purchase common stock under the applicable stock option agreement.

90


 

      Any purchase of shares of common stock by the option holder may be subject to regulatory approvals, including prior approval of the Federal Reserve Board.

      Adjustments Upon Changes in Capitalization and Substitute Option. The number and kind of securities subject to each stock option agreement and the exercise price will be adjusted for any change in the number of issued and outstanding shares of common stock of the option issuer in the event of any stock dividend, subdivision, spin-off, stock split, split-up, merger, consolidation, recapitalization, combination, exchange of shares or dividend or distribution, other than regular cash dividends. Accordingly, the option holder will receive, upon exercise of the option, the number and class of shares or other securities or property that the option holder would have received if the option had been exercised immediately before the event or record date for the event, as applicable. In addition, if additional shares of common stock of the option issuer become outstanding after the date of the applicable stock option agreement, the total number of shares of the option issuer’s common stock subject to the option will be automatically increased to 19.9% of all the issued and outstanding shares of that option issuer’s common stock, excluding any shares previously issued upon exercise of the option.

      In the event that the option issuer enters into any agreement:

  •  to consolidate with or merge into any person other than the option holder, and the option issuer will not be the continuing or surviving corporation in the consolidation or merger;
 
  •  to permit any person, other than the option holder, to merge into the option issuer and the option issuer will be the continuing or surviving or acquiring corporation but, in connection with the merger:

  •  the outstanding shares of common stock of the option issuer will be changed into or exchanged for stock or other securities of any other person or cash or any other property; or
 
  •  the outstanding shares of common stock of the option issuer will, after the merger, represent less than 50% of the outstanding voting securities of the merged company; or

  •  to sell or otherwise transfer all or substantially all of its assets or all of the assets of its subsidiaries, taken as a whole, to any person, other than the option holder,

then, in each case, the agreement governing the transaction must contain a provision that the option granted under the stock option agreement will upon completion of the transaction be converted into, or exchanged for, a substitute option with substantially identical terms to acquire shares of the surviving corporation or a person that controls the surviving corporation and at a price intended to preserve the economics of the option, except that the substitute option will be immediately exercisable if the original option was at that time exercisable and will be subject to provisions regarding repurchase of the substitute option specified in the stock option agreement.

      Repurchase of the Option. After an option becomes exercisable, the option holder has the right to require the option issuer to repurchase the option and any shares acquired upon exercise of the option at any time following any of the following events:

  •  any person other than the option holder acquires or has the right to acquire beneficial ownership of 50% or more of the then outstanding shares of the option issuer’s common stock; or
 
  •  the option issuer enters into an agreement with a person other than the option holder for a merger, consolidation or sale of all or substantially all of its assets of a type described above in the second paragraph under “— Adjustment Upon Changes in Capitalization and Substitute Option.”

91


 

      The repurchase price for any such repurchase will equal the sum of:

  •  the aggregate exercise price paid for all shares issued under the option;
 
  •  the excess of the market/offer price referred to below over the exercise price times the number of shares with respect to which the option has not been exercised; and
 
  •  the excess of the market/offer price over the exercise price paid for each share owned by the option holder with respect to which the option holder had exercised the option.

      The term “market/offer price” is defined in the stock option agreements to mean the highest of:

  •  the highest price per share at which a tender offer or exchange offer for the option issuer’s common stock has been made;
 
  •  the highest price to be paid for common stock of the option issuer by any third party under an agreement with the option issuer;
 
  •  the price per share received by holders of the option issuer’s common stock in a business combination transaction;
 
  •  the highest closing price for shares of the option issuer’s common stock within the 12-month period immediately preceding the transaction in question; and
 
  •  in the event of a sale of all or substantially all of the option issuer’s assets, the sum of the price paid in that sale and the current market value of the remaining assets of the option issuer divided by the number of outstanding shares of the option issuer’s common stock.

      Registration Rights. Each of the stock option agreements provides that the option holder has specified rights to require the option issuer to register, under the Securities Act and any applicable state laws, all shares purchased by the option holder under the stock option agreement. The option issuer may repurchase at a specified average market value any shares requested to be registered instead of registering those shares.

      Profit Limitations. Each of the stock option agreements provides that in no event will the option holder’s “total profit,” as defined below, exceed, in the aggregate, $2.87 billion. If the option holder’s total profit would otherwise exceed $2.87 billion, the option holder, at its sole discretion, will either (a) reduce the number of shares subject to the option, (b) deliver to the option issuer for cancellation shares of the option issuer’s common stock, (c) pay cash to the option issuer, (d) reduce the amount payable by the option issuer upon repurchase of the option and/or the option shares or (e) any combination of the above, so that the option holder’s actually realized total profit does not exceed $2.87 billion after taking into account the above actions.

      In addition, the option may not be exercised for a number of shares that would result in a “notional total profit,” as defined below, of more than $2.87 billion. If exercise of the option would otherwise result in the notional total profit exceeding that amount, the option holder, in its discretion, may take any of the actions specified above so that the notional total profit does not exceed $2.87 billion.

      For purposes of the option agreements, “total profit” means the aggregate amount (before taxes) of:

  •  the excess of (1) the net cash amounts or fair market value of any property received by the option holder in a sale of shares received on exercise of the option, other than to a wholly-owned subsidiary of the option holder, or a repurchase of those shares by the option issuer, over (2) the option holder’s aggregate purchase price for those shares, plus

92


 

  •  all equivalent net amounts with respect to any substitute option, plus
 
  •  any termination fee paid to the option holder under the merger agreement, minus
 
  •  all cash paid and the value of all shares surrendered to the option issuer as described above to reduce the total profit or notional total profit.

      For purposes of the stock option agreements, “notional total profit” with respect to any number of shares the option holder proposes to purchase under the option means the total profit on the proposed purchase date assuming that those shares were purchased and, together with all other shares received upon exercise of the option and held by the option holder and its affiliates as of that date, were sold for cash at the closing market price for the option issuer’s common stock as of the close of business on the preceding trading day, less customary brokerage commissions.

      Assignability. Neither of the stock option agreements, nor any of the rights, interests or obligations under them, may be assigned by either of the parties without the prior written consent of the other party.

      Effect of Stock Option Agreements. The stock option agreements are intended to increase the likelihood that the merger will be completed on the terms set forth in the merger agreement and to compensate the option holder for the efforts undertaken and the expenses and losses incurred by it if the merger is not completed. The stock option agreements could make any business combination with a third party more expensive than would otherwise be the case. Consequently, the stock option agreements may discourage persons who might be interested in acquiring all or a significant interest in JPMorgan Chase or Bank One before completion of the merger from considering or proposing an acquisition, even if those persons were prepared to offer higher consideration per share of Bank One common stock or JPMorgan Chase common stock than the consideration implicit in the merger.

93


 

JPMORGAN CHASE/ BANK ONE

 
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

      The following unaudited pro forma combined financial information and explanatory notes present how the combined financial statements of JPMorgan Chase and Bank One may have appeared had the businesses actually been combined as of the date indicated. The unaudited pro forma combined balance sheet at December 31, 2003 assumes the merger was completed on that date. The unaudited pro forma combined income statement for the year ended December 31, 2003 gives effect to the merger as if the merger had been completed on January 1, 2003. The unaudited pro forma combined financial information shows the impact of the merger on JPMorgan Chase’s and Bank One’s combined financial position and results of operations under the purchase method of accounting with JPMorgan Chase treated as the acquiror. Under this method of accounting, JPMorgan Chase will record the assets and liabilities of Bank One at their estimated fair values as of the date the merger is completed.

      The unaudited pro forma combined financial information has been derived from and should be read in conjunction with the historical consolidated financial statements and the related notes of both JPMorgan Chase and Bank One that are incorporated into this document by reference. See “Where You Can Find More Information” on page 173.

      The unaudited pro forma combined financial information is presented for illustrative purposes only and does not indicate the financial results of the combined company had the companies actually been combined at the beginning of the period presented and had the impact of possible revenue enhancements, expense efficiencies, asset dispositions and share repurchases, among other factors, been considered. In addition, as explained in more detail in the accompanying notes to unaudited pro forma combined financial information, the allocation of the purchase price reflected in the unaudited pro forma combined financial information is subject to adjustment and will vary from the actual purchase price allocation that will be recorded upon completion of the merger based upon changes in the balance sheet including fair value estimates.

94


 

JPMORGAN CHASE/ BANK ONE

UNAUDITED PRO FORMA COMBINED INCOME STATEMENT

For the Year Ended December 31, 2003
In millions (except per share data)
                                         
Pro
JP Morgan Reporting Pro Forma Forma
Chase Bank One Reclassifications Adjustments Combined





Revenue
                                       
Investment banking fees
  $ 2,890     $     $ 371  (1)   $     $ 3,261  
Banking fees and commissions
          1,795       (1,795 )(1,2,3)            
Trading revenue (losses)
    4,427       (26 )                 4,401  
Fees and commissions
    10,652             743  (2,5,6,7)     97  (O)     11,492  
Private equity gains
    33             330  (4)           363  
Securities gains
    1,446       122       (330 )(4)           1,238  
Mortgage fees and related income
    892             86  (3,8)           978  
Credit card revenue
          3,764       2,971  (5)           6,735  
Service charges on deposits
          1,661       (1,661 )(6)            
Fiduciary and investment management fees
          656       (656 )(7)            
Other revenue
    579       91       74  (8,12,13)             744  
     
     
     
     
     
 
Total noninterest revenue
    20,919       8,063       133       97       29,212  
     
     
     
     
     
 
Interest income
    23,444       12,661             41  (O)     35,767  
                              (379 )(A)        
Interest expense
    11,107       4,512             (510 )(G)     14,865  
                              (250 )(I)        
                              6  (O)        
     
     
     
     
     
 
Net interest income
    12,337       8,149             416       20,902  
     
     
     
     
     
 
Revenue before provision for credit losses
    33,256       16,212       133       513       50,114  
Provision for credit losses
    1,540       2,045                   3,585  
     
     
     
     
     
 
Total net revenue
    31,716       14,167       133       513       46,529  
     
     
     
     
     
 
Noninterest Expense
                                       
Compensation expense
    11,695       4,765             42  (O)     16,690  
                              188  (S)        
Occupancy expense
    1,912       679             2  (O)     2,583  
                              (10 )(R)        
Technology and communications expense
    2,844       213       473  (9)     3  (O)     3,533  
Surety settlement and litigation reserve
    100                         100  
Equipment
          473       (473 )(9)            
Outside service fees and processing
          1,153       (1,153 )(10)            
Marketing and development
          957       (957 )(11)            
Amortization of intangibles
          137       294  (14)     (137 )(K)     1,729  
                              1,435  (E)        
Other expense
    5,137       1,400       1,949  (10,11,12,13,14)     40  (O)     8,526  
     
     
     
     
     
 
Total noninterest expense
    21,688       9,777       133       1,563       33,161  
     
     
     
     
     
 
Income before income tax expense
    10,028       4,390             (1,050 )     13,368  
Income tax expense
    3,309       1,265             (400 )(L,O)     4,174  
     
     
     
     
     
 
Income from continuing operations
  $ 6,719     $ 3,125     $     $ (650 )   $ 9,194  
     
     
     
     
     
 
Income from continuing operations applicable to common stockholders
  $ 6,668     $ 3,125     $     $ (650 )   $ 9,143  
     
     
     
     
     
 
Per common share information
                                       
Basic earnings per share from continuing operations
  $ 3.32     $ 2.78                     $ 2.62  
     
     
                     
 
Diluted earnings per share from continuing operations
  $ 3.24     $ 2.75                     $ 2.57  
     
     
                     
 
Average common shares outstanding
    2,009       1,126               360  (M)     3,495  
     
     
             
     
 
Average diluted common shares outstanding
    2,055       1,135               363  (M)     3,553  
     
     
             
     
 

The notes to unaudited pro forma combined financial information are an integral part of these statements.

95


 

JPMORGAN CHASE/ BANK ONE

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

December 31, 2003
(in millions)
                                           
JPMorgan Reporting Pro Forma Pro Forma
Assets Chase Bank One Reclassifications Adjustments Combined






Cash and due from banks
  $ 20,268     $ 17,089     $     $ (2,118 )(N)   $ 35,239  
Deposits with banks
    10,175       3,093                       13,268  
Federal funds sold and securities purchased under resale agreements
    76,868       15,551       (4,423 )(1)             87,996  
Securities borrowed
    41,834             4,423  (1)             46,257  
Trading assets:
                                       
 
Debt and equity instruments
    169,120       11,584                       180,704  
 
Derivative receivables
    83,751       5,208                       88,959  
Securities
    60,244       84,951       (2,563 )(2)             142,632  
Interests in purchased receivables
          32,938       4,751  (3)             37,689  
Loans, net of allowance
    214,995       134,675       (4,751 )(3)     882  (A)     345,801  
Private equity investments
    7,250             2,563  (2)             9,813  
Accrued interest and accounts receivable
    12,356             (12,356 )(4)              
Premises and equipment
    6,487       2,960               (200 )(R)     9,247  
Goodwill
    8,511       2,061               32,779  (C)     41,220  
                              (2,061 )(C)        
                              (70 )(B)        
Other intangibles
    6,480       758               3,600  (E)     16,505  
                              4,900  (E)        
                              1,525  (E)        
                              (758 )(D)        
Other assets
    52,573       15,695       12,356  (4)     103  (F)     79,904  
                              (823 )(P)        
     
     
     
     
     
 
 
Total assets
  $ 770,912     $ 326,563     $     $ 37,759     $ 1,135,234  
     
     
     
     
     
 
Liabilities
                                       
Deposits — U.S. Noninterest-bearing
  $ 73,154     $     $ 44,316  (5,6)   $ (2,118 )(N)   $ 115,352  
 
Interest-bearing
    125,855             102,286  (6)     680  (G)     228,821  
 
Demand
          24,485       (24,485 )(5)              
 
Savings