Bank One Corporation - Page 33

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          which maintained the floors, etc., for FNBC’s building, and                 
          charges for maintenance of electronic and computer equipment;               
          (6) charges for data processing systems, virtual memory and                 
          mainframe computer systems; (7) charges from FNBC’s commercial              
          bank credit area; (8) charges from FNBC’s internal mail and                 
          corporate staff; (9) charges from FNBC’s internal audit                     
          department and finance department; and (10) charges for high                
          level expenditures for top level executives such as, but not                
          necessarily, a corporate jet.                                               
          XI.  FNBC’s Credit Adjustment                                               
               A.  Overview                                                           
               At the inception of each swap, FNBC (through its finance               
          department) determined an initial credit adjustment for that                
          swap.  While the midmarket values for each swap were recalculated           
          annually to determine yearend swap values, FNBC never                       
          recalculated its credit adjustments for its swaps.                          
                    1.  Initial and Subsequent Methods                                
               For the relevant years, FNBC used two different methods to             
          calculate its credit adjustments.  It used one method from 1990             
          through the third quarter of 1992.  It used a second method for             
          new swaps that arose in the fourth quarter of 1992 through 1993.            
          As to the two methods, FNBC considered the first method to be the           
          more accurate but also believed that the first method was more              
          error prone.                                                                






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Last modified: May 25, 2011