<PAGE>

                                                                   EXHIBIT 10(Z)

                              SETTLEMENT AGREEMENT
                              --------------------

     THIS SETTLEMENT AGREEMENT (the "Agreement") is made and entered into as of
the 21st day of December, 1999, by and between John B. McCoy ("Executive") and
BANK ONE CORPORATION, a Delaware corporation (the "Company").

                              STATEMENT OF PURPOSE

     Executive is employed as Chairman and Chief Executive Officer of the
Company.  The parties hereto have agreed that Executive shall resign as a
director and officer of the Company and its Affiliates effective as of December
21, 1999 and that Executive's employment with the Company and its Affiliates
will cease effective as of January 15, 2000 (the "Date of Termination").  The
Company and Executive wish to settle in full all matters and claims, contractual
and non-contractual, relating to Executive's employment with the Company and its
Affiliates.  The term "Affiliate" means any business in which the Company owns a
direct or indirect 25% or greater equity interest.

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, the parties hereto agree as follows:

     1.  Termination of Employment; Termination Payments.  The Company and
Executive acknowledge that Executive shall remain on the Company's or an
Affiliate's payroll as a non-officer and receive base salary at his current
annual rate through the Date of Termination at which date Executive's employment
with the Company shall be terminated. Executive hereby resigns from all
officerships, directorships and other positions with the Company and its
Affiliates as of December 21, 1999, and agrees to acknowledge such resignation
pursuant to the attached letter of resignation.
<PAGE>

     2.  Severance and Supplemental Pension Benefits.  In consideration of
Executive's agreement relating to confidentiality, noncompetition and
nonsolicitation set forth in Paragraph 9 below, the Company agrees as follows:

     a.  Severance Benefits.  Executive shall be entitled to a lump sum cash
severance payment in the amount of $10.3 million, to be credited as of January
15, 2000 to his account under the Deferred Compensation Plan unless Executive
elects on or before December 31, 1999, to have such amount paid in cash, as of
January 15, 2000.  Such severance amount to be subject to all applicable
withholding and deductions.

     b.  Supplemental Pension Benefits.  Executive shall be entitled to an
aggregate pension benefit, payable in the form of a 50% joint and survivor
annuity, of $3,000,000 per annum commencing as of April 1, 2001. Such pension
benefit amount shall be inclusive of all amounts to which Executive is entitled
under all qualified and nonqualified defined benefit pension plans or
arrangements sponsored by the Company or any of its Affiliates, including
without limitation the Personal Pension Account Plan and the Supplemental
Personal Pension Account Plan. To the extent permitted under the applicable
pension plans, Executive may elect to receive such pension amount in any other
actuarially equivalent manner or to defer receipt thereof. To the extent that
the pension benefit provided by this paragraph exceeds the pension benefit to
which Executive would otherwise be entitled, payment of such excess shall be
made in accordance with the provisions of the Supplemental Executive Retirement
Plan. Executive will execute such forms as may be appropriate under such plans
to effect the foregoing payments.

     c.  Stock and Special Recognition Awards.  Executive's restricted stock
award granted February 16, 1999 shall be fully vested as of January 15, 2000.
Executive's Special Recognition Awards which would otherwise vest on October 22,
2000, and April 21, 2001 shall

                                       2
<PAGE>

vest on January 15, 2000 and, unless Executive elects on or before December 31,
1999, to have the amount of such awards paid in cash as of January 15, 2000,
such amount will be credited as of that date to the Executive's account under
the Deferred Compensation Plan. Such amounts shall be subject to all applicable
withholding and deductions. Each of Executive's outstanding stock options become
exercisable, if not already exercisable, on January 15, 2000 and shall continue
to be exercisable until the earliest of (i) January 15, 2005 (ii) the expiration
date of the option, or (iii) the date on which Executive violates the provisions
of Paragraph 9 below, determined without regard to the eighteen-month time
limitation otherwise applicable under Paragraphs 9(b) and 9(c) below.

     d.  Office Space and Secretarial Support.  The Company shall provide
Executive with reasonable office space and secretarial support for life or, if
earlier, until Executive commences full time employment with another employer.

     3.  Other Benefits.  Executive is a participant in certain stock incentive
plans and employee benefit plans maintained by the Company.  This Agreement
shall not change the terms of such plans or the benefits earned by or due to
Executive thereunder for services rendered to the Company through the Date of
Termination.  The benefits earned by or due to Executive in accordance with the
terms of such plans shall be paid or provided by the Company or such plans (as
the case may be) when due (whether such due date is on, before or after the Date
of Termination), and full payments and provision of benefits shall discharge
fully all obligations of the Company and such plans with respect to Executive's
benefits under such plans.  Notwithstanding the foregoing, Executive's pension
benefits shall be paid in accordance with the provisions of Paragraph 2(b)
above, and the severance benefits set forth in Paragraph 2(a) above shall be
inclusive of all other severance and all accrued vacation pay to which Executive
would

                                       3
<PAGE>

otherwise be entitled from the Company and its Affiliates. Executive
acknowledges that he is not entitled to a bonus for 1999. The benefits to which
Executive is entitled as a retiree of the Company have been set forth in a
letter to Executive dated December 21, 1999 from the Company's Executive Vice
President - Human Resources.

     In addition to the foregoing, the Company agrees to make Executive whole
for any loss he incurs on the sale of his Chicago residence on or before
December 31, 2000, and to reimburse him for all relocation and moving expenses
in connection therewith, all on an after tax basis.

     4.  Tax Withholding and Reporting.  The Company shall be entitled to
withhold from the benefits and payment described herein all income and
employment taxes required to be withheld by applicable law.

     5.  Release of the Company.  In consideration of the Company entering into
this Agreement, Executive, on behalf of himself and his heirs, personal
representatives, successors and assigns, hereby releases and forever discharges
the Company, its Affiliates, and each and every one of their respective present
and former directors, officers, employees, agents, successors, and assigns from
and against any and all claims, demands, damages, actions, causes of action,
costs and expenses, which Executive now has, may ever have had or may have
hereafter upon or by reason of any matter, cause or thing occurring, done or
omitted to be done prior to the date of this Agreement, that constitute
"Employment-Related Claims" or rights and claims Executive has or might have
under the Worker Adjustment and Retraining Notification Act, the Age
Discrimination in Employment Act of 1967, as amended ("ADEA"), Title VII of the
Civil Rights Act of 1964, as amended, and the Americans with Disabilities Act of
1990, as amended; provided, however, that this release shall not apply to any
claims which Executive may have for the payments or provision of the benefits
under this Agreement and shall not apply to

                                       4
<PAGE>

any rights Executive may have under applicable law to obtain contribution in the
event of the entry of judgment against him as a result of any act or failure to
act for which both Executive and the Company are jointly responsible. For
purposes of this Agreement, "Employment-Related Claims" means all rights and
claims Executive has or may have related to his employment by or status as an
employee, officer or director of the Company or any of its Affiliates or to the
termination of that employment or status or to any employment practices and
policies of the Company or its Affiliates.

     Executive acknowledges and agrees that he has read this release in its
entirety and that this release is a general release of all known and unknown
claims, including rights and claims arising under ADEA. Executive and the
Company further acknowledge and agree that:

     i.   This release does not release, waive or discharge any rights or claims
          that may arise for actions or omissions after the date of this
          Agreement;

     ii.  Executive is entering into this Agreement and releasing, waiving and
          discharging rights or claims only in exchange for consideration which
          he is not already entitled to receive;

     iii. Executive has been advised, and is being advised by this release, to
          consult with an attorney before executing this Agreement;

     iv.  Executive has been advised, and is being advised by this release, that
          he has up to twenty-one (21) days within which to consider this
          release; and

     v.   Executive is aware that this release will not become effective or
          enforceable until seven (7) days following his execution of this
          Agreement and that he may revoke this release at any time during such
          period by delivering (or causing to be delivered) to the Company at
          the address provided in Paragraph 14 hereof written

                                       5
<PAGE>

          notice of his revocation of this release no later than 5:00 p.m.
          eastern time on the seventh (7th) full date following his execution of
          this Agreement.

Executive further agrees and covenants that neither he, nor any person,
organization or other entity on his behalf, will file, charge, claim, sue or
cause or permit to be filed, charged, or claimed, any action for personal
equitable, monetary or other similar relief against the Company or its
Affiliates (including any action for damages, injunctive, declaratory or other
relief), arising from or relating in any way to his employment relationship, and
the terms, conditions and benefits payments resulting therefrom, or his
retirement and the termination of his employment relationship with the Company,
except as may be necessary to enforce the obligations of the Company to the
Executive in accordance with the express terms of this Agreement or under any
other plans or programs of the Company in which Executive participated and under
which Executive has accrued a benefit, involving any matter occurring from the
beginning of Executives' employment with the Company and its Affiliates to the
date of these presents, or involving any continuing effects of any actions or
practices which may have arisen or occurred from the beginning or such
employment to the date of these presents.  Executive agrees and covenants that
if Executive, or any other person, organization or entity on his behalf, files,
charges, claims, sues or causes or permits to be filed, charged, or claimed, any
action prohibited by the preceding sentence for personal equitable, monetary or
other similar relief, despite Executive's agreement not to do so hereunder, then
Executive will pay all of the costs and expenses of the Company (including
reasonable attorney's fees) incurred in the defense of any such action or
undertaking.

     6.  Release of Executive.  In consideration of Executive's entering into
this Agreement, the Company, for itself and its Affiliates and their respective
predecessors,

                                       6
<PAGE>

successors and assigns hereby releases and forever discharges Executive and his
heirs, personal representative, successors and assigns from and against any and
all claims, demands, damages, actions, causes of action, costs and expenses, of
whatever kind or nature, in law, equity or otherwise, which the Company or any
of said entities now has, may ever have had or may have hereafter upon or by
reason of any matter, cause or thing occurring, done or omitted to be done prior
to the date of this Agreement, relating to or arising out of Executive's status
as an officer, director or employee of the Company or any of said entities or
the termination of that status; provided, however, that this release shall not
apply to any claims the Company or any of said entities or parties may have
which arise out of or relate to the conviction of Executive for the commission
of a felony involving dishonesty with respect to the Company or any of said
entities or parties or arise out of any actions with respect to which the
Company would be precluded from indemnifying Executive under applicable law. As
of the date of this Agreement, the Company has no knowledge of any claims
against Executive arising out of the events described above.

     7.  Cooperation.  Executive agrees that he will assist the Company and its
Affiliates in the defense of any claims or potential claims that may be made or
threatened to be made against the Company and its Affiliates in any action, suit
or proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), and will assist the Company and its Affiliates in the prosecution
of any claims that may be made by the Company or any Affiliate in any
Proceeding, to the extent that such claims may relate to the period of
Executive's employment by the Company or its Affiliates.  The Company will
consult with Executive, and make reasonable efforts to schedule such assistance
so as not to materially disrupt Executive's business and personal affairs.
Executive agrees, unless precluded by law, to promptly inform the Company if

                                       7
<PAGE>

Executive is asked to participate (or otherwise become involved) in any
Proceeding involving such claims that may be filed against the Company or any
Affiliate.  Executive also agrees, unless precluded by law, to promptly inform
the Company if Executive is asked to assist in any or investigation (whether
governmental or private) of the Company or any Affiliate (or their actions),
regardless of whether a lawsuit has then been filed against the Company or any
Affiliate with respect to such investigation.  The Company agrees to reimburse
Executive for all of Executive's reasonable out-of-pocket expenses associated
with such assistance, including travel expenses.

     8.  Indemnification.

     a.  The Company agrees that if Executive is made a party, or is threatened
to be made a party to any Proceeding, by reason of the fact that he was a
director, officer or employee of the Company or was serving at the request of
the Company as director, officer, member, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, whether or not the basis of such
Proceeding is Executive's alleged action in an official capacity while serving
as director, officer, member, employee or agent, Executive shall be indemnified
and held harmless by the Company to the fullest extent permitted or authorized
by the Company's certificate of incorporation and bylaws against all cost,
expense, liability and loss (including without limitation, attorney's fees,
judgment, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by Executive in connection
therewith, and such indemnification shall continue as to Executive even though
he has ceased to be a director, member, employee or agent of the Company or
other entity and shall inure to the benefit of Executive's heirs, executors and
administrators. The Company shall advance to

                                       8
<PAGE>

Executive all reasonable costs and expenses incurred by him in connection with a
Proceeding within 20 days after receipt by the Company of a written request for
such advance. Such request shall include an undertaking by Executive
satisfactory to the Company to repay the amount of such advance if it shall
ultimately be determined that he is not entitled to be indemnified against such
costs and expenses.

     b.  The Company agrees to continue to cover Executive under its directors'
and officers' liability insurance policy as in effect from time to time until
such time as suits against Executive are no longer permitted by law.

     9.  Confidential Information/Noncompetition/Nonsolicitation.  In
consideration for the severance benefits and supplemental pension benefits set
forth in Paragraph 2 above, Executive agrees as follows:

     a.  Executive shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their respective businesses,
which shall have been obtained by Executive during the Executive's employment by
the Company or any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by Executive or representatives of
Executive in violation of this Agreement). Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it.

     b.  For eighteen months after the Date of Termination, Executive will not
directly or indirectly, own, manage, operate, control or participate in the
ownership, management, operation

                                       9
<PAGE>

or control of or be connected as an officer, employee, partner, director,
consultant or otherwise with, or have any financial interest in, any business
engaged in the financial services business in the states in which the Company or
its Affiliates operate a commercial banking or other financial services business
which is in material competition with the business conducted by the Company or
its Affiliates. Ownership for personal investment purposes only of less than 2%
of the voting stock of any publicly held corporation shall not constitute a
violation hereof.

     c.  For eighteen months after the Date of Termination, the Executive will
not, directly or indirectly, on behalf of the Executive or any other person,
solicit for employment any person employed by the Company or its Affiliates as
of the date hereof or known by the Executive at the time to be employed by the
Company or its Affiliates.

     d.  (i) Executive acknowledges and agrees that the restrictions contained
in this Paragraph 9 are reasonable and necessary to protect and preserve the
legitimate interests, properties, goodwill and business of the Company, that the
Company would not have entered into this Agreement in the absence of such
restrictions and that irreparable injury will be suffered by the Company should
Executive breach any of the provisions of this paragraph.  Executive represents
and acknowledges that (i) Executive has been advised by the Company to consult
Executive's own legal counsel in respect of this Agreement, (ii) Executive has
had full opportunity, prior to execution of this Agreement, to review thoroughly
this Agreement with Executive's counsel, and (iii) the provisions of this
Paragraph 9 are reasonable and these restrictions do not prevent Executive from
earning a reasonable livelihood.

     (ii)  Executive further acknowledges and agrees that a breach of any of the
restrictions in this Paragraph 9 cannot be adequately compensated by monetary
damages. Executive agrees

                                       10
<PAGE>

that that Company shall be entitled to preliminary and permanent injunctive
relief, without the necessity of proving actual damages, as well as provable
damages and an equitable accounting of all earnings, profits and other benefits
arising from any violation of this Paragraph 9, which rights shall be cumulative
and in addition to any other rights or remedies to which the Company may be
entitled. In the event that any of the provisions of this Paragraph 9 should
ever be adjudicated to exceed the time, geographic, service, or other
limitations permitted by applicable law in any jurisdiction, it is the intention
of the parties that the provisions shall be amended to the extent of the maximum
time, geographic, service, or other limitations permitted by applicable law,
that such amendment shall apply only within the jurisdiction of the court that
made such adjudication and that the provision otherwise be enforced to the
maximum extent permitted by law.

     (iii)  Executive irrevocably and unconditionally (i) agrees that any suit,
action or other legal proceeding arising out of this Paragraph 9, including
without limitation, any action commenced by the Company for preliminary and
permanent injunctive relief and other equitable relief, may be brought in the
United States District Court for the Northern District of Illinois or if such
court does not have jurisdiction or will not accept jurisdiction, in any court
of general jurisdiction in Chicago, Illinois, (iii) consents to the non-
exclusive jurisdiction of any such court in any such suit, action or proceeding,
and (iii) waive any objection which Executive may have to the laying of venue of
any such suit, action or proceeding in any such court.  Executive also
irrevocably and unconditionally consents to the service of any process,
pleading, notices or other papers in a manner permitted by the notice provisions
of this Paragraph 9.

     10.  Confidentiality.  For the period during which this Agreement has not
been publicly disclosed by the Company, Executive hereby covenants and agrees to
keep in full confidence all information concerning this Agreement except (i) to
the extent disclosure is or

                                       11
<PAGE>

may be required by a statute, by a court of law, by any governmental agency
having supervisory authority over the business of the Company or by any
administrative or legislative body (including a committee thereof) with apparent
jurisdiction to order him to divulge, disclose or make accessible such
information, (ii) to the extent disclosure to Executive's legal counsel and
personal financial advisors is reasonably necessary in connection with
Executive's consideration of the terms of this Agreement or Executive's personal
financial dealings, or (iii) to members of his immediate family.

     11.  Mutual Nondisparagement.  Executive shall not make any public
statements, encourage others to make statements or release information intended
to disparage or defame the Company or any of its respective directors or
officers. The Company shall not make public statements, encourage other to make
statements or release information intended to disparage or defame Executive's
reputations. Notwithstanding the foregoing, nothing in this Paragraph 11 shall
prohibit any person from making truthful statements when required by order of a
court or other body having jurisdiction. Except to the extent consistent with
the press release to be issued by the Company in connection with Executive's
termination of employment or with the prior written consent of the Company,
Executive will not make any direct or indirect written or oral statements to the
press, television, radio or other media concerning any matters pertaining to the
business and affairs of the Company, or any of its Affiliates, or any of their
officers or directors in their capacities as such, or pertaining to any matters
related to Executive's employment or termination of employment with the Company.

     12.  Resolution of Disputes.  Except as otherwise provided in Paragraph 9,
any disputes arising under or in connection with this Agreement shall, at the
election of Executive, be resolved by binding arbitration, to be held in
Chicago, Illinois in accordance with the rules and

                                       12
<PAGE>

procedures of the American Arbitration Association. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. Costs of the arbitration or litigation, including without limitation,
attorneys' fees or both parties, shall be borne by the Company and the Executive
in such proportion as the arbitrators may determine to be appropriate.

     13.  Compliance with Law.  Notwithstanding any provision contained in this
Agreement to the contrary, in the event the FDIC, Office of the Comptroller of
the Currency or the Federal Reserve Board commences a proceeding, action or
order challenging the payment to Executive of any benefit hereunder, or in the
event any such payment hereunder is otherwise prohibited by law, such benefit
payment shall be suspended until such time as the challenge is fully and finally
resolved and the applicable regulatory authority does not object to the payments
or until such payments are otherwise permitted by law.  In the event that any
challenge to the payments required by this Agreement is initiated by a
regulatory authority or other person, the Company shall notify Executive of such
challenge and shall promptly proceed in good faith to attempt to resolve such
challenge in a manner that enables the Company to make to Executive all payments
required hereunder.

     14.  Notices.  All notices, requests, demands or other communications under
this Agreement will be in writing and shall be deemed to have been duly given
when delivered in person or deposited in the United States mail, postage
prepaid, by registered or certified mail, return receipt requested, to the party
to whom such notice is being given as follows:

                                       13
<PAGE>

     As to Executive:
                    John B. McCoy
                    [Address]




     As to the Company:
                    Bank One Corporation
                    1 Bank One Plaza
                    Chicago, Illinois 60670
                    Attention: General Counsel

Either party may change his or its address or the name of the person to whose
attention the notice or other communication shall be directed from time to time
by serving notice thereof upon the other party as provided herein.

     15.  Governing Law.  This Agreement, and the rights and obligations of the
parties hereto, shall be governed by and construed in accordance with the laws
of the State of Delaware, without regard to principles of the conflicts of laws.
If any provision hereof is unenforceable, such provision shall be fully
severable, and this Agreement shall be construed and enforced as if such
unenforceable provision had never comprised a part hereof, the remaining
provisions hereof shall remain in full force and effect, and the court
construing the Agreement shall add as a part hereof a provision as similar in
terms and effect to such unenforceable provision as may be enforceable, in lieu
of the unenforceable provision.

     16.  Representation of the Company.  The Company represents and warrants to
Executive that the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized on behalf of the Company by its Board of Directors and that all
corporate action required to be taken by the Company for the execution, delivery
and performance of this Agreement has been duly and

                                       14
<PAGE>

effectively taken. The Company acknowledges that Executive has relied upon such
representations and warranties in entering into this Agreement.

     17.  Prior Agreements.  This Agreement sets forth the entire agreement
between the parties hereto, and fully supersedes any and all prior oral or
written agreements between the parties pertaining to the subject matter hereof.
Executive acknowledges that his Change in Control Employment Agreement,
effective as of October 1, 1999, shall terminate on the Date of Termination and
no benefits shall be payable thereunder.

     18.  Waiver of Breach.  The waiver by Executive or the Company of a breach
of any provision of this Agreement shall not operate as or be deemed a waiver of
any subsequent breach by Executive or the Company.  Continuation of benefits
hereunder by the Company following a breach by Executive of any provision of
this Agreement shall not preclude the Company from thereafter exercising any
right that it may otherwise independently have to terminate said benefits based
upon the same violation.

     19.  Counterparts.  This Agreement may be executed in more than one
counterpart, but all of which together will constitute one and the same
agreement.

     20.  Amendments.  This Agreement may be amended or canceled only by mutual
agreement of the parties in writing without the consent of any other person.  So
long as Executive shall live, no person, other than the parties hereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.

                                       15
<PAGE>

     IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company has
caused this Agreement to be executed by its duly authorized representative, all
as of the date first above written.

     Witness:

          /s/ Sherman I. Goldberg               /s/ John B. McCoy
     --------------------------------      ----------------------------------
                                                JOHN B. MCCOY


                                           BANK ONE CORPORATION


                                           By:  /s/ Timothy P. Moen
                                              -------------------------------
                                                Executive Vice President
                                                Head, Human Resources

                                       16
<PAGE>

                                  RESIGNATION
                                  -----------


     To:  Bank One Corporation


     I hereby resign from my positions as director and Chairman and Chief
Executive Officer of Bank One Corporation and from all other offices and
directorships I hold with Bank One Corporation and all of its affiliated and
subsidiary corporations, effective December 21, 1999.


Dated: December 21, 1999                   /s/ John B. McCoy
                                     -------------------------------------
                                     JOHN B. MCCOY

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