-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, H9LwX4I1htQJVqa1afZNC1sXK0nsItSYfz9O4Tc9T/734R50D+1+iyDn80hQtSXL Zce4jxHoR4LpEJNsTO6aqg== 0000950135-95-001029.txt : 19950501 0000950135-95-001029.hdr.sgml : 19950501 ACCESSION NUMBER: 0000950135-95-001029 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 19950428 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLEET FINANCIAL GROUP INC /RI/ CENTRAL INDEX KEY: 0000050341 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 050341324 STATE OF INCORPORATION: RI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 033-58933 FILM NUMBER: 95532923 BUSINESS ADDRESS: STREET 1: 50 KENNEDY PLZ CITY: PROVIDENCE STATE: RI ZIP: 02903 BUSINESS PHONE: 4012785800 MAIL ADDRESS: STREET 1: 111 WESTMINISTER STREET CITY: PROVIDENCE STATE: RI ZIP: 02903 FORMER COMPANY: FORMER CONFORMED NAME: FLEET NORSTAR FINANCIAL GROUP INC DATE OF NAME CHANGE: 19920525 FORMER COMPANY: FORMER CONFORMED NAME: FLEET FINANCIAL GROUP INC DATE OF NAME CHANGE: 19880110 FORMER COMPANY: FORMER CONFORMED NAME: INDUSTRIAL NATIONAL CORP DATE OF NAME CHANGE: 19820512 S-4 1 FLEET FINANCIAL GROUP, INC. 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 1995 REGISTRATION NO. 33- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ FLEET FINANCIAL GROUP, INC. (Exact name of Registrant as specified in its charter) RHODE ISLAND 05-0341324 6711 (State or other jurisdiction of (I.R.S. Employer (Primary Standard Industrial incorporation or organization) Identification No.) Classification Code Number)
50 KENNEDY PLAZA, PROVIDENCE, RHODE ISLAND 02903 401-278-5800 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ------------------------ WILLIAM C. MUTTERPERL, ESQ. FLEET FINANCIAL GROUP, INC. 50 Kennedy Plaza, Providence, Rhode Island 02903 (401) 278-5880 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------ Copies to: LAURA N. WILKINSON, ESQ. CRAIG M. WASSERMAN, ESQ. J. MICHAEL SHEPHERD, ESQ. WILLIAM S. RUBENSTEIN, ESQ. EDWARDS & ANGELL WACHTELL, LIPTON, SHAWMUT NATIONAL SKADDEN, ARPS, SLATE, 2700 Hospital Trust Tower ROSEN & KATZ CORPORATION MEAGHER & FLOM Providence, Rhode Island 02903 51 West 52nd Street One Federal Street 919 Third Avenue
------------------------ CALCULATION OF REGISTRATION FEE ================================================================================================================================= Proposed Proposed Amount Maximum Maximum Amount of Title of each Class of to be Offering Price Aggregate Registration Securities to be Registered Registered(1) Per Share Offering Price Fee - --------------------------------------------------------------------------------------------------------------------------------- Common Stock, $1 par value (2).................... 116,139,576 shares (3) $3,449,561,472(4) $1,189,504 - --------------------------------------------------------------------------------------------------------------------------------- Preferred Stock with Cumulative and Adjustable Dividends, no par value(2)...................... 688,700 shares (3) $ 34,435,000(5) $ 11,874 - --------------------------------------------------------------------------------------------------------------------------------- Depositary Shares, each representing a 1/10 interest in a share of 9.30% Cumulative 5,750,000 Preferred Stock, no par value................... depositary shares (3) $ 149,500,000(6) $ 51,552 - --------------------------------------------------------------------------------------------------------------------------------- Depositary Shares, each representing a 1/10 interest in a share of 9.35% Cumulative 5,000,000 Preferred Stock, no par value................... depositary shares (3) $ 130,600,000(7) $ 45,043 - --------------------------------------------------------------------------------------------------------------------------------- Warrants to Purchase Common Stock................. 1,185,836 warrants (3) $ 6,977,854(8) $ 2,406 - --------------------------------------------------------------------------------------------------------------------------------- Common Stock Issuable upon exercise of the Warrants(2)..................................... 1,185,836 shares(9) (3) (3) (3) - --------------------------------------------------------------------------------------------------------------------------------- Total..................................... $3,771,074,326 $1,300,379(10) =================================================================================================================================
(1) This Registration Statement covers the maximum number of the Registrant's securities that would be issued in the transaction described herein or upon exercise of the options or warrants issued in the transaction described herein. (2) Including preferred shares purchase rights. (3) Not applicable. (4) Computed pursuant to Rule 457(f)(1), based upon the market value of the securities to be cancelled in the merger (130,172,131 shares of Shawmut common stock, consisting of 116,357,871 shares of Shawmut common stock outstanding at April 21, 1995 plus 13,814,260 shares issuable upon exercise of stock options outstanding at April 21, 1995 plus 8,028,998 shares of Shawmut common stock representing the maximum number of shares of Shawmut common stock to be issued in its acquisition of Northeast Federal Corp.). (5) Computed pursuant to Rule 457(f)(1), based upon the book value of the securities to be cancelled in the merger (688,700 shares of Shawmut preferred stock with cumulative and adjustable dividends). (6) Computed pursuant to Rule 457(f)(1), based upon the market value of the securities to be cancelled in the merger (5,750,000 depositary shares, each representing 1/10 of a share of Shawmut 9.30% cumulative preferred stock). (7) Computed pursuant to Rule 457(f)(1), based upon the market value of the securities to be cancelled in the merger (5,000,000 depositary shares, each representing 1/10 of a share of Shawmut 9.35% cumulative preferred stock). (8) Computed pursuant to Rule 457(f)(1), based upon the market value of the securities to be cancelled in the merger (1,329,115 warrants to purchase Shawmut common stock). (9) Pursuant to Rule 416, there are also being registered such additional shares of Common Stock as may become issuable pursuant to anti-dilution provisions of the Warrants. (10) $715,313 of the Registration Fee was previously paid in connection with the Registrant's Preliminary Proxy Statement filed with the Commission on Schedule 14A on March 17, 1995. APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement and all other conditions precedent to the merger of Shawmut National Corporation with and into the Registrant have been satisfied or waived as described in the enclosed Joint Proxy Statement-Prospectus. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. / / THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ 2 FLEET FINANCIAL GROUP, INC. CROSS-REFERENCE SHEET FOR REGISTRATION STATEMENT ON FORM S-4 AND JOINT PROXY STATEMENT-PROSPECTUS.
LOCATION IN JOINT PROXY S-4 ITEM STATEMENT-PROSPECTUS ------------------------------------------ ------------------------------------------ 1. Forepart of Registration Statement and Outside Front Cover Page of Prospectus.... Facing Page of Registration Statement; Cross- Reference Sheet; Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus............................. Table of Contents; Available Information; Information Incorporated by Reference 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Information............. Summary of Proxy Statement-Prospectus; Selected Consolidated Financial Data 4. Terms of the Transaction.................. Summary of Proxy Statement-Prospectus; The Merger; Description of Fleet Capital Stock, Fleet New Preferred Stock, Fleet New Depositary Shares and Fleet Warrants; Comparison of Stockholders' Rights 5. Pro Forma Financial Information........... Unaudited Pro Forma Condensed Combined Financial Statements; Notes to Unaudited Pro Forma Condensed Combined Financial Statements 6. Material Contacts with the Company being Acquired.................................. Not Applicable 7. Additional Information Required for Reoffering by Persons and Parties Deemed to be Underwriters........................ Not Applicable 8. Interests of Named Experts and Counsel.... Legal Opinions 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities............................... Not Applicable 10. Information with Respect to S-3 Registrants............................... Not Applicable 11. Incorporation of Certain Information by Reference................................. Information Incorporated by Reference 12. Information with Respect to S-2 or S-3 Registrants............................... Not Applicable 13. Incorporation of Certain Information by Reference................................. Not Applicable 14. Information with Respect to Registrants Other Than S-2 or S-3 Registrants......... Not Applicable 15. Information with Respect to S-3 Companies................................. Information Incorporated by Reference 16. Information with Respect to S-2 or S-3 Companies................................. Not Applicable 17. Information with Respect to Companies Other Than S-2 or S-3 Companies........... Not Applicable
3
LOCATION IN JOINT PROXY S-4 ITEM STATEMENT-PROSPECTUS ------------------------------------------ ------------------------------------------ 18. Information if Proxies, Consents or Authorizations are to be Solicited........ Cover Page; Information Incorporated by Reference; Summary of Proxy Statement- Prospectus; Meeting of Fleet Stockholders; Meeting of Shawmut Stockholders; The Merger; Board of Directors, Management and Operations of Fleet Following the Merger; Interests of Certain Persons in the Merger; Involvement in Certain Legal Proceedings; Experts; Solicitation of Proxies 19. Information if Proxies, Consents or Authorizations are not to be Solicited, or in an Exchange Offer...................... Not Applicable
4 This Registration Statement contains two forms of the Joint Proxy Statement-Prospectus to be delivered separately to stockholders of Fleet Financial Group, Inc. ("Fleet") and Shawmut National Corporation ("Shawmut") in connection with their respective Annual Meetings. The Joint Proxy Statement-Prospectus to be delivered to Fleet stockholders in connection with the Fleet-Shawmut merger described herein will contain a letter to Fleet stockholders and a Notice of the Fleet Annual Meeting, as well as a separate table of contents and a separate section at the end of the Joint Proxy Statement-Prospectus containing information on the amendment and restatement of the Fleet articles of incorporation, the election of Fleet directors to serve for terms of three years until their successors are duly elected and qualified and the ratification of the selection of independent auditors. Similarly, the Joint Proxy Statement-Prospectus to be delivered to Shawmut stockholders in connection with the Fleet-Shawmut merger will contain a letter to Shawmut stockholders and a Notice of the Shawmut Annual Meeting, as well as a separate table of contents and a separate section at the end of the Joint Proxy Statement-Prospectus containing information on the election of Shawmut directors to serve until the next annual meeting of stockholders of Shawmut until their successors are duly elected and qualified, or, if earlier, until the effective time of the merger, and the appointment of independent accountants. As described in the accompanying Joint Proxy Statement-Prospectus, from and after the effective time of the merger, the Fleet Board of Directors will consist of 20 members, 12 of whom will be directors appointed by Fleet's chairman and the Fleet Board of Directors and 8 of whom will be directors appointed by Shawmut's chairman and the Shawmut Board of Directors. 5 [LOGO] May 8, 1995 Dear Holder of Fleet Common Stock: You are cordially invited to attend the Annual Meeting of the Stockholders (the "Fleet Meeting") of Fleet Financial Group, Inc., a Rhode Island corporation ("Fleet"), to be held on June 21, 1995 at 11:00 a.m. at the Rhode Island Convention Center, 99 Sabin Street, Providence, Rhode Island. At the Fleet Meeting, you will be asked to consider and vote upon a proposal to approve and adopt an Agreement and Plan of Merger dated as of February 20, 1995 (the "Merger Agreement"), by and between Fleet and Shawmut National Corporation, a Delaware corporation ("Shawmut"), and each of the transactions contemplated thereby, pursuant to which Shawmut will be merged with and into Fleet (the "Merger"). A copy of the Merger Agreement is attached to the accompanying Joint Proxy Statement-Prospectus as Exhibit A. At the effective time of the Merger, each share of Shawmut common stock, $.0l par value ("Shawmut Common Stock"), will be entitled to receive 0.8922 shares of Fleet common stock, $1.00 par value, including the associated preferred share purchase rights (the "Fleet Common Stock"). This significant transaction for Fleet will create one of the ten largest banking organizations in the United States, and the only such organization to be headquartered in New England. The Merger will create a strong and profitable banking institution that is well-positioned to meet the competitive challenges of the dramatically changing market for United States banking and financial services. By combining Fleet's and Shawmut's various banking and non-banking businesses, the combined company will be able to provide a broad array of financial products and services to the customers and communities it serves more efficiently than either company could provide separately, creating significant benefits for the customers and stockholders of both companies. Enclosed are a Notice of Annual Meeting of Stockholders and a Joint Proxy Statement-Prospectus which describes the Merger and the background to the transaction. You are urged to read all of these materials carefully. The Board of Directors has fixed the close of business on May 3, 1995 as the record date for the Fleet Meeting. Accordingly, only stockholders of record on that date will be entitled to notice of, and to vote at, the Fleet Meeting or any adjournments or postponements thereof. The affirmative vote of the holders of a majority of the shares of Fleet Common Stock outstanding and entitled to vote is necessary to approve and adopt the Merger Agreement and each of the transactions contemplated thereby. THE BOARD OF DIRECTORS OF FLEET HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF APPROVING AND ADOPTING THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER. At the Fleet Meeting, you will also be asked to consider and vote upon a proposal to amend and restate Fleet's Restated Articles of Incorporation to increase the authorized shares of Fleet Common Stock from 300,000,000 to 600,000,000, to change the par value of the Fleet Common Stock from $1.00 to $0.01 and to include certain other technical amendments. You will also be asked to consider and vote upon the election of directors to serve on the Fleet Board of Directors for terms of three years until their successors are elected and qualified and the ratification of the selection of independent auditors for 1995. As described in the accompanying Joint Proxy Statement-Prospectus, from and after the effective time of the Merger the Fleet Board of Directors will consist of 20 6 members, 12 of whom will be directors appointed by myself and the Fleet Board of Directors and 8 of whom will be directors appointed by Shawmut's Chairman and the Shawmut Board of Directors. The Fleet Board of Directors recommends that stockholders vote FOR the amendment and restatement of Fleet's Restated Articles of Incorporation, FOR the proposed slate of directors and FOR the ratification of the selection of independent auditors. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE FLEET MEETING, WHETHER OR NOT YOU PLAN TO ATTEND. AN ABSTENTION OR FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER. ACCORDINGLY, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE FLEET MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD. I strongly support the Merger of Shawmut with Fleet and join with the other members of the Board in enthusiastically recommending the Merger to you. We urge you to vote in favor of approval and adoption of the Merger Agreement, as well as each of the additional proposals referred to herein. If you should have any questions about the Merger or need assistance in completing your proxy card, please contact Fleet's information agent, Georgeson & Co. at 1-800-223-2064. Very truly yours, /s/ Terrence Murray TERRENCE MURRAY Chairman and President 7 FLEET FINANCIAL GROUP, INC. NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 21, 1995 The Annual Meeting of Stockholders (the "Fleet Meeting") of Fleet Financial Group, Inc., a Rhode Island corporation ("Fleet"), will be held on June 21, 1995 at 11:00 a.m. at the Rhode Island Convention Center, 99 Sabin Street, Providence, Rhode Island, for the following purposes: 1. To consider and vote upon a proposal to approve and adopt the Agreement and Plan of Merger, dated as of February 20, 1995 (the "Merger Agreement"), by and between Fleet and Shawmut National Corporation, a Delaware corporation ("Shawmut"), and the consummation of the transactions contemplated thereby, pursuant to which Shawmut will be merged (the "Merger") with Fleet, upon the terms and subject to the conditions set forth in the Merger Agreement, as are more fully described in the enclosed Joint Proxy Statement-Prospectus. A copy of the Merger Agreement is attached as Exhibit A to the accompanying Joint Proxy Statement-Prospectus. 2. To consider and vote upon a proposal to amend and restate Fleet's Restated Articles of Incorporation to increase the authorized shares of Fleet Common Stock, $1.00 par value ("Fleet Common Stock") from 300,000,000 to 600,000,000, to change the par value of the Fleet Common Stock from $1.00 to $0.01 and to include certain other technical amendments. 3. To elect five directors to serve for terms of three years until their successors are elected and qualified. As described in the accompanying Joint Proxy Statement-Prospectus, from and after the effective time of the Merger, the Fleet Board of Directors will consist of 20 members, 12 of whom will be directors appointed by Fleet's Chairman and the Fleet Board of Directors and 8 of whom will be directors appointed by Shawmut's Chairman and the Shawmut Board of Directors. 4. To ratify the selection of KPMG Peat Marwick LLP as independent auditors to audit Fleet's books and accounts for the year ending December 3l, 1995. 5. To transact such other business as may properly be brought before the Annual Meeting, or any adjournments or postponements thereof. The Board of Directors has fixed the close of business on May 3, 1995 as the record date for determining stockholders entitled to vote at the Fleet Meeting and any adjournments or postponements thereof. The holders of record of Fleet Common Stock at said Record Date are entitled to notice of and to vote at the Fleet Meeting and any adjournments or postponements thereof. Fleet's transfer books will not be closed. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AS WELL AS EACH OF THE FOREGOING ADDITIONAL ACTIONS. By Order of the Board of Directors, WILLIAM C. MUTTERPERL Secretary Providence, Rhode Island May 8, 1995 WHETHER OR NOT YOU PLAN TO ATTEND THE FLEET MEETING IN PERSON, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE FLEET MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD. 8 [LOGO] SHAWMUT NATIONAL CORPORATION 777 Main Street Hartford, Connecticut 06115 One Federal Street Boston, Massachusetts 02211 May 8, 1995 Dear Shareholder: You are cordially invited to attend the Annual Meeting of Stockholders of Shawmut National Corporation ("Shawmut") which will be held at the Federal Reserve Bank of Boston, 600 Atlantic Avenue, Boston, Massachusetts at 10:00 a.m., local time, on June 21, 1995 (the "Shawmut Annual Meeting"). At the Shawmut Annual Meeting, Shawmut shareholders will be asked to consider and vote upon a proposal to approve and adopt an Agreement and Plan of Merger, dated February 20, 1995 (the "Merger Agreement"), between Shawmut and Fleet Financial Group, Inc. ("Fleet"), and the consummation of the transactions contemplated thereby, including the merger (the "Merger") of Shawmut with and into Fleet. The Merger is further described in the accompanying Joint Proxy Statement-Prospectus and a copy of the Merger Agreement is attached thereto as Exhibit A. The Merger is designed to create one of the nation's premier banking organizations. Your Board of Directors believes that the Merger presents a unique opportunity to create a combined entity that will be stronger than Shawmut or Fleet alone and will have the financial and managerial resources to compete effectively in the rapidly changing marketplace for banking and financial services. Upon consummation of the Merger, each outstanding share of Shawmut common stock will be converted into 0.8922 shares of Fleet common stock. In addition, upon consummation of the Merger, each holder of Shawmut preferred stock and depositary shares will be entitled to receive Fleet preferred stock or depositary shares, as applicable, and each holder of Shawmut options and warrants to purchase Shawmut common stock will receive options or warrants, as applicable, to acquire Fleet common stock. At the Shawmut Annual Meeting, Shawmut shareholders will also be asked to consider and vote upon the election of directors to serve on the Shawmut Board until the next annual meeting of Shawmut until their successors are elected and qualified, or, if earlier, until consummation of the Merger, and the appointment of Price Waterhouse LLP as Shawmut's independent accountant for 1995, or, if earlier, until consummation of the Merger. As described in the accompanying Joint Proxy Statement-Prospectus, from and after the effective time of the Merger, the Fleet Board of Directors will consist of 20 members, 12 of whom will be directors appointed by Fleet's Chairman and the Fleet Board of Directors and 8 of whom will be directors appointed by myself and the Shawmut Board of Directors. The Shawmut Board has determined that the Merger Agreement and the transactions contemplated thereby are in the best interests of Shawmut and its shareholders. THE SHAWMUT BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, FOR THE PROPOSED SLATE OF DIRECTORS AND FOR THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS AT THE SHAWMUT ANNUAL MEETING. The accompanying Joint Proxy Statement-Prospectus sets forth the voting rights of holders of Shawmut common stock with respect to these matters, and describes the matters to be acted upon at the Shawmut Annual Meeting. Holders of Shawmut preferred stock are not entitled to vote at the Shawmut Annual Meeting. Shareholders are urged to review carefully the attached Joint Proxy Statement-Prospectus, which contains a detailed description of the Merger, its terms and conditions and the transactions contemplated thereby. If the Merger is consummated, holders of Shawmut Preferred Stock with Cumulative and Adjustable Dividends who have complied with the requirements of Section 262 of the Delaware General Corporation Law 9 will have certain appraisal rights under Delaware Law, as described in more detail in the accompanying Joint Proxy Statement-Prospectus. BECAUSE OF THE SIGNIFICANCE OF THE PROPOSED MERGER TO SHAWMUT, YOUR PARTICIPATION IN THE SHAWMUT ANNUAL MEETING, IN PERSON OR BY PROXY, IS ESPECIALLY IMPORTANT. AN ABSTENTION OR FAILURE TO EITHER ATTEND AND VOTE AT THE ANNUAL MEETING OR SUBMIT A PROXY WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER AGREEMENT. ACCORDINGLY, PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY IN THE POSTAGE-PAID ENVELOPE THAT HAS BEEN PROVIDED TO YOU FOR YOUR CONVENIENCE. IF YOU ATTEND THE SHAWMUT ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD. Promptly after the Merger, a letter of transmittal will be mailed to each holder of record of shares of Shawmut capital stock and depositary shares. PLEASE DO NOT SEND YOUR STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD TO THE EXCHANGE AGENT UNLESS AND UNTIL YOU RECEIVE THE LETTER OF TRANSMITTAL, WHICH WILL INCLUDE INSTRUCTIONS AS TO THE PROCEDURE TO BE USED IN SENDING YOUR STOCK CERTIFICATES OR DEPOSITARY RECEIPTS. I urge you to vote FOR the Merger Agreement and each of the transactions contemplated thereby as well as each of the additional proposals referred to herein. Thank you, and I look forward to seeing you at the Shawmut Annual Meeting. Sincerely, JOEL B. ALVORD Chairman and Chief Executive Officer 10 SHAWMUT NATIONAL CORPORATION 777 Main Street One Federal Street Hartford, Connecticut 06115 Boston, Massachusetts 02211
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 21, 1995 The Annual Meeting of Stockholders (the "Shawmut Meeting") of Shawmut National Corporation, a Delaware corporation ("Shawmut"), will be held on June 21, 1995 at 10:00 a.m., local time, at the Federal Reserve Bank of Boston, 600 Atlantic Avenue, Boston, Massachusetts for the following purposes: 1. To consider and vote upon a proposal to approve and adopt the Agreement and Plan of Merger, dated as of February 20, 1995 (the "Merger Agreement"), by and between Shawmut and Fleet Financial Group, Inc., a Rhode Island corporation ("Fleet"), and the consummation of the transactions contemplated thereby, pursuant to which Shawmut will be merged with Fleet (the "Merger"), upon the terms and subject to the conditions set forth in the Merger Agreement, as are more fully described in the enclosed Joint Proxy Statement-Prospectus. A copy of the Merger Agreement is attached as Exhibit A to the accompanying Joint Proxy Statement-Prospectus. 2. To elect directors to serve until the next annual meeting of stockholders of Shawmut until their successors are elected and qualified, or, if earlier, until the effective time of the Merger. As described in the accompanying Joint Proxy Statement-Prospectus, from and after the effective time of the Merger, the Fleet Board of Directors will consist of 20 members, 12 of whom will be directors appointed by Fleet's Chairman and the Fleet Board of Directors and 8 of whom will be directors appointed by Shawmut's Chairman and the Shawmut Board of Directors. 3. To act upon the appointment of Price Waterhouse LLP as independent accountants for Shawmut for 1995 or, if earlier, until the effective time of the Merger. 4. To transact such other business as may properly be brought before the Shawmut Meeting, or any adjournments or postponements thereof. The Board of Directors has fixed the close of business on May 3, 1995 as the record date (the "Record Date") for determination of stockholders entitled to notice of and to vote at the Shawmut Meeting and any adjournments or postponements thereof. A list of stockholders of record will be available for examination by any stockholder for purposes germane to the meeting at Shawmut's headquarters located at 777 Main Street, Hartford, Connecticut and One Federal Street, Boston, Massachusetts during ordinary business hours for a period of at least ten days prior to the Shawmut Meeting and at the Shawmut Meeting. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS APPROVE AND ADOPT THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, APPROVE THE ELECTION OF DIRECTORS AND APPROVE THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS. If the Merger is consummated, holders of Shawmut Preferred Stock with Cumulative and Adjustable Dividends who have complied with the requirements of Section 262 of the Delaware General Corporation Law will have certain appraisal rights under Delaware Law. See "THE MERGER -- Appraisal Rights" in the accompanying Joint Proxy Statement-Prospectus. By Order of the Board of Directors, J. MICHAEL SHEPHERD Executive Vice President, General Counsel and Secretary Hartford, Connecticut Boston, Massachusetts May 8, 1995 WHETHER OR NOT YOU PLAN TO ATTEND THE SHAWMUT MEETING IN PERSON, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE SHAWMUT MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD. 11 FLEET FINANCIAL GROUP, INC. SHAWMUT NATIONAL CORPORATION 50 Kennedy Plaza 777 Main Street Providence, RI 02903 Hartford, Connecticut 06115 One Federal Street Boston, Massachusetts 02211
JOINT PROXY STATEMENT-PROSPECTUS ANNUAL MEETING OF STOCKHOLDERS FLEET FINANCIAL GROUP, INC. ANNUAL MEETING OF STOCKHOLDERS SHAWMUT NATIONAL CORPORATION MAY 8, 1995 This Joint Proxy Statement-Prospectus is being furnished in connection with the solicitation of proxies by the Board of Directors (the "Fleet Board") of Fleet Financial Group, Inc. ("Fleet") to be used at the Fleet Annual Meeting of Stockholders to be held on June 21, 1995 (the "Fleet Meeting"). At the Fleet Meeting, holders of the common stock, par value $1.00 per share, of Fleet (the "Fleet Common Stock") will consider and vote upon a proposal to approve and adopt an Agreement and Plan of Merger dated as of February 20, 1995 (the "Merger Agreement") by and between Fleet and Shawmut National Corporation ("Shawmut") providing for the merger of Shawmut with and into Fleet (the "Merger"). This Joint Proxy Statement-Prospectus is also furnished in connection with the solicitation of proxies by the Board of Directors (the "Shawmut Board") of Shawmut to be used at the Shawmut Annual Meeting of Stockholders to be held on June 21, 1995 (the "Shawmut Meeting"). At the Shawmut Meeting, holders of the common stock, par value $.01 per share, of Shawmut (the "Shawmut Common Stock") will consider and vote upon a proposal to approve and adopt the Merger Agreement. The Merger Agreement is attached hereto as Exhibit A and is incorporated herein by reference. This Joint Proxy Statement-Prospectus is also being furnished to holders of Fleet Common Stock and holders of Shawmut Common Stock for the purpose of considering and voting upon separate proposals to elect directors and approve auditors for their respective corporations, and, in the case of Fleet, to amend and restate Fleet's Restated Articles of Incorporation (the "Fleet Existing Articles") to increase the authorized shares of Fleet Common Stock from 300,000,000 to 600,000,000, to change the par value of the Fleet Common Stock from $1.00 to $0.01 and to include certain other technical amendments. Information with respect to these proposals is being furnished separately to each of the stockholders of Shawmut and Fleet at the end of this Joint Proxy Statement-Prospectus. (continued on next page) THE SHARES OF FLEET COMMON STOCK, FLEET NEW PREFERRED STOCK, FLEET NEW DEPOSITARY SHARES AND FLEET WARRANTS OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY OF FLEET AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER FEDERAL OR STATE GOVERNMENT AGENCY. THE SECURITIES OF FLEET OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. This Joint Proxy Statement-Prospectus and the respective forms of proxy are first being mailed on or about May 11, 1995. 12 (continued from prior page) At the effective time of the Merger: (i) each share of Shawmut Common Stock, other than shares held in Shawmut's treasury or directly or indirectly by Fleet or its subsidiaries or by Shawmut or its subsidiaries (except for in both cases shares held in a fiduciary capacity or in respect of a debt previously contracted), will be converted into the right to receive 0.8922 shares (the "Common Exchange Ratio") of Fleet Common Stock, including the associated preferred share purchase rights; (ii) each share of preferred stock with cumulative and adjustable dividends of Shawmut (the "Shawmut Adjustable Preferred"), except for shares of Shawmut Adjustable Preferred as to which appraisal rights are perfected, will be converted into the right to receive one share of preferred stock with cumulative and adjustable dividends of Fleet (the "Fleet Adjustable Preferred"); (iii) each share of 9.30% cumulative preferred stock of Shawmut (the "Shawmut 9.30% Preferred") will be converted into the right to receive one share of 9.30% cumulative preferred stock of Fleet (the "Fleet 9.30% Preferred"); and (iv) each share of 9.35% cumulative preferred stock of Shawmut (the "Shawmut 9.35% Preferred, and together with the Shawmut Adjustable Preferred and the Shawmut 9.30% Preferred, collectively, the "Shawmut Preferred", and the Shawmut Common Stock, together with the Shawmut Preferred, collectively the "Shawmut Capital Stock") will be converted into the right to receive one share of 9.35% cumulative preferred stock of Fleet (the "Fleet 9.35% Preferred", and together with the Fleet Adjustable Preferred and the Fleet 9.30% Preferred, collectively, the "Fleet New Preferred Stock"); and (v) the depositary shares, each representing 1/10 of a share of Shawmut 9.30% Preferred (the "Shawmut 9.30% Depositary Shares") and the depositary shares, each representing 1/10 of a share of Shawmut 9.35% Preferred (the "Shawmut 9.35% Depositary Shares" and together with the Shawmut 9.30% Depositary Shares, the "Shawmut Depositary Shares") will be converted respectively into depositary shares, each representing 1/10 of a share of Fleet 9.30% Preferred (the "Fleet 9.30% Depositary Shares") and depositary shares, each representing 1/10 of a share of Fleet 9.35% Preferred (the "Fleet 9.35% Depositary Shares", and together with the Fleet 9.30% Depositary Shares, the "Fleet New Depositary Shares"). The terms of the Fleet New Preferred Stock and the Fleet New Depositary Shares will be substantially the same as the terms of the Shawmut Preferred and the Shawmut Depositary Shares, respectively. The outstanding warrants (the "Shawmut Warrants") and outstanding options of Shawmut to purchase Shawmut Common Stock will be converted based on the Common Exchange Ratio into warrants (the "Fleet Warrants") and options, respectively, to purchase Fleet Common Stock with terms substantially the same as the Shawmut Warrants and the Shawmut options, respectively. See "DESCRIPTION OF FLEET CAPITAL STOCK, FLEET NEW PREFERRED STOCK, FLEET NEW DEPOSITARY SHARES AND FLEET WARRANTS". Fleet has filed a Registration Statement on Form S-4 under the Securities Act of 1933, as amended (the "Securities Act"), with the Securities and Exchange Commission (the "Commission") covering a maximum of 116,139,576 shares of Fleet Common Stock, 688,700 shares of Fleet Adjustable Preferred, 5,750,000 Fleet 9.30% Depositary Shares and 5,000,000 Fleet 9.35% Depositary Shares, representing shares to be issued in connection with the Merger. The Registration Statement also covers a maximum of 1,185,836 Fleet Warrants and 1,185,836 shares of Fleet Common Stock to be issued upon exercise of the Fleet Warrants. This Joint Proxy Statement-Prospectus also constitutes the Prospectus of Fleet filed as a part of such Registration Statement. 2 13 This Joint Proxy Statement-Prospectus does not cover any resales of Fleet Common Stock, Fleet New Preferred Stock, Fleet New Depositary Shares or Fleet Warrants received by stockholders or warrantholders of Shawmut upon consummation of the Merger, and no person is authorized to make use of this Joint Proxy Statement-Prospectus in connection with any such resale. All information contained in this Joint Proxy Statement-Prospectus with respect to Fleet has been supplied by Fleet and all information with respect to Shawmut has been supplied by Shawmut. THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS JOINT PROXY STATEMENT-PROSPECTUS. THE PROPOSED MERGER IS A COMPLEX TRANSACTION. STOCKHOLDERS ARE STRONGLY URGED TO READ AND CONSIDER CAREFULLY THIS JOINT PROXY STATEMENT-PROSPECTUS IN ITS ENTIRETY. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY FLEET OR SHAWMUT. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS JOINT PROXY-STATEMENT PROSPECTUS NOR ANY DISTRIBUTION OF THE SHARES OF FLEET COMMON STOCK, FLEET NEW PREFERRED STOCK, FLEET NEW DEPOSITARY SHARES OR FLEET WARRANTS HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF FLEET OR SHAWMUT SINCE THE DATE HEREOF. The date of this Joint Proxy Statement-Prospectus is May 8, 1995. 3 14 TABLE OF CONTENTS
PAGE ------ AVAILABLE INFORMATION................................................................ 7 INFORMATION INCORPORATED BY REFERENCE................................................ 7 SUMMARY OF JOINT PROXY STATEMENT-PROSPECTUS.......................................... 9 The Parties..................................................................... 9 Recent Developments............................................................. 9 Date, Time and Place of Meetings................................................ 9 Purposes of Meetings............................................................ 9 Vote Required................................................................... 10 Fleet...................................................................... 10 Shawmut.................................................................... 10 Terms of the Merger............................................................. 11 Recommendation of the Boards of Directors and Reasons for the Merger............ 12 Fairness Opinions of Financial Advisors......................................... 13 Conditions to the Consummation of the Merger.................................... 13 Board of Directors, Management and Operations of Fleet Following the Merger..... 14 Regulatory Approvals............................................................ 14 Certain Federal Income Tax Consequences......................................... 15 Accounting Treatment............................................................ 15 Termination of the Merger Agreement............................................. 15 Waiver and Amendment............................................................ 15 Fleet and Shawmut Stock Option Agreements....................................... 16 Interests of Certain Persons in the Merger...................................... 16 Appraisal Rights................................................................ 17 Certain Differences in the Rights of Stockholders............................... 17 Comparative Stock Prices and Dividends; Pro Forma Equivalent Market Value Per Share.......................................................................... 17 SELECTED HISTORICAL AND PRO FORMA PER SHARE DATA..................................... 19 SELECTED CONSOLIDATED FINANCIAL DATA................................................. 21 FLEET FINANCIAL GROUP, INC........................................................... 25 SHAWMUT NATIONAL CORPORATION......................................................... 25 RECENT DEVELOPMENTS.................................................................. 25 MEETING OF FLEET STOCKHOLDERS........................................................ 27 Date, Time and Place; Purpose of Meeting........................................ 27 Record Date..................................................................... 28 Proxies; Voting and Revocation.................................................. 28 Votes Required to Approve the Merger; Principal Stockholders.................... 29 MEETING OF SHAWMUT STOCKHOLDERS...................................................... 30 Date, Time and Place; Purpose of Meeting........................................ 30 Record Date..................................................................... 30 Proxies; Voting and Revocation.................................................. 30 Votes Required to Approve the Merger; Principal Stockholders.................... 31 THE MERGER........................................................................... 32 General......................................................................... 32 Background of the Merger........................................................ 32 Fleet...................................................................... 32 Shawmut.................................................................... 33 Reasons for the Merger.......................................................... 34 General....................................................................... 34 Recommendation of the Fleet Board and Reasons for the Merger.................. 35 Recommendation of the Shawmut Board and Reasons for the Merger................ 36 Fairness Opinions of Financial Advisors......................................... 38 Fleet...................................................................... 38 Shawmut.................................................................... 43 Structure of the Merger......................................................... 49 Conversion of Shawmut Capital Stock; Treatment of Shawmut Stock Options and Shawmut Warrants............................................................... 49 Exchange of Certificates; Fractional Shares..................................... 50 Shawmut.................................................................... 50 Fleet...................................................................... 51 Effective Time.................................................................. 52
4 15
PAGE ------ Representations and Warranties.................................................. 52 Conduct of Business Pending the Merger and Other Agreements..................... 52 Conditions to the Consummation of the Merger.................................... 54 Regulatory Approvals Required for the Merger.................................... 55 Certain Federal Income Tax Consequences......................................... 60 Accounting Treatment............................................................ 60 Termination of the Merger Agreement............................................. 61 Waiver and Amendment of the Merger Agreement.................................... 61 Fleet and Shawmut Stock Option Agreements....................................... 62 The Fleet Rights Agreement...................................................... 66 The Shawmut Rights Agreement.................................................... 66 Employee Benefits and Plans..................................................... 66 Stock Exchange Listing.......................................................... 68 Expenses........................................................................ 68 Dividends....................................................................... 68 Resales of Fleet Common Stock, Fleet New Preferred Stock, Fleet New Depositary Shares and Fleet Warrants Received in the Merger............................... 68 Fleet Dividend Reinvestment and Stock Purchase Plan............................. 69 Appraisal Rights................................................................ 69 BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS OF FLEET FOLLOWING THE MERGER......................................................... 72 Board of Directors.............................................................. 72 Management...................................................................... 72 Operations...................................................................... 73 INTERESTS OF CERTAIN PERSONS IN THE MERGER........................................... 74 Interests of Shawmut Directors and Executive Officers........................... 74 Interests of Fleet Directors and Executive Officers............................. 78 INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS............................................. 79 CERTAIN REGULATORY CONSIDERATIONS.................................................... 80 General......................................................................... 80 Payment of Dividends............................................................ 80 Legislation and Related Matters................................................. 81 UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS.......................... 84 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS................. 93 DESCRIPTION OF FLEET CAPITAL STOCK, FLEET NEW PREFERRED STOCK, FLEET NEW DEPOSITARY SHARES AND FLEET WARRANTS.......................................................... 97 General......................................................................... 97 Fleet Common Stock.............................................................. 97 Existing Preferred Stock........................................................ 100 Description of Fleet New Preferred Stock and Fleet New Depositary Shares........ 103 Description of Fleet Warrants................................................... 107 Selected Provisions in the Fleet Existing Articles and the Fleet New Articles... 108 COMPARISON OF STOCKHOLDERS' RIGHTS................................................... 109 General......................................................................... 109 Voting Rights................................................................... 109 Special Meetings; Corporate Action Without a Meeting............................ 111 Dividends....................................................................... 112 Appraisal Rights................................................................ 112 Provisions Relating to Directors................................................ 113 Derivative Suits................................................................ 114 State Anti-Takeover Statutes.................................................... 114 COMPARATIVE COMMON STOCK PRICES AND DIVIDENDS........................................ 116 EXPERTS.............................................................................. 118 LEGAL OPINIONS....................................................................... 119 SOLICITATION OF PROXIES.............................................................. 119
5 16 [ALTERNATIVE PAGE 6 TO FLEET STOCKHOLDERS ONLY]
PAGE ------ AMENDMENT AND RESTATEMENT OF FLEET EXISTING ARTICLES; ELECTION OF FLEET DIRECTORS; RATIFICATION OF FLEET INDEPENDENT AUDITORS......................................... 120 Voting Requirements............................................................. 120 Principal Stockholders.......................................................... 121 Securities of Fleet Owned by Management......................................... 122 Amendment and Restatement of Fleet Existing Articles............................ 122 Election of Directors........................................................... 124 Committees of the Board of Directors............................................ 129 Compensation Committee Interlocks and Insider Participation..................... 129 Section 16 Compliance........................................................... 130 Human Resources and Planning Committee Report on Executive Compensation........................................... 130 Compensation of Directors and Officers.......................................... 133 Pension Plans................................................................... 137 Change of Control Contracts..................................................... 138 Stockholder Return Performance Graph............................................ 139 Indebtedness and Other Transactions............................................. 139 Ratification of the Selection of Fleet's Independent Auditors................... 141 Stockholder Proposals........................................................... 141 Other Business.................................................................. 142
EXHIBITS A. Agreement and Plan of Merger...................................................... A-1 B. Fleet Option Agreement............................................................ B-1 C. Shawmut Option Agreement.......................................................... C-1 D. Opinion of Salomon Brothers Inc................................................... D-1 E. Opinion of Morgan Stanley & Co., Incorporated..................................... E-1 F. Delaware General Corporation Law Section 262...................................... F-1
6 17 [ALTERNATIVE PAGE 6 TO SHAWMUT STOCKHOLDERS ONLY]
PAGE ------ ELECTION OF SHAWMUT DIRECTORS; APPOINTMENT OF SHAWMUT INDEPENDENT ACCOUNTANTS........ 120 Voting requirements............................................................. 120 Common stock ownership.......................................................... 121 Election of Directors........................................................... 123 Committees of the board......................................................... 126 Transactions with directors and executive officers.............................. 127 Directors' remuneration......................................................... 128 Executive compensation.......................................................... 129 Executive severance and employment agreements................................... 134 Compensation committee interlocks and insider participation..................... 135 Compensation policies applicable to executive officers.......................... 135 Elements of compensation........................................................ 136 Options......................................................................... 136 Restricted Stock................................................................ 137 Performance Equity Share Units.................................................. 137 Bases for the Compensation of the Chief Executive Officer....................... 138 Appointment of Independent Accountants.......................................... 140 Stockholder proposals for next year's meeting................................... 140 Annual report................................................................... 140 Other matters................................................................... 140
EXHIBITS A. Agreement and Plan of Merger...................................................... A-1 B. Fleet Option Agreement............................................................ B-1 C. Shawmut Option Agreement.......................................................... C-1 D. Opinion of Salomon Brothers Inc................................................... D-1 E. Opinion of Morgan Stanley & Co., Incorporated..................................... E-1 F. Delaware General Corporation Law Section 262...................................... F-1 G. Certain Compensation Information Relating to Fleet................................ G-1
6 18 AVAILABLE INFORMATION Each of Fleet and Shawmut is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy statements and other information with the Commission. Proxy statements, reports and other information concerning either Fleet or Shawmut can be inspected and copied at the Commission's office at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and the Commission's Regional Offices in New York (Suite 1300, Seven World Trade Center, New York, New York 10048) and Chicago (Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661), and copies of such material can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Fleet Common Stock, Shawmut Common Stock, Shawmut 9.30% Depositary Shares, Shawmut 9.35% Depositary Shares and Shawmut Warrants are each listed on the New York Stock Exchange (the "Stock Exchange"). Reports, proxy materials and other information concerning Fleet and Shawmut also may be inspected at the offices of the Stock Exchange, 20 Broad Street, New York, New York 10005. This Joint Proxy Statement-Prospectus does not contain all the information set forth in the Registration Statement and Exhibits thereto which Fleet or Shawmut has filed with the Commission under the Securities Act, which may be obtained from the Public Reference Section of the Commission at its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the prescribed fees, and to which reference is hereby made. INFORMATION INCORPORATED BY REFERENCE THIS JOINT PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS, OTHER THAN EXHIBITS THERETO, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS JOINT PROXY STATEMENT-PROSPECTUS IS DELIVERED UPON WRITTEN OR ORAL REQUEST TO THE FOLLOWING:
FLEET DOCUMENTS SHAWMUT DOCUMENTS - ------------------------------------------ ---------------------------- Robert W. Lougee, Jr. Shawmut National Corporation Director of Investor Relations 777 Main Street Fleet Financial Group, Inc. MSN 335 50 Kennedy Plaza Hartford, Connecticut 06115 Providence, Rhode Island 02903 Attn: Shareholder Relations 401-278-5879 203-986-2028
IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, A REQUEST MUST BE RECEIVED NO LATER THAN JUNE 14, 1995. The following Fleet documents are incorporated by reference herein: (1) Fleet's Annual Report on Form 10-K for the year ended December 31, 1994, ("Annual Report on Form 10-K"); (2) Fleet's Current Reports on Form 8-K dated January 18, 1995, January 27, 1995, February 20, 1995, February 21, 1995 and April 13, 1995; (3) The description of the Fleet Common Stock contained in a Registration Statement filed by Industrial National Corporation (predecessor to Fleet) on Form 8-B dated May 29, 1970, and any amendment or report filed for the purpose of updating such description; and (4) The description of the preferred share purchase rights contained in Fleet's Registration Statement on Form 8-A dated November 29, 1990 (as amended by an Amendment to Application or Report on Form 8 dated September 6, 1991 and a Form 8-A/A dated March 17, 1995). 7 19 Such incorporation by reference shall not be deemed to specifically incorporate by reference the information referred to in Item 402(a)(8) of Regulation S-K. The following Shawmut documents are incorporated by reference herein: (1) Shawmut's Annual Report on Form 10-K for the year ended December 31, 1994 ("Annual Report on Form 10-K"); (2) Shawmut's Current Reports on Form 8-K, dated January 6, 1995, January 11, 1995 (as amended by a Form 8-K/A filed February 7, 1995), January 17, 1995, January 26, 1995, February 7, 1995, February 20, 1995 (as amended by Form 8-K/A filed April 13, 1995), February 21, 1995, April 13, 1995 and April 19, 1995; and (3) The description of Shawmut Common Stock and Shawmut Series A Junior Participating Preferred Stock and Preferred Stock Purchase Rights set forth in Shawmut's Registration Statements on Form 8-A dated November 29, 1988 and March 7, 1989 (as amended by a Form 8-A/A dated March 2, 1995). Such incorporation by reference shall not be deemed to specifically incorporate by reference the information referred to in Item 402(a)(8) of Regulation S-K. All documents filed with the Commission by Fleet and Shawmut pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Joint Proxy Statement-Prospectus and prior to the date of the Fleet Meeting and the Shawmut Meeting are incorporated herein by reference and such documents shall be deemed to be a part hereof from the date of filing of such documents. Any statement contained in this Joint Proxy Statement-Prospectus or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Joint Proxy Statement-Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Joint Proxy Statement-Prospectus. 8 20 SUMMARY OF JOINT PROXY STATEMENT-PROSPECTUS The following is a summary, which is necessarily incomplete, of certain information contained elsewhere in this Joint Proxy Statement-Prospectus or in documents incorporated herein by reference. Reference is made to, and this Summary is qualified in its entirety by, the more detailed information contained herein, the Exhibits hereto and the documents incorporated by reference herein. Each stockholder is urged to read the Joint Proxy Statement-Prospectus and the Exhibits hereto in their entirety and with care. THE PARTIES Fleet Financial Group, Inc. ("Fleet") and Shawmut National Corporation ("Shawmut"), through their respective banking and nonbanking subsidiaries, provide banking and financial services throughout the United States to customers, including individuals, corporations, governments and other institutions. Fleet is headquartered at 50 Kennedy Plaza, Providence, Rhode Island 02903, telephone (401) 278-5800. Shawmut is headquartered at 777 Main Street, Hartford, Connecticut 06115, telephone (203) 986-2000 and One Federal Street, Boston, Massachusetts 02211, telephone (617) 292-2000. See "FLEET FINANCIAL GROUP, INC." and "SHAWMUT NATIONAL CORPORATION". RECENT DEVELOPMENTS Fleet and Shawmut each announced its first quarter earnings on April 19, 1995. See "RECENT DEVELOPMENTS". DATE, TIME AND PLACE OF MEETINGS The Fleet Meeting will be held at the Rhode Island Convention Center, 99 Sabin Street, Providence, Rhode Island at 11:00 a.m. on Wednesday, June 21, 1995. The Shawmut Meeting will be held at the Federal Reserve Bank of Boston, 600 Atlantic Avenue, Boston, Massachusetts at 10:00 a.m. on Wednesday, June 21, 1995. PURPOSES OF MEETINGS The Fleet Meeting will be held for the purpose of considering and voting upon proposals to (i) approve and adopt the Merger Agreement and the consummation of the transactions contemplated thereby, including the Merger, (ii) amend and restate the Fleet Existing Articles to increase the authorized shares of Fleet Common Stock from 300,000,000 to 600,000,000, to change the par value of the Fleet Common Stock from $1.00 to $0.01, and to include certain other technical amendments to the Fleet Existing Articles (the Fleet Existing Articles, as so amended and restated are hereinafter referred to herein as the "Fleet New Articles"), (iii) elect directors to serve on the Fleet Board for terms of three years until their successors are elected and qualified, (iv) ratify the selection of independent auditors for 1995 and (v) conduct any other business that may properly come before the Fleet Meeting, or any adjournments or postponements thereof. See "MEETING OF FLEET STOCKHOLDERS -- Date, Time and Place; Purpose of Meeting". The Shawmut Meeting will be held for the purpose of considering and voting upon proposals to (i) approve and adopt the Merger Agreement and the consummation of the transactions contemplated thereby, including the Merger, (ii) elect directors to serve on the Shawmut Board until the next annual meeting of stockholders of Shawmut until their successors are elected and qualified, or, if earlier, until the effective time of the Merger, (iii) appoint independent accountants for 1995, or, if earlier, until the effective time of the Merger, and (iv) conduct any other business that may properly come before the Shawmut Meeting, or any adjournments or postponements thereof. See "MEETING OF SHAWMUT STOCKHOLDERS -- Date, Time and Place; Purpose of Meeting". As described herein under "BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS OF FLEET FOLLOWING THE MERGER", from and after the Effective Time of the Merger, the Fleet Board 9 21 will consist of 20 members, 12 of whom will be directors appointed by Fleet's Chairman and the Fleet Board and 8 of whom will be directors appointed by Shawmut's Chairman and the Shawmut Board. VOTE REQUIRED The Fleet Board and the Shawmut Board have fixed the close of business on May 3, 1995 as the record date (the "Record Date") for the determination of stockholders entitled to notice of and to vote at the Fleet Meeting and the Shawmut Meeting, respectively. Only the holders of record of the outstanding shares of Fleet Common Stock and Shawmut Common Stock on the Record Date will be entitled to notice of, and to vote at, the Fleet Meeting and Shawmut Meeting and any adjournments or postponements thereof. In addition, the holders of record of the outstanding shares of Fleet preferred stock and Shawmut Preferred on the Record Date will be entitled to notice of, but will not be entitled to vote at, the Fleet Meeting or the Shawmut Meeting, respectively. The presence, in person or by proxy, of a majority of the aggregate number of shares of Fleet Common Stock or Shawmut Common Stock outstanding and entitled to vote on the Record Date is necessary to constitute a quorum at the Fleet Meeting and the Shawmut Meeting, respectively. Fleet. The affirmative vote of the holders of a majority of the shares of Fleet Common Stock issued, outstanding and entitled to vote at the Fleet Meeting will be required to approve the Merger Agreement and the consummation of the transactions contemplated thereby and to approve the Fleet New Articles. Holders of shares of Fleet's currently outstanding preferred stock are not entitled to vote on any of the matters to be considered at the Fleet Meeting. Approval of the Merger Agreement by the requisite vote of the holders of Fleet Common Stock is a condition to, and required for, consummation of the Merger. None of the other matters being considered at the Fleet Meeting must be approved by holders of Fleet Common Stock in order for the Merger to be consummated. The affirmative vote of a majority of the shares of Fleet Common Stock represented at the Fleet Meeting and entitled to vote is required to elect Fleet directors and to ratify the selection of independent auditors, as more fully described in the section entitled "AMENDMENT AND RESTATEMENT OF FLEET EXISTING ARTICLES; ELECTION OF FLEET DIRECTORS; RATIFICATION OF FLEET INDEPENDENT AUDITORS" which is included in the Joint Proxy Statement-Prospectus to be delivered to Fleet stockholders only. As of the Record Date, shares of Fleet Common Stock were issued, outstanding and entitled to vote, of which approximately shares, or approximately %, were held by directors and executive officers of Fleet, its subsidiaries and their respective affiliates. Each such director and officer of Fleet has indicated his or her intention to vote the Fleet Common Stock beneficially owned by him or her for approval of the Merger Agreement and the consummation of the transactions contemplated thereby. As of the Record Date, the banking and trust subsidiaries of Fleet, as fiduciaries, custodians or agents, held a total of shares, or %, of the outstanding shares of Fleet Common Stock under trust agreements and other instruments and agreements. These entities maintained sole or shared voting power with respect to of such shares. In addition, Shawmut's directors and executive officers as a group beneficially owned shares, or approximately %, of the outstanding shares of Fleet Common Stock, all of which they intend to vote for approval of the Merger and the consummation of the transactions contemplated thereby. As of the Record Date, the banking and trust subsidiaries of Shawmut, as fiduciaries, custodians or agents, held a total of shares, or %, of the outstanding shares of Fleet Common Stock under trust agreements and other instruments and agreements. These entities maintained sole or shared voting power with respect to of such shares. See "MEETING OF FLEET STOCKHOLDERS -- Votes Required to Approve the Merger; Principal Stockholders". Shawmut. The affirmative vote of the holders of a majority of the shares of Shawmut Common Stock issued, outstanding and entitled to vote at the Shawmut Meeting will be required to approve the Merger Agreement and the consummation of the transactions contemplated thereby. Holders of shares of Shawmut Preferred are not entitled to vote on any of the matters to be considered at the Shawmut Meeting. Approval of the Merger Agreement by the requisite vote of the holders of Shawmut Common Stock is a condition to, and 10 22 required for, consummation of the Merger. None of the other matters being considered at the Shawmut Meeting must be approved by holders of Shawmut Common Stock in order for the Merger to be consummated. At the Shawmut Meeting, Shawmut directors will be elected by a plurality of the votes of the shares of Shawmut Common Stock represented at the Shawmut Meeting and entitled to vote. The affirmative vote of a majority of the shares of Shawmut Common Stock represented at the Shawmut Meeting and entitled to vote is required to appoint independent accountants. See "ELECTION OF SHAWMUT DIRECTORS; APPOINTMENT OF INDEPENDENT ACCOUNTANTS" included in the Joint Proxy Statement-Prospectus to be delivered to Shawmut stockholders only. As of the Record Date, shares of Shawmut Common Stock were issued, outstanding and entitled to vote, of which approximately shares, or approximately %, were held by directors and executive officers of Shawmut, its subsidiaries and their respective affiliates. Each such director and officer of Shawmut has indicated his or her intention to vote the Shawmut Common Stock beneficially owned by him or her for approval of the Merger Agreement and the consummation of the transactions contemplated thereby. As of the Record Date, the banking and trust subsidiaries of Shawmut, as fiduciaries, custodians or agents, held a total of shares, or %, of the outstanding shares of Shawmut Common Stock under trust agreements and other instruments and agreements. These entities maintained sole or shared voting power with respect to of such shares. In addition, Fleet, on the one hand, and Fleet's directors and executive officers as a group, on the other hand, beneficially owned and shares, respectively, or approximately % and %, respectively, of the outstanding shares of Shawmut Common Stock, all of which they intend to vote for approval of the Merger and the consummation of the transactions contemplated thereby. As of the Record Date, the banking and trust subsidiaries of Fleet, as fiduciaries, custodians or agents, held a total of shares, or %, of the outstanding shares of Shawmut Common Stock under trust agreements and other instruments and agreements. These entities maintained sole or shared voting power with respect to of such shares. See "MEETING OF SHAWMUT STOCKHOLDERS -- Votes Required to Approve the Merger; Principal Stockholders". TERMS OF THE MERGER At the Effective Time (as hereinafter defined), Shawmut will be merged with and into Fleet, with Fleet as the surviving corporation in the Merger. In connection with the Merger (i) each then outstanding share of Shawmut Common Stock (other than shares held in Shawmut's treasury or directly or indirectly by Fleet or its subsidiaries or by Shawmut or its subsidiaries (except for in both cases shares held in a fiduciary capacity or in respect of a debt previously contracted)) will be converted into the right to receive 0.8922 shares of Fleet Common Stock, including the associated preferred share purchase rights (the "Common Exchange Ratio"). Shawmut's obligation to consummate the Merger is not conditioned upon Fleet Common Stock continuing to trade at any specified minimum price during any period prior to the Effective Time. Because the Common Exchange Ratio is fixed and because the market price of Fleet Common Stock is subject to fluctuation, the value of the shares of Fleet Common Stock that holders of Shawmut Common Stock will receive in the Merger may increase or decrease prior to and following the Merger. Immediately following the Merger, stockholders of Fleet and Shawmut will own approximately 60% and 40%, respectively, of the then outstanding Fleet Common Stock. Further, at the Effective Time, (i) each share of preferred stock with cumulative and adjustable dividends of Shawmut (the "Shawmut Adjustable Preferred"), except for shares of Shawmut Adjustable Preferred as to which appraisal rights are perfected, will be converted into the right to receive one share of preferred stock with cumulative and adjustable dividends of Fleet (the "Fleet Adjustable Preferred"), (ii) each share of 9.30% cumulative preferred stock of Shawmut (the "Shawmut 9.30% Preferred") will be converted into the right to receive one share of 9.30% cumulative preferred stock of Fleet (the "Fleet 9.30% Preferred") and (iii) each share of 9.35% cumulative preferred stock of Shawmut (the "Shawmut 9.35% Preferred", and together with the Shawmut Adjustable Preferred and the Shawmut 9.30% Preferred, 11 23 collectively, the "Shawmut Preferred", and the Shawmut Common Stock, together with the Shawmut Preferred, collectively, the "Shawmut Capital Stock") will be converted into the right to receive one share of 9.35% cumulative preferred stock of Fleet (the "Fleet 9.35% Preferred", and together with the Fleet Adjustable Preferred and the Fleet 9.30% Preferred, collectively, the "Fleet New Preferred Stock"). Further, the depositary shares, each representing 1/10 of a share of Shawmut 9.30% Preferred (the "Shawmut 9.30% Depositary Shares") and the depositary shares, each representing 1/10 of a share of Shawmut 9.35% Preferred (the "Shawmut 9.35% Depositary Shares" and together with the Shawmut 9.30% Depositary Shares, the "Shawmut Depositary Shares") will be converted respectively into depositary shares, each representing 1/10 of a share of Fleet 9.30% Preferred (the "Fleet 9.30% Depositary Shares") or depositary shares, each representing 1/10 of a share of Fleet 9.35% Preferred (the "Fleet 9.35% Depositary Shares", and together with the Fleet 9.30% Depositary Shares, the "Fleet New Depositary Shares"). The terms of the Fleet New Preferred Stock and the Fleet New Depositary Shares will be substantially the same as the terms of the Shawmut Preferred and the Shawmut Depositary Shares, respectively. See "DESCRIPTION OF FLEET CAPITAL STOCK, FLEET NEW PREFERRED STOCK, FLEET NEW DEPOSITARY SHARES AND FLEET WARRANTS" and "THE MERGER -- Appraisal Rights". No fractional shares of Fleet Common Stock will be issued in the Merger. In lieu thereof, each holder of Shawmut Common Stock who otherwise would have been entitled to a fractional share of Fleet Common Stock will receive cash in an amount equal to such fraction multiplied by the average of the closing-sale prices of Fleet Common Stock on the Stock Exchange as reported by The Wall Street Journal for the five trading days immediately preceding the date of the Effective Time. Each stock option to acquire Shawmut Common Stock granted under the Shawmut Stock Option and Restricted Stock Award Plan and the Shawmut Secondary Stock Option and Restricted Stock Award Plan (collectively, the "Shawmut Stock Plans") which is outstanding and unexercised immediately prior to the Effective Time will be converted automatically at the Effective Time into options to purchase Fleet Common Stock and will continue to be governed by the terms of the Shawmut Stock Plans which will be assumed by Fleet. Each unvested option granted under the Shawmut Stock Plans will, pursuant to the terms of each such plan, automatically vest and become exercisable upon the approval of the Merger Agreement by the holders of Shawmut Common Stock. Under the Shawmut 1989 Nonemployee Directors' Restricted Stock Plan, which provides for annual grants of restricted stock to plan participants in lieu of the annual fees otherwise payable to such participants, all restrictions on outstanding awards will lapse upon the consummation of the Merger. Each warrant granted by Shawmut to purchase shares of Shawmut Common Stock (a "Shawmut Warrant") which is outstanding and unexercised immediately prior to the Effective Time shall be converted automatically at the Effective Time into a warrant to purchase shares of Fleet Common Stock (a "Fleet Warrant"). The number of shares of Fleet Common Stock subject to such options and Shawmut Warrants and the exercise price of such options and Shawmut Warrants will be adjusted as provided in the Merger Agreement to give effect to the Common Exchange Ratio. The Merger will become effective on the date and time (the "Effective Time") as set forth in the certificate of merger which will be filed with the Secretary of State of Delaware and the articles of merger which will be filed with the Secretary of State of Rhode Island. See "THE MERGER -- Structure of the Merger", "-- Conversion of Shawmut Capital Stock; Treatment of Shawmut Stock Options and Shawmut Warrants", "-- Exchange of Certificates; Fractional Shares", and "-- Effective Time" and "INTERESTS OF CERTAIN PERSONS IN THE MERGER -- Interests of Shawmut Directors and Executive Officers". RECOMMENDATION OF THE BOARDS OF DIRECTORS AND REASONS FOR THE MERGER THE BOARD OF DIRECTORS OF EACH OF FLEET AND SHAWMUT HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND EACH UNANIMOUSLY RECOMMENDS APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, BY ITS RESPECTIVE STOCKHOLDERS. 12 24 The Fleet Board and the Shawmut Board believe that the terms of the Merger Agreement are fair and in the best interests of Fleet and its stockholders and Shawmut and its stockholders, respectively. The terms of the Merger Agreement were reached on the basis of arms' length negotiations between Fleet and Shawmut. In the course of reaching their respective decisions to approve the Merger Agreement, the Fleet Board and the Shawmut Board consulted with their respective legal advisors regarding the legal terms of the Merger Agreement and the Fleet Board's and the Shawmut Board's obligations in consideration thereof, and with their respective financial advisors, Salomon Brothers Inc ("Salomon") and Morgan Stanley & Co., Incorporated ("Morgan Stanley"), regarding the financial terms of the Merger Agreement and the fairness to the holders of Fleet Common Stock and the holders of Shawmut Common Stock (other than Fleet and its affiliates), respectively, from a financial point of view, of the Common Exchange Ratio. See "THE MERGER -- Background of the Merger", "-- Reasons for the Merger -- Recommendation of the Fleet Board and Reasons for the Merger" and "-- Recommendation of the Shawmut Board and Reasons for the Merger" and "-- Fairness Opinions of Financial Advisors". FAIRNESS OPINIONS OF FINANCIAL ADVISORS Salomon, Fleet's financial advisor, has rendered its oral opinion as of February 20, 1995, and its written opinion as of the date of this Joint Proxy Statement-Prospectus, to the Fleet Board that the Common Exchange Ratio was fair, from a financial point of view, to the holders of Fleet Common Stock. Morgan Stanley, Shawmut's financial advisor, has rendered its written opinions, as of February 20, 1995, and as of the date of this Joint Proxy Statement-Prospectus, to the Shawmut Board that, as of the date of such opinions, the Common Exchange Ratio was fair, from a financial point of view, to the holders of Shawmut Common Stock (other than Fleet and its affiliates). The opinions of the financial advisors which are attached hereto as Exhibits D and E, should be read in their entirety with respect to the assumptions made, matters considered and limits of the reviews undertaken by Salomon and Morgan Stanley in rendering their respective opinions. Fleet and Shawmut have agreed to pay fees to Salomon and Morgan Stanley, respectively, a portion of which are contingent upon consummation of the Merger. See "THE MERGER -- Fairness Opinions of Financial Advisors" for a further description of the opinions of Salomon and Morgan Stanley and of the fees payable to Salomon and Morgan Stanley by Fleet and Shawmut, respectively. See "THE MERGER -- Background of the Merger", "-- Reasons for the Merger -- Recommendation of the Fleet Board and Reasons for the Merger", "-- Reasons for the Merger -- Recommendation of the Shawmut Board and Reasons for the Merger", "-- Fairness Opinions of Financial Advisors" and Exhibits D and E to this Joint Proxy Statement-Prospectus. CONDITIONS TO THE CONSUMMATION OF THE MERGER Consummation of the Merger is subject to certain conditions, including the approval of the Merger Agreement by the affirmative vote of the holders of a majority of the shares of Fleet Common Stock and Shawmut Common Stock issued, outstanding and entitled to vote thereon; the effectiveness of the Registration Statement of which this Joint Proxy Statement-Prospectus forms a part; approval of the Merger by certain federal and state regulatory authorities; receipt by Fleet and Shawmut of opinions of counsel as to the tax-free nature of the Merger for Federal income tax purposes (except for cash in lieu of fractional shares and cash received by holders of Shawmut Adjustable Preferred ("Dissenting Preferred Shares") who perfect appraisal rights); receipt by Fleet and Shawmut of a letter from KPMG Peat Marwick LLP that the Merger will qualify for "pooling of interests" accounting treatment; the listing, subject to notice of issuance, on the Stock Exchange of the Fleet Common Stock to be issued in the Merger; and certain other customary closing conditions. There can be no assurance as to when and if such conditions will be satisfied (or, where permissible, waived) or that the Merger will be consummated. See "THE MERGER -- Conditions to the Consummation of the Merger" and "-- Regulatory Approvals Required for the Merger". 13 25 BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS OF FLEET FOLLOWING THE MERGER From and after the Effective Time, the Fleet Board will consist of 20 persons, divided into three classes of directors. Mr. Terrence Murray, the current Chairman of the Board, President and Chief Executive Officer of Fleet, and Mr. Joel B. Alvord, the current Chairman of the Board and Chief Executive Officer of Shawmut, will each be a director of Fleet and, with the approval of the respective Boards of Directors of Fleet and Shawmut, will each designate an additional eleven and seven individuals, respectively, to be members of the Fleet Board following the Merger. As of the date of this Joint Proxy Statement-Prospectus, such directors have not been designated by Messrs. Murray and Alvord and their respective Boards of Directors. The directors selected by Fleet and Shawmut will be divided as equally as practicable among the three classes of directors and will serve on the various committees established by the Fleet Board in proportion to the aggregate representation of such directors. In addition, the Fleet Board will establish, promptly following the Effective Time, and maintain for a period of 18 months thereafter, an integration committee, comprised of Messrs. Murray and Alvord, two additional representatives of Fleet and two additional representatives of Shawmut, to oversee the integration of the operations of Fleet, Shawmut and their respective subsidiaries. The executive officers of Fleet after the Merger will be comprised of certain members of Fleet's current senior management and certain members of Shawmut's current senior management. Mr. Murray will be the Chief Executive Officer and President of Fleet following the Merger and Mr. Alvord will be the Chairman of Fleet following the Merger. In addition, the persons listed under "BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS OF FLEET FOLLOWING THE MERGER -- Management" will be executive officers of Fleet following the Merger. Except for such persons, it has not yet been determined which members of Fleet's or Shawmut's senior management will become executive officers of Fleet following the Merger or what such persons' titles or functions will be. From time to time prior to consummation of the Merger, decisions may be made with respect to the management and operations of Fleet following the Merger, including the selection of executive officers of Fleet. Following the Merger, Fleet intends to combine the operations of and, subject to required regulatory approvals, to merge certain of the subsidiary banks of Fleet and Shawmut and to consolidate the operations of certain other Fleet and Shawmut subsidiaries which provide similar services. The receipt of such required regulatory approvals is not a condition to, or required for, consummation of the Merger. As of the date of this Joint Proxy Statement-Prospectus, no final determination with respect to such matters had been made. See "BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS OF FLEET FOLLOWING THE MERGER" and "INTERESTS OF CERTAIN PERSONS IN THE MERGER". REGULATORY APPROVALS The Merger is subject to approval by the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") pursuant to Sections 3 and 4 of the Bank Holding Company Act of 1956, as amended ("BHCA"), the Office of the Thrift Supervision ("OTS") pursuant to Section 10 of the Home Owners' Loan Act, as amended ("HOLA") and by various state regulators. Assuming Federal Reserve Board and other required regulatory approvals for the Merger are obtained, the Merger may not be consummated for 30 days after such approvals (or 15 days in certain circumstances described more fully under "THE MERGER -- Regulatory Approvals"), during which time the United States Department of Justice may challenge the Merger on antitrust grounds and seek the divestiture of assets and liabilities. Fleet and Shawmut intend to file applications with the appropriate federal and state regulators with respect to the Merger as soon as practicable following the date of this Joint Proxy Statement-Prospectus. The Merger will not proceed until all regulatory approvals required to consummate the Merger have been obtained, such approvals are in full force and effect and all statutory waiting periods in respect thereof have expired. There can be no assurance that the Merger will be approved by the appropriate federal and state regulators of whom approval is required. If such approvals are received, there can be no assurance as to the date of such approvals or the absence of any litigation challenging such approvals. See "THE MERGER -- Regulatory Approvals Required for the Merger". 14 26 - -------------------------------------------------------------------------------- CERTAIN FEDERAL INCOME TAX CONSEQUENCES Each party's obligation to effect the Merger is conditioned on delivery of an opinion, in the case of Fleet, from Wachtell, Lipton, Rosen & Katz, special counsel to Fleet, and, in the case of Shawmut, from Skadden, Arps, Slate, Meagher & Flom, special counsel to Shawmut, each dated as of the Effective Time, based upon certain customary representations and assumptions set forth therein, substantially to the effect that for federal income tax purposes the Merger constitutes a reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"). Based on such opinions, the material federal income tax results of the Merger will be as follows: (i) no gain or loss will be recognized by Fleet or by Shawmut as a result of the Merger; (ii) no gain or loss will be recognized by the stockholders of Shawmut who exchange their Shawmut Capital Stock for Fleet Common Stock or Fleet New Preferred Stock pursuant to the Merger (except with respect to cash received in lieu of a fractional share interest in Fleet Common Stock or cash received with respect to Dissenting Preferred Shares); and (iii) the tax basis of the Fleet Common Stock or Fleet New Preferred Stock received by stockholders who exchange all of their Shawmut Capital Stock solely for Fleet Common Stock or Fleet New Preferred Stock in the Merger will be the same as the tax basis of the Shawmut Capital Stock surrendered in exchange therefor (reduced by any amount allocable to a fractional share interest for which cash is received). Each holder of Dissenting Preferred Shares who receives cash instead of Fleet Adjustable Preferred will recognize gain or loss equal to the difference between the cash proceeds and the holder's tax basis in the Dissenting Preferred Shares. Such gain or loss will constitute capital gain or loss if such stockholder's Dissenting Preferred Shares are held as capital assets at the Effective Time. Each stockholder should consult his or her own tax advisors as to the tax consequences of the Merger to him or her under federal, state, local or any other applicable law. See "THE MERGER -- Certain Federal Income Tax Consequences". ACCOUNTING TREATMENT The Merger is intended to be accounted for as a pooling of interests under generally accepted accounting principles. It is a condition to consummation of the Merger that Fleet and Shawmut receive an opinion from KPMG Peat Marwick LLP that the Merger will be accounted for as a pooling of interests. See "THE MERGER -- Accounting Treatment". TERMINATION OF THE MERGER AGREEMENT The Merger Agreement may be terminated at any time prior to the Effective Time (i) by the mutual consent of Fleet and Shawmut by a majority vote of the members of each company's entire Board of Directors; (ii) by either Fleet or Shawmut if any governmental entity which must grant a regulatory approval has denied approval of the Merger and such denial has become final and non-appealable or any governmental entity of competent jurisdiction has issued a final, non-appealable order enjoining or otherwise prohibiting consummation of the transactions contemplated by the Merger Agreement; (iii) except if the party seeking termination is in breach of the Merger Agreement, by either Fleet or Shawmut, (a) if the Effective Time has not occurred by February 20, 1996 or (b) if there is a material breach by the other party of any representation, warranty, covenant or agreement contained in the Merger Agreement which is not timely cured; or (iv) by either Fleet or Shawmut if the requisite stockholder approvals of either party have not been obtained. See "THE MERGER -- Termination of the Merger Agreement" and "-- Fleet and Shawmut Stock Option Agreements". WAIVER AND AMENDMENT Prior to the Effective Time, Fleet and Shawmut, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts required of the other party contained in the Merger Agreement; (ii) waive any - -------------------------------------------------------------------------------- 15 27 - -------------------------------------------------------------------------------- inaccuracies in the representations and warranties of the other party contained in the Merger Agreement or in any document delivered pursuant to the Merger Agreement; or (iii) waive compliance by the other party of any of its agreements or conditions contained in the Merger Agreement, except that after Shawmut stockholder approval, no extension or waiver shall reduce the amount or change the form of consideration to be delivered to Shawmut's stockholders under the Merger Agreement without further approval of Shawmut's stockholders. Subject to compliance with applicable law, the Merger Agreement may be amended by Fleet and Shawmut by action taken or authorized by their respective Boards of Directors at any time, except that after Shawmut stockholder approval, no amendment shall reduce the amount or change the form of the consideration to be delivered to Shawmut's stockholders other than as contemplated by the Merger Agreement. In addition, Delaware law prohibits any change in any of the terms and conditions of the Merger Agreement subsequent to Shawmut stockholder approval if such change or alteration would, among other things, adversely affect any holder of Shawmut Common Stock. See "THE MERGER -- Waiver and Amendment of the Merger Agreement". FLEET AND SHAWMUT STOCK OPTION AGREEMENTS As an inducement to Shawmut to enter into the Merger Agreement, Fleet and Shawmut entered into the Fleet Stock Option Agreement, dated February 20, 1995 (the "Fleet Stock Option Agreement"), pursuant to which Fleet granted Shawmut an option to purchase from Fleet 28,171,050 shares of Fleet Common Stock (subject to adjustment, but in no event to exceed 19.9% of the then outstanding Fleet Common Stock), at a price of $33.625 per share (the "Fleet Option"). Shawmut may exercise the Fleet Option only upon the occurrence of certain events (none of which has occurred as of the date hereof). At the request of the holder of the Fleet Option, under certain circumstances, Fleet will repurchase for a formula price the Fleet Option and any shares of Fleet Common Stock purchased upon the exercise of the Fleet Option and beneficially owned by such holder at that time. As an inducement to Fleet to enter into the Merger Agreement, Shawmut and Fleet entered into the Shawmut Stock Option Agreement, dated February 20, 1995 (the "Shawmut Stock Option Agreement", and together with the Fleet Stock Option Agreement, the "Option Agreements"), pursuant to which Shawmut granted Fleet an option to purchase from Shawmut 24,195,625 shares of Shawmut Common Stock (subject to adjustment, but in no event to exceed 19.9% of the then outstanding Shawmut Common Stock), at a price of $24.50 per share (the "Shawmut Option"). Fleet may exercise the Shawmut Option only upon the occurrence of certain events (none of which has occurred as of the date hereof). At the request of the holder of the Shawmut Option, under certain circumstances, Shawmut will repurchase for a formula price the Shawmut Option and any shares of Shawmut Common Stock purchased upon the exercise of the Shawmut Option and beneficially owned by such holder at that time. The Option Agreements are intended to increase the likelihood that the Merger will be consummated in accordance with the terms set forth in the Merger Agreement. Consequently, certain aspects of the Option Agreements may have the effect of discouraging persons who might now or prior to the Effective Time be interested in acquiring all of or a significant interest in Fleet or Shawmut from considering or proposing such an acquisition, even if, in the case of Shawmut, such persons were prepared to offer to pay consideration to Shawmut's stockholders which had a higher current market price than the shares of Fleet Common Stock to be received for each share of Shawmut Common Stock pursuant to the Merger Agreement. See "THE MERGER -- Fleet and Shawmut Stock Option Agreements" and Exhibits B and C to this Joint Proxy Statement-Prospectus. INTERESTS OF CERTAIN PERSONS IN THE MERGER Certain members of Fleet's management and the Fleet Board, and Shawmut's management and the Shawmut Board, respectively, may be deemed to have certain interests in the Merger that are in addition to their interests as stockholders of Fleet or Shawmut, as the case may be, generally. Certain executive officers - -------------------------------------------------------------------------------- 16 28 and directors of each of Fleet and Shawmut will be executive officers and directors of Fleet following the Merger. Fleet also has agreed to take certain actions regarding the existing employment and severance arrangements of certain officers of Shawmut and to indemnify, and maintain directors and officers insurance covering, the Shawmut directors and officers following the Merger and has entered into certain employment and severance agreements with Messrs. Alvord and Overstrom, the Chairman of the Board and Chief Executive Officer and the President and Chief Operating Officer, respectively, of Shawmut. Finally, certain restrictions on certain benefits payable to the directors and executive officers of Shawmut will lapse, and such benefits will vest, in connection with the Merger. The Fleet Board and the Shawmut Board were aware of these interests and considered them, among other matters, in approving the Merger Agreement and the transactions contemplated thereby. See "INTERESTS OF CERTAIN PERSONS IN THE MERGER" and "BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS OF FLEET FOLLOWING THE MERGER". APPRAISAL RIGHTS Holders of Shawmut Adjustable Preferred who comply with the requirements of Section 262 of the Delaware General Corporation Law will be entitled to appraisal rights in connection with the Merger. A copy of Section 262 is attached to this Joint Proxy Statement-Prospectus as Exhibit F. Holders of Shawmut Common Stock, Shawmut 9.30% Preferred, Shawmut 9.35% Preferred and the Shawmut Depositary Shares do not have any appraisal rights under Delaware law in connection with the Merger. See "THE MERGER -- Appraisal Rights" and Exhibit F to this Joint Proxy Statement-Prospectus. CERTAIN DIFFERENCES IN THE RIGHTS OF STOCKHOLDERS The rights of stockholders of Shawmut are currently governed by the Delaware General Corporation Law, the Shawmut Amended and Restated Certificate of Incorporation and Shawmut's by-laws. Upon consummation of the Merger, Shawmut stockholders who receive Fleet capital stock in the Merger will become stockholders of Fleet, and their rights will be governed by the Rhode Island Business Corporation Act, the Fleet Existing Articles (or the Fleet New Articles, if adopted) and Fleet's by-laws. See "COMPARISON OF STOCKHOLDERS' RIGHTS". COMPARATIVE STOCK PRICES AND DIVIDENDS; PRO FORMA EQUIVALENT MARKET VALUE PER SHARE Common Stock. The shares of Fleet Common Stock and Shawmut Common Stock are each listed and traded on the Stock Exchange under the symbols "FLT" and "SNC", respectively. The table below sets forth the high and low sales prices for Fleet Common Stock and Shawmut Common Stock as reported on the Stock Exchange, and the cash dividends declared, for the periods indicated, as well as certain pro forma data per share of Shawmut Common Stock, assuming consummation of the Merger.
SHAWMUT FLEET SHAWMUT PRO FORMA ------------------------------- ------------------------------- EQUIVALENT HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS DIVIDENDS(1) ------- ------- --------- ------- ------- --------- ------------ 1991......................... $26.250 $ 9.625 $ 0.800 $10.875 $ 2.875 -- $ 0.71 1992......................... 33.875 24.250 0.825 19.500 8.875 -- 0.74 1993......................... 37.875 28.250 1.025 26.375 17.875 $ 0.500 0.91 1994......................... 41.375 29.875 1.400 25.750 16.375 0.820 1.25 1995 (through May 3, 1995)... 0.800 0.360 0.36 - --------------- (1) Represents dividends declared for Fleet Common Stock multiplied by the Common Exchange Ratio.
The following table sets forth the closing sales price of Fleet Common Stock and Shawmut Common Stock and the equivalent per share price of Shawmut Common Stock giving effect to the Merger on January 24, 1995, February 17, 1995 (the last business day prior to the public announcement of the proposed 17 29 - -------------------------------------------------------------------------------- Merger) and May 3, 1995 (the latest practicable trading day before the printing of this Joint Proxy Statement-Prospectus). Subsequent to January 24, 1995, a run-up in the market price for the Shawmut Common Stock occurred. Morgan Stanley believes that such increase was attributable to merger speculation concerning a potential sale of Shawmut. See "THE MERGER -- Fairness Opinions of Financial Advisors -- Shawmut."
CLOSING SALES PRICE --------------------------- PRO FORMA FLEET SHAWMUT EQUIVALENT COMMON STOCK COMMON STOCK PER SHARE(1) ------------ ------------ ------------ Market value per share: January 24, 1995.......................... $ 31.250 $ 18.000 $27.88 February 17, 1995......................... 33.625 20.625 30.00 May 3, 1995............................... - --------------- (1) Equivalent market value per share of Shawmut Common Stock represents the closing sales price of Fleet Common Stock on the Stock Exchange, as reported in The Wall Street Journal, on each specified date, multiplied by 0.8922.
Stockholders are advised to obtain current market quotations for Fleet Common Stock and Shawmut Common Stock. No assurance can be given as to the market price of Fleet Common Stock or Shawmut Common Stock at the Effective Time of the Merger, or the Fleet Common Stock after the Effective Time of the Merger. Because the Common Exchange Ratio is fixed and because the market price of the Fleet Common Stock is subject to fluctuation, the value of the shares of Fleet Common Stock that holders of Shawmut Common Stock will receive in the Merger may increase or decrease prior to and following the Merger. Shawmut Depositary Shares and Shawmut Warrants. The Shawmut Depositary Shares and Shawmut Warrants are each listed for trading on the Stock Exchange. The following table sets forth the high and low sales prices per share of such shares and warrants as reported on the Stock Exchange on February 17, 1995, the trading day immediately preceding the public announcement of the proposed Merger, and on May 3, 1995, the latest practicable trading day before the printing of this Joint Proxy Statement-Prospectus.
SHAWMUT 9.30% SHAWMUT 9.35% DEPOSITARY DEPOSITARY SHAWMUT SHARES SHARES WARRANTS ---------------- ---------------- --------------- HIGH LOW HIGH LOW HIGH LOW ------- ------ ------ ------- ------ ------ February 17, 1995............................ $26.125 $26.00 $25.50 $25.375 $3.875 $3.750 May 3, 1995..................................
Stockholders are advised to obtain current market quotations for Shawmut 9.30% Depositary Shares, Shawmut 9.35% Depositary Shares and Shawmut Warrants. No assurance can be given as to the market price of Fleet 9.30% Depositary Shares, Fleet 9.35% Depositary Shares or Fleet Warrants at or after the Effective Time of the Merger. See "THE MERGER -- Conversion of Shawmut Common Stock; Treatment of Shawmut Stock Options and Shawmut Warrants" and "COMPARATIVE COMMON STOCK PRICES AND DIVIDENDS". - -------------------------------------------------------------------------------- 18 30 - -------------------------------------------------------------------------------- SELECTED HISTORICAL AND PRO FORMA PER SHARE DATA The unaudited information set forth on the following page reflects certain comparative per common share data related to income per share, cash dividends declared per share and book value per share (i) on a historical basis for Fleet and Shawmut; (ii) on a pro forma combined basis per share of Fleet Common Stock assuming consummation of the merger (the "NBB Merger") of NBB Bancorp, Inc. ("NBB") into Fleet and the issuance of 6,165,912 shares of Fleet Common Stock in connection therewith, the consummation of Fleet's repurchase (the "FMG Repurchase") of the publicly-held shares of Fleet's majority-owned subsidiary, Fleet Mortgage Group, Inc. ("FMG") and the consummation of the merger ("the Plaza Merger") of a wholly-owned subsidiary of Fleet National Bank ("Fleet-RI") into Plaza Home Mortgage Corporation ("Plaza"); (iii) on a pro forma combined basis per share of Shawmut Common Stock assuming consummation of the pending merger (the "Northeast Merger") of Northeast Federal Corp. ("Northeast") into Shawmut and the issuance of 6,572,060 shares of Shawmut Common Stock in connection therewith (assuming that the exchange ratio in connection with such transaction is 0.415 which is based on the closing sales price for Shawmut Common Stock on the Stock Exchange on May 3, 1995, the latest practicable trading day before the printing of this Joint Proxy Statement-Prospectus) and the acquisition (the "Barclays Acquisition") of substantially all of the assets and assumption of certain liabilities of the Business Finance Division of Barclays Business Credit, Inc. ("Barclays") by Shawmut; (iv) on a pro forma combined basis per share of Fleet Common Stock assuming consummation of the Merger, the NBB Merger, the Plaza Merger, the FMG Repurchase, the Northeast Merger and the Barclays Acquisition; and (v) on an equivalent pro forma combined basis per share of Shawmut Common Stock assuming consummation of the Merger, the NBB Merger, the Plaza Merger, the FMG Repurchase, the Northeast Merger and the Barclays Acquisition. The pro forma per share data for the years ended December 31, 1993 and 1992 assume consummation of the Merger but do not take into account the affect of the Northeast Merger, the NBB Merger, the Plaza Merger, the Barclays Acquisition and the FMG Repurchase since such transactions were or will be accounted for under the purchase method of accounting. The NBB Merger was consummated on January 27, 1995, the Barclays Acquisition was consummated on January 31, 1995, and the Plaza Merger was consummated on March 3, 1995. It is anticipated that the Merger will be consummated in the fourth quarter of 1995 and the Northeast Merger and the FMG Repurchase will be consummated in the second quarter of 1995. The information shown below should be read in conjunction with the consolidated historical financial statements of Fleet and Shawmut, including the respective notes thereto, which are incorporated by reference in this Joint Proxy Statement-Prospectus and the unaudited pro forma condensed combined financial information, including the notes thereto, which appear elsewhere in this Joint Proxy Statement-Prospectus. The pro forma data is presented for comparative purposes only and is not necessarily indicative of the combined financial position or results of operations which would have been realized had the acquisitions been consummated during the periods or as of the dates for which the pro forma data is presented. See "INFORMATION INCORPORATED BY REFERENCE", "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS" AND "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS". - -------------------------------------------------------------------------------- 19 31 - --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, ------------------------------- 1994 1993 1992 ------- ------- ------- FLEET COMMON STOCK: Income per share from continuing operations: Primary: Historical................................................... $ 3.75 $ 3.01 $ 1.78 Fleet Pro Forma(1)........................................... 3.36 N/A N/A Fleet/Shawmut Pro Forma(2)................................... 2.93 2.86 1.35 Fully Diluted: Historical................................................... 3.75 3.01 1.77 Fleet Pro Forma(1)........................................... 3.36 N/A N/A Fleet/Shawmut Pro Forma(2)................................... 2.93 2.86 1.34 Cash dividends declared per share: Historical................................................... 1.40 1.025 0.825 Fleet Pro Forma(3)........................................... 1.40 N/A N/A Fleet/Shawmut Pro Forma(3)................................... 1.40 1.025 0.825 Book Value per share at period end: Historical................................................... 22.23 Fleet Pro Forma(1)........................................... 22.78 Fleet/Shawmut Pro Forma(2)................................... 20.25 SHAWMUT COMMON STOCK: Income before extraordinary credit and accounting changes: Primary: Historical................................................... $ 1.87 $ 2.35 $ 0.60 Shawmut Pro Forma(4)......................................... 1.93 N/A N/A Fleet/Shawmut Pro Forma Equivalent(5)........................ 2.61 2.55 1.20 Fully Diluted: Historical................................................... 1.87 2.35 0.60 Shawmut Pro Forma(4)......................................... 1.93 N/A N/A Fleet/Shawmut Pro Forma Equivalent(5)........................ 2.61 2.55 1.19 Cash dividends declared per share: Historical................................................... 0.82 0.50 -- Shawmut Pro Forma(3)......................................... 0.82 N/A N/A Fleet/Shawmut Pro Forma Equivalent(3)........................ 1.25 0.91 0.74 Book value per share at period end: Historical................................................... 16.72 Shawmut Pro Forma(4)......................................... 17.15 Fleet/Shawmut Pro Forma Equivalent(5)........................ 18.06 - --------------- (1) Fleet Pro Forma shares reflect Fleet's historical common shares outstanding and Fleet's historical primary and fully diluted equivalent shares, both adjusted for the issuance of 6,165,912 shares of Fleet Common Stock in connection with the NBB Merger. (2) Fleet/Shawmut Pro Forma shares reflect Fleet's historical common shares outstanding and Fleet's historical primary and fully diluted equivalent shares adjusted for the issuance of 6,165,912 shares of Fleet Common Stock in connection with the NBB Merger and the exchange of 108,429,899 shares of Fleet Common Stock in connection with the Merger at a Common Exchange Ratio of 0.8922 shares of Fleet Common Stock for each share of Shawmut Common Stock (which includes the issuance of 6,572,060 shares of Shawmut Common Stock issued in connection with the Northeast Merger and excludes the 5,811,900 shares of Shawmut Common Stock owned by Fleet which are assumed to be retired for combining purposes). (3) The Fleet Pro Forma dividends per share amounts and the Shawmut Pro Forma dividends per share amounts represent Fleet's and Shawmut's respective historical dividends per share. The Fleet/Shawmut Pro Forma dividends per share represent Fleet's historical dividends per share and the Fleet/Shawmut Pro Forma Equivalent dividends per share represent Fleet's historical dividends per share multiplied by the Common Exchange Ratio of 0.8922. (4) Shawmut Pro Forma shares reflect Shawmut's historical common shares outstanding and Shawmut's historical primary and fully diluted equivalent shares, both adjusted for the issuance of 6,572,060 shares of Shawmut Common Stock in connection with the Northeast Merger. (5) Fleet/Shawmut Pro Forma Equivalent share amounts are calculated by multiplying the Fleet/Shawmut Pro Forma per share amounts by the Common Exchange Ratio of 0.8922.
- -------------------------------------------------------------------------------- 20 32 SELECTED CONSOLIDATED FINANCIAL DATA The following tables set forth certain unaudited historical consolidated financial data for each of Fleet and Shawmut. This data is based on the respective consolidated financial statements of Fleet and Shawmut, including the respective notes thereto, which are incorporated by reference in this Joint Proxy Statement-Prospectus and should be read in conjunction therewith. See "INFORMATION INCORPORATED BY REFERENCE". Certain amounts in prior periods have been reclassified to conform to current-year presentation. SELECTED CONSOLIDATED FINANCIAL DATA FLEET FINANCIAL GROUP, INC. (HISTORICAL)
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------------- 1994 1993 1992 1991(1) 1990 ----------- ---------- ---------- ---------- ---------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Consolidated Summary of Operations: Interest income............................. $3,272 $3,212 $3,416 $3,329 $3,279 Interest expense............................ 1,290 1,161 1,463 1,930 2,126 Net interest income......................... 1,982 2,051 1,953 1,399 1,153 Provision for credit losses................. 62 271 486 509 762 Net interest income after provision for credit losses............................. 1,920 1,780 1,467 890 391 Noninterest income......................... 1,173 1,465 1,368 1,082 735 Noninterest expense......................... 2,070 2,424 2,318 1,819 1,289 Income (loss) before income taxes........... 1,023 821 517 153 (163) Income tax expense (benefit)................ 398 327 228 55 (89) Net income (loss) before minority interest.................................. 625 494 289 98 (74) Minority interest in FMG (after-tax)(2)..... 12 6 9 -- -- ----- ----- ----- ----- ----- Net income (loss)........................... $613 $488 $280 $98 $(74) ===== ===== ===== ===== ===== Earnings (loss) per common share: Primary..................................... $3.75 $3.01 $1.78 $.67 $(.75) Fully diluted............................... 3.75 3.01 1.77 .67 (.75) Weighted average primary shares outstanding............................... 159,483,021 154,666,307 141,469,658 124,966,226 109,415,386 Weighted average fully diluted shares outstanding............................... 159,483,021 154,899,995 142,778,665 127,092,029 111,259,336 Book value per common share................. $22.23 $22.84 $19.50 $18.15 $17.65 Cash dividends declared per common share.... 1.40 1.025 . 825 .80 1.25 Common dividend payout ratio(3)............. 31.3% 28.7% 36.1% 96.7% -- Ratio of Earnings to Fixed Charges: Excluding interest on deposits.............. 2.80x 2.81x 2.22x 1.32x --(4) Including interest on deposits.............. 1.76 1.68 1.34 1.08 --(4) Ratio of Earnings to Fixed Charges and Dividends on Preferred Stock: Excluding interest on deposits.............. 2.73 2.67 2.09 1.31 --(5) Including interest on deposits.............. 1.75 1.66 1.33 1.08 --(5) Consolidated Balance Sheet -- Average Balances: Total assets................................ $48,386 $45,966 $45,166 $38,839 $34,363 Securities held to maturity(6).............. 865 2,496 650 6,787 7,127 Securities available for sale(6)............ 14,573 10,442 11,059 1,376 -- Loans and leases, net of unearned income.... 26,637 26,144 26,615 23,995 21,027 Interest-bearing deposits................... 25,645 25,173 26,551 24,248 18,607 Short-term borrowings....................... 7,645 5,971 4,753 3,284 6,366 Long-term debt/subordinated notes and debentures................................ 3,392 3,718 3,127 3,020 2,544 Dual Convertible Preferred Stock(7).................................. -- -- 283 134 -- Stockholders' equity........................ 3,583 3,453 2,611 2,269 2,197
21 33
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------------- 1994 1993 1992 1991(1) 1990 ----------- ---------- ---------- ---------- ---------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Consolidated Ratios: Net interest margin (fully taxable equivalent)............................... 4.64% 5.02% 4.80% 4.09% 3.92% Return (loss) on average assets............. 1.27 1.06 .62 .25 (.21) Return (loss) on average common stockholders' equity...................... 18.77(8) 16.07 11.01 4.02 (3.93) Return (loss) on average stockholders' equity.................................... 17.11(8) 14.14 10.72 4.31 (3.35) Average stockholders' equity to average assets.................................... 7.40(8)(9) 7.51(9) 5.78(9) 5.84(9) 6.39 Tier 1 risk-based capital ratio............. 10.08 11.76 10.44 9.77 7.58 Total risk-based capital ratio.............. 14.21 16.62 15.38 13.79 11.19 Period-end reserve for credit losses to period-end loans and leases, net of unearned income........................... 3.46 3.80 3.86 3.81 3.42 Net charge-offs to average loans and leases, net of unearned income.................... .39 1.11 2.05 1.65 1.92 Period-end nonperforming assets to period-end loans and leases, net of unearned income, and other real estate owned..................................... 1.88 2.27 3.68 5.89 6.64 - --------------- (1) Data for the year ended December 31, 1991 includes results of the banks acquired in the Bank of New England acquisition from July 14, 1991. (2) For the year ended December 31, 1992, the minority interest deduction for FMG totalled approximately 19% of FMG's earnings from the date of the initial public offering (August 7, 1992) to the end of the period. (3) The common dividend payout ratio is equal to the ratio of aggregate common dividends declared during the indicated period to the consolidated net income of Fleet during such period. For the year ended December 31, 1990, common dividends aggregated $137 million and the net loss was $74 million. (4) Fixed charges exceeded earnings by $164 million (excluding interest on deposits) and by $164 million (including interest on deposits) for the year ended December 31, 1990. (5) The sum of fixed charges and dividends exceeded earnings by $164 million (excluding interest on deposits) and by $164 million (including interest on deposits) for the year ended December 31, 1990. (6) For a discussion of Fleet's reclassification in 1992 of its "securities held to maturity" to "securities available for sale", see Fleet's Current Report on Form 8-K dated October 21, 1992. Effective January 1, 1994, Fleet adopted FASB Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The standard requires that securities available for sale be reported at fair value, with unrealized gains or losses reflected as a separate component of stockholders' equity. In connection with the adoption of FASB Statement No. 115, Fleet transferred securities netting to $767 million from the held to maturity portfolio to the available for sale portfolio. (7) Fleet's Dual Convertible Preferred Stock was issued in 1991 and reclassified to stockholders' equity as of December 31, 1992. (8) Fleet's return on average common stockholders' equity, return on average stockholders' equity and average stockholders' equity to average assets ratios include the average unrealized gains and losses on securities available for sale. Excluding the impact of FASB Statement No. 115, Fleet's return on average common stockholders' equity and return on average stockholders' equity would have been 18.11% and 16.57%, respectively, for the year ended December 31, 1994. (9) Excludes $283 million of Fleet's Dual Convertible Preferred Stock at December 31, 1992 and December 31, 1991 and includes $283 million of Fleet's Dual Convertible Preferred Stock at December 31, 1994 and December 31, 1993. Including the $283 million of Dual Convertible Preferred Stock, this ratio would be 6.41% and 6.19% at December 31, 1992 and December 31, 1991, respectively.
22 34 SELECTED CONSOLIDATED FINANCIAL DATA(1) SHAWMUT NATIONAL CORPORATION (HISTORICAL) The following table sets forth certain unaudited historical consolidated financial data of Shawmut. The table is based on and should be read in conjunction with Shawmut's historical financial statements and notes thereto incorporated by reference in this Joint Proxy Statement-Prospectus. See "INFORMATION INCORPORATED BY REFERENCE." Certain amounts in prior periods have been reclassified to conform to current-year presentation.
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------- 1994(1) 1993 1992 1991 1990 ----------- ----------- ----------- ---------- ---------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Consolidated Summary of Operations: Interest and dividend income.................. $ 1,938 $ 1,827 $ 1,856 $ 2,028 $ 2,475 Interest expense.............................. 870 755 874 1,212 1,657 Net interest income........................... 1,068 1,072 982 816 818 Provision for credit losses................... 3 56 242 486 474 Net interest income after provision for credit losses...................................... 1,065 1,016 740 330 344 Noninterest income............................ 378 411 523 545 473 Noninterest expense(2)........................ 1,072 1,137 1,154 1,044 973 Income (loss) before income taxes, extraordinary credit and cumulative effect of accounting changes....................... 371 290 109 (169) (156) Income tax expense............................ 134 7 41 4 -- Income (loss) before extraordinary credit and cumulative effect of accounting changes..... 237 283 68 (173) (156) Extraordinary credit.......................... -- -- 18 -- -- Cumulative effect of changes in methods of accounting.................................. -- 46 -- -- -- ----------- ----------- ----------- ---------- ---------- Net income (loss)............................. $ 237 $ 329 $ 86 $ (173) $ (156) ========== ========== ========== ========= ========= Net income (loss) applicable to common shares...................................... $ 222 $ 314 $ 81 $ (176) $ (159) ========== ========== ========== ========= ========= Earnings (loss) per common share: Income (loss) before extraordinary credit and cumulative effect of accounting changes..... $ 1.87 $ 2.35 $ .60 $ (2.04) $ (1.89) Net income (loss)............................. 1.87 2.75 .78 (2.04) (1.89) Weighted average shares outstanding........... 118,977,173 113,908,148 104,379,621 85,857,688 84,116,028 Book value per common share................... 16.72 16.25 13.69 13.22 15.65 Common dividend payout ratio.................. 42.63 16.46 -- -- -- Cash dividends declared per common share(3)... .82 .50 .75 Ratio of Earnings to Fixed Charges: Excluding interest on deposits................ 1.77x 1.82x 1.40x 0.43x(4) 0.63x(4) Including interest on deposits................ 1.42 1.37 1.12 0.86(4) 0.91(4) Ratio of Earnings to Fixed Charges and Dividends on Preferred Stock: Excluding interest on deposits................ 1.69 1.71 1.32 0.43(5) 0.63(5) Including interest on deposits................ 1.38 1.33 1.10 0.86(5) 0.91(5) Consolidated Balance Sheet -- Average Balances: Total assets.................................. 31,319 29,320 26,467 26,260 27,612 Securities held to maturity(6)................ 7,922 5,239 3,650 5,571 4,209 Securities available for sale(6).............. 2,358 3,698 3,002 221 394 Loans and leases, net of unearned income...... 17,659 17,139 16,414 16,991 18,380 Interest-bearing deposits..................... 14,489 14,593 15,480 16,619 16,681 Other borrowings.............................. 8,361 7,317 4,417 3,494 4,459 Long-term debt/subordinated notes and debentures.................................. 1,341 839 667 669 687 Shareholders' equity.......................... 2,162 1,859 1,507 1,327 1,572
23 35
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------- 1994(1) 1993 1992 1991 1990 ----------- ----------- ----------- ---------- ---------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Consolidated Ratios: Net interest margin (fully taxable equivalent)................................. 3.78% 4.03% 4.15% 3.71% 3.42% Return (loss) on average assets............... .76 1.12 .33 (.66) (.57) Return (loss) on average common shareholders' equity...................................... 11.22 18.90 5.73 (13.93) (10.32) Return (loss) on average shareholders' equity...................................... 10.98 17.70 5.71 (13.07) (9.94) Average shareholders' equity to average assets...................................... 6.90 6.34 5.69 5.05 5.69 Tier 1 risk-based capital ratio............... 8.27 8.79 8.12 5.93 6.16 Total risk-based capital ratio................ 11.55 12.73 12.21 9.82 10.31 Period-end reserve for credit losses to period end loans and leases, net of unearned income...................................... 2.93 3.80 5.24 6.04 5.77 Net charge-offs to average loans and leases, net of unearned income...................... .76 1.72 2.30 2.54 1.41 Period-end nonaccruing loans plus foreclosed properties to period-end loans and leases, net of unearned income, and foreclosed properties.................................. 1.31 2.48 5.81 8.83 10.60 - --------------- (1) Restated to reflect the pooling of interests acquisitions that occurred during the second quarter of 1994. (2) Includes merger and restructuring related charges of $140.7 million ($99.8 million after-tax) for the year ended December 31, 1994 and restructuring related charges of $36.3 million ($23.6 million after-tax) for year ended December 31, 1993. (3) The common dividend payout ratio is equal to the ratio of aggregate common dividends declared during the indicated period to the consolidated net income of Shawmut during such period. For the years ended December 31, 1992 and 1991, Shawmut did not declare common dividends. (4) Fixed charges exceeded earnings by $169.2 million and $155.7 million (including and excluding interest on deposits, respectively) for the years ended December 31, 1991 and 1990, respectively. (5) The sum of fixed charges and dividends on preferred stock exceeded earnings by $171.5 million and $158.0 million (including and excluding interest on deposits, respectively) for the years ended December 31, 1991 and 1990, respectively. (6) Effective December 31, 1993, Shawmut adopted FASB Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The standard requires that securities available for sale be reported at fair value, with unrealized gains or losses reflected as a separate component of shareholders' equity. In connection with the adoption of FASB Statement No. 115, Shawmut transferred securities netting to $422 million from the available for sale portfolio to the held to maturity portfolio.
24 36 FLEET FINANCIAL GROUP, INC. Fleet is a diversified financial services company organized under the laws of the State of Rhode Island. At December 31, 1994, Fleet was the 17th largest banking institution in the United States in terms of total assets, with total assets of $48.8 billion, total deposits of $34.8 billion and stockholders' equity of $3.4 billion. Fleet is engaged in a general commercial banking and trust business throughout the states of Rhode Island, New York, Connecticut, Massachusetts, Maine and New Hampshire, through its banking subsidiaries, Fleet-RI, Fleet Bank ("Fleet-NY"), Fleet Bank, National Association ("Fleet-CT"), Fleet Bank of Massachusetts, National Association ("Fleet-MA"), Fleet Bank of Maine and Fleet Bank NH ("Fleet-NH"). Fleet provides, through its nonbanking subsidiaries, a variety of financial services, including mortgage banking, asset-based lending, equipment leasing, consumer finance, real estate financing, securities brokerage services, investment banking, investment advice and management, data processing and student loan servicing. The principal office of Fleet is located at 50 Kennedy Plaza, Providence, Rhode Island 02903, telephone number (40l) 278-5800. SHAWMUT NATIONAL CORPORATION Shawmut is a multibank holding company and a unitary savings and loan holding company, registered under the BHCA and the HOLA. At December 31, 1994, Shawmut had assets of $32.4 billion, deposits of $20.7 billion, and shareholders' equity of $2.2 billion. Shawmut was organized under the laws of the State of Delaware in October 1987 and became a bank holding company on February 29, 1988 through the consummation of a plan of reorganization between Hartford National Corporation ("HNC") and Shawmut Corporation ("SC") pursuant to which both HNC and SC became wholly owned subsidiaries of Shawmut. Shawmut maintains dual headquarters in the States of Connecticut and Massachusetts. The principal executive offices of Shawmut are located at 777 Main Street, Hartford, Connecticut 06115 and One Federal Street, Boston, Massachusetts 02211. Its telephone numbers in Connecticut and Massachusetts are (203) 986-2000 and (617) 292-2000, respectively. Shawmut is engaged principally in the business of providing comprehensive corporate, commercial, correspondent and individual banking services, and personal and corporate trust services, through its network of approximately 330 branches located throughout Connecticut, Massachusetts, New Hampshire and Rhode Island. Shawmut's principal banking subsidiaries are Shawmut Bank Connecticut, National Association, Hartford, Connecticut ("Shawmut-CT") and Shawmut Bank, National Association, Boston, Massachusetts ("Shawmut-MA"). Shawmut also has a bank subsidiary in New Hampshire, Shawmut Bank NH, Manchester, New Hampshire ("Shawmut-NH"). Shawmut's thrift subsidiary is Shawmut Bank, FSB, Boca Raton, Florida ("Shawmut-FSB"). On June 11, 1994, Shawmut entered into an Agreement and Plan of Merger with Northeast, pursuant to which Northeast will merge into Shawmut. The parties expect the Northeast Merger to be consummated in the second quarter of 1995. RECENT DEVELOPMENTS 1995 FIRST QUARTER RESULTS Fleet. Fleet's net income for the quarter ended March 31, 1995 was $164 million, or $1.02 per fully diluted share, compared to net income of $136 million, or $0.79 per fully diluted share for the first quarter of 1994, an increase of 29%. Net interest income for the first quarter totaled $487 million ($497 million on a fully taxable equivalent basis) compared to $482 million ($493 million on a fully taxable equivalent basis) for the fourth quarter of 1994 and $504 million ($512 million on a fully taxable equivalent basis) for the first quarter of 1994. The higher net interest margin of 4.83%, an increase of 8 basis points over the 4.75% recorded in the fourth quarter of 1994, reflected a reduction in Fleet's securities portfolio as a result of actions taken in the last half of 1994 to restructure its securities portfolio and improve its sensitivity to rising interest rates and an increase in higher yielding average loans outstanding, due in part to the consummation of the NBB Merger in January, 1995. These actions, coupled with an increase in Fleet's prime rate during the first quarter, resulted in an increase in 25 37 the yield on interest earning assets from 8.03% in the fourth quarter of 1994 to 8.54% in the first quarter of 1995. This increase, however, was partially offset by an increase in Fleet's overall cost of funds which was the result of customers moving into higher yield time deposits, coupled with the impact of an increase in short-term borrowing rates by the Federal Reserve Board of 50 basis points during the first quarter of 1995. Fleet's first quarter provision for credit losses was $20 million, a slight decrease from the prior year's first quarter. Net charge-offs for the quarter totaled $35 million, compared to $32 million in the first quarter of 1994. Expenses related to other real estate owned ("OREO") were $3 million for the first three months of 1995, compared to $7 million in the first three months of 1994. Nonperforming assets increased in the first quarter to $578 million from $518 million at December 31, 1994, while the reserve for loan losses also rose to $966 million from $953 million. At March 31, 1995, Fleet's ratio of reserves to nonperforming loans was 198%, compared to 208% at March 31, 1994. Noninterest income in the first quarter totaled $308 million, compared to $295 million for the same period in 1994. Mortgage banking revenue of $99 million in the first quarter of 1995 remained basically even with the $100 million recorded in the first quarter of 1994, reflecting a reduction in mortgage production revenue, as this business has been negatively impacted by rising interest rates over the past year, offset by an increase in mortgage servicing revenue and gains on sale of servicing. Fleet's servicing portfolio totaled $90 billion at March 31, 1995 compared to $70 billion at March 31, 1994. Service charges, fees and commissions increased $13 million as a result of the implementation of various fee producing programs initiated as part of Fleet's efficiency improvement programs. Investment services revenue improved slightly to $46 million, compared to the first quarter of 1994. Noninterest expense in the first quarter totaled $498 million, a reduction of $52 million, compared to the $550 million reported for the first quarter of 1994. The decrease is primarily attributable to the successful implementation of numerous cost-cutting strategies developed as part of Fleet's efficiency-improvement programs. The first quarter of 1994 included a $25 million restructuring charge related to such efficiency improvement program. Total assets at March 31, 1995 were $47.8 billion, while total loans and leases were $29.5 billion at the same date, compared with $48.8 billion of total assets and $27.7 billion of loans and leases at December 31, 1994. Total assets and loans and leases were $47.4 billion and $26.0 billion, respectively, at March 31, 1994. Excluding the NBB and Plaza acquisitions, loans and leases increased by approximately $513 million from December 31, 1994. The largest increases were noted in the commercial and residential real estate portfolio. Fleet's investment securities portfolio remained relatively stable from December 31, 1994 to March 31, 1995 at $11 billion. However, the depreciation in the portfolio was reduced to approximately $200 million at March 31, 1995, a reduction of more than $400 million from December 31, 1994 as a result of an increase in the bond market rally in the first quarter. Stockholder's equity equaled $3.9 billion at March 31, 1995 and $3.4 billion at December 31, 1994, an increase of $500 million. This increase is primarily attributable to the reissuance in the NBB Merger of $217 million of treasury stock purchased by Fleet for that purpose, and a $240 million after-tax improvement in Fleet's securities available for sale valuation reserve. At March 31, 1995, Fleet's capital ratios exceeded all minimum regulatory capital requirements. Shawmut. Shawmut's net income for the quarter ended March 31, 1995 was $62.6 million, or $.47 per common share, compared with net income of $77.3 million, or $.62 per common share for the first quarter of 1994. Included in first quarter 1995 results was a $36.9 million pre-tax charge ($23.1 million after-tax, or $.19 per common share) related to the settlement of certain Shawmut employee retirement benefits caused by the pending Merger. First quarter 1995 results reflect the Barclays Acquisition. Tax equivalent net interest income for the quarter ended March 31, 1995 totaled $273.2 million, compared with $275.4 million for the comparable period in the previous year. The net interest margin for the first quarter of 1995 was 3.55%, compared to 3.65% for the fourth quarter of 1994 and 3.91% for the first quarter of 1994. The increase in net interest income relative to the fourth quarter of 1994 resulted from growth in average interest-earning assets, primarily due to the Barclays Acquisition. The decline in net interest margin 26 38 for the same period resulted from the liability sensitive nature of Shawmut's balance sheet in an environment of rising interest rates. Consistent with its strategy in recent quarters, Shawmut has extended funding maturities while shortening asset maturities to lessen liability sensitivity. These risk reduction actions have contributed to the decline in net interest margin. Noninterest income for the quarter ended March 31, 1995 was $95.3 million, compared with $88.7 million for the comparable prior year period. This improvement in noninterest income was primarily due to the Barclays Acquisition and purchases of other companies during 1994, which contributed to increases in customer service and other fees. Noninterest expenses for the quarter ended March 31, 1995 before the Merger related charge discussed above were $228.7 million, compared with $241.8 million in the first quarter of 1994. Noninterest expenses for the first quarter of 1995 included $2.9 million of stock incentive adjustments reflecting the increase in Shawmut's stock price which was influenced by the announcement of the Merger Agreement and $9.0 million added by the Barclays Acquisition. Excluding these items, noninterest expenses of $216.8 million declined by $25 million when compared with the first quarter of 1994, primarily due to Shawmut's continuing cost management program and acquisition consolidation. There was no provision for credit losses for the first quarter of 1995, compared with $3.0 million for the first quarter of 1994. With continuing increases in reserve coverage of nonaccruing loans and improving credit quality in the loan portfolio, Shawmut does not currently anticipate that provisions for credit losses will be necessary in the first half and possibly all of 1995. At March 31, 1995, nonaccruing loans plus foreclosed properties were $240.3 million, compared with $242.8 million at December 31, 1994, or 1.14% and 1.31%, respectively, of total loans plus foreclosed properties. Nonaccruing loans increased from $224.0 million at December 31, 1994 to $228.4 million at March 31, 1995. The Barclays Acquisition increased nonaccruing loans by $14.1 million at period end and an additional $13.0 million of loans were identified as assets held for accelerated disposition. Shawmut's reserve for credit losses increased $17.1 million from $542.1 million at December 31, 1994 to $559.2 million at March 31, 1995, due to the addition of $41.7 million of reserves purchased as part of the Barclays Acquisition, net of loans charged off of $24.6 million for the quarter. At March 31, 1995, Shawmut's ratio of credit loss reserves to nonaccruing loans was 245%, compared with 242% at December 31, 1994. At March 31, 1995, Shawmut had total assets of $34.2 billion, total deposits of $20.6 billion and total shareholders' equity of $2.4 billion. Total loans and leases were $21.1 billion at March 31, 1995, compared with $18.5 billion at December 31, 1994. The increase in loans of $2.6 billion from year end was due to the Barclays Acquisition. Shawmut's securities portfolio at March 31, 1995 was $9.9 billion, compared with $10.0 billion at December 31, 1994. The after-tax unrealized loss on Shawmut's $2.1 billion available for sale securities portfolio recorded as a component of shareholders' equity declined to $37.4 million at March 31, 1995 from $54.3 million at year end. The unrealized loss on Shawmut's $7.8 billion held to maturity securities portfolio declined to $248.5 million at March 31, 1995 from $438.5 million at year end, or a decrease of $190.0 million. At March 31, 1995, Shawmut's capital ratios exceeded the ratios designated for well-capitalized financial institutions. MEETING OF FLEET STOCKHOLDERS DATE, TIME AND PLACE; PURPOSE OF MEETING This Joint Proxy Statement-Prospectus is being furnished in connection with the solicitation of proxies by the Fleet Board for use at the Fleet Meeting. The Fleet Meeting will be held at the Rhode Island Convention Center, 99 Sabin Street, Providence, Rhode Island, at 11:00 a.m. on June 21, 1995. The Fleet Meeting will be held for the purpose of considering and voting upon proposals to (i) approve and adopt the Merger Agreement and the consummation of the transactions contemplated thereby, including the Merger, (ii) amend the Fleet Existing Articles to increase the authorized shares of Fleet Common Stock 27 39 from 300,000,000 to 600,000,000, to change the par value of the Fleet Common Stock from $1.00 to $0.01 and to restate the Fleet Existing Articles by including technical amendments which would delete from the Fleet Existing Articles the terms of Fleet preferred stock which has been redeemed or converted in full, (iii) elect directors to serve on the Fleet Board of Directors for terms of three years until their successors are elected and qualified, (iv) ratify the selection of independent auditors for 1995, and (v) conduct any other business that may properly come before the Fleet Meeting, or any adjournments or postponements thereof. Any action may be taken on the foregoing proposals at the Fleet Meeting or at any adjournments or postponements thereof. Management of Fleet knows of no matters to be brought before the meeting other than those referred to herein. If any other business should properly come before the Fleet Meeting, the persons named in the proxy will vote in accordance with their best judgment. THE FLEET BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AS WELL AS EACH OF THE FOREGOING ADDITIONAL ACTIONS. Additional information with respect to the amendment and restatement of the Fleet Existing Articles, the election of directors and the ratification of the selection of independent auditors is set forth in the section entitled "AMENDMENT AND RESTATEMENT OF FLEET EXISTING ARTICLES; ELECTION OF FLEET DIRECTORS; RATIFICATION OF FLEET INDEPENDENT AUDITORS" which is included in the Joint Proxy Statement-Prospectus to be delivered to Fleet stockholders only. RECORD DATE The Fleet Board has fixed the close of business on May 3, 1995 as the Record Date. Only the holders of record of the outstanding shares of Fleet Common Stock and Fleet's outstanding preferred stock on the Record Date will be entitled to notice of, and only the holders of record of the outstanding shares of Fleet Common Stock will be entitled to vote at, the Fleet Meeting and any adjournments or postponements thereof. At the Record Date, shares of Fleet Common Stock were outstanding and entitled to vote. The presence, in person or by proxy, of a majority of the aggregate number of shares of Fleet Common Stock outstanding and entitled to vote on the Record Date is necessary to constitute a quorum at the Fleet Meeting. PROXIES; VOTING AND REVOCATION Shares of Fleet Common Stock represented by a properly executed proxy received prior to the vote at the Fleet Meeting and not revoked will be voted at the Fleet Meeting as directed in the proxy. IF A PROXY IS SUBMITTED AND NO DIRECTIONS ARE GIVEN, THE PROXY WILL BE VOTED FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AND FOR THE ADDITIONAL PROPOSALS REFERRED TO HEREIN. Fleet intends to count shares of Fleet Common Stock present in person at the Fleet Meeting but not voting, and shares of Fleet Common Stock for which it has received proxies but with respect to which holders of shares have abstained on any matter, as present at the Fleet Meeting for purposes of determining the presence or absence of a quorum for the transaction of business. Since the affirmative vote of the holders of a majority of the outstanding shares of Fleet Common Stock entitled to vote on the Merger is required to approve and adopt the Merger Agreement and the transactions contemplated thereby, such non-voting shares and abstentions will have the effect of a vote against the approval of the Merger Agreement. In addition, under the rules of the Stock Exchange, brokers who hold shares in street name for customers who are the beneficial owners of such shares are prohibited from giving a proxy to vote shares held for such customers with respect to the approval and adoption of the Merger Agreement and the transactions contemplated thereby without specific instructions from such customers. Given that Rhode Island law requires the affirmative vote of the holders of a majority of the outstanding shares of Fleet Common Stock entitled to vote on the Merger Agreement and the transactions contemplated thereby, the failure of such customers to provide specific instructions with respect to their shares 28 40 of Fleet Common Stock to their broker will have the effect of a vote against the approval of the Merger Agreement. The affirmative vote of the holders of a majority of the outstanding shares of Fleet Common Stock entitled to vote on the amendment and restatement of the Fleet Existing Articles is required to take such action. The affirmative vote of the holders of a majority of the shares of Fleet Common Stock represented at the Fleet Meeting and entitled to vote is required to elect Fleet directors and to ratify the selection of independent auditors for 1995. Each of these requirements is more fully described in the section entitled "AMENDMENT AND RESTATEMENT OF FLEET EXISTING ARTICLES; ELECTION OF FLEET DIRECTORS; RATIFICATION OF FLEET INDEPENDENT AUDITORS" which is included in the Joint Proxy Statement-Prospectus to be delivered to Fleet stockholders only. Each share of Fleet Common Stock is entitled to one vote on each matter voted upon at the Fleet Meeting. The persons named as proxies by a stockholder may propose and vote for one or more adjournments or postponements of the Fleet Meeting to permit further solicitation of proxies in favor of such proposal; provided, however, that no proxy which is voted against the proposal to approve and adopt the Merger Agreement will be voted in favor of any such adjournment or postponement. A stockholder of record may revoke a proxy by filing an instrument of revocation with William C. Mutterperl, Secretary of Fleet (50 Kennedy Plaza, Providence, Rhode Island 02903), by filing a duly executed proxy bearing a later date, or by appearing at the Fleet Meeting in person, notifying the Secretary, and voting by ballot at the Fleet Meeting. Any stockholder of record attending the Fleet Meeting may vote in person whether or not a proxy has been previously given, but the mere presence (without notifying the Secretary) of a stockholder at the Fleet Meeting will not constitute revocation of a previously given proxy. In addition, stockholders whose shares of Fleet Common Stock are not registered in their own name will need additional documentation from the record holder of such shares to vote personally at the Fleet Meeting. VOTES REQUIRED TO APPROVE THE MERGER; PRINCIPAL STOCKHOLDERS The affirmative vote of the holders of a majority of the shares of Fleet Common Stock issued, outstanding and entitled to vote at the Fleet Meeting is necessary to approve and adopt the Merger Agreement and the transactions contemplated thereby. The approval of the Merger Agreement by holders of Fleet Common Stock is a condition to the consummation of the Merger. None of the other matters being considered at the Fleet Meeting must be approved by holders of Fleet Common Stock in order for the Merger to be consummated. As of the Record Date, shares of Fleet Common Stock were outstanding and entitled to vote, of which approximately shares, or approximately %, were held by directors and executive officers of Fleet, its subsidiaries and their respective affiliates. Each such director and officer of Fleet has indicated his or her intention to vote the Fleet Common Stock beneficially owned by him or her for approval of the Merger Agreement and the consummation of the transactions contemplated thereby. As of the Record Date, the banking and trust subsidiaries of Fleet, as fiduciaries, custodians or agents, held a total of shares, or %, of the outstanding shares of Fleet Common Stock under trust agreements and other instruments and agreements. These entities maintained sole or shared voting power with respect to of such shares. In addition, as of the Record Date, Shawmut's directors and officers beneficially owned shares, or approximately % of the outstanding shares of Fleet, all of which they intend to vote for approval of the Merger and the consummation of the transactions contemplated thereby. As of the Record Date, the banking and trust subsidiaries of Shawmut, as fiduciaries, custodians or agents, held a total of shares, or %, of the outstanding shares of Fleet Common Stock under trust agreements and other instruments and agreements. These entities maintained sole or shared voting power with respect to of such shares. Information with respect to beneficial ownership of Fleet Common Stock by entities owning more than 5% of such stock and more detailed information with respect to beneficial ownership of Fleet Common Stock by Fleet directors and executive officers is incorporated by reference to Fleet's 1994 Annual Report on Form 10-K which is incorporated herein by reference. See "INFORMATION INCORPORATED BY REFERENCE". Such information is also set forth in the section entitled "AMENDMENT AND RESTATEMENT 29 41 OF FLEET EXISTING ARTICLES; ELECTION OF FLEET DIRECTORS; RATIFICATION OF FLEET INDEPENDENT AUDITORS" which is included in the Joint Proxy Statement-Prospectus to be delivered to Fleet stockholders only. MEETING OF SHAWMUT STOCKHOLDERS DATE, TIME AND PLACE; PURPOSE OF MEETING This Joint Proxy Statement-Prospectus is being furnished in connection with the solicitation of proxies by the Shawmut Board for use at the Shawmut Meeting. The Shawmut Meeting will be held at the Federal Reserve Bank of Boston, 600 Atlantic Avenue, Boston, Massachusetts, at 10:00 a.m. on June 21, 1995. The Shawmut Meeting will be held for the purpose of considering and voting upon proposals to (i) approve and adopt the Merger Agreement and the consummation of the transactions contemplated thereby, (ii) elect directors to serve until the next annual meeting of stockholders of Shawmut and until their successors are elected and qualified, or, if earlier, until the Effective Time of the Merger, (iii) appoint independent accountants for 1995, or, if earlier, until the Effective Time of the Merger, and (iv) conduct any other business that may properly come before the Shawmut Meeting, or any adjournments or postponements thereof. Any action may be taken on the foregoing proposals at the Shawmut Meeting or at any adjournments or postponements thereof. THE BOARD OF DIRECTORS OF SHAWMUT UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AS WELL AS EACH OF THE FOREGOING ADDITIONAL ACTIONS. Additional information with respect to the election of directors and the appointment of independent accountants is set forth in the section entitled "ELECTION OF SHAWMUT DIRECTORS; APPOINTMENT OF SHAWMUT INDEPENDENT ACCOUNTANTS" which is included in the Joint Proxy Statement-Prospectus to be delivered to Shawmut stockholders only. RECORD DATE The Shawmut Board of Directors has fixed the close of business on May 3, 1995 as the Record Date. Only the holders of record of the outstanding shares of Shawmut Common Stock and Shawmut Preferred on the Record Date will be entitled to notice of, and only the holders of record of the outstanding shares of Shawmut Common Stock will be entitled to vote at, the Shawmut Meeting and any adjournments or postponements thereof. At the Record Date, shares of Shawmut Common Stock were outstanding and entitled to vote. The presence, in person or by proxy, of a majority of the aggregate number of shares of Shawmut Common Stock outstanding and entitled to vote on the Record Date is necessary to constitute a quorum at the Shawmut Meeting. PROXIES; VOTING AND REVOCATION Shares represented by a properly executed proxy received prior to the vote at the Shawmut Meeting and not revoked will be voted at the Shawmut Meeting as directed in the proxy. IF A PROXY IS SUBMITTED AND NO DIRECTIONS ARE GIVEN, THE PROXY WILL BE VOTED FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AND FOR THE ADDITIONAL PROPOSALS REFERRED TO HEREIN. Shawmut intends to count shares of Shawmut Common Stock present in person at the Shawmut Meeting but not voting, and shares of Shawmut Common Stock for which it has received proxies but with respect to which holders of shares have abstained on any matter, as present at the Shawmut Meeting for purposes of determining the presence or absence of a quorum for the transaction of business. Since the affirmative vote of the holders of a majority of the outstanding shares of Shawmut Common Stock entitled to vote on the Merger is required to approve and adopt the Merger 30 42 Agreement and the transactions contemplated thereby, such non-voting shares and abstentions will have the effect of a vote against the approval of the Merger Agreement. In addition, under the rules of the Stock Exchange, brokers who hold shares in street name for customers who are the beneficial owners of such shares are prohibited from giving a proxy to vote shares held for such customers on the approval and adoption of the Merger Agreement without specific instructions from such customers. Given that Delaware law requires the affirmative vote of the holders of a majority of the outstanding shares of Shawmut Common Stock entitled to vote on the Merger Agreement in order to approve and adopt the Merger Agreement, the failure of such customers to provide specific instructions with respect to their shares of Shawmut Common Stock to their broker will have the effect of a vote against the approval of the Merger Agreement. At the Shawmut Meeting, Shawmut directors will be elected by a plurality of the votes of the shares of Shawmut Common Stock represented at the Shawmut Meeting and entitled to vote. "Plurality" means that the nominees who receive the largest number of votes cast "for" are elected as directors, up to the maximum number of directors to be chosen at the meeting. The affirmative vote of a majority of the shares represented at the Shawmut Meeting and entitled to vote is required to appoint independent accountants. See "ELECTION OF SHAWMUT DIRECTORS; APPOINTMENT OF SHAWMUT INDEPENDENT ACCOUNTANTS" which is included in the Joint Proxy Statement-Prospectus to be delivered to Shawmut stockholders only. Each share of Shawmut Common Stock is entitled to one vote on each matter voted upon at the Shawmut Meeting. The persons named as proxies by a stockholder may propose and vote for one or more adjournments or postponements of the Shawmut Meeting to permit further solicitation of proxies in favor of such proposal; provided, however, that no proxy which is voted against the proposal to approve and adopt the Merger Agreement will be voted in favor of any such adjournment or postponement. The giving of a proxy does not affect the rights of a holder of Shawmut Common Stock who attends the Shawmut Meeting to vote at such meeting, since a stockholder may revoke his or her proxy at any time before it is voted at the Shawmut Meeting. A stockholder of record may revoke a proxy by filing an instrument of revocation with J. Michael Shepherd, Secretary of Shawmut (One Federal Street, Boston, Massachusetts 02211), by filing a duly executed proxy bearing a later date, or by appearing at the Shawmut Meeting in person, notifying the Secretary, and voting by ballot at the Shawmut Meeting. Any stockholder of record attending the Shawmut Meeting may vote in person whether or not a proxy has been previously given, but the mere presence (without notifying the Secretary) of a stockholder at the Shawmut Meeting will not constitute revocation of a previously given proxy. In addition, stockholders whose shares of Shawmut Common Stock are not registered in their own name will need additional documentation from the record holder of such shares to vote personally at the Shawmut Meeting. VOTES REQUIRED TO APPROVE THE MERGER; PRINCIPAL STOCKHOLDERS The affirmative vote of the holders of a majority of the shares of Shawmut Common Stock issued, outstanding and entitled to vote at the Shawmut Meeting is necessary to approve and adopt the Merger Agreement and the transactions contemplated thereby. The approval of the Merger Agreement by Shawmut's stockholders is a condition to the consummation of the Merger. None of the other matters being considered at the Shawmut Meeting must be approved by holders of Shawmut Common Stock in order for the Merger to be consummated. As of the Record Date, shares of Shawmut Common Stock were issued, outstanding and entitled to vote, of which approximately shares, or approximately % were held by directors and executive officers of Shawmut, its subsidiaries and their respective affiliates. Each such director and officer of Shawmut has indicated his or her intention to vote the Shawmut Common Stock beneficially owned by him or her for approval of the Merger Agreement and the consummation of the transactions contemplated thereby. As of the Record Date, the banking and trust subsidiaries of Shawmut, as fiduciaries, custodians or agents, held a total of shares, or %, of the outstanding shares of Shawmut Common Stock under trust agreements and other instruments and agreements. These entities maintained sole or shared voting power with respect to of such shares. In addition, as of the Record Date, Fleet, on the one hand, and Fleet's directors and executive officers as a group, on the other hand, beneficially owned and shares respectively, or approximately % and %, respectively, of the outstanding shares of Shawmut 31 43 Common Stock, all of which they intend to vote for approval of the Merger and the consummation of the transactions contemplated thereby. As of the Record Date, the banking and trust subsidiaries of Fleet, as fiduciaries, custodians or agents, held a total of shares, or %, of the outstanding shares of Shawmut Common Stock under trust agreements and other instruments and agreements. These entities maintained sole or shared voting power with respect to of such shares. Information with respect to beneficial ownership of Shawmut Common Stock by entities owning more than 5% of such stock and more detailed information with respect to beneficial ownership of Shawmut Common Stock by Shawmut directors and executive officers is incorporated by reference to Shawmut's 1994 Annual Report on Form 10-K which is incorporated herein by reference. See "INFORMATION INCORPORATED BY REFERENCE". Such information is also set forth in the section entitled, "ELECTION OF SHAWMUT DIRECTORS; APPOINTMENT OF SHAWMUT INDEPENDENT ACCOUNTANTS" which is included in the Joint Proxy Statement-Prospectus to be delivered to Shawmut stockholders only. THE MERGER GENERAL The Boards of Directors of Fleet and Shawmut have unanimously approved the Merger Agreement, which provides for the Merger at the Effective Time (as hereinafter defined), with Fleet as the surviving corporation in the Merger. With certain limited exceptions described below, each share of Shawmut Common Stock outstanding at the Effective Time shall be converted into the right to receive the Common Exchange Ratio. Shares of Fleet Common Stock issued and outstanding immediately prior to the Effective Time will remain issued and outstanding after the Merger. The Board of Directors of each of Fleet and Shawmut believes that the terms of the Merger Agreement are fair and in the best interest of the parties and their respective stockholders and unanimously recommends that the stockholders of each of Fleet and Shawmut vote to approve and adopt the Merger Agreement and the consummation of the transactions contemplated thereby and the other proposals set forth herein. This Section of the Joint Proxy Statement-Prospectus describes certain aspects of the proposed Merger, including the principal provisions of the Merger Agreement and the Option Agreements. Copies of the Merger Agreement, the Fleet Option Agreement and the Shawmut Option Agreement are attached to this Joint Proxy Statement-Prospectus as Exhibits A, B and C, respectively. All stockholders of Fleet and Shawmut are urged to read each of these agreements in their entirety. BACKGROUND OF THE MERGER Fleet. For many years, the Fleet Board's strategy for building long-term value for Fleet stockholders has been based upon the objective of building a strong and profitable Northeast banking franchise that will enable Fleet to compete effectively in the increasingly competitive market for financial service products, while continuing to expand selectively into national financial product markets. In 1991, Fleet completed its highly successful acquisition of the former Bank of New England franchises from the Federal Deposit Insurance Corporation. Since 1991, Fleet has completed a number of smaller bank and nonbank acquisitions and in 1993, Fleet embarked upon an extensive reengineering campaign, entitled Fleet Focus, designed to improve substantially Fleet's operating efficiency. The Fleet Board has long recognized that in order for Fleet to achieve the requisite size and scope of operations necessary for Fleet to remain an effective competitor in the dramatically changing market for banking and financial services in the United States, a strategic combination with another roughly equally sized regional bank holding company would likely be necessary. An important component to Fleet of any such strategic combination has been the compatibility of the business profiles of the two merger partners and the ability of the managements of both parties to work together effectively in integrating the combining companies. From time to time, Fleet has explored potential strategic combinations with other leading regional bank holding companies. None of such discussions led to an agreement as to the terms of a potential merger 32 44 until the recent commencement of discussions with Shawmut leading to the execution of the Merger Agreement. Mr. Murray and Mr. Alvord are well acquainted with each other, each having played a significant role in New England banking for numerous years. From time to time during the past several years, Mr. Murray and Mr. Alvord have met to discuss regional and national developments in the financial services industry as well as developments affecting their respective companies. On February 6, 1995, Mr. Alvord met with Mr. Murray, at Mr. Alvord's request, regarding a potential merger of the companies. Mr. Alvord and Mr. Murray subsequently met to explore the potential transaction structure and value of a merger between Fleet and Shawmut. Thereafter, Messrs. Murray and Alvord met with their respective senior management teams and financial and legal advisors to negotiate further the structure of the transaction and the terms of the Merger Agreement. During this time, members of Fleet's management team commenced a due diligence investigation of Shawmut's business. On February 14 and 15, 1995, Mr. Murray presented the terms of the Merger and the then current drafts of the Merger Agreement and the Option Agreements to the Fleet Board at its regular monthly meeting. At such meetings, members of Fleet's management team made presentations which set forth the reasons for the Merger and the benefits to Fleet and its stockholders from the Merger. At the February 15, 1995 meeting, Fleet's legal advisors reviewed the legal terms of the proposed Merger Agreement and Option Agreements and the Fleet Board's obligations in consideration thereof, and Fleet's financial advisors made presentations regarding the financial terms and fairness, from a financial point of view, of the Common Exchange Ratio to the holders of Fleet Common Stock. After discussion and consideration of the factors discussed below under "-- Reasons for the Merger -- General" and "-- Reasons for the Merger -- Recommendation of the Fleet Board and Reasons for the Merger", the Fleet Board unanimously approved the terms of the Merger and authorized Mr. Murray and senior management to continue such negotiations at an exchange ratio which reflected a value per share of Shawmut Common Stock of $30.00 based on the then current trading price of the Fleet Common Stock. During the remainder of that week, Mr. Murray again met with Mr. Alvord to continue discussions concerning the proposed transaction and Fleet's senior management team continued to conduct its due diligence investigation of Shawmut's business and to negotiate issues in the Merger Agreement and the Option Agreements. On February 20, 1995, the Fleet Board held a telephonic conference meeting, during which Mr. Murray presented a summary of Fleet's due diligence, the final resolution of the open issues and the final Common Exchange Ratio to be provided in the Merger Agreement and the Fleet Board ratified its actions taken at the February 14 and 15, 1995 meetings. After consideration of the factors described below under "-- Reasons for the Merger -- General" and "-- Reasons for the Merger -- Recommendation of the Fleet Board and Reasons for the Merger", the Fleet Board unanimously approved and authorized the execution of the Merger Agreement and the Option Agreements. The Merger Agreement and the Option Agreements were entered into on February 20, 1995. Shawmut. Shawmut was formed in 1988 through the merger of HNC and SC. From 1989 to 1991, most bank and thrift institutions in New England, including Shawmut, were adversely affected by a severe regional recession. This recession resulted in significant asset quality problems, which in turn adversely affected Shawmut's financial condition and results of operations and led to enhanced regulatory scrutiny. As the severe New England recession continued, Shawmut initiated discussions in late 1990 with another in-region bank holding company of similar size concerning a potential merger of equals. Shawmut ultimately chose to abandon those discussions approximately one year later. From time to time following the termination of such merger discussions, the Shawmut Board reviewed potential strategic alternatives for enhancing stockholder value and the feasibility of pursuing various alternatives. Thereafter, Shawmut pursued a strategic course seeking (i) the strengthening of Shawmut's position in the communities it served through acquisitions and the marketing of new products to Shawmut's 33 45 existing customer base; (ii) the diversification of Shawmut's revenue sources by expanding into specialty market niches with attractive operating margins; (iii) greater geographic diversification; and (iv) the achievement of greater operating efficiencies. Numerous steps were taken by Shawmut in an effort to achieve these objectives. Asset quality improved, and Shawmut was able to access the capital markets to increase its capital. Programs designed to achieve greater operating efficiencies were implemented beginning in early 1993 and continued throughout 1994. Between 1993 and January 1995, Shawmut was able to acquire a number of banks and thrifts, which strengthened its position in communities previously served by Shawmut and, in certain instances, added a presence in communities which were not previously served by Shawmut. In addition, in January 1995 Shawmut consummated the Barclay's Acquisition, which was intended to provide a profitable source of loans outside the New England region and reduce Shawmut's sensitivity to fluctuations in interest rates. As Shawmut continued to implement programs aimed at further growth and geographic and revenue source diversification, its management from time to time considered possible strategies for enhancing Shawmut's ability to achieve those strategic objectives. In that connection, the possibility of Shawmut affiliating with another large bank holding company with a similar strategic focus was considered. Mr. Murray and Mr. Alvord are well acquainted with each other, each having played a significant role in New England banking for numerous years. From time to time during the past several years, Mr. Murray and Mr. Alvord have met to discuss regional and national developments in the financial services industry as well as developments affecting their respective companies. On February 6, 1995, Mr. Alvord met with Mr. Murray, at Mr. Alvord's request, regarding a potential merger of the companies. Mr. Alvord and Mr. Murray subsequently met to explore the potential transaction structure and value of a merger between Fleet and Shawmut. Thereafter, senior executives of Shawmut and Fleet and their respective legal and financial advisors commenced negotiations concerning the potential merger. During this time, Shawmut's management performed due diligence on Fleet, including due diligence designed to confirm its assumptions regarding the enhanced opportunities for operating efficiencies which were anticipated to result from the Merger. At meetings of the Shawmut Board held on February 19, 1995 and on February 20, 1995, the management of Shawmut, as well as Shawmut's legal and financial advisors, reviewed, among other things, a summary of management's due diligence findings concerning Fleet, presentations by management and Morgan Stanley concerning the strategic alternatives available to Shawmut, the terms of the definitive Merger Agreement and Stock Option Agreements and Morgan Stanley's fairness opinion concerning the Common Exchange Ratio. Based upon that review, and after consideration of other factors, the Shawmut Board unanimously approved and authorized the execution of the Merger Agreement and the Option Agreements. REASONS FOR THE MERGER General. The Merger will create a strong Northeast banking franchise with an important national presence. By combining the strengths of two leading financial institutions, the Merger is expected to create an institution that is capable of meeting the challenges of the ever-changing market for financial products and services in the United States. The Merger will combine two companies that currently (i) do not have significant asset quality problems; (ii) have strong management teams with experience in successfully completing substantial merger transactions and reducing costs; (iii) maintain compatible data-processing and other operating systems; and (iv) share many cultural traits. The Merger will also permit each company to diversify beyond its current businesses and its current strengths in specialty financial products and services by expanding the marketing of its products and services to the customers now served by the other, and will enable the combined company to continue to provide a broad array of innovative financial services and products to the customers and communities currently served by each. In reaching their decisions to approve the Merger Agreement and the Option Agreements, the Fleet Board and Shawmut Board considered that the Merger would create one of the ten largest banking institutions in the United States, and the only such institution to be headquartered in New England. Each Board also 34 46 considered that the Merger would represent a strategic alliance between Fleet and Shawmut and that the Fleet and Shawmut stockholders would realize the expected benefits of such alliance, including, but not limited to, the future stock value and earnings per share prospects of the combined company, the combined company's financial strength and its consequent enhanced ability to strengthen its existing businesses and develop new products and services, the cost savings to be realized through consolidation of services in the New England market, the potential for cross-marketing services to customers of the two companies and increased access to the combined company's customers, the opportunity to diversify earnings, the business synergies that might be realized, and the potential effect of the Merger on the perception of the combined company's businesses by the rating agencies and the financial markets. Each Board determined that the Merger would significantly enhance the combined company's ability to compete effectively and to meet the ever-changing credit and product needs of its customers and communities by combining two financially sound institutions with complementary businesses and business strategies, thereby creating a stronger combined company with greater size, flexibility, breadth of services, efficiency, capital strength, profitability and potential for growth than either Fleet or Shawmut would possess on a stand-alone basis. Each Board believes that each institution is well-managed and possesses management philosophies and strategic focus compatible with those of the other, and that the strong capitalization of Fleet following the Merger will allow it to take advantage of future opportunities for growth, including appropriate acquisitions and investments in products and technology. Each Board also believes that the Merger will allow the combined company to compete effectively in the rapidly changing marketplace for banking and financial services and to take advantage of opportunities for growth and diversification that may not be available to either institution on its own. In evaluating the Merger, each Board and management discussed the critical importance of successfully integrating, and building on the strengths of, the management teams and cultures of both companies, and considered the uncertainties inherent in any such combination of two significant companies. Recommendation of the Fleet Board and Reasons for the Merger. THE FLEET BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, FLEET AND ITS STOCKHOLDERS. THE FLEET BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER. In reaching its conclusion to approve the Merger Agreement and the Option Agreements, the Fleet Board consulted with Fleet management, as well as its financial and legal advisors, and considered the factors described above under "-- General" and a number of additional factors, including the following: (i) The Fleet Board considered the effectiveness of the Merger in implementing and accelerating Fleet's basic long-term external growth strategy. (ii) The Fleet Board analyzed the financial condition, businesses and prospects of Fleet and Shawmut, including, but not limited to, information with respect to its respective recent and historic stock and earnings performance and its respective relatively strong credit position and access to the capital markets. The Fleet Board considered the detailed financial analyses, pro forma and other information with respect to Fleet and Shawmut discussed by Salomon, as well as the Fleet Board's own knowledge of Fleet, Shawmut and their respective businesses. In making its determination, the Fleet Board took into account the results of Fleet's due diligence review of Shawmut's business. The Fleet Board also considered the fact that while the Merger on a pro forma basis would initially be dilutive to Fleet stockholders, the dilutive effects would be eliminated once cost savings from the Merger were achieved following the Merger. In addition, the Fleet Board took Shawmut's interest rate sensitivity, including Shawmut's $438 million unrealized loss on its held to maturity portfolio at December 31, 1994, into account in approving the Common Exchange Ratio, and determined that such loss, even if realized, would not be material to the equity account of the combined company following the Merger. See "-- Background of the Merger -- Fleet". 35 47 (iii) The Fleet Board considered the oral opinion of Salomon that, as of February 20, 1995, the Common Exchange Ratio was fair to holders of Fleet Common Stock from a financial point of view. See "-- Fairness Opinions of Financial Advisors -- Fleet". (iv) The Fleet Board considered the terms of the Merger Agreement and the reciprocal Option Agreements. The Fleet Board also considered certain other information regarding the structure of the Merger, including the terms and structure of the Merger, the proposed arrangements with respect to the Fleet Board following the Merger, the management structure following the Merger, and that the corporate headquarters of Fleet would be located in Boston, with major functions being located in Hartford and Providence. See "BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS OF FLEET FOLLOWING THE MERGER" and "INTERESTS OF CERTAIN PERSONS IN THE MERGER". (v) The Fleet Board considered the effect on Fleet stockholders' value of Fleet continuing as a stand-alone entity compared to the effect of Fleet combining with Shawmut in light of the factors summarized above with respect to the financial condition and prospects of the two companies on a stand-alone basis and of the combined company, and the current economic and financial environment. (vi) The Fleet Board also considered the likelihood of the Merger being approved by the appropriate regulatory authorities. See "-- Regulatory Approvals Required for the Merger". The foregoing discussion of the information and factors considered by the Fleet Board is not intended to be exhaustive but is believed to include all material factors considered by the Fleet Board. In reaching its determination to approve and recommend the Merger, the Fleet Board did not assign any relative or specific weights to the foregoing factors, and individual directors may have given differing weights to different factors. Throughout its deliberations, the Fleet Board received the advice of special counsel. After deliberating with respect to the Merger and the other transactions contemplated by the Merger Agreement, considering, among other things, the matters discussed above and the opinion of Salomon referred to above, the Fleet Board, by unanimous vote of all directors, approved and adopted the Merger Agreement and the transactions contemplated thereby, including the Option Agreements, as being in the best interests of Fleet and its stockholders. The Fleet Board is unanimous in its recommendation that holders of Fleet Common Stock vote for approval and adoption of the Merger. Recommendation of the Shawmut Board and Reasons for the Merger. THE SHAWMUT BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, SHAWMUT AND ITS STOCKHOLDERS. THE SHAWMUT BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER. In reaching its determination to approve and adopt the Merger Agreement, the Shawmut Board considered the factors described above (see "-- General") and a number of additional factors, including, without limitation, the following: (i) the Shawmut Board's familiarity with and review of Shawmut's business, operations, financial condition and earnings; (ii) the Shawmut Board's familiarity with and review of Shawmut's prospects, and the factors giving rise to uncertainty concerning Shawmut's ability to enhance revenues and achieve geographic and revenue source diversification on a stand-alone basis, including: (a) the effect on Shawmut's operating margins of a higher interest rate environment in light of the composition of Shawmut's existing assets and liabilities; (b) the low price/earnings multiple at which the Shawmut Common Stock has recently traded and could continue to trade, and the effect of such trading prices on Shawmut's ability to bid at competitive price levels for attractive acquisition targets; 36 48 (c) the scarcity of attractive bank and thrift acquisition candidates in Shawmut's existing markets; (d) the increased competition for attractive non-bank acquisitions which has resulted from the efforts of many financial institutions to enhance fee-based income; and (e) the high cost of investment in technology which could improve Shawmut's efficiency and accordingly its competitive posture; (iii) the current and prospective economic, regulatory and competitive environment facing financial institutions, including Shawmut and Fleet; (iv) the Shawmut Board's review, based in part on the advice of Morgan Stanley and Shawmut's management, of alternatives to the Merger, the range of possible values to Shawmut's stockholders obtainable through implementation of such alternatives and the timing and likelihood of actually receiving such values, which review included consideration of the alternatives of remaining independent and growing through future acquisitions, selling Shawmut to a larger bank holding company based outside of New England, either at the present time or after first enhancing the business of Shawmut to increase the value which might be realized in the sale, or engaging in a merger or a similar transaction with an in-region or out-of-region bank holding company other than Fleet; (v) the Shawmut Board's review, based in part on presentations by Morgan Stanley and Shawmut management, of (a) the business, operations, earnings and financial condition of Fleet on both an historical and a prospective basis and (b) the historical market price and potential future value of Fleet Common Stock, and the possible effect on such historical price and potential value of the terms and conditions of Fleet's Dual Convertible Preferred Stock (as defined below); (vi) the anticipated cost savings and operating efficiencies available to the combined institution from the Merger (see "BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS OF FLEET FOLLOWING THE MERGER -- Operations"); (vii) the Shawmut Board's belief that the terms of the Merger Agreement are attractive in that the agreement allows Shawmut stockholders to become stockholders in a combined institution which would be the ninth largest bank holding company in the United States on the basis of assets as of December 31, 1994; (viii) the financial presentations of Morgan Stanley and the February 20, 1995 opinion of Morgan Stanley as to the fairness of the Common Exchange Ratio to the stockholders of Shawmut (see "-- Fairness Opinions of Financial Advisors -- Shawmut"); (ix) the expectation that the Merger will generally be a tax-free transaction to Shawmut and its stockholders (see "-- Certain Federal Income Tax Consequences"); (x) the Shawmut Board's understanding that Fleet had held discussions with another major New England banking organization concerning a potential merger and that further discussions were scheduled to be held, and the views expressed by Shawmut's management and Morgan Stanley that a merger of Fleet and such entity could impair Shawmut's ability to enhance stockholder value on a stand-alone basis and could also reduce significantly Shawmut's attractiveness as an acquisition target; (xi) the terms of the Merger Agreement and the Option Agreements, which were reciprocal in nature, and certain other information regarding the Merger, including the terms and structure of the Merger, the proposed arrangements with respect to the Fleet Board, the management structure following the Merger, and that the corporate headquarters of Fleet would be located in Boston, with major functions being located in Hartford and Providence (see "BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS OF FLEET FOLLOWING THE MERGER" and "INTERESTS OF CERTAIN PERSONS IN THE MERGER"); and 37 49 (xii) the effect of the Merger on Shawmut's other constituencies, including its senior management and other employees and the communities served by Shawmut (see "INTERESTS OF CERTAIN PERSONS IN THE MERGER"). The foregoing discussion of the information and factors considered by the Shawmut Board is not intended to be exhaustive but is believed to include all material factors considered by the Shawmut Board. In reaching its determination to approve and recommend the Merger, the Shawmut Board did not assign any relative or specific weights to the foregoing factors, and individual directors may have given differing weights to different factors. Throughout its deliberations, the Shawmut Board received the advice of special counsel. After deliberating with respect to the Merger and the other transactions contemplated by the Merger Agreement, considering, among other things, the matters discussed above and the opinion of Morgan Stanley referred to above, the Shawmut Board, by unanimous vote of all directors, approved and adopted the Merger Agreement and the transactions contemplated thereby, including the Option Agreements, as being in the best interests of Shawmut and its stockholders. The Shawmut Board is unanimous in its recommendation that holders of Shawmut Common Stock vote for approval and adoption of the Merger. FAIRNESS OPINIONS OF FINANCIAL ADVISORS Fleet. Salomon has delivered its oral opinion dated February 20, 1995, and its written opinion dated the date of this Joint Proxy Statement-Prospectus, to the Board of Directors of Fleet that the Common Exchange Ratio in the Merger was fair, from a financial point of view, to the holders of Fleet Common Stock. No limitations were imposed by Fleet with respect to the investigations made or the procedures followed by Salomon in rendering its opinions. Salomon has consented to the use of its written opinion in this Joint Proxy Statement-Prospectus without admitting that it comes within the category of persons whose consent is required under Section 7 of the Securities Act. THE FULL TEXT OF THE OPINION OF SALOMON DATED THE DATE OF THIS JOINT PROXY STATEMENT-PROSPECTUS, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN BY SALOMON, IS ATTACHED HERETO AS EXHIBIT D. HOLDERS OF FLEET COMMON STOCK ARE URGED TO READ THIS OPINION IN ITS ENTIRETY. SALOMON'S OPINIONS ARE DIRECTED ONLY TO THE COMMON EXCHANGE RATIO IN THE MERGER AND DO NOT CONSTITUTE RECOMMENDATIONS TO ANY FLEET STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE FLEET MEETING. THE SUMMARY SET FORTH IN THIS JOINT PROXY STATEMENT-PROSPECTUS OF THE OPINIONS OF SALOMON IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION ATTACHED HERETO AS EXHIBIT D. In connection with its oral opinion dated February 20, 1995, Salomon reviewed, among other things: (i) drafts of the Merger Agreement and the Option Agreements; (ii) certain publicly available reports filed with the Commission by Fleet and by Shawmut; (iii) certain other publicly available financial and other information concerning Fleet and Shawmut and the trading markets for the publicly traded securities of Fleet and Shawmut; (iv) certain other internal information, including pro forma financial statements prepared by the management of each of Fleet and Shawmut giving effect to recently-completed and pending acquisitions, and projections relating to Fleet and to Shawmut prepared by the management of Fleet, furnished to Salomon for the purposes of its analysis; and (v) certain publicly available information concerning certain other banks and bank holding companies, the trading markets for their securities and the financial terms of certain other merger and acquisition transactions Salomon believed relevant to its inquiry. In connection with its opinion dated the date of this Joint Proxy Statement-Prospectus, Salomon reviewed the foregoing as well as the executed Merger Agreement and Option Agreements and this Joint Proxy Statement-Prospectus. Salomon also met with certain officers and representatives of Fleet and Shawmut to discuss the foregoing as well as other matters that Salomon believed relevant to its inquiry. Salomon also considered such financial and other factors as it deemed appropriate under the circumstances and took into account its assessment of general economic, market and financial conditions and its experience in other transactions, as well as its experience in securities valuation and its knowledge of the banking industry generally. Each of Salomon's opinions is necessarily based upon conditions as they existed and could be evaluated on the date thereof and the information made available to Salomon through the date thereof. 38 50 In conducting its review and arriving at its opinions, Salomon relied upon and assumed the accuracy and completeness of the financial and other information provided to it or publicly available and did not assume any responsibility for independently verifying the same. Salomon relied upon the management of Fleet and of Shawmut as to the reasonableness of the assumptions underlying the pro forma financial statements giving effect to recently-completed and pending acquisitions provided to Salomon, the appropriateness of the adjustments made to give effect to such assumptions in such pro forma financial statements and the proper allocation of such adjustments to the respective historical financial statements. Salomon relied upon the management of Fleet as to the reasonableness and achievability of the projections (and the assumptions and bases therefor) for each of Fleet and Shawmut provided to Salomon, and assumed that such projections were reasonably prepared by the management of Fleet and reflected the best currently available estimates and judgments of the management of Fleet and that such projections would be realized in the amounts and in the time periods estimated by the management of Fleet. Salomon also assumed, without independent verification, that the aggregate allowances for loan losses for Fleet and Shawmut were adequate to cover such losses. Salomon did not make or obtain any evaluations or appraisals of the properties or assets of Fleet or Shawmut, nor did Salomon examine any individual loan credit files. Salomon was retained by the Fleet Board to express an opinion as to the fairness, from a financial point of view, to the holders of Fleet Common Stock of the Common Exchange Ratio, and the Fleet Board did not look to Salomon to independently verify the accuracy and completeness of the financial and other information provided to it or publicly available, including the pro forma financial statements or the projections provided to it by Fleet or Shawmut, or to obtain any evaluations or appraisals of the property or assets of Fleet or Shawmut. Salomon did not address Fleet's underlying business decision to proceed with the Merger and did not make any recommendation to the Fleet Board or to the stockholders of Fleet with respect to any approval of the Merger. In connection with rendering its opinions to the Fleet Board, Salomon performed a variety of financial analyses which are summarized below. Salomon believes that its analyses must be considered as a whole and that selecting portions of such analyses and the factors considered therein, without considering all factors and analyses, could create an incomplete view of the analyses and the processes underlying Salomon's opinions. The preparation of a fairness opinion is a complex process involving subjective judgments and is not necessarily susceptible to partial analyses or summary description. With respect to the comparable company analysis and bank merger transaction analysis summarized below, no public company utilized as a comparison is identical to Fleet or Shawmut and such analyses necessarily involve complex considerations and judgments concerning the differences in financial and operating characteristics of the companies and other factors that could affect the acquisition or public trading values of the companies concerned. The projections prepared by the management of Fleet contained in or underlying Salomon's analyses are not necessarily indicative of future results or values, which may be significantly more or less favorable than such projections. Estimates of values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities actually may be sold. None of the analyses performed by Salomon was assigned a greater significance by Salomon than any other. The projections furnished to Salomon for each of Fleet and Shawmut were prepared by the respective managements of each company. Neither Fleet nor Shawmut publicly discloses internal management projections of the type provided to Salomon in connection with Salomon's review of the Merger. Such projections were not prepared with a view towards public disclosure. The projections were based on numerous variables and assumptions that are inherently uncertain, including without limitation, factors related to general economic and competitive conditions. Accordingly, actual results could vary significantly from those set forth in such projections. Each of Fleet and Shawmut believes (i) that the historical financial information provided by it to Salomon in connection with its analysis was accurate and complete in all material respects; (ii) that the pro forma financial data provided by it to Salomon in connection with its analysis, while not necessarily indicative of the combined financial position or results of operations in the future or of the combined financial position or results of operations which would have been realized had the acquisitions been consummated during the periods or as of the dates for which the pro forma data is presented, was based on reasonable assumptions and contained appropriate and properly allocated adjustments; and (iii) that the projections provided by it to 39 51 Salomon in connection with its analysis were reasonably prepared and reflected the best currently available estimates and judgments of the management of Fleet and Shawmut, respectively. The following is a brief summary of the analyses performed by Salomon in connection with its oral opinion dated February 20, 1995: (a) Transaction Summary. Salomon analyzed the closing price for the Fleet Common Stock on February 17, 1995 (the last trading day prior to the announcement of the Merger) of $33.625 and the Common Exchange Ratio of 0.8922, resulting in consideration of $30.00 per share of Shawmut Common Stock, noting that the aggregate transaction value was $3,917.7 million (including shares of Shawmut Common Stock currently owned by Fleet and calculating the number of outstanding shares of Shawmut Common Stock, pro forma for all pending acquisitions, using the treasury stock method for warrants, options and stock appreciation rights). Salomon noted that the Common Exchange Ratio represented a premium of 45.5% to the closing price of the Shawmut Common Stock on February 17, 1995 (the last trading day prior to the announcement of the Merger) and 67.8% to the closing price of the Shawmut Common Stock on January 17, 1995 (the trading day one month prior to the announcement of the Merger). Salomon also noted that, as a multiple of Shawmut's fully diluted earnings per share, the Common Exchange Ratio represented 11.4x earnings per share for 1994, adjusted to reflect the recently-completed Barclays Acquisition and the pending Northeast Merger (assuming an exchange ratio in the Northeast Merger of 0.415 shares of Shawmut Common Stock for each fully diluted share of common stock of Northeast), 11.2x Shawmut's projection of earnings per share for 1995 and 10.5x the median First Call ("First Call") projection of earnings per share for 1995 as of February 15, 1995. First Call is a data service that monitors and publishes compilations of earnings estimates produced by selected research analysts regarding companies of interest to institutional shareholders. Salomon further noted that the Common Exchange Ratio represented a multiple of 1.79x Shawmut's fully diluted book value, and 2.38x Shawmut's fully diluted tangible book value, at December 31, 1994, in each case adjusted to reflect the recently-completed Barclays Acquisition and the pending Northeast Merger, assuming an exchange ratio in the Northeast Merger of 0.415 shares of Shawmut Common Stock for each fully diluted share of common stock of Northeast. In addition, Salomon noted that the Common Exchange Ratio represented a premium (defined as the total purchase price paid over tangible book value, adjusted to reflect the recently-completed Barclays Acquisition and the pending Northeast Merger) to Shawmut's total deposits and core deposits (defined as total retail deposits, less certificates of deposit greater than $100,000, less foreign deposits) of 9.8% and 10.8%, respectively. Salomon observed that the current holders of Fleet Common Stock would own 59.2%, and the current holders of Shawmut Common Stock would own 40.8%, of the combined entity after giving effect to the Merger, in each case adjusted to reflect the recently-completed Barclays Acquisition and the pending Northeast Merger, assuming an exchange ratio in the Northeast Merger of 0.415 shares of Shawmut Common Stock for each fully diluted share of common stock of Northeast. (b) Comparable Transaction Analysis. Salomon analyzed certain other commercial bank merger and acquisition transactions, excluding merger-of-equals transactions, involving consideration to stockholders of over $1 billion for commercial banking institutions in the United States during the period from January 1, 1990 to February 20, 1995 and analyzed a subset of these transactions involving in-market acquisitions. Salomon also analyzed certain other in-market commercial bank merger and acquisition transactions, excluding merger-of-equal transactions, over the period from January 1, 1985 to February 20, 1995 involving consideration to stockholders of over $500 million, and noted separately the results of its analysis for target institutions whose return on average assets ("target ROAA") was greater than 0.75% and for target institutions whose ROAA was less than 0.75%. Salomon chose to segregate transactions at the level of a 0.75% ROAA based on Salomon's belief that bank holding companies with an ROAA below this level are widely regarded as less strong performers and that the consideration paid in comparable transactions for such bank holding companies was less than the consideration paid for better-performing bank holding companies. This analysis, which was based on publicly available financial information for the 12 months preceding the announcement of the relevant transaction, showed that the Common Exchange Ratio represented a multiple of: (i) 11.4x Shawmut's 12 months' fully diluted earnings per share, compared to a median multiple of 20.5x for United States transactions (1990 to 40 52 present) in excess of $1 billion, 27.7x for in-market transactions (1990 to present) in excess of $1 billion, 17.5x for in-market transactions (1985 to present) in excess of $500 million with a target ROAA of more than 0.75%, and 22.9x for in-market transactions (1985 to present) in excess of $500 million with a target ROAA less than 0.75%; (ii) 1.79x Shawmut's fully diluted book value, compared to a median multiple of 1.43x for United States transactions (1990 to present) in excess of $1 billion, 1.38x for in-market transactions (1990 to present) in excess of $1 billion, 2.42x for in-market transactions (1985 to present) in excess of $500 million with a target ROAA of more than 0.75%, and 1.43x for in-market transactions (1985 to present) in excess of $500 million with a target ROAA less than 0.75%; and (iii) 2.38x Shawmut's fully diluted tangible book value, compared to a median multiple of 1.63x for United States transactions (1990 to present) in excess of $1 billion, 1.52x for in-market transactions (1990 to present) in excess of $1 billion, 2.57x for in-market transactions (1985 to present) in excess of $500 million with a target ROAA of more than 0.75%, and 1.63x for in-market transactions (1985 to present) in excess of $500 million with a target ROAA less than 0.75%. This analysis also showed that the Common Exchange Ratio represented a premium to the closing price of the Shawmut Common Stock one day and one month, respectively, prior to announcement of the Merger, of 45.5% and 67.8%, respectively, compared to median premiums to market price of 34.5% and 44.5%, respectively, for U.S. transactions (1990 to present) in excess of $1 billion, 30.4% and 34.2%, respectively, for in-market transactions (1990 to present) in excess of $1 billion, 33.3% and 38.0%, respectively, for in-market transactions (1985 to present) in excess of $500 million with a target ROAA of more than 0.75%, and 34.6% and 49.5%, respectively, for in-market transactions (1985 to present) in excess of $500 million with a target ROAA less than 0.75%. With respect to dilution to the acquiror in the transactions analyzed, this analysis showed dilution to Fleet's pro forma last 12 months' earnings of 4.5% (pro forma for all recently-completed and pending acquisitions and before the after-tax impact of Shawmut's non-recurring charges of $99.8 million), compared to median dilution of 11.9% for United States transactions (1990 to present) in excess of $1 billion, 20.1% for in-market transactions (1990 to present) in excess of $1 billion, 9.1% for in-market transactions (1985 to present) in excess of $500 million with a target ROAA of 0.75% or more and 17.5% for in-market transactions (1985 to present) in excess of $500 million with a target ROAA less than 0.75%. Salomon noted that no transaction reviewed was identical to the Merger and that, accordingly, any analysis of comparable transactions necessarily involves complex considerations and judgments concerning differences in financial and operating characteristics of the parties to the transactions being compared. (c) Summary Pro Forma Financial Impact. Salomon analyzed the financial impact of the Merger on the holders of Fleet Common Stock and of Shawmut Common Stock, using for these purposes financial projections prepared by management of Fleet for each of Fleet and Shawmut for each fiscal year in the five-year period ending December 31, 1999 and using Fleet management's assumptions that cost reductions are phased in 0.0% in 1995, 60.0% in 1996 and 100.0% from 1997 through 1999. In these analyses, Salomon considered the impact on earnings per share and book value of investing ("leveraging") the combined entity's excess capital (defined as capital in excess of a 6.25% tangible common equity ratio at the combined entity) at different rates of return. These analyses showed that, giving effect to the Merger before the impact of one-time Merger-related charges and gain on assumed divestitures of certain assets and liabilities that may be required by regulatory authorities, in each case as projected by Fleet management, current holders of Fleet Common Stock would experience a change in fully diluted earnings per share, leveraged at a 14.0% return, of (11.4)% for 1995, (5.1)% for 1996, 1.9% for 1997, 7.8% for 1998 and 14.7% for 1999 as compared to Fleet stand-alone. Salomon's analysis also showed the changes as compared to Fleet stand-alone in earnings per share with no leverage and leveraged at 10.0% and 18.0% returns. Salomon selected these different rates of return based on historical rates of return on average common equity for Fleet and for the constituent bank holding companies included in the Salomon Brothers' Superregional Composite Index, an index of 21 leading superregional bank holding companies throughout the United States. Salomon performed this analysis in order to show the pro forma financial impact of the Merger on the holders of Fleet Common Stock and Shawmut Common Stock under the assumption that Fleet as the surviving entity would invest its excess capital (as defined above) in a manner that would produce a return on investment comparable to such historical rates of return. 41 53 Salomon also analyzed the changes in book value per share from Fleet stand-alone, including Fleet management's estimates of after-tax losses from one-time Merger related charges and gain on such assumed regulatory divestitures, with no leverage and leveraged at a 14.0% return, noting in each case that such book value would decrease by 7.1% and 7.1%, respectively, in 1995, by 7.8% and 7.8%, respectively, in 1996, by 7.6% and 7.1%, respectively, in 1997, by 7.3% and 5.4%, respectively, in 1998, and by 7.1% and 2.9%, respectively, in 1999. This analysis further showed that current holders of Shawmut Common Stock would experience an increase in fully diluted earnings per share, leveraged at a 14.0% return, of 33.2% for 1995, 46.0% for 1996, 57.6% for 1997, 67.6% for 1998 and 79.4% for 1999 as compared to Shawmut stand-alone. Salomon's analysis also showed the increases as compared to Shawmut stand-alone in earnings per share with no leverage and leveraged at 10.0% and 18.0% returns. Salomon also analyzed the increases in book value per share from Shawmut stand-alone, including Fleet management's estimates of after-tax losses from one-time merger related charges and gain on such assumed regulatory divestitures, with no leverage and leveraged at a 14.0% return, noting in each case that such book value would increase by 11.0% and 11.0%, respectively, in 1995, by 13.6% and 13.6%, respectively, in 1996, by 17.2% and 17.8%, respectively, in 1997, by 20.4% and 22.9%, respectively, in 1998, and by 23.4% and 29.0%, respectively, in 1999. (d) Discounted Cash Flow Analysis. Salomon performed discounted cash flow analyses to determine the present value per share of Shawmut Common Stock using financial projections for Shawmut through 2000 provided by management of Fleet. For purposes of this analysis, such projections gave effect to the full benefit of the after-tax cost savings estimated by the management of Fleet, all of which were allocated to Shawmut, and to the impact on Shawmut of the Merger. Salomon utilized discount rates ranging from 14.0% to 20.0% and terminal value multiples ranging from 7.0x to 10.0x to apply to forecasted earnings for 2000. Salomon selected these discount rates because they represented a reasonable range above and below the historical cost of equity capital to Fleet and comparable bank holding companies and these terminal value multiples because they represented a reasonable range above and below the historical market multiples of Fleet and comparable bank holding companies. These analyses showed a range of present values from $27.95 to $42.66 per share for Shawmut. These analyses also showed projected dividends to Fleet, assuming all excess capital (defined as capital in excess of a 6.0% tangible common equity ratio at Shawmut) were dividended to Fleet, of $449.5 million in 1996, $552.6 million in 1997, $587.0 million in 1998, $681.2 million in 1999 and $687.0 million in 2000. Salomon performed this analysis as one method of showing the present value of Shawmut to Fleet on a per share basis. This analysis included the projected dividends that Fleet could expect to receive from Shawmut as a part of Fleet over the period shown, in each case subject to the assumptions included in the analysis. These analyses did not purport to be indicative of actual values or expected values of the shares of Shawmut Common Stock before, or Fleet Common Stock after, the Merger. Salomon noted that the discounted cash flow analysis is a widely used valuation methodology, but noted that it relies on numerous assumptions, including asset and earnings growth rates, dividend payout rates, terminal values and discount rates. (e) Summary Contribution Analysis. Salomon computed the contribution to the combined entity's pro forma 1994 financial results attributable to each of Fleet and Shawmut. The computation showed, among other things, that Fleet and Shawmut contributed to the combined entity approximately 57.8% and 42.2%, respectively, of total loans, 57.8% and 42.2%, respectively, of total assets, 61.8% and 38.2%, respectively, of total deposits, 63.1% and 36.9%, respectively, of tangible common equity (including purchased mortgage servicing rights), 61.5% and 38.5%, respectively, of common equity, 62.0% and 38.0%, respectively, of net income available to common shares (before the after-tax impact of Shawmut's non-recurring charges of $99.8 million), 48.3% and 51.7%, respectively, of net income available to common shares (adjusting earnings for Shawmut to reflect Fleet management's estimate of the full benefit of after-tax cost savings), 66.8% and 33.2%, respectively, of market capitalization adjusted to give pro forma effect to pending share issuances (based on market capitalization as of February 17, 1995) and 59.2% and 40.8%, respectively, of pro forma ownership of the combined entity (using the Common Exchange Ratio of 0.8922 shares of Fleet Common Stock for each share of Shawmut Common Stock). 42 54 (f) Pro Forma Industry Statistics. Salomon noted that, based on Fleet's closing price as of February 17, 1995 and the number of shares outstanding as of December 31, 1994, pro forma for pending acquisitions, the Merger would create the seventh largest publicly traded bank holding company ranked by market capitalization. Salomon is a nationally recognized investment banking firm and is continually engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwriting, competitive bidding, secondary distributions of listed and unlisted securities and valuations for estate, corporate and other purposes. Fleet selected Salomon as its financial advisor because of its reputation and because of its substantial experience in transactions such as the Merger. In addition to the financial advisory services referred to above, Salomon has from time to time provided investment banking and financial advisory services to Fleet and Shawmut for which Salomon has received customary compensation, aggregating $5.9 million for the period from February 20, 1993 through February 20, 1995. Such services have included acting as a managing underwriter of offerings of Fleet Common Stock and Fleet debt securities, acting as financial advisor to Fleet and as dealer-manager in connection with Fleet's offer to purchase the publicly-held shares of FMG and acting as financial advisor to Fleet in connection with acquisitions of other financial institutions. In the ordinary course of business, Salomon actively trades the debt and equity securities of Fleet and Shawmut for its own account and for the accounts of its customers and, accordingly, at any time may hold a long or short position in such securities. Fleet and Salomon have entered into a letter agreement, dated February 13, 1995 (the "Salomon Engagement Letter"), relating to the services to be provided by Salomon in connection with the Merger. Fleet has agreed to pay Salomon's fees for all services rendered in connection with the Merger as follows: (i) $250,000, payable promptly following Fleet's execution of the Salomon Engagement Letter; (ii) $1,000,000, payable upon execution of the Merger Agreement; and (iii) an additional fee of $3,750,000, payable upon consummation of the Merger. In the Salomon Engagement Letter, Fleet also has agreed to reimburse Salomon for all reasonable fees and disbursements of Salomon's counsel and all of Salomon's reasonable travel and other out-of-pocket expenses incurred in connection with the Merger or otherwise arising out of Salomon's engagement under the Salomon Engagement Letter. Pursuant to an additional letter agreement dated February 13, 1995, Fleet also has agreed to indemnify Salomon against certain liabilities, including liabilities under the federal securities laws. Shawmut. Shawmut retained Morgan Stanley to act as Shawmut's financial advisor in connection with the Merger and related matters based upon its qualifications, expertise and reputation, as well as Morgan Stanley's prior investment banking relationship and familiarity with Shawmut. At the February 20, 1995 meeting of the Shawmut Board, Morgan Stanley rendered an oral opinion to the Shawmut Board that, as of such date, the Common Exchange Ratio pursuant to the Merger was fair from a financial point of view to holders of the Shawmut Common Stock (other than Fleet and its affiliates). Morgan Stanley subsequently delivered to the Shawmut Board a written opinion dated as of February 20, 1995 confirming its oral opinion. Morgan Stanley also delivered to the Shawmut Board a written opinion dated as of the date of this Joint Proxy Statement-Prospectus which is substantially identical to the February 20, 1995 opinion. No limitations were imposed by Shawmut with respect to the investigations made or the procedures followed by Morgan Stanley in rendering its opinions. THE FULL TEXT OF MORGAN STANLEY'S OPINION, DATED AS OF THE DATE OF THIS JOINT PROXY STATEMENT-PROSPECTUS, WHICH SETS FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED, AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS EXHIBIT E TO THIS JOINT PROXY STATEMENT-PROSPECTUS. SHAWMUT STOCKHOLDERS ARE URGED TO READ THE MORGAN STANLEY OPINION IN ITS ENTIRETY. MORGAN STANLEY'S OPINION ADDRESSES ONLY THE FAIRNESS OF THE COMMON EXCHANGE RATIO FROM A FINANCIAL POINT OF VIEW TO THE HOLDERS OF SHAWMUT COMMON STOCK AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF SHAWMUT COMMON STOCK AS TO HOW TO VOTE AT THE SHAWMUT MEETING. THE SUMMARY OF THE OPINION OF MORGAN STANLEY SET FORTH IN THIS JOINT PROXY STATEMENT-PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. In connection with rendering its opinion dated as of February 20, 1995, Morgan Stanley, among other things: (i) analyzed certain publicly available financial statements and other information of Shawmut and 43 55 Fleet; (ii) analyzed certain internal financial statements and other financial and operating data concerning Shawmut and Fleet prepared by the managements of Shawmut and Fleet, respectively; (iii) analyzed certain financial projections prepared by the managements of Shawmut and Fleet; (iv) discussed the past and current operations and financial condition and the prospects of Shawmut and Fleet with senior executives of the two companies, respectively; (v) reviewed the reported prices and trading activity for the Shawmut Common Stock and Fleet Common Stock; (vi) compared the financial performance of Shawmut and Fleet and the prices and trading activity of the Shawmut Common Stock and Fleet Common Stock with that of certain other comparable bank holding companies and their securities; (vii) discussed the results of regulatory examinations of Shawmut and Fleet with senior management of the respective companies; (viii) reviewed and discussed with senior management of Shawmut and Fleet the strategic objectives of the Merger and the synergies and other benefits of the Merger for the combined company; (ix) analyzed certain pro forma financial projections for the combined company prepared by Shawmut and Fleet; (x) reviewed the amount and timing of the cost savings projected by Shawmut and Fleet for the combined company; (xi) reviewed the financial terms, to the extent publicly available, of certain comparable bank holding company merger transactions; (xii) participated in discussions and negotiations among representatives of Shawmut and Fleet and their financial and legal advisors; (xiii) reviewed the draft Merger Agreement, the draft Option Agreements and certain related documents; and (xiv) performed such other analyses as it has deemed appropriate. In rendering its opinion, Morgan Stanley assumed and relied upon without independent verification the accuracy and completeness of the information reviewed for purposes of its opinion. With respect to the financial projections, Morgan Stanley assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the future financial performance of Shawmut and Fleet. Morgan Stanley has not made any independent valuation or appraisal of the assets or liabilities of Shawmut and Fleet, nor has it been furnished with any such appraisals and it has not examined any loan files of Shawmut and Fleet. Morgan Stanley's opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to Morgan Stanley as of, the date of the opinion. In arriving at its opinion, Morgan Stanley was not authorized to solicit, and did not solicit, interest from any party with respect to an acquisition of Shawmut or any of its assets. Morgan Stanley has consented to the use of its written opinion in this Joint Proxy Statement-Prospectus without admitting that it comes within the category of persons whose consent is required under Section 7 of the Securities Act. The projections furnished to Morgan Stanley for each of Fleet and Shawmut were prepared by the respective managements of each company. Neither Fleet nor Shawmut publicly discloses internal management projections of the type provided to Morgan Stanley in connection with Morgan Stanley's review of the Merger. Such projections were not prepared with a view towards public disclosure. The projections were based on numerous variables and assumptions that are inherently uncertain, including without limitation factors related to general economic and competitive conditions. Accordingly, actual results could vary significantly from those set forth in such projections. Each of Fleet and Shawmut believes (i) that the historical financial information provided by it to Morgan Stanley in connection with its analysis was accurate and complete in all material respects; (ii) that the pro forma financial data provided by it to Morgan Stanley in connection with its analysis, while not necessarily indicative of the combined financial position or results of operations in the future or of the combined financial position or results of operations which would have been realized had the acquisitions been consummated during the periods or as of the dates for which the pro forma data is presented, was based on reasonable assumptions and contained appropriate and properly allocated adjustments; and (iii) that the projections provided by it to Morgan Stanley in connection with its analysis were reasonably prepared and reflected the best currently available estimates and judgments of the management of Fleet and Shawmut, respectively. The following is a brief summary of the analyses performed by Morgan Stanley in preparation of its presentation to the Shawmut Board on February 19, 1995 and February 20, 1995, its oral opinion to the Shawmut Board on February 20, 1995 and its opinion letter dated February 20, 1995 to the Shawmut Board. 44 56 (a) Overview of Shawmut. Morgan Stanley presented an overview of Shawmut which included a comparison of Shawmut to a peer group of the 30 largest domestic bank holding companies (ranked by asset size) in terms of (i) net interest margin; (ii) non-interest income to average earning assets; (iii) efficiency ratio; (iv) price to 1996 estimated earnings per share; (v) price to book value; (vi) price as a percentage of the highest closing price of Shawmut Common Stock in the last twelve months; and (vii) one year stock price performance. Morgan Stanley also presented an overview of Shawmut's financial performance for 1994 compared to management's projections for 1995 through 1997. (b) Strategic Alternatives Available to Shawmut. Morgan Stanley performed an analysis of a hypothetical acquisition of Shawmut by an in-market acquiror and by 16 potential acquirors from outside the New England region. The analysis examined the impact of such a transaction on each potential acquiror's earnings per share and leverage ratio in hypothetical transactions in which Shawmut's shareholders received prices per share of Shawmut Common Stock of $30 and $33. The analysis was also performed reviewing each hypothetical transaction as if it were accounted for as a pooling of interests and a purchase. For purposes of the analysis, the potential acquirors were generally assumed to be able to achieve cost savings equal to 15% (or 30% in the case of the in-market acquiror) of Shawmut's core non-interest expense (excluding expenses for other real estate owned ("OREO") and any non-recurring charges). In the purchase accounting scenario, it was assumed that each acquiror would fund the acquisition with 50% acquiror stock and 50% debt. Morgan Stanley's assumptions concerning the level of cost savings which could be achieved in the various hypothetical transactions was based upon its review of the estimated cost savings achieved in a number of large bank holding company merger transactions which Morgan Stanley deemed comparable to the hypothetical transactions and the range of potential divestitures which might be required by regulators in connection with a potential acquisition of Shawmut. (c) Valuation Methodologies. As part of its financial analysis, Morgan Stanley evaluated the positions and strengths of Shawmut on a stand-alone basis, considered cost savings and synergies relating to the Merger and determined an acquisition value based upon specified assumptions. In addition, Morgan Stanley considered premiums paid in transactions comparable to the Merger as well as a pro forma analysis concerning the Merger. For purposes of its analyses of Shawmut on a historical basis, Morgan Stanley utilized financial information concerning Shawmut as of December 31, 1994, and accordingly such information did not reflect the effects of the then-pending Barclays Acquisition or the Northeast Merger. However, Morgan Stanley's analyses which utilized the earning projections for Shawmut prepared by Shawmut management for periods beginning after such date included the projected effect of such transactions on Shawmut's earnings. The following is a brief summary of the report presented by Morgan Stanley to the Shawmut Board on February 17, 1995 (the "Morgan Stanley Report") in connection with its February 20, 1995 opinion. Comparable Company Analysis. Comparable company analysis analyzes a company's operating performance relative to a group of publicly traded peers. Based on relative performance and outlook for a company versus its peers, this analysis enables an implied unaffected market trading value to be determined. Morgan Stanley analyzed the operating performance of Shawmut relative to (x) Fleet, Bank of Boston Corporation and Bay Banks, Inc. (the "New England Peer Group") and (y) 35 bank holding companies (the "Morgan Stanley Bank Index"). (The New England Peer Group and the Morgan Stanley Bank Index are collectively referred to as the "Comparables.") Historical financial information used in connection with the ratios provided below with respect to the Comparables is as of December 31, 1994. Morgan Stanley analyzed the relative performance and value of Shawmut by comparing certain market trading statistics for Shawmut with the Comparables. Market information used in ratios provided below is as of February 10, 1995. The market trading information used in the valuation analysis was market price to book value (which was 1.30x for Shawmut; the average was 1.40x for the New England Peer Group and 1.50x for the Morgan Stanley Bank Index) and market price to earnings per share estimates for 1995 and 1996 (which, for Shawmut, were 7.4x and 7.1x, respectively; the averages were 8.0x and 7.1x, respectively, for the New England Peer Group and 8.6x and 7.8x, respectively, for the Morgan Stanley Bank Index). Earnings per share estimates for the New England Peer Group were based 45 57 on First Call estimates as of February 10, 1995. Earnings per share estimates for the Morgan Stanley Bank Index were based on Institutional Brokers Estimate System ("IBES") estimates as of January 19, 1995. IBES and First Call are data services that monitor and publish compilations of earnings estimates produced by selected research analysts regarding companies of interest to institutional shareholders. Shawmut's earnings per share estimates were based on management's projections for 1995 and 1996, respectively. The implied range of values for Shawmut Common Stock derived from the analysis of the Comparables market price to book value and market price to 1995 and 1996 earnings per share estimates ranged from $17.00 to approximately $20.00. No company or transaction used in the comparable company and comparable transaction analyses is identical to Shawmut or the Merger. Accordingly, an analysis of the results of the foregoing necessarily involves complex considerations and judgments concerning differences in financial and operating characteristics of Shawmut and other factors that could affect the public trading value of the companies to which they are being compared. Mathematical analysis (such as determining the average or median) is not in itself a meaningful method of using comparable transaction data or comparable company data. Analysis of Relationship Between Return on Equity and Price to Book Value. Based on a sampling of 36 selected publicly traded bank holding companies that in Morgan Stanley's judgment were deemed to be appropriate for comparison, Morgan Stanley determined a theoretical relationship in the market between the ratio of expected sustainable return on equity (based on Morgan Stanley estimates) to risk-adjusted required return on investment and the ratio of price to book value. This relationship can be observed by plotting the price-to-book-value multiple versus the ratio of the expected sustainable return on equity to the required return on equity and estimating the line of best fit. The required return on equity was calculated using a predicted beta estimate by Barra, a data service which derives and publishes compilations of beta estimates, and assumed a risk free rate of 7.58%, which was the yield on the 10 year treasury note on February 10, 1995. According to this analysis, Morgan Stanley estimated that the implied value per share of Shawmut Common Stock as of February 10, 1995, would have ranged from approximately $19 to approximately $21 if the market assumed that Shawmut would realize a future sustainable return on equity of between 14% and 15%. The estimate of Shawmut's future sustainable return on equity was based on the historical and projected financial performance of Shawmut. For the year ended December 31, 1994, Shawmut's annualized return on equity was 11.2%. The bank holding companies used in this analysis were AmSouth Bancorporation, Banc One Corporation, Bank of Boston Corporation, Bank of New York, BankAmerica Corporation, Bankers Trust New York Corporation, Barnett Banks, Inc., Boatmen's Bancshares, Inc., The Chase Manhattan Corporation, Chemical Banking Corporation, Citicorp, Comerica, Inc., CoreStates Financial Corp., Crestar Financial Corporation, First Bank System, Inc., First Chicago Corporation, First Fidelity Bancorporation, First Interstate, First Union Corporation, Fleet, Huntington Bancshares, Inc., Integra Financial Corporation, J.P. Morgan & Co. Inc., KeyCorp, Mellon Bank Corporation, Midlantic Corporation, National City Corp., Nationsbank, NBD Bancorp, Inc., Norwest Corporation, PNC Financial Corp., SunTrust Banks, Inc., U.S. Bancorp, Wachovia Corporation, and Wells Fargo & Company. Dividend Discount Analysis. Morgan Stanley performed a dividend discount analysis to determine a range of present values per share of Shawmut Common Stock assuming Shawmut continued to operate as a stand-alone entity. This range was determined by adding (i) the present value of the estimated future dividend stream that Shawmut could generate over the three-year period beginning in 1995 and ending in 1997 and (ii) the present value of the "terminal value" of Shawmut Common Stock at the end of 1997. To determine a projected dividend stream, Morgan Stanley assumed a dividend payout ratio equal to 40% of Shawmut's projected net income. The earnings projections which formed the basis for the dividends were adapted from Shawmut's actual results for 1994 and Shawmut management's projections for 1995-97. The "terminal value" of Shawmut Common Stock at the end of the three-year period was determined by applying two 1997 projected price-to-earnings multiples (8.0x and 10.0x) to 1997 projected net income for Shawmut. The dividend stream and terminal values were discounted to present values using discount rates of 16% and 18%, which Morgan Stanley viewed as the appropriate discount rate range for a company with Shawmut's risk characteristics. For the 8.0x case the fully diluted stand- 46 58 alone value of Shawmut Common Stock ranged from approximately $16.00 per share to approximately $16.77 per share and for the 10.0x case the fully diluted stand-alone value of Shawmut Common Stock ranged from approximately $19.37 per share to approximately $20.32 per share. Value of Potential Cost Savings. In order to ultimately determine an implied acquisition value of the Shawmut Common Stock (see "-- Implied Acquisition Value"), the potential for realization of future cost savings was estimated by Morgan Stanley using a present value calculation. Based on discussions with Shawmut management, Morgan Stanley determined the net theoretical present value of the cost savings that could result if Shawmut were acquired. The estimates for such cost savings ranged from 10-40% of Shawmut's core non-interest expense (i.e., excluding OREO expenses and any non-recurring charges). Such a range would imply annual pre-tax cost savings between approximately $95 million and approximately $380 million. Based on discount rates of 16% and 18%, a phase-in of savings over 2 years, a perpetual expense growth rate of 3.0%, a marginal tax rate of 40%, and a restructuring charge equal to 100% of fully-phased in cost savings incurred in the first year following an acquisition, the range of present values for the cost savings were $334 million to $1,560 million in the aggregate, or $2.59 to $12.09 per share of Shawmut Common Stock. Implied Acquisition Value. As part of its analysis of the acquisition valuation, Morgan Stanley assumed that the net present value of the estimated cost savings described above was added to the fully diluted stand-alone value of Shawmut Common Stock also described above (see "-- Dividend Discount Analysis"). Based on this analysis, Morgan Stanley estimated the implied acquisition value of Shawmut Common Stock to range from $18.59 to $28.85 per share in the 8.0x case and from $21.96 to $32.40 per share in the 10.0x case. This analysis did not consider any loss in value that could result if divestitures of deposits or assets were required upon an acquisition of Shawmut. Comparable Transaction Analysis. Morgan Stanley performed an analysis of premiums paid for selected holding companies of commercial banks in transactions with value of over $750 million in order to obtain a valuation range for the Shawmut Common Stock based upon comparable merger transactions. Multiples of market value, book value, and earnings implied by the consideration to be received by stockholders of Shawmut in the Merger were compared with multiples paid in other comparable merger transactions from 1991 through February 5, 1995. The comparison included a total of 15 transactions. The transactions examined were (acquiree/acquiror): Michigan National Corporation and the National Australia Bank Limited, Continental Bancorporation and BankAmerica Corporation, Liberty National Bank and Banc One Corporation, Valley Bancorporation and Marshall & Ilsley Corporation, MNC Financial, Inc. and NationsBank Corporation, Dominion Bankshares Corporation and First Union Corporation, First Florida Banks, Inc. and Barnett Banks, Inc., Valley National Bancorp and Banc One Corporation, Team Bancshares, Inc. and Banc One Corporation, INB Financial Corporation and NBD Bancorp, Inc., Puget Sound Bancorp and KeyCorp, Ameritrust Corporation and Society Corporation, Security Pacific Corporation and BankAmerica Corporation, C&S/Sovran Corporation and NCNB Corporation, and South Carolina National Bank and Wachovia Corporation. The analysis yielded a mean premium over market value of 50% for the comparable transactions, compared to approximately 70% for the Merger, based on the market price of the Shawmut Common Stock as of January 24, 1995 ($18.00). Morgan Stanley utilized such market price rather than the market price as of February 17, 1995 (the last trading day prior to the public announcement of the Merger) because subsequent to January 24, 1995, the market price of the Shawmut Common Stock appreciated. Morgan Stanley believed such appreciation was attributable to merger speculation concerning a potential sale of Shawmut. In terms of price to book multiple, the mean for the comparable transactions was 1.80x (compared to approximately 1.80x for the Merger, based on Shawmut's December 31, 1994 book value of $2,019 million). The third multiple considered was price to latest twelve month trailing earnings with a mean for the comparable transactions of 20.4x (compared with 11.8x for the Merger, based upon Shawmut's earnings for the twelve months ended December 31, 1994). For the comparable transactions: (i) the premiums over market value ranged from 20-80%; (ii) multiples of book value ranged from 1.0x to 2.4x; and (iii) the premiums over latest twelve month trailing earnings ranged from 8.5x to 39.9x. 47 59 (d) Pro Forma Merger Analysis. The effects of the Merger on Shawmut and Fleet were analyzed both qualitatively and quantitatively. Qualitative attributes of the Merger included broader geographical presence, diversification of the revenue stream, cost savings through the elimination of duplicative functions and greater economies of scale for Fleet and Shawmut on a combined basis. Perceived risks associated with the Merger included cultural integration, the ability to achieve cost savings estimates and the unknown size and impact of required divestitures. Shawmut's and Fleet's stand-alone projections were compared to pro forma combined company projections. The present value of the combined company per share of Shawmut Common Stock was determined by applying two 1997 projected price to earnings multiples (9.0x and 11.0x) to 1997 estimated net income for the combined company to ascertain a "terminal value" for the combined company and then discounting those terminal values along with the estimated future value of the dividend stream. The multiples of 9.0x and 11.0x reflect the increased value of the combined company and therefore are higher than the multiples used when evaluating Shawmut on a stand-alone basis. The dividend stream and terminal values were discounted to present values using discount rates of 15% and 17%, the discount rate range deemed by Morgan Stanley to be appropriate for a company with the combined company's risk characteristics. For the 9.0x case the present value of the combined company per share of Shawmut Common Stock ranged from approximately $30.03 to $31.53 and for the 11.0x case the present value of the combined company per share of Shawmut Common Stock ranged from approximately $35.88 to $37.69. The estimated earnings used by Morgan Stanley for purpose of this analysis took into account cost savings equal to 40% of Shawmut's core non-interest expense (i.e. excluding OREO expense and any non-recurring charges) phased in equally over two years (for discussion of cost savings see "-- Value of Potential Cost Savings") after giving effect to management's projected 1996 earnings estimate for a range of estimated earnings impacts created by potential divestitures. In connection with its opinion dated as of the date of this Joint Proxy Statement-Prospectus, Morgan Stanley confirmed the appropriateness of its reliance on the analyses used to render its February 20, 1995 opinion by performing procedures to update certain of such analyses and by reviewing the assumptions upon which such analyses were based and the factors considered in connection therewith. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. Morgan Stanley believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering all analyses, would create an incomplete view of the process underlying its opinion. In addition, Morgan Stanley may have given various analyses more or less weight than other analyses, and may have deemed various assumptions more or less probable than other assumptions, so that the ranges of valuations resulting from any particular analysis described above should not be taken to be Morgan Stanley's view of the actual value of Shawmut. In performing its analyses, Morgan Stanley made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Fleet or Shawmut. The analyses performed by Morgan Stanley are not necessarily indicative of actual values, which may be significantly more or less favorable than suggested by such analyses. Such analyses were prepared solely as a part of Morgan Stanley's analysis of the fairness of the Common Exchange Ratio to the holders of Shawmut Common Stock (other than Fleet and its affiliates) and were provided to the Shawmut Board in connection with the delivery of Morgan Stanley's February 20, 1995 opinion. The analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold. In addition, as described above, Morgan Stanley's opinion and presentation to the Shawmut Board was one of many factors taken into consideration by the Shawmut Board in making its determination to approve the Merger. Consequently, the Morgan Stanley analyses described above should not be viewed as determinative of the Shawmut Board's or Shawmut management's opinion with respect to the value of Shawmut or of whether the Shawmut Board or Shawmut management would have been willing to agree to a different exchange ratio. The Shawmut Board retained Morgan Stanley based upon its experience and expertise. Morgan Stanley is an internationally recognized investment banking and advisory firm. Morgan Stanley, as part of its 48 60 investment banking business, is continuously engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. Morgan Stanley makes a market in Shawmut Common Stock and Fleet Common Stock, and may continue to provide investment banking services to Fleet in the future. In the course of its market-making and other trading activities, Morgan Stanley may, from time to time, have a long or short position in, and buy and sell securities of, Shawmut and Fleet. In the past, Morgan Stanley and its affiliates have provided financial advisory and financing services to Fleet, and have received customary fees for the rendering of these services. Recent services rendered by Morgan Stanley to Fleet include serving as financial advisor to the special committee of the Board of Directors of FMG in connection with the tender offer for the publicly held minority stake of FMG, for which Morgan Stanley has requested a payment of approximately $1.25 million. Since the beginning of 1993, Morgan Stanley and its affiliates have also provided financial advisory and financing services to Shawmut, and received customary fees totalling approximately $4.6 million for the rendering of those services. Recent services rendered by Morgan Stanley to Shawmut include serving in 1995 as an underwriter of the Shawmut Depositary Shares and Shawmut-CT's Subordinated Notes due 2005 and serving in November 1994 as financial advisor to Shawmut in conjunction with the Barclays Acquisition. Shawmut has agreed to pay Morgan Stanley an opinion fee of $3 million, which is currently payable, and a transaction fee of $12 million against which the opinion fee will be credited, which will become payable upon the consummation of the Merger. In addition, Shawmut has agreed, among other things, to reimburse Morgan Stanley for all reasonable out-of-pocket expenses incurred in connection with the services provided by Morgan Stanley, and to indemnify and hold harmless Morgan Stanley and certain related parties to the full extent lawful from and against certain liabilities and expenses, including certain liabilities under the federal securities laws, in connection with its engagement. STRUCTURE OF THE MERGER Subject to the terms and conditions of the Merger Agreement and in accordance with the Delaware General Corporation Law ("Delaware law") and the Rhode Island Business Corporation Law ("Rhode Island law"), at the Effective Time, Shawmut will merge with and into Fleet. Fleet will be the surviving corporation in the Merger, and will continue its corporate existence under Rhode Island law under the name Fleet Financial Group, Inc. At the Effective Time, the separate corporate existence of Shawmut will terminate. The Fleet Existing Articles (or the Fleet New Articles if adopted), as in effect immediately prior to the Effective Time, will be the articles of incorporation of the surviving corporation and the by-laws of Fleet (the "Fleet By-laws"), as in effect immediately prior to the Effective Time, will be the by-laws of the surviving corporation. CONVERSION OF SHAWMUT CAPITAL STOCK; TREATMENT OF SHAWMUT STOCK OPTIONS AND SHAWMUT WARRANTS At the Effective Time of the Merger, each share of Shawmut Common Stock outstanding, other than shares held in Shawmut's treasury or held by Fleet or Shawmut or any subsidiary thereof (except in both cases for shares held directly or indirectly in trust accounts, managed accounts and the like or otherwise held in a fiduciary capacity that are beneficially owned by third parties ("Trust Account Shares") or in respect of a debt previously contracted ("DPC Shares")), will be converted into the right to receive 0.8922 shares of Fleet Common Stock, including the associated preferred share purchase rights (the "Common Exchange Ratio"). Shawmut's obligation to consummate the Merger is not conditioned upon Fleet Common Stock continuing to trade at any specified minimum price during any period prior to the Effective Time. Because the Common Exchange Ratio is fixed and because the market price of Fleet Common Stock is subject to fluctuation, the value of the shares of Fleet Common Stock that holders of Shawmut Common Stock will receive in the Merger may increase or decrease prior to and following the Merger. Further, at the Effective Time, (i) each share of Shawmut Adjustable Preferred (other than Dissenting Preferred Shares) will be converted into the right to receive one share of Fleet Adjustable Preferred, (ii) each share of Shawmut 9.30% Preferred will be converted into the right to receive one share of Fleet 9.30% Preferred and (iii) each share of Shawmut 9.35% Preferred will be converted into the right to receive one share of Fleet 9.35% Preferred. Further, the Shawmut Depositary Shares will be converted into the Fleet New 49 61 Depositary Shares, as applicable. The terms of the Fleet New Preferred Stock and the Fleet New Depositary Shares will be substantially the same as the terms of the Shawmut Preferred and the Shawmut Depositary Shares. See "-- Appraisal Rights" and "DESCRIPTION OF FLEET CAPITAL STOCK, FLEET NEW PREFERRED STOCK, FLEET NEW DEPOSITARY SHARES AND FLEET WARRANTS". Each outstanding share of Shawmut Capital Stock owned by Fleet or its subsidiaries or Shawmut or its subsidiaries (other than Dissenting Preferred Shares, Trust Account Shares or DPC Shares) or by Shawmut as treasury stock will be cancelled at the Effective Time and shall cease to exist, and no Fleet Capital Stock or other consideration will be delivered in exchange therefor. All shares of Fleet Common Stock or Fleet preferred stock that are owned by Shawmut (except for shares held by Shawmut or any subsidiary directly or indirectly in trust accounts, managed accounts and the like or otherwise held in a fiduciary capacity that are beneficially owned by third parties in respect of a debt previously contracted) will become treasury stock of Fleet. Each stock option to acquire Shawmut Common Stock granted under the Shawmut Stock Plans which is outstanding and unexercised immediately prior to the Effective Time will be converted automatically at the Effective Time into, and will become, stock options to purchase Fleet Common Stock and will continue to be governed by the terms of the Shawmut Stock Plans which will be assumed by Fleet. Each Shawmut Warrant which is outstanding and unexercised immediately prior to the Effective Time shall be converted automatically at the Effective Time into a Fleet Warrant. In each case, (a) the number of shares of Fleet Common Stock subject to the Fleet option or Fleet Warrant, as the case may be, shall be equal to the product of the number of shares of Shawmut Common Stock subject to the Shawmut option or Shawmut Warrant, as the case may be, and the Common Exchange Ratio, rounded down to the nearest share, and (b) the exercise price per share of Fleet Common Stock subject to the Fleet option or Fleet Warrant, as the case may be, will be equal to the exercise price per share of Shawmut Common Stock under the Shawmut option or Shawmut Warrant, as the case may be, divided by the Common Exchange Ratio, rounded up to the nearest cent. The duration and other terms of each Fleet option and Fleet Warrant shall be substantially the same as the Shawmut option or Shawmut Warrant. Each option granted under the Shawmut Stock Plans will, pursuant to the terms of each such plan, automatically vest and become exercisable upon approval and adoption of the Merger Agreement by the holders of Shawmut Common Stock. The indenture governing Shawmut's 9.85% Subordinated Capital Notes (the "Capital Notes") provides that, on the maturity date of June 1, 1999, the Capital Notes, at Shawmut's or, if the Merger is consummated, Fleet's option, will either be exchanged for common stock, preferred stock or certain other primary capital securities of Shawmut or, if the Merger is consummated, Fleet, having a market value equal to the principal amount of the Capital Notes, or will be repaid from the proceeds of other issuances of such securities. Shawmut or, if the Merger is consummated, Fleet, may, however, at its option revoke its obligation to redeem the Capital Notes with capital securities based upon the capital treatment of the Capital Notes by its primary regulator or consent by its primary regulator for such revocation. The Capital Notes will remain outstanding after the Merger. Neither Fleet nor Shawmut currently intends to exchange Fleet Common Stock or Shawmut Common Stock, as the case may be, for the Capital Notes upon the maturity of the Capital Notes. Shares of Fleet capital stock (including Fleet Common Stock) issued and outstanding immediately prior to the Effective Time will remain issued and outstanding immediately after the Merger. EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES Shawmut. At or prior to the Effective Time, Fleet will deposit, or cause to be deposited, with Fleet-RI (the "Exchange Agent"), for the benefit of the holders of certificates of Shawmut Capital Stock, certificates representing the shares of Fleet Common Stock, Fleet New Preferred Stock and the cash in lieu of any fractional shares (such certificates for shares of Fleet Common Stock, Fleet New Preferred Stock and the cash in lieu of any fractional shares, together with any dividends or distributions with respect thereto, being referred to as the "Exchange Fund") to be issued pursuant to the Merger Agreement in exchange for outstanding shares of Shawmut Capital Stock. At or prior to the Effective Time, Fleet will also deposit, or cause to be deposited, with Fleet-RI (the "Depositary"), for the benefit of the holders of depositary receipts 50 62 representing Shawmut Depositary Shares, depositary receipts representing the Fleet New Depositary Shares to be issued pursuant to the Merger Agreement in exchange for outstanding Shawmut Depositary Shares. As soon as is practicable after the Effective Time, and in no event later than five business days thereafter, a form of transmittal letter will be mailed by the Exchange Agent to the holders of Shawmut Capital Stock and holders of Shawmut Depositary Shares. The form of transmittal letter will contain instructions with respect to the surrender of certificates representing Shawmut Capital Stock and depositary receipts representing Shawmut Depositary Shares. SHAWMUT STOCK CERTIFICATES OR DEPOSITARY RECEIPTS SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY AND SHOULD NOT BE FORWARDED TO THE EXCHANGE AGENT UNLESS AND UNTIL THE SHAWMUT STOCKHOLDER OR HOLDER OF DEPOSITARY RECEIPTS RECEIVES A LETTER OF TRANSMITTAL FOLLOWING THE EFFECTIVE TIME. Until the certificates representing Shawmut Capital Stock or the depositary receipts representing Shawmut Depositary Shares are surrendered for exchange after the Effective Time of the Merger, holders of such certificates or receipts will accrue but will not be paid dividends or other distributions declared after the Effective Time with respect to the Fleet Common Stock, Fleet New Preferred Stock or Fleet New Depositary Shares into which their shares have been converted. When such certificates or receipts are surrendered, any unpaid dividends or other distributions will be paid, without interest. After the Effective Time, there will be no transfers on the stock transfer books of Shawmut of shares of Shawmut Capital Stock issued and outstanding immediately prior to the Effective Time. If certificates representing shares of Shawmut Capital Stock are presented after the Effective Time, they will be cancelled and exchanged for the relevant certificate representing the applicable shares of Fleet Common Stock, Fleet New Preferred Stock or depositary receipts representing the Fleet New Depositary Shares. No fractional shares of Fleet Common Stock will be issued to any holder of Shawmut Common Stock upon consummation of the Merger. For each fractional share that would otherwise be issued, Fleet will pay cash in an amount equal to such fraction multiplied by the average of the closing sale prices of Fleet Common Stock on the Stock Exchange as reported by The Wall Street Journal for the five trading days immediately preceding the date of the Effective Time. No interest will be paid or accrued on the cash in lieu of fractional shares payable to holders of such certificates. Any Dissenting Preferred Shares with respect to which appraisal rights have been properly perfected will be purchased in accordance with the procedures described under "-- Appraisal Rights" and under Section 262 of the Delaware law attached as Exhibit F to this Joint Proxy Statement-Prospectus. Neither Fleet nor Shawmut nor any other person will be liable to any former holder of Shawmut Capital Stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. If a certificate for Shawmut Capital Stock has been lost, stolen or destroyed, the Exchange Agent will issue the consideration properly payable in accordance with the Merger Agreement upon receipt of appropriate evidence as to such loss, theft or destruction, appropriate evidence as to the ownership of such certificate by the claimant, and appropriate and customary indemnification. For a description of the differences between the rights of the holders of Fleet Capital Stock and Shawmut Capital Stock, see "COMPARISON OF STOCKHOLDERS' RIGHTS". For a description of the Fleet Capital Stock, including the Fleet New Preferred Stock, the Fleet New Depositary Shares and the Fleet Warrants, see "DESCRIPTION OF FLEET CAPITAL STOCK, FLEET NEW PREFERRED STOCK, FLEET NEW DEPOSITARY SHARES AND FLEET WARRANTS". Fleet. Shares of Fleet capital stock (including Fleet Common Stock) issued and outstanding immediately prior to the Effective Time will remain issued and outstanding and be unaffected by the Merger, and holders of such stock will not be required to exchange the certificates representing such stock or take any other action by reason of the consummation of the Merger. 51 63 EFFECTIVE TIME The Effective Time will be as set forth in the Certificate of Merger (the "Certificate of Merger") which will be filed with the Secretary of State of the State of Delaware and in the Articles of Merger (the "Articles of Merger") which will be filed with the Secretary of State of the State of Rhode Island, each on the closing date of the Merger (the "Closing Date"). The Closing Date will occur on a date to be specified by the parties which shall be no later than two business days after the satisfaction or waiver (subject to applicable law) of the latest to occur of the conditions precedent to the Merger set forth in Article VII of the Merger Agreement. Fleet and Shawmut each anticipate that the Merger will be consummated during the fourth quarter of 1995. However, the consummation of the Merger could be delayed as a result of delays in obtaining the necessary governmental and regulatory approvals. There can be no assurances as to if or when such approvals will be obtained or that the Merger will be consummated. If the Merger is not effected on or before February 20, 1996, the Merger Agreement may be terminated by either Fleet or Shawmut, unless the failure to effect the Merger by such date is due to the failure of the party seeking to terminate the Merger Agreement to perform or observe the covenants and agreements of such party set forth therein. See "THE MERGER -- Conditions to the Consummation of the Merger" and "-- Regulatory Approvals Required for the Merger". REPRESENTATIONS AND WARRANTIES The Merger Agreement contains representations and warranties of Fleet and Shawmut as to, among other things, (i) the corporate organization and existence of each party and its subsidiaries; (ii) the capitalization of each party and its subsidiaries; (iii) the corporate power and authority of each party; (iv) the compliance of the Merger Agreement with (a) the charter and by-laws of each party, (b) applicable law, and (c) certain material agreements; (v) governmental and third party approvals; (vi) the timely filing of required regulatory reports; (vii) each party's financial statements and filings with the Commission; (viii) the absence of certain changes in each party's business since December 31, 1994; (ix) the absence of material legal proceedings; (x) the filing and accuracy of each party's tax returns; (xi) each party's employee benefit plans and related matters; (xii) each party's compliance with applicable law; (xiii) the absence of material defaults under certain contracts; (xiv) agreements between each party and regulatory agencies; (xv) the absence of undisclosed liabilities; and (xvi) the inapplicability to the Merger of the Delaware or Rhode Island takeover law, certain antitakeover provisions in each party's charter, and each party's Rights Agreement (as hereinafter defined); and (xvii) pooling of interests accounting treatment. CONDUCT OF BUSINESS PENDING THE MERGER AND OTHER AGREEMENTS Pursuant to the Merger Agreement, prior to the Effective Time Fleet and Shawmut have each agreed to, and to cause their respective subsidiaries to, (i) conduct its business in the usual, regular and ordinary course consistent with past practice, (ii) use reasonable best efforts to maintain and preserve intact its business organization, employees and advantageous business relationships and retain the services of its officers and key employees, and (iii) take no action which would adversely affect or delay the ability of either Fleet or Shawmut to obtain any necessary or other governmental regulatory approvals required for the transactions contemplated by the Merger Agreement or to perform its covenants and agreements under the Merger Agreement or the Option Agreements. Fleet and Shawmut have also agreed to use their best efforts to promptly prepare and file all necessary documentation to effect all applications, notices, petitions and filings, and to obtain and to cooperate in obtaining permits, consents, approvals and authorizations of all third parties and governmental entities necessary or advisable to consummate the transactions contemplated by the Merger Agreement and to comply with the terms and conditions of all such permits, consents, approvals and authorizations. Fleet and Shawmut have each agreed upon request to furnish to the other party all information concerning themselves and their subsidiaries, directors, officers and stockholders and such other matters as may be necessary or advisable in connection with the Merger. Fleet and Shawmut have also agreed, subject to the terms and conditions of the Merger Agreement, to use their best efforts to take, or cause to be taken, all actions necessary, proper or advisable to comply promptly with all legal requirements which may be imposed on such party or its subsidiaries and to consummate the Merger. Fleet also agreed to cause the shares of Fleet Common Stock to 52 64 be issued in the Merger to be approved for listing on the Stock Exchange, subject to official notice of issuance, and to use its best efforts to cause the Fleet New Depositary Shares to be so listed. Fleet and Shawmut have further agreed to give the other party access to all of its properties, books, contracts, commitments and records and to furnish information concerning its businesses, properties and personnel, subject to the restrictions set forth in the Merger Agreement. In addition, except as expressly contemplated by the Merger Agreement or specified in a schedule thereto or as contemplated by the Option Agreements, each of Fleet and Shawmut has agreed that, without the consent of the other party, it will not, among other things: (i) other than in the ordinary course of business consistent with past practice, incur any indebtedness for borrowed money (other than short-term indebtedness incurred to refinance short-term indebtedness and indebtedness of such party or any of its subsidiaries to such party or any of its subsidiaries), assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any individual, corporation or other entity, or make any loan or advance; (ii) adjust, split, combine or reclassify any capital stock; make, declare or pay any dividend or make any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or any securities or obligations convertible into or exchangeable for any shares of its capital stock, or grant any stock appreciation rights or grant any individual, corporation or other entity any right to acquire any shares of its capital stock (except, in the case of Shawmut, for regular quarterly cash dividends at a rate not in excess of $0.22 per share of Shawmut Common Stock, and in the case of Fleet, for regular quarterly cash dividends on Fleet Common Stock at a rate not in excess of $0.50 per share of Fleet Common Stock, and, in the case of Shawmut Preferred Stock and Fleet Preferred Stock, for regular quarterly or semiannual cash dividends thereon at the rates set forth in the applicable certificate or articles of incorporation or certificate of designation for such securities and except for dividends paid by any of the wholly-owned subsidiaries of each of Fleet and Shawmut to Fleet or Shawmut or any of their wholly-owned subsidiaries, respectively); or issue any additional shares of capital stock except pursuant to (A) the exercise of stock options or warrants outstanding as of the date of the Merger Agreement, (B) the conversion of shares of Fleet's Dual Convertible Preferred Stock (as hereinafter defined), (C) the Option Agreements, (D) the Shawmut Rights Agreement (as hereinafter defined), (E) the Fleet Rights Agreement (as hereinafter defined), or (F) the Northeast Merger; (iii) sell, transfer, mortgage, encumber or otherwise dispose of any of its properties or assets to any individual, corporation or other entity other than a direct or indirect wholly-owned subsidiary, or cancel, release or assign any indebtedness to any such entity or any claims held by any such entity, except in the ordinary course of business consistent with past practice or pursuant to contracts or agreements in force at the date of the Merger Agreement; (iv) except for transactions in the ordinary course of business consistent with past practice, make any material investment either by purchase of stock or securities, contributions to capital, property transfers, or purchase of any property or assets of any other individual, corporation or other entity other than a wholly-owned subsidiary thereof; (v) except for transactions in the ordinary course of business consistent with past practice, enter into or terminate any material contract or agreement, or make any change in any of its material leases or contracts, other than renewals of contracts and leases without material adverse changes of terms; (vi) increase in any manner the compensation or fringe benefits of any of its employees or pay any pension or retirement allowance not required by any existing plan or agreement to any such employees or become a party to, amend or commit itself to any pension, retirement, profit-sharing or welfare benefit plan or agreement or employment agreement with or for the benefit of any employee other than in the ordinary course of business consistent with past practice or accelerate the vesting of any stock options or other stock-based compensation; 53 65 (vii) solicit, encourage or authorize any individual, corporation or other entity to solicit from any third party any inquiries or proposals relating to the disposition of its business or assets, or the acquisition of its voting securities, or the merger of it or any of its subsidiaries with any corporation or other entity other than as provided by the Merger Agreement (and each party will promptly notify the other of all of the relevant details relating to all inquiries and proposals which it may receive relating to any of such matters); (viii) settle any claim, action or proceeding involving money damages, except in the ordinary course of business consistent with past practice; (ix) take any action that would prevent or impede the Merger from qualifying (i) for pooling of interests accounting treatment or (ii) as a reorganization within the meaning of Section 368 of the Code; provided, however, that nothing contained in the Merger Agreement will limit the ability of Fleet or Shawmut to exercise its rights under the Shawmut Option Agreement or the Fleet Option Agreement, as the case may be; (x) amend its certificate of incorporation or articles of incorporation, as the case may be, or its bylaws; (xi) other than in prior consultation with the other party to the Merger Agreement, restructure or materially change its investment securities portfolio or its gap position, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported; (xii) take any action that is intended or may reasonably be expected to result in any of its representations and warranties set forth in the Merger Agreement being or becoming untrue in any material respect at any time prior to the Effective Time, or in any of the conditions to the Merger not being satisfied or in a violation of any provision of the Merger Agreement, except, in every case, as may be required by applicable law; or (xiii) agree to, or make any commitment to, take any of the actions listed above. CONDITIONS TO THE CONSUMMATION OF THE MERGER Each party's obligation to effect the Merger is subject to the satisfaction or waiver, where permissible, of the following conditions at or prior to the Effective Time: (i) Approval and adoption of the Merger Agreement and the transactions contemplated thereby by the respective requisite affirmative votes of the holders of Fleet Common Stock and Shawmut Common Stock entitled to vote thereon; (ii) The shares of Fleet Common Stock which are to be issued to Shawmut stockholders upon consummation of the Merger shall have been authorized for listing on the Stock Exchange, subject to official notice of issuance; (iii) All regulatory approvals required to consummate the transactions contemplated by the Merger Agreement shall have been obtained and shall remain in full force and effect and all statutory waiting periods with respect to such approvals shall have expired (the "Requisite Regulatory Approvals"); (iv) The registration statement of which this Joint Proxy Statement-Prospectus forms a part shall have become effective and no stop order suspending the effectiveness shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the Commission; (v) No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement shall be in effect and no statute, rule, regulation, order, injunction or decree shall have been enacted, entered, promulgated or enforced by any court, administrative agency or commission or other governmental authority or instrumentality which prohibits or makes illegal consummation of the Merger; 54 66 (vi) Fleet shall have received an opinion of Wachtell, Lipton, Rosen & Katz, special counsel to Fleet, and Shawmut shall have received an opinion of Skadden, Arps, Slate, Meagher & Flom, special counsel to Shawmut, in form and substance reasonably satisfactory to Fleet and Shawmut, each dated as of the Effective Time, substantially to the effect that on the basis of facts, representations and assumptions set forth in such opinion which are consistent with the state of facts existing at the Effective Time, the Merger will be treated for Federal income tax purposes as part of one or more reorganizations within the meaning of Section 368 of the Code and that accordingly (i) no gain or loss will be recognized by Fleet or by Shawmut as a result of the Merger; (ii) no gain or loss will be recognized by the stockholders of Shawmut who exchange their Shawmut Capital Stock for Fleet Common Stock or Fleet New Preferred Stock pursuant to the Merger (except with respect to cash received in lieu of a fractional share interest in Fleet Common Stock or cash received with respect to Dissenting Preferred Shares); and (iii) the tax basis of the Fleet Common Stock or Fleet New Preferred Stock received by stockholders who exchange all of their Shawmut Capital Stock solely for Fleet Common Stock or Fleet New Preferred Stock in the Merger will be the same as the tax basis of the Shawmut Capital Stock surrendered in exchange therefor (reduced by any amount allocable to a fractional share interest for which cash is received) (See "-- Certain Federal Income Tax Consequences"); (vii) Fleet and Shawmut each shall have received a letter from KPMG Peat Marwick LLP addressed to each of them, to the effect that the Merger will qualify for "pooling of interests" accounting treatment; (viii) The representations and warranties of the other party to the Merger Agreement shall be true and correct in all material respects as of the date of the Merger Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on the Closing Date; (ix) Each party shall have performed in all material respects all obligations required to be performed by it under the Merger Agreement at or prior to the Closing Date; and (x) The rights issued pursuant to the Fleet Rights Agreement or the Shawmut Rights Agreement, respectively, shall not have become nonredeemable, exercisable, distributed or triggered pursuant to the terms of each such agreement. See "-- The Fleet Rights Agreement" and "-- The Shawmut Rights Agreement". No assurance can be provided as to if or when the Requisite Regulatory Approvals necessary to consummate the Merger will be obtained or whether all of the other conditions precedent to the Merger will be satisfied or waived by the party permitted to do so. If the Merger is not effected on or before February 20, 1996, the Merger Agreement may be terminated by either Fleet or Shawmut, unless the failure to effect the Merger by such date is due to the failure of the party seeking to terminate the Merger Agreement to perform or observe covenants and agreements of such party set forth therein. REGULATORY APPROVALS REQUIRED FOR THE MERGER Fleet and Shawmut have agreed to use their best efforts to obtain the Requisite Regulatory Approvals, which include approval from the Federal Reserve Board, the OTS and various state regulatory authorities, and intend to file applications to obtain such Requisite Regulatory Approvals promptly after the date of this Joint Proxy Statement-Prospectus. The Merger cannot proceed in the absence of the Requisite Regulatory Approvals. There can be no assurance that such Requisite Regulatory Approvals will be obtained, and, if obtained, there can be no assurance as to the date of any such approvals or the absence of any litigation challenging such approvals. There can likewise be no assurance that the Department of Justice or any state attorney general will not attempt to challenge the Merger on antitrust grounds or, if such a challenge is made, as to the result thereof. Fleet and Shawmut are not aware of any other governmental approvals or actions that are required prior to the parties' consummation of the Merger other than those described below. It is presently contemplated 55 67 that if any such additional governmental approvals or actions are required, such approvals or actions will be sought. There can be no assurance, however, that any such additional approvals or actions will be obtained. Federal Reserve Board. The Merger is subject to approval by the Federal Reserve Board pursuant to Sections 3 and 4 of the BHCA. Assuming Federal Reserve Board approval, the Merger may not be consummated until 30 days after such approval, during which time the Department of Justice may challenge the Merger on antitrust grounds and seek the divestiture of certain assets and liabilities. With the approval of the Federal Reserve Board and the Department of Justice, the waiting period may be reduced to no less than 15 days. The Federal Reserve Board is prohibited from approving any transaction under the applicable statutes which: (i) would result in a monopoly or which would be in furtherance of any combination or conspiracy to monopolize or to attempt to monopolize the business of banking in any part of the United States; or (ii) may have the effect in any section of the United States of substantially lessening competition, or tending to create a monopoly, or resulting in a restraint of trade, unless the Federal Reserve Board finds that the anti-competitive effects of the transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the communities to be served. In addition, in reviewing a transaction under the applicable statutes, the Federal Reserve Board will consider the financial and managerial resources of the companies and their subsidiary banks and the convenience and needs of the communities to be served. As part of, or in addition to, consideration of the above factors, it is anticipated that the Federal Reserve Board will consider the regulatory status of Fleet and Shawmut, current and projected economic conditions in the New England region and the overall capital and safety and soundness standards established by the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") and the regulations promulgated thereunder. In addition, under the Community Reinvestment Act of 1977, as amended (the "CRA"), the Federal Reserve Board must take into account the record of performance of each of Fleet and Shawmut in meeting the credit needs of the entire community, including low and moderate income neighborhoods, served by each company. Each of Fleet-RI, Fleet-NY, Fleet-CT and Fleet-MA has a "satisfactory" CRA rating with the appropriate federal regulator and each of Fleet Bank of Maine and Fleet-NH has an "outstanding" CRA rating with the appropriate federal regulator. Each of Shawmut's banking subsidiaries has a "satisfactory" CRA rating with the appropriate federal regulator. None of Fleet's or Shawmut's banking subsidiaries received any comments from its respective federal regulator in its last CRA examination relating to such ratings which were material and remain unresolved. In addition, under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Act"), certain sections of which will become effective September 29, 1995, the Federal Reserve Board generally may not approve an application if the applicant (including all insured depository institutions which are affiliates of the applicant), upon consummation of the acquisition, would control 30% or more of the total amount of deposits of insured depository institutions in a particular state. This provision is not applicable, however, if the acquisition is approved by the appropriate state bank supervisor of such state and the standard on which such approval is based does not have the effect of discriminating against out-of-state banks, out-of- state bank holding companies, or subsidiaries of such out-of-state banks or bank holding companies. The Federal Reserve Board will furnish notice and a copy of the application for approval of the Merger to the Office of the Comptroller of the Currency (the "OCC"), the Federal Deposit Insurance Corporation (the "FDIC") and the appropriate state regulatory authorities. These agencies have 30 days to submit their views and recommendations to the Federal Reserve Board. The Federal Reserve Board is required to hold a public hearing in the event it receives a written recommendation of disapproval of the application from any of these agencies within such 30-day period. Furthermore, the BHCA and Federal Reserve Board regulations require publication of notice of, and the opportunity for public comment on, the application submitted by Fleet for approval of the Merger and authorize the Federal Reserve Board to hold a public hearing in connection therewith if the Federal Reserve Board determines that such a hearing would be appropriate. Any such 56 68 hearing or comments provided by third parties could prolong the period during which the application is subject to review by the Federal Reserve Board. As noted above, the Merger may not be consummated until 30 days after Federal Reserve Board approval, during which time the Department of Justice may challenge the Merger on antitrust grounds and seek the divestiture of certain assets and liabilities. With the approval of the Federal Reserve Board and the Department of Justice, the waiting period may be reduced to no less than 15 days. The commencement of an antitrust action by the Department of Justice would stay the effectiveness of Federal Reserve Board approval of the Merger unless a court specifically orders otherwise. In reviewing the Merger, the Department of Justice could analyze the Merger's effect on competition differently than the Federal Reserve Board, and thus it is possible that the Department of Justice could reach a different conclusion than the Federal Reserve Board regarding the Merger's competitive effects. Failure of the Department of Justice to object to the Merger may not prevent the filing of antitrust actions by private persons or state attorneys general. In general, the Federal Reserve Board and the Department of Justice will examine the impact of the Merger on competition in various product and geographic markets, including competition for deposits and loans, especially loans to small and middle market businesses. Using the above standards, Fleet and Shawmut expect that the Federal Reserve Board or the Department of Justice will request that Fleet or Shawmut divest certain operations in order to alleviate what such agency believes would be an adverse competitive effect. Fleet has not yet formulated a firm divestiture proposal and will not do so until further discussions with the Federal Reserve Board and the Department of Justice are held; accordingly, as of the date of this Joint Proxy Statement-Prospectus neither Fleet nor Shawmut can predict what the aggregate amount of any such divestitures may be. While any potential divestitures may affect certain pro forma combined financial statement amounts, merger and restructuring costs, cost savings and revenues, Fleet believes that the aggregate amount and financial impact of any such divestitures will not be material to the business, operations or financial condition of the combined institution and its subsidiaries, taken as a whole. Fleet's and Shawmut's rights to exercise their respective options under the Option Agreements are also subject to the prior approval of the Federal Reserve Board, to the extent that the exercise of their respective options under the Option Agreements would result in Fleet or Shawmut, as the case may be, owning more than 5% of the outstanding shares of Shawmut Common Stock or Fleet Common Stock, respectively. In considering whether to approve Fleet's or Shawmut's right to exercise its respective option, including its respective right to purchase more than 5% of the outstanding shares of Shawmut Common Stock or Fleet Common Stock, as the case may be, the Federal Reserve Board would generally apply the same statutory criteria it would apply to its consideration of approval of the Merger. OTS. The Merger is subject to approval of the OTS under Section 10 of HOLA because the Merger will cause Fleet to acquire control of Shawmut-FSB. HOLA directs the OTS to take into consideration the financial and managerial resources and future prospects of the acquiring company and savings association involved, the effect of the acquisition on the savings association, the insurance risk to the Bank Insurance Fund or the Savings Association Insurance Fund of the FDIC and the convenience and needs of the community to be served. The OTS is prohibited from approving any transaction under the applicable statutes which: (i) would result in a monopoly or would be in furtherance of any combination or conspiracy to monopolize or to attempt to monopolize the savings and loan business in any part of the United States; or (ii) may have the effect in any section of the United States of substantially lessening competition or tending to create a monopoly, or resulting in a restraint of trade, unless the OTS finds that the anti- competitive effects of the transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the communities to be served. Massachusetts BBI. The Merger requires the approval of the Massachusetts Board of Bank Incorporation (the "Massachusetts BBI"), under Section 2 of Chapter 167A of the Massachusetts General Laws. In 57 69 determining whether or not to approve the Merger, the Massachusetts BBI must determine that the Merger will not unreasonably affect competition among Massachusetts banking institutions and that it will promote public convenience and advantage. In making such a determination, the Massachusetts BBI must consider, but is not limited to, a showing of net new benefits including initial capital investments, job creation plans, consumer and business services and commitments to maintain and open branch offices within a bank's statutorily-delineated local community. Section 2 also requires that the Massachusetts BBI receive notice from the Massachusetts Housing Partnership Fund (the "MHPF") that arrangements satisfactory to the MHPF have been made for the proposed acquiror to make 0.9% of its assets located in Massachusetts available for call by MHPF for a period of ten years for purposes of funding various affordable housing programs. Under the statute, Fleet will be required to maintain, for a period of two years following the consummation of the Merger, the asset base of Shawmut-MA at a level equal to or greater than the total assets of Shawmut-MA on the date of consummation of the Merger. In addition, unless waived by the Massachusetts Commissioner of Banks, the Massachusetts BBI may not approve any proposed acquisition or merger if such acquisition or merger would result in a bank holding company holding or controlling in excess of 25% of the total deposits, exclusive of foreign deposits, of all state and federally chartered banks in Massachusetts and all Massachusetts branches existing by authority of a foreign country. It is estimated that the Merger will result in Fleet controlling no more than 18% of such total deposits, and therefore, the 25% limit on deposits will not be exceeded. Connecticut Banking Commissioner. The Merger is also subject to the filing of an application with the Connecticut Banking Commissioner under Section 36a-411 of the Connecticut General Statutes, Revisions of 1958, as amended ("C.G.S."). Under the C.G.S., the Connecticut Banking Commissioner is required to consider whether the acquisition of a bank in Connecticut or a Connecticut bank holding company by an out-of-state bank holding company can reasonably be expected to produce benefits to the public and whether such benefits clearly outweigh possible adverse effects, including, but not limited to, an undue concentration of resources and decreased or unfair competition. The Connecticut Banking Commissioner may not approve such acquisition unless the commissioner considers whether: (i) the investment and lending policies of the institution to be acquired are consistent with safe and sound banking practices and will benefit the economy of Connecticut; (ii) the services or proposed services of the institution to be acquired are consistent with safe and sound banking practices and will benefit the economy of Connecticut; (iii) the acquisition will not substantially lessen competition in the banking industry of Connecticut; and (iv) in the case of such acquisition and retention of ownership or control of twenty-five per cent or more of such voting stock, the out- of-state holding company (A) has sufficient capital to ensure, and agrees to ensure, that the institution to be acquired will comply with applicable minimum capital requirements, and (B) has sufficient managerial resources to operate the institution to be acquired in a safe and sound manner. Pursuant to C.G.S. Section 36a-34(b), the Connecticut Banking Commissioner may not grant approval under C.G.S. Section 36a-411 without a finding that (i) the applicant has a record of compliance with the Connecticut community reinvestment act, the Connecticut corollary to the CRA and applicable consumer protection laws and (ii) the resulting entity will provide adequate services to meet the banking needs of community residents, including those of low and moderate income. Further, C.G.S. Section 36a-34(b) prohibits the Connecticut Banking Commissioner from approving a transaction if it would result in or further a monopoly, substantially lessen competition, or restrain trade, without a finding that the anti-competitive effects are clearly outweighed by public benefit. New Hampshire Board of Trust Company Incorporation. The Merger is also subject to the filing of an application with the New Hampshire Board of Trust Company Incorporation under Section 384:47 of the New Hampshire Revised Statutes Annotated. Under New Hampshire law, an out-of-state bank or bank holding company may affiliate with a New Hampshire bank or bank holding company by directly or indirectly acquiring 5% or more of the voting stock of a New Hampshire bank or bank holding company following the issuance of a certificate by the New Hampshire Board of Trust Company Incorporation. To receive a certificate, an applicant must file an application with the New Hampshire Board of Trust Company Incorporation, which application must include (i) the initial and future plans of the affiliating bank or bank holding company for capital investment in New Hampshire, with specific reference to the issue of how the proposed affiliation will bring net new funds to New Hampshire; (ii) the loan, investment and dividend 58 70 policies of the affiliating bank or bank holding company and the bank to be affiliated with, if applicable; (iii) the record of performance of the affiliating bank or bank holding company and its subsidiaries in serving the credit needs of the community or communities in which the affiliating bank or bank holding company and its subsidiaries have operated in the past, including low and moderate income neighborhoods; and (iv) the plan of the affiliating bank or bank holding company for providing new services in New Hampshire and for servicing the credit needs of the community or communities in which each New Hampshire bank it proposes to affiliate with is located consistent with safe and sound banking. Section 384-B:3 of the New Hampshire Revised Statutes Annotated prohibits a bank holding company from directly or indirectly acquiring ownership or control of any voting stock of any bank or national bank if, upon such acquisition, the bank holding company would have more than 12 affiliates in New Hampshire or if the dollar volume of the total deposits of the bank holding company and all of its affiliates, including time, savings and demand deposits in New Hampshire, would exceed 20% of the dollar volume in the state of such total deposits of all banks, national banks, and federal savings and loan associations in New Hampshire, as determined by the Board of Trust Company Incorporation on the basis of the most recent reports made by such institutions to the supervisory authorities and available at the time of acquisition. It is estimated that the Merger will result in Fleet controlling no more than 18% of such total deposits, and therefore, the 20% limit on deposits will not be exceeded. New York Superintendent of Banks. Assuming consummation of the Northeast Merger and the bank reorganizations described under "CERTAIN REGULATORY CONSIDERATIONS -- General", the Merger would also be subject to filing of an application with the New York Banking Board under Section 142 of the New York Banking Laws. In determining whether to approve such application, the New York Banking Board is required to take into consideration the policy of the New York Department of Banking which requires that the business of banking organizations be supervised and regulated through the New York Department of Banking in such manner as to insure the safe and sound conduct of such business, to conserve their assets, to prevent hoarding of money, to eliminate unsound and destructive competition among banking organizations and thus to maintain public confidence in such business and protect the public interest and interests of depositors, creditors and stockholders. In addition, the New York Banking Board must consider whether the effect of such action shall be either to result in the formation of a bank holding company or to expand the size or extent of the resulting or acquiring bank holding company beyond limits consistent with adequate or sound banking and the preservation thereof, or result in the concentration of assets beyond limits consistent with effective competition. Further, the New York Banking Board must consider whether the Merger may result in such a lessening of competition as to be injurious to the interest of the public or tend toward monopoly. The New York Banking Board must primarily consider the public interests and the needs and convenience thereof. Rhode Island Board of Bank Incorporation. The Merger may also be subject to the filing of an application with the Rhode Island Board of Bank Incorporation under Section 19-30-2 of the Rhode Island General Laws. Under the Rhode Island statute, the Rhode Island Board of Bank Incorporation is required to consider whether the acquisition is in the public interest. In determining whether the proposed acquisition is in the public interest, the Rhode Island Board of Bank Incorporation must consider, in addition to such other factors as it may, in its discretion, determine, whether the acquisition shall promote the safety and soundness of the institution whose voting stock is being acquired, and the needs and convenience of the communities served by that institution, and whether the acquisition is likely to have a significant impact on Rhode Island's economy, employment levels and tax base. Florida Banking Department. The Merger is also subject to the filing of a notice with the Florida Banking Department regarding the change of control of Shawmut FSB. State Attorneys General. In addition, the Merger is subject to review by the attorneys general in the various states in which Shawmut and Fleet own banking subsidiaries. Shawmut and Fleet are providing certain requested information about the potential effects of the Merger to the attorneys general of Connecticut and Massachusetts. There can be no assurance that no state attorney general will file an antitrust action to enjoin the Merger or that Shawmut and Fleet will not agree to divest assets and liabilities or take other actions to avoid or settle any such action. 59 71 CERTAIN FEDERAL INCOME TAX CONSEQUENCES General. The following is a summary description of the material federal income tax consequences of the Merger. This summary is not a complete description of all of the consequences of the Merger and, in particular, may not address federal income tax considerations that may affect the treatment of a stockholder which, at the Effective Time, already owns some Fleet capital stock, is not a U.S. person, is a tax-exempt entity or an individual who acquired Shawmut Common Stock pursuant to an employee stock option, or exercises some form of control over Shawmut. In addition, no information is provided herein with respect to the tax consequences of the Merger under applicable foreign, state or local laws. Consequently, each Shawmut stockholder is advised to consult a tax advisor as to the specific tax consequences of the transaction to that stockholder. The following discussion is based on the Code, as in effect on the date of this Joint Proxy Statement-Prospectus, without consideration of the particular facts or circumstances of any holder of Shawmut Common Stock. The Merger. Each party's obligation to effect the Merger is conditioned on delivery of an opinion to Fleet from Wachtell, Lipton, Rosen & Katz, its special counsel, and an opinion to Shawmut from Skadden, Arps, Slate, Meagher & Flom, its special counsel, each dated as of the Effective Time, based upon certain customary representations and assumptions set forth therein, substantially to the effect that for Federal income tax purposes the Merger constitutes a reorganization within the meaning of Section 368 of the Code. Based on such opinions, the material federal income tax consequences of the Merger will be: (i) No gain or loss will be recognized by Fleet or by Shawmut as a result of the Merger; (ii) No gain or loss will be recognized by Shawmut stockholders upon their exchange of Shawmut Capital Stock for Fleet Common Stock or Fleet New Preferred Stock, except that a Shawmut stockholder who receives cash proceeds in lieu of a fractional share interest in Fleet Common Stock or a holder of Dissenting Preferred Shares who receives cash instead of Fleet Adjustable Preferred will recognize gain or loss equal to the difference between such proceeds and the tax basis allocated to the fractional share interest or the holder's tax basis in the Dissenting Preferred Shares, as the case may be, and such gain or loss will constitute capital gain or loss if such stockholder's Shawmut Capital Stock with respect to which gain or loss is recognized is held as a capital asset at the Effective Time; (iii) The tax basis of the Fleet Common Stock or Fleet New Preferred Stock (including any fractional share interest) received by a Shawmut stockholder who exchanges his or her Shawmut Capital Stock for Fleet Common Stock or Fleet New Preferred Stock will be the same as such stockholder's tax basis in the Shawmut Capital Stock surrendered in exchange therefor; and (iv) The holding period of the Fleet Common Stock or Fleet New Preferred Stock (including any fractional share interest) received by a Shawmut stockholder will include the period during which the Shawmut Capital Stock surrendered in exchange therefor was held (provided that such Shawmut Capital Stock was held by such Shawmut stockholder as a capital asset at the Effective Time). Information Reporting and Backup Withholding. Payments in respect of Shawmut Capital Stock may be subject to information reporting to the Internal Revenue Service and to a 31% backup withholding tax. Backup withholding will not apply, however, to a payment to a Shawmut stockholder or other payee if such stockholder or payee completes and signs the substitute Form W-9 that will be included as part of the transmittal letter or otherwise proves to Fleet and the Exchange Agent that it is exempt from backup withholding. ACCOUNTING TREATMENT It is anticipated that the Merger will be accounted for as a "pooling of interests" transaction under generally accepted accounting principles. Under such method of accounting, holders of Shawmut Common Stock will be deemed to have combined their existing voting common stock interest with that of holders of Fleet Common Stock by exchanging their shares for shares of Fleet Common Stock. Accordingly, the book value of the assets, liabilities and stockholders' equity of Shawmut, as reported on its consolidated balance sheet, will be carried over to the consolidated balance sheet of Fleet and no goodwill will be created. Fleet will 60 72 be able to include in its consolidated income the consolidated income of Shawmut for the entire fiscal year in which the Merger occurs; however, certain expenses incurred to effect the Merger must be treated by Fleet as current charges against income rather than adjustments to its balance sheet. In order for the Merger to qualify for pooling-of-interests accounting treatment, among other criteria, substantially all (90% or more) of the outstanding Shawmut Common Stock must be exchanged for Fleet Common Stock. Fleet and Shawmut's respective obligations to consummate the Merger is conditioned upon the receipt by Fleet and Shawmut of an opinion from Fleet's independent public accountants to the effect that the Merger qualifies for pooling-of-interests method of accounting. The unaudited pro forma financial information contained in this Joint Proxy Statement-Prospectus has been prepared using the pooling-of-interests accounting method to account for the Merger. See "SUMMARY -- Selected Historical and Pro Forma Per Share Data" and "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS". TERMINATION OF THE MERGER AGREEMENT The Merger Agreement provides that the Merger may be terminated at any time prior to the Effective Time, whether before or after Shawmut stockholder approval: (i) by mutual consent of Fleet and Shawmut in a written instrument, if the Board of Directors of each so determines by a vote of a majority of the members of its entire Board; (ii) by either the Board of Directors of Fleet or Shawmut if any governmental entity which must grant a Requisite Regulatory Approval has denied approval of the Merger and such denial has become final and non-appealable or any governmental entity of competent jurisdiction shall have issued a final non-appealable order enjoining or otherwise prohibiting the consummation of the transactions contemplated by the Merger Agreement; (iii) by either the Board of Directors of Fleet or Shawmut if the Merger shall not have been consummated on or before February 20, 1996, unless the failure of the Effective Time of the Merger to occur by such date shall be due to the failure of the party seeking to terminate the Merger Agreement to perform or observe the covenants and agreements of such party set forth therein; (iv) by either the Board of Directors of Fleet or Shawmut (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained therein) if there shall have been a material breach of any of the covenants or agreements or any of the representations or warranties set forth in the Merger Agreement on the part of the other party, which breach is not cured within forty-five (45) days following written notice to the party committing such breach, or which breach, by its nature, cannot be cured prior to the Effective Time; or (v) by either Fleet or Shawmut if Fleet or Shawmut stockholder approvals have not been obtained by reason of the failure to obtain the required vote at a duly held meeting of stockholders or any adjournment or postponement thereof. Whether or not the Merger is consummated, all fees and expenses incurred in connection with the Merger and the transactions contemplated thereby will be paid by the party incurring such expenses, except that the costs and expenses of printing and mailing this Joint Proxy Statement-Prospectus, and all filing and other fees paid to the Commission in connection with the Merger, shall be borne equally by Fleet and Shawmut. WAIVER AND AMENDMENT OF THE MERGER AGREEMENT Waiver. At any time prior to the Effective Time, Fleet and Shawmut, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other party; (ii) waive any inaccuracies in the representations and warranties of the other party contained in the Merger Agreement or in any document delivered pursuant to the Merger Agreement; or (iii) waive compliance by the other party of any of its 61 73 agreements or conditions contained in the Merger Agreement, except that after Shawmut stockholder approval, no extension or waiver shall reduce the amount or change the form of consideration to be delivered to each of Shawmut's stockholders under the Merger Agreement without further approval of Shawmut's stockholders. Amendment. Subject to compliance with applicable law, the Merger Agreement may be amended by Fleet and Shawmut by action taken or authorized by their respective Boards of Directors, at any time, except that after Shawmut stockholder approval, no amendment shall reduce the amount or change the form of the consideration to be delivered to Shawmut's stockholders under the Merger Agreement without further approval of Shawmut's stockholders, other than as contemplated by the Merger Agreement. In addition, Delaware law prohibits any change in any of the terms and conditions of the Merger Agreement subsequent to Shawmut stockholder approval if such change or alteration would, among other things, adversely effect any holder of Shawmut Common Stock. FLEET AND SHAWMUT STOCK OPTION AGREEMENTS Concurrently with the execution of the Merger Agreement, Fleet executed and delivered the Fleet Stock Option Agreement, pursuant to which Fleet granted to Shawmut the Fleet Option. At the same time, Shawmut executed and delivered the Shawmut Stock Option Agreement, pursuant to which Shawmut granted to Fleet the Shawmut Option. The Fleet Stock Option Agreement and the Shawmut Stock Option Agreement are attached to this Joint Proxy Statement-Prospectus as Exhibits B and C and are incorporated by reference herein. Fleet and Shawmut approved and entered into the Fleet and Shawmut Option Agreements to induce each other to enter into the Merger Agreement. The Option Agreements are intended to increase the likelihood that the Merger will be consummated in accordance with the terms of the Merger Agreement. Consequently, certain aspects of the Option Agreements may have the effect of discouraging persons who might now or prior to the Effective Time be interested in acquiring all of or a significant interest in Fleet or Shawmut from considering or proposing such an acquisition, even if, in the case of Shawmut, such persons were prepared to offer to pay consideration to Shawmut stockholders which had a higher current market price than the shares of Fleet Common Stock to be received per share of Shawmut Common Stock pursuant to the Merger Agreement. Except as otherwise noted below, the terms and conditions of the Fleet Option Agreement and the Shawmut Option Agreement are identical in all material respects. For purposes of this section, except as otherwise noted, (i) the Fleet Option Agreement or the Shawmut Option Agreement, as the case may be, is sometimes referred to as the "Issuer Option Agreement", (ii) Fleet, as issuer of the Fleet Common Stock, and Shawmut, as issuer of the Shawmut Common Stock, upon the exercise of the Fleet Option and the Shawmut Option, respectively, are sometimes individually referred to as the "Issuer", (iii) Fleet and Shawmut, as the holder of the Shawmut Option and the Fleet Option, respectively, are sometimes individually referred to as the "Optionee", (iv) the Fleet Option or the Shawmut Option, as the case may be, is sometimes referred to as the "Issuer Option" and (v) the Fleet Common Stock and the Shawmut Common Stock is referred to as "Issuer Common Stock". The Fleet Option Agreement provides for the purchase by Shawmut of 28,171,050 shares (the "Fleet Option Shares" or the "Issuer Option Shares", as the case may be) of Fleet Common Stock at an exercise price of $33.625 per share, payable in cash. The Fleet Option Shares, if issued pursuant to the Fleet Option Agreement, shall in no event exceed 19.9% of the Fleet Common Stock issued and outstanding without giving effect to the issuance of any Fleet Common Stock subject to the Fleet Option. The Shawmut Option Agreement provides for the purchase by Fleet of 24,195,625 shares (the "Shawmut Option Shares" or the "Issuer Option Shares", as the case may be) of Shawmut Common Stock at an exercise price of $24.50 per share, payable in cash. The Shawmut Option Shares, if issued pursuant to the Shawmut Option Agreement, shall in no event exceed 19.9% of the Shawmut Common Stock issued and outstanding without giving effect to the issuance of any Shawmut Common Stock subject to the Shawmut Option. 62 74 The number of shares of Issuer Common Stock subject to the applicable Issuer Option will be increased to the extent that additional shares of Issuer Common Stock are issued or otherwise become outstanding (other than pursuant to an exercise of an Issuer Option), such that, after such issuance, the number of Issuer Option Shares will continue to equal 19.9% of the Issuer Common Stock then issued and outstanding without giving effect to the issuance of any Issuer Common Stock subject to such Issuer Option. In the event of any change in, or distributions in respect of, the shares of Issuer Common Stock by reason of a stock dividend, split-up, merger, recapitalization, combination, subdivision, conversion, exchange of shares, distribution on or in respect of such Issuer Common Stock or similar transaction, the type and number of Issuer Option Shares purchasable upon exercise of the applicable Issuer Option, and the applicable option price will also be adjusted in such a manner as shall fully preserve the economic benefits of the Option. Each Issuer Option Agreement provides that the Optionee or any other holder or holders of the Issuer Option (as used in this section, collectively, the "Holder") may exercise the Issuer Option, in whole or in part, subject to regulatory approval, if both an Initial Triggering Event (as defined below) and a Subsequent Triggering Event (as defined below) shall have occurred prior to the occurrence of an Exercise Termination Event (as defined below); provided that the Holder shall have sent to the Issuer written notice of such exercise within 90 days following such Subsequent Triggering Event (subject to extension as provided in each Issuer Option Agreement). The terms Initial Triggering Event and Subsequent Triggering Event generally relate to attempts by one or more third parties to acquire a significant interest in the Issuer. Any exercise of the Issuer Option will be deemed to occur on the date such notice is sent. For purposes of each Issuer Option Agreement: (a) The term "Initial Triggering Event" means the occurrence of any of the following events or transactions after February 20, 1995: (i) the Issuer or any subsidiary of the Issuer, without the Optionee's prior written consent, shall have entered into an agreement to engage in, or Issuer's Board of Directors accepts, or recommends stockholder approval of, an Acquisition Transaction (as defined below) with any person or group (other than as contemplated by the Merger Agreement); (ii) Issuer's Board of Directors shall have publicly withdrawn or modified, or publicly announced its intention to withdraw or modify, in any manner adverse to the Optionee, its recommendation that its stockholders approve the Merger Agreement; (iii) any person, other than the Optionee or any subsidiary of the Optionee, acting in a fiduciary capacity in the ordinary course of business acquires beneficial ownership, or the right to acquire beneficial ownership, of 10% or more of the outstanding shares of the Issuer's Common Stock; (iv) any person other than the Optionee or any subsidiary of the Optionee shall have made a bona fide proposal to the Issuer or its stockholders by public announcement or written communication that shall be or becomes the subject of public disclosure to engage in an Acquisition Transaction; (v) the Issuer breaches any covenant or obligation in the Merger Agreement after any person, other than the Optionee or any subsidiaries of the Optionee, has proposed an Acquisition Transaction, and such breach (A) would entitle the Optionee to terminate the Merger Agreement and (B) is not remedied prior to the date of the Optionee's notice to the Issuer of the exercise of the Option; or (vi) any person other than the Optionee or any subsidiary of the Optionee, other than in connection with a transaction to which the Optionee has given its prior written consent, shall have filed an application or notice with the Federal Reserve Board, or other federal or state bank regulatory authority, which application or notice has been accepted for processing, for approval to engage in an Acquisition Transaction. For purposes of each Issuer Option Agreement, the term "Acquisition Transaction" means (i) a merger or consolidation, or any similar transaction with the Issuer or any of its Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X of the Commission); (ii) a purchase, lease or other acquisition of all or substantially all of the assets of the Issuer or any of its Significant Subsidiaries; (iii) a purchase or other acquisition of securities representing 10% or more of the voting power of the Issuer or any of its Significant Subsidiaries; or (iv) any substantially similar transaction, provided, however, that in no event shall any (i) merger, consolidation or similar transaction involving Issuer or any Significant Subsidiary in which the voting securities of the Issuer outstanding immediately prior thereto continue to represent (by either remaining outstanding or being converted into the voting securities of the surviving entity of any such transaction) at least 65% of the combined voting power of the voting securities of the 63 75 Issuer or the surviving entity outstanding immediately after the consummation of such merger, consolidation or similar transaction or (ii) merger, consolidation, purchase or similar transaction involving only the Issuer and one or more of its subsidiaries or involving only any two or more of such subsidiaries, be deemed to be an Acquisition Transaction, provided any such transaction is not entered into in violation of the terms of the Merger Agreement. (b) The term "Subsequent Triggering Event" means the occurrence of either of the following events or transactions after February 20, 1995: (i) the acquisition by any person of beneficial ownership of 20% or more of the then outstanding shares of Issuer Common Stock; or (ii) the occurrence of the Initial Triggering Event described above in clause (a)(i), except that the percentage referred to in subclause (iii) of the definition of "Acquisition Transaction" set forth above shall be 20%. Each Issuer Option will expire upon the occurrence of an "Exercise Termination Event", defined as: (i) the Effective Time of the Merger; (ii) termination of the Merger Agreement in accordance with the provisions thereof if such termination occurs prior to the occurrence of an Initial Triggering Event, except in the case of the termination of the Merger Agreement by the Optionee as a result of an uncured material breach by the Issuer of any of its representations, warranties, covenants or agreements unless the breach by the Issuer is non-volitional; or (iii) twelve months after the termination of the Merger Agreement if such termination occurs after the occurrence of an Initial Triggering Event or is a termination by the Optionee due to a material, volitional breach by the Issuer of the Merger Agreement (provided that if an Initial Triggering Event continues or occurs beyond such termination of the Merger Agreement and prior to the passage of such 12-month period, the Issuer Option will terminate 12 months from the expiration of the last Initial Triggering Event to expire, but in no event more than 18 months after such termination of the Merger Agreement.) As of the date of this Joint Proxy Statement-Prospectus, to the best knowledge of Fleet and Shawmut, no Initial Triggering Event or Subsequent Triggering Event has occurred. Immediately prior to the occurrence of a Repurchase Event (as defined below), (i) following a request of a Holder, delivered prior to an Exercise Termination Event, the Issuer (or any successor thereto) shall repurchase the Option from the Holder at a price (the "Issuer Option Repurchase Price") equal to the amount by which (A) the market/offer price (as defined below) exceeds (B) the Option Price, multiplied by the number of shares for which the Option may then be exercised and (ii) at the request of the owner of Option Shares from time to time (the "Owner"), delivered within 90 days of such occurrence (or such later period as provided in Section 10 of the Option Agreements), Issuer shall repurchase such number of the Option Shares from the Owner as the Owner shall designate at a price (the "Issuer Option Share Repurchase Price") equal to the market/offer price multiplied by the number of Option Shares so designated. The term "market/offer price" shall mean the highest of (i) the price per share of Issuer Common Stock at which a tender offer or exchange offer therefor has been made, (ii) the price per share of Issuer Common Stock to be paid by any third party pursuant to an agreement with Issuer, (iii) the highest closing price for shares of Issuer Common Stock within the six-month period immediately preceding the date the Holder gives notice of the required repurchase of the Option or the Owner gives notice of the required repurchase of Option Shares, as the case may be, or (iv) in the event of a sale of all or a substantial portion of Issuer's assets, the sum of the price paid in such sale for such assets and the current market value of the remaining assets of Issuer as determined by a nationally recognized investment banking firm selected by the Holder or the Owner, as the case may be, divided by the number of shares of Issuer Common Stock outstanding at the time of such sale. In determining the market/offer price, the value of consideration other than cash shall be determined by a nationally recognized investment banking firm selected by the Holder or Owner, as the case may be. However, if Issuer at any time after delivery of a notice of repurchase as described in this paragraph is prohibited under applicable law or regulation, from delivering to the Holder and/or the Owner, as appropriate, the Issuer Option Repurchase Price and the Issuer Option Share Repurchase Price, respectively, in full, the Holder or Owner may revoke its notice of repurchase of the Issuer Option or the Issuer Option Shares either in whole or to the extent of the prohibition, whereupon, in the latter case, Issuer shall promptly (I) deliver to the Holder and/or the Owner, as appropriate, that portion of the Issuer Option Repurchase Price or the Issuer Option Share Repurchase Price that Issuer is not prohibited from delivering and (II) deliver, as appropriate, 64 76 (a) to the Holder, a new Issuer Option Agreement evidencing the right of the Holder to purchase that number of shares of the Issuer Common Stock obtained by multiplying the number of shares of the Issuer Common Stock for which the surrendered Issuer Option Agreement was exercisable at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Issuer Option Repurchase Price less the portion thereof theretofore delivered to the Holder and the denominator of which is the Issuer Option Repurchase Price, and (b) to the Owner, a certificate for the Issuer Option Shares it is then so prohibited from repurchasing. A "Repurchase Event" is deemed to have occurred (i) upon the consummation of an Acquisition Transaction or (ii) upon the acquisition by any person of the beneficial ownership of 50% or more of the then outstanding Issuer Common Stock, provided that a Subsequent Triggering Event shall have occurred prior to an Exercise Termination Event. In the event that prior to an Exercise Termination Event, the Issuer enters into any agreement (a) to consolidate with or merge into any person, other than the Optionee or one of its subsidiaries, such that Issuer is not the continuing or surviving corporation of such consolidation or merger; (b) to permit any person, other than the Optionee or one of its subsidiaries, to merge into the Issuer and the Issuer is the continuing or surviving corporation, but in connection with such consolidation or merger, the outstanding shares of the Issuer Common Stock are changed into or exchanged for stock or other securities of any other person or cash or any other property, or the then outstanding shares of Issuer Common Stock after such merger shall represent less than 50% of the outstanding voting shares and voting share equivalents of the merged corporation; or (c) to sell or otherwise transfer all or substantially all of its assets to any person, other than the Optionee or any of its subsidiaries, then, and in each such case, the agreement governing such transaction must provide that, upon consummation of such transaction and upon terms and conditions set forth in the Issuer Option Agreement, the Option will be converted into, or exchanged for, an option having substantially the same terms as the Option (the "Substitute Option") to purchase securities, at the election of the Holder, of either the acquiring person or any person that controls the acquiring person. At the request of the Holder of the Substitute Option, the issuer of the Substitute Option shall repurchase it at a price, and subject to such other terms and conditions, as set forth in the Issuer Option Agreement. Within 90 days after the occurrence of a Subsequent Triggering Event that occurs prior to an Exercise Termination Date (subject to extension as provided in the Issuer Option Agreement), the Optionee may request the Issuer to prepare, file and keep current with respect to the Option Shares, a registration statement with the Commission. The Issuer is required to use its reasonable best efforts to cause such registration statement to become effective and then to remain effective for 180 days or such shorter time as may be reasonably necessary to effect such sales or other disposition of Option Shares. The Optionee has the right to demand two such registrations. Neither the Issuer nor the Optionee may assign any of its rights and obligations under the Issuer Option Agreements or the Issuer Option to any other person without the express written consent of the other party, except that if a Subsequent Triggering Event occurs prior to an Exercise Termination Event, the Optionee, subject to the terms of the Issuer Option Agreement, may assign in whole or in part its rights and obligations thereunder, within 90 days (subject to extension as provided in the Issuer Option Agreement) of such Subsequent Triggering Event; provided that until the date 15 days after the date on which the Federal Reserve Board approves an application by the Optionee to acquire the Issuer Option Shares, the Optionee may not assign its rights under the Issuer Option except in (a) a widely dispersed public distribution, (b) a private placement in which no one party acquires the right to purchase in excess of 2% of the voting shares of the Issuer, (c) an assignment to a single party for the purpose of conducting a widely dispersed public distribution on the Optionee's behalf, or (d) any other manner approved by the Federal Reserve Board. Certain rights and obligations of the Optionee and the Issuer under the Option Agreement are subject to receipt of required regulatory approvals. The approval of the Federal Reserve Board is required for the acquisition by the Optionee of more than 5% of the outstanding shares of Issuer Common Stock. Accordingly, the Optionee has included or will include in its applications with the Federal Reserve Board a request for approval of the right of the Optionee to exercise its rights under the Issuer Option Agreement, including its right to purchase more than 5% of the outstanding shares of Issuer Common Stock. See "-- Regulatory Approvals Required for the Merger". 65 77 THE FLEET RIGHTS AGREEMENT On November 21, 1990, the Fleet Board declared a dividend of one preferred share purchase right (a "Fleet Right") for each outstanding share of Fleet Common Stock to stockholders of record at the close of business on December 4, 1990. Each Fleet Right, when exercisable, will entitle the registered holder to purchase from Fleet one one-hundredth of a share of the Junior Preferred Stock of Fleet, at a purchase price of $50 per one one-hundredth of a share of Junior Preferred Stock, subject to certain adjustments. The Fleet Rights are not currently exercisable. The description and terms of the Fleet Rights, as well as the Fleet Rights Agreement (as hereinafter defined) pursuant to which the Fleet Rights were issued are set forth below in "DESCRIPTION OF FLEET CAPITAL STOCK, FLEET NEW PREFERRED STOCK, FLEET NEW DEPOSITARY SHARES AND FLEET WARRANTS -- Fleet Common Stock -- Preferred Share Purchase Rights". Immediately prior to the execution of the Merger Agreement, Fleet amended the Fleet Rights Agreement to amend the definition of "Acquiring Person" to permit the execution and delivery by Fleet of the Merger Agreement and the Shawmut Option Agreement without Shawmut becoming an Acquiring Person under the Fleet Rights Agreement. THE SHAWMUT RIGHTS AGREEMENT On February 28, 1989, the Shawmut Board declared a dividend of one preferred share purchase right (a "Shawmut Right") for each outstanding share of Shawmut Common Stock to stockholders of record at the close of business on March 13, 1989. Each Shawmut Right, when exercisable, will entitle the registered holder to purchase from Shawmut a unit consisting of one one-hundredth of a share (a "Unit") of Series A Junior Participating Preferred Stock of Shawmut, at a purchase price of $100 per Unit, subject to adjustment. The Shawmut Rights are not currently exercisable. The description and terms of the Shawmut Rights are set forth in the Rights Agreement dated as of February 28, 1989 between Shawmut and Chemical Bank, as Rights Agent (the "Shawmut Rights Agreement"), a copy of which was filed as an Exhibit to the Shawmut Registration Statement on Form 8-A dated March 7, 1989, as amended by a Form 8-A/A dated March 2, 1995, which is incorporated by reference herein. See "INFORMATION INCORPORATED BY REFERENCE". Immediately prior to the execution of the Merger Agreement, the Shawmut Board amended the Shawmut Rights Agreement to amend the definition of "Acquiring Person" to permit the execution and delivery by Shawmut of the Fleet Option Agreement without Fleet becoming an Acquiring Person under the Shawmut Rights Agreement. EMPLOYEE BENEFITS AND PLANS The Merger Agreement requires Fleet to honor all employment, severance and other compensation agreements disclosed to Fleet in the Merger Agreement in accordance with their terms. See "INTERESTS OF CERTAIN PERSONS IN THE MERGER". The Merger Agreement also provides that, after the Merger, Fleet will provide Fleet employees who formerly were employees of Shawmut employee benefits substantially the same as those provided to similarly situated employees of Fleet, and employees of Fleet who were formerly employees of Shawmut will receive full credit for all purposes under such employee benefit plans, except the accrual of benefits, for their years of service with Shawmut or any of its subsidiaries (and any predecessors thereto). Each stock option to acquire Shawmut Common Stock granted under the Shawmut Stock Plans which is outstanding and unexercised immediately prior to the Effective Time will be converted at the Effective Time into, and will become, a stock option to purchase Fleet Common Stock and will continue to be governed by the terms of the Shawmut Stock Plans which will be assumed by Fleet. Each Shawmut Warrant which is outstanding and unexercised immediately prior to the Effective Time shall be converted automatically into a Fleet Warrant. In each case, (i) the number of shares of Fleet Common Stock subject to the Fleet option or Fleet Warrant, as the case may be, shall be equal to the product of the number of shares of Shawmut Common Stock subject to the Shawmut option or Shawmut Warrant, as the case may be, and the Common Exchange Ratio, rounded down to the nearest share, and (ii) the exercise price per share of Fleet Common 66 78 Stock subject to the Fleet option or Fleet Warrant, as the case may be, will be equal to the exercise price per share of Shawmut Common Stock under the Shawmut option or Shawmut Warrant, as the case may be, divided by the Common Exchange Ratio, rounded up to the nearest cent. The duration and other terms of each Fleet option and Fleet Warrant shall be substantially the same as the Shawmut option or Shawmut Warrant. Each option granted under the Shawmut Stock Plans will, pursuant to the terms of each such plan, automatically become vested and exercisable upon approval and adoption of the Merger Agreement by the stockholders of Shawmut. Shawmut has in effect a separation policy (the "Separation Policy") covering 41 of its senior officers (each, a "Participant"), several of whom may be deemed to be executive officers of Shawmut. Of the 41 Participants, 16 have been classified as Class 1 Participants and 25 have been classified as Class 2 Participants. The Separation Policy provides that if the employment of a Participant is terminated within the two-year period following a change in control (as defined in the Separation Policy) of Shawmut and such termination is by Shawmut (or its successor) other than for cause (as defined in the Separation Policy) or by the Participant for good reason (as defined in the Separation Policy), the Participant will be entitled to receive, among other things, an amount equal to the sum of the Participant's annual base salary and the highest of the short-term bonuses awarded during the prior three years multiplied by 2 (in the case of Class 1 Participants) or by 1.5 (in the case of Class 2 Participants). The Separation Policy also provides (i) that each Participant will receive, for a period of 24 months (in the case of Class 1 Participants) or 18 months (in the case of Class 2 Participants) after the date of termination of employment, benefits equivalent to the additional benefits the Participant would have received under the qualified and nonqualified pension plans in which the Participant was participating immediately prior to termination and (ii) for the continuation of coverage, for a period terminating on the earlier of (A) 24 months (in the case of Class 1 Participants) or 18 months (in the case of Class 2 Participants) following the date of termination of employment and (B) the commencement of equivalent benefits from a new employer, under all medical and other welfare benefit plans being provided as of the date of termination. The Merger will constitute a change in control under the Separation Policy. The Separation Policy provides that payments received in connection with a change in control will be reduced to the extent necessary to avoid the imposition of an excise tax under federal tax laws. Shawmut has in effect a Special Severance Plan (the "Severance Plan"), which covers all persons employed by Shawmut (each, a "Covered Employee"), other than on a temporary, occasional or seasonal basis, who are not otherwise parties to an individual severance agreement or a participant in the Separation Policy, and classifies such persons into "Class 1 Covered Employees" and "Class 2 Covered Employees". The Severance Plan provides that if the employment of a Covered Employee is terminated within the one-year period following a change in control (as defined in the Severance Plan) of Shawmut, and such termination is by Shawmut (or its successor) other than for cause (as defined in the Severance Plan) or by the Covered Employee for good reason (as defined in the Severance Plan), the Covered Employee will be entitled to receive, in addition to the severance pay to which such employee is entitled under the Shawmut Salary Continuation Procedure, as described below (the "Procedure"), (i) an amount equal to six months of annual base salary (in the case of Class 1 Covered Employees) or three months of annual base salary (in the case of Class 2 Covered Employees), (ii) an amount equal to the present value of the Covered Employee's accrued benefit, if any, which shall be fully vested at the date of termination of employment, under Shawmut's supplemental, nonqualified pension plans, (iii) an amount equal to the pro rata portion of such Covered Employee's outstanding short-term bonus award and (iv) continuation of coverage, for a period terminating on the earlier of (A) the number of months with respect to which such employee is entitled to severance pay under the Procedure plus six months (in the case of Class 1 Covered Employees) or three months (in the case of Class 2 Covered Employees) following the date of termination of employment and (B) the commencement of equivalent benefits from a new employer, under all medical or other welfare benefit plans being provided as of the date of termination. The Procedure provides that a Covered Employee will be entitled to receive severance pay in an amount equal to two weeks of base salary at the weekly rate in effect on such employee's last day of active employment with Shawmut (or its successor) for each year of past service with Shawmut (or its successor) up to a maximum of twenty-six weeks, with a minimum of four weeks, plus, if applicable, one day's base salary in lieu of notice for each business day in which no written notice was given in the thirty days prior to termination of employment. The Severance Plan provides that payments received in connection with a 67 79 change in control will be reduced to the extent necessary to avoid the imposition of any federal excise tax. The consummation of the Merger will constitute a change in control under the Severance Plan. The aggregate liability that may be incurred by Fleet under the Separation Policy and the Severance Plan cannot be determined as of the date of this Joint Proxy Statement-Prospectus. However, as more fully described below (see "BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS OF FLEET FOLLOWING THE MERGER -- Operations"), Fleet and Shawmut anticipate that in connection with the Merger, they will incur personnel related costs (including without limitation costs incurred pursuant to the Separation Policy and the Severance Plan) of approximately $255 million (pre-tax). STOCK EXCHANGE LISTING The Merger Agreement provides for the filing of a listing application with the Stock Exchange covering the Fleet Common Stock issuable pursuant to the Merger. It is a condition to the consummation of the Merger that such shares of Fleet Common Stock be authorized for listing on the Stock Exchange effective upon official notice of issuance. In addition, Fleet agreed to use its best efforts to cause the Fleet New Depositary Shares to be so listed. EXPENSES The Merger Agreement provides that Fleet and Shawmut will each pay its own expenses in connection with the Merger and the transaction contemplated thereby, provided that Fleet and Shawmut will divide equally all printing costs, filing fees and registration fees in connection with the Merger Agreement, the registration statement and this Joint Proxy Statement-Prospectus. DIVIDENDS The Merger Agreement provides that Fleet and Shawmut will coordinate the declaration and payment of dividends in respect of Fleet Common Stock and Shawmut Common Stock so that holders thereof will not receive two dividends for a single quarter or fail to receive one dividend which they would otherwise receive in the absence of the Merger. Dividends on the Shawmut Preferred Stock and the Fleet New Preferred Stock will be payable in accordance with their respective terms. RESALES OF FLEET COMMON STOCK, FLEET NEW PREFERRED STOCK, FLEET NEW DEPOSITARY SHARES AND FLEET WARRANTS RECEIVED IN THE MERGER The Fleet Common Stock, Fleet New Preferred Stock, Fleet New Depositary Shares and Fleet Warrants issued pursuant to the Merger will be freely transferable under the Securities Act, except for shares or warrants issued to any Shawmut stockholder who may be deemed to be an affiliate of Fleet for purposes of Rule 144 promulgated under the Securities Act ("Rule 144") or an affiliate of Shawmut for purposes of Rule 145 promulgated under the Securities Act ("Rule 145") (each an "Affiliate"). Affiliates will include persons (generally executive officers, directors and ten percent stockholders) who control, are controlled by, or are under common control with (i) Fleet or Shawmut at the time of the Shawmut Meeting or (ii) Fleet at or after the Effective Time. Rules 144 and 145 will restrict the sale of Fleet Common Stock, Fleet New Preferred Stock, Fleet New Depositary Shares and Fleet Warrants received in the Merger by Affiliates and certain of their family members and related interests. Generally speaking, during the two years following the Effective Time, those persons who are Affiliates of Shawmut at the time of the Shawmut Meeting, provided they are not Affiliates of Fleet at or following the Effective Time, may publicly resell any Fleet Common Stock, Fleet New Preferred Stock, Fleet New Depositary Shares and Fleet Warrants received by them in the Merger, subject to certain limitations as to, among other things, the amount of Fleet Common Stock, Fleet New Preferred Stock, Fleet New Depositary Shares and Fleet Warrants, as the case may be, sold by them in any three-month period and as to the manner of sale. After the two-year period, such Affiliates may resell their shares without such restrictions so long as there is adequate current public information with respect to Fleet as required by Rule 144. Persons who become Affiliates of Fleet prior to, at or after the Effective Time may publicly resell the 68 80 Fleet Common Stock, Fleet New Preferred Stock, Fleet New Depositary Shares and Fleet Warrants received by them in the Merger subject to similar limitations and subject to certain filing requirements specified in Rule 144. The ability of Affiliates to resell shares of Fleet Common Stock, Fleet New Preferred Stock, Fleet New Depositary Shares and Fleet Warrants received in the Merger under Rule 144 or 145 as summarized herein generally will be subject to Fleet's having satisfied its Exchange Act reporting requirements for specified periods prior to the time of sale. Affiliates also would be permitted to resell Fleet Common Stock, Fleet New Preferred Stock, Fleet New Depositary Shares and Fleet Warrants received in the Merger pursuant to an effective registration statement under the Securities Act or another available exemption from the Securities Act registration requirements. This Joint Proxy Statement-Prospectus does not cover any resales of Fleet Common Stock, Fleet New Preferred Stock, Fleet New Depositary Shares or Fleet Warrants received by persons who may be deemed to be Affiliates of Fleet or Shawmut in the Merger, or the shares issuable upon exercise of the Fleet Warrants. Commission guidelines regarding qualifying for the pooling of interests method of accounting also limit sales of shares of the acquiring and acquired company by affiliates of either company in a business combination. Commission guidelines indicate further that the pooling of interests method of accounting will generally not be challenged on the basis of sales by affiliates of the acquiring or acquired company if they do not dispose of any of the shares of the corporation they own or shares of a corporation they receive in connection with a merger during the period beginning 30 days before the merger and ending when financial results covering at least 30 days of post-merger operations of the combined entity have been published. Each of Shawmut and Fleet has agreed in the Merger Agreement to use its best efforts to cause each person who is an Affiliate (for purposes of Rule 145 and for purposes of qualifying the Merger for pooling of interests accounting treatment) of such party to deliver to the other party a written agreement intended to ensure compliance with the Securities Act and preserve the ability to treat the Merger as a pooling of interests. Fleet has agreed in the Merger Agreement to use its best efforts to publish not later than 90 days after the end of the first month after the Effective Time in which there are at least 30 days of post-Merger combined operations, combined sales and net income figures as contemplated by and in accordance with the terms of the Commission's Accounting Series Release No. 135. FLEET DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN Fleet has an automatic Dividend Reinvestment and Stock Purchase Plan (the "Plan"). The Plan provides, in substance, for those stockholders who elect to participate, that dividends on Fleet Common Stock and optional cash payments of not less than $10 per month, up to a maximum of $10,000 for each quarter, will be invested in shares of Fleet Common Stock. The purchase price for Fleet Common Stock purchased with reinvested cash dividends is 97% of the market price and for purchases with optional cash payments is 100% of the market price. In each case, the Plan provides for the payment by Fleet of any brokerage commissions or service charges with respect to such purchases. The Plan also provides that Fleet may change the discount amounts for dividends and optional cash payments, and the maximum optional cash payment amount at any time in its sole discretion. After the Effective Time, stockholders of Shawmut who receive Fleet Common Stock in the Merger will have the right to participate in the Plan. APPRAISAL RIGHTS HOLDERS OF SHAWMUT COMMON STOCK, SHAWMUT 9.30% PREFERRED, SHAWMUT 9.35% PREFERRED AND SHAWMUT DEPOSITARY SHARES DO NOT HAVE ANY APPRAISAL RIGHTS UNDER DELAWARE LAW IN CONNECTION WITH THE MERGER. If the Merger is consummated, a holder of record of Shawmut Adjustable Preferred on the date of making a demand for appraisal, as described below, who continues to hold such shares through the Effective Time and who strictly complies with the procedures set forth under Section 262 of the Delaware General Corporation Law ("Section 262") will be entitled to have such shares appraised by the Delaware Court of 69 81 Chancery under Section 262 and to receive payment of the "fair value" of such shares in lieu of the consideration provided for in the Merger Agreement. This Joint Proxy Statement-Prospectus is being sent to all holders of record of Shawmut Adjustable Preferred at the Record Date and constitutes notice of the appraisal rights available to such holders under Section 262. THE STATUTORY RIGHT OF APPRAISAL GRANTED BY SECTION 262 REQUIRES STRICT COMPLIANCE WITH THE PROCEDURES SET FORTH IN SECTION 262. FAILURE TO FOLLOW ANY OF SUCH PROCEDURES MAY RESULT IN A TERMINATION OR WAIVER OF DISSENTERS' RIGHTS UNDER SECTION 262. The following is a summary of certain of the provisions of Section 262 and is qualified in its entirety by reference to the full text of Section 262, a copy of which is attached to this Joint Proxy Statement-Prospectus as Exhibit F. A holder of Shawmut Adjustable Preferred electing to exercise appraisal rights under Section 262 must deliver a written demand for appraisal of such stockholder's shares to Shawmut prior to the vote on the approval of the Merger Agreement. Such written demand must reasonably inform Shawmut of the identity of the stockholder of record and of such stockholder's intention to demand appraisal of his shares. All such demands should be delivered to Shawmut National Corporation, Attention: J. Michael Shepherd, Executive Vice President, General Counsel and Secretary, at One Federal Street, Boston, Massachusetts 02211. Only a holder of shares of Shawmut Adjustable Preferred on the date of making such written demand for appraisal who continuously holds such shares through the Effective Time is entitled to seek appraisal. Demand for appraisal must be executed by or for the holder of record, fully and correctly, as such holder's name appears on the holder's stock certificates representing shares of Shawmut Adjustable Preferred. If Shawmut Adjustable Preferred is owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, the demand should be made in that capacity, and if Shawmut Adjustable Preferred is owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be made by or for all owners of record. An authorized agent, including one or more joint owners, may execute the demand for appraisal for a holder of record; however, such agent must identify the record owner or owners and expressly disclose in such demand that the agent is acting as agent for the record owner or owners of such shares. A record holder such as a broker who holds shares of Shawmut Adjustable Preferred as a nominee for beneficial owners, some of whom desire to demand appraisal, must exercise appraisal rights on behalf of such beneficial owners with respect to the shares of Shawmut Adjustable Preferred held for such beneficial owners. In such case, the written demand for appraisal should set forth the number of shares of Shawmut Adjustable Preferred covered by it. Unless a demand for appraisal specifies a number of shares, such demand will be presumed to cover all shares of Shawmut Adjustable Preferred held in the name of such record owner. BENEFICIAL OWNERS WHO ARE NOT RECORD OWNERS AND WHO INTEND TO EXERCISE APPRAISAL RIGHTS SHOULD INSTRUCT THE RECORD OWNER TO COMPLY WITH THE STATUTORY REQUIREMENTS WITH RESPECT TO THE EXERCISE OF APPRAISAL RIGHTS BEFORE THE DATE OF THE SHAWMUT MEETING. Within ten days after the Effective Time, Fleet is required to send notice of the effectiveness of the Merger to each stockholder of Shawmut who prior to the Effective Time complied with the requirements of Section 262. Within 120 days after the Effective Time, Fleet or any stockholder who has complied with the requirements of Section 262 may file a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares of Shawmut Adjustable Preferred held by all stockholders seeking appraisal. A dissenting stockholder must serve a copy of such petition on Fleet. If no petition is filed by either Fleet or a dissenting stockholder within such 120 day period, the rights of all dissenting stockholders to appraisal shall cease. Shawmut stockholders seeking to exercise appraisal rights should not assume that Fleet will file a petition with respect to the appraisal of the fair value of their shares or that Fleet will initiate any negotiations with respect to the fair value of such shares. Fleet is under no obligation to and has no present intention to take any action in this regard. Accordingly, Shawmut stockholders who wish to seek appraisal of their shares should initiate all necessary action with respect to the perfection of their appraisal rights within 70 82 the time periods and in the manner prescribed in Section 262. FAILURE TO FILE THE PETITION ON A TIMELY BASIS WILL CAUSE THE STOCKHOLDER'S RIGHT TO AN APPRAISAL TO CEASE. Within 120 days after the Effective Time, any stockholder who has complied with subsections (a) and (d) of Section 262 is entitled, upon written request, to receive from Fleet a statement setting forth the aggregate number of shares of Shawmut Adjustable Preferred with respect to which demands for appraisal have been received by Shawmut and the number of holders of such shares. Such statement must be mailed within 10 days after the written request therefor has been received by Fleet or within 10 days after expiration of the time for delivery of demands for appraisal under Section 262, whichever is later. If a petition for an appraisal is timely filed, at the hearing on such petition, the Delaware Court of Chancery will determine which stockholders are entitled to appraisal rights and will appraise the shares of Shawmut Adjustable Preferred owned by such stockholders, determining the fair value of such shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with a fair rate of interest to be paid, if any, upon the amount determined to be the fair value. In determining fair value, the court is to take into account all relevant factors. The Delaware Supreme Court has stated that "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court" should be considered in the appraisal proceedings. The Delaware Supreme Court has stated that, in making this determination of fair value, the court must consider "market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts which were known or which could be ascertained as of the date of the merger which throw any light on future prospects of the merged corporation." The Delaware Supreme Court has also held that "elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered." In addition, Delaware courts have decided that the statutory appraisal remedy, depending on factual circumstances, may or may not be a dissenter's exclusive remedy. Stockholders considering seeking appraisal should consider that the fair value of their shares determined under Section 262 could be more, the same, or less than the value of the consideration to be received pursuant to the Merger Agreement without the exercise of appraisal rights, and that investment banking opinions as to fairness from a financial point of view are not necessarily opinions as to fair value as determined under Section 262. The cost of the appraisal proceeding may be determined by the Court of Chancery and assessed against the parties as the Court deems equitable in the circumstances. Upon application of a dissenting stockholder, the court may order that all or a portion of the expenses incurred by any dissenting stockholder in connection with the appraisal proceeding (including without limitation reasonable attorney's fees and the fees and expenses of experts) be charged pro rata against the value of all shares of the Shawmut Adjustable Preferred entitled to appraisal. In the absence of such a determination or assessment, each party bears its own expenses. Any stockholder who has fully demanded appraisal in compliance with Section 262 will not, after the Effective Time, be entitled to receive payment of dividends or other distributions on the Shawmut Adjustable Preferred, except for dividends or distributions payable to stockholders of record at a date prior to the Effective Time. A Shawmut stockholder may withdraw a demand for appraisal and accept the terms of the Merger at any time within 60 days after the Effective Time, or thereafter may withdraw such demand with the written approval of Fleet. In the event an appraisal proceeding is properly instituted, such proceeding may not be dismissed as to any stockholder without the approval of the Delaware Court of Chancery, and any such approval may be conditioned on the terms the Court of Chancery deems just. IN VIEW OF THE COMPLEXITY OF THESE PROVISIONS OF DELAWARE LAW, ANY HOLDER OF THE SHAWMUT ADJUSTABLE PREFERRED WHO IS CONSIDERING EXERCISING APPRAISAL RIGHTS SHOULD CONSULT HIS OR HER LEGAL ADVISOR. See "-- Certain Federal Income Tax Consequences" for a brief description of certain federal income tax consequences resulting from the receipt of the fair value of appraised shares. 71 83 BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS OF FLEET FOLLOWING THE MERGER BOARD OF DIRECTORS From and after the Effective Time, the Fleet Board will consist of 20 persons, divided into three classes of directors, with each class serving staggered terms of three years, so that only one class is elected in any one year. Messrs. Murray and Alvord will each be a director of Fleet and, with the approval of the respective Boards of Directors of Fleet and Shawmut, will designate an additional eleven and seven individuals, respectively, to be members of the Fleet Board. As of the date of this Joint Proxy Statement-Prospectus, such directors had not been designated by Messrs. Murray and Alvord and their respective Boards of Directors. The directors selected by Fleet and Shawmut shall be divided as equally as practicable among the three classes of directors and the various committees established by the Fleet Board in proportion to the aggregate representation of such directors. In addition, the Fleet Board will establish, promptly following the Effective Time, and maintain for a period of 18 months thereafter, an integration committee, comprised of Messrs. Murray and Alvord, two additional representatives of Fleet and two additional representatives of Shawmut, to oversee the integration of the operations of Fleet, Shawmut and their respective subsidiaries. MANAGEMENT The executive officers of Fleet will be comprised of certain members of Fleet's senior management and certain members of Shawmut's senior management. Mr. Murray, the Chairman of the Board, President and Chief Executive Officer of Fleet will be the Chief Executive Officer and President of Fleet following the Merger, and Mr. Alvord, the Chairman of the Board and Chief Executive Officer of Shawmut will be the Chairman of Fleet following the Merger. In addition, the following persons will have the responsibilities set forth below at Fleet after the Merger:
PRESENT COMPANY NAME AFFILIATION RESPONSIBILITY - ----------------------------------- ------------------ ----------------------------------- Robert J. Higgins.................. Fleet Vice Chairman (commercial banking) Gunnar S. Overstrom, Jr............ Shawmut Vice Chairman (consumer banking/small business and investment services) H. Jay Sarles...................... Fleet Vice Chairman (staff functions and corporate strategy) Michael R. Zucchini................ Fleet Vice Chairman (financial services, fee-based businesses and technology operations) David L. Eyles..................... Shawmut Executive Vice President and Chief Credit Policy Officer Eugene M. McQuade.................. Fleet Executive Vice President and Chief Financial Officer
Additional information about each of such persons is contained in Fleet's and Shawmut's respective Annual Reports on Form 10-K for the year ended December 3l, 1994, which are incorporated by reference in this Joint Proxy Statement-Prospectus. See "AVAILABLE INFORMATION" and "INFORMATION INCORPORATED BY REFERENCE". Except for the foregoing, it has not yet been determined which members of Fleet's or Shawmut's senior management will also become executive officers of Fleet following the Merger or what such persons' titles or functions will be. From time to time prior to consummation of the Merger, decisions may be made with respect to the management and operations of Fleet following the Merger, including the selection of executive officers of Fleet. 72 84 OPERATIONS Following the Merger, Fleet intends to combine the operations of and, subject to required regulatory approvals, to merge certain of the subsidiary banks of Fleet and Shawmut and to consolidate the operations of certain other Fleet and Shawmut subsidiaries which provide similar services. As of the date of this Joint Proxy Statement-Prospectus, no final determination with respect to such matters had been made. While no assurance can be given, Fleet and Shawmut expect to achieve cost savings of approximately $400 million (pre-tax) within fifteen months following the Merger. Such cost savings are expected to be realized primarily through reductions in staff, elimination, consolidation or divestiture of certain branches and the consolidation of certain offices, data processing and other redundant back-office operations and staff functions. Cost reductions and branch consolidations will come from both companies and will be spread throughout the geographic region. Cost savings are also expected to be achieved in connection with the NBB Merger, the Northeast Merger and the Plaza Merger. These cost savings are expected to be approximately $20 million, $25 million and $15 million, respectively, and are expected to be achieved within the first twelve months after the consummation of these respective mergers. The extent to which cost savings will be achieved is dependent upon various factors beyond the control of Fleet and Shawmut, including the regulatory environment, economic conditions, unanticipated changes in business conditions, inflation and the level of FDIC assessments. Therefore, no assurances can be given with respect to the ultimate level of cost savings to be realized, or that such savings will be realized in the time-frame currently anticipated. In addition, as described above in "THE MERGER -- Regulatory Approvals Required for the Merger," certain regulatory agencies may seek the divestiture of certain assets and liabilities of the combined company following the Merger. Fleet and Shawmut expect that the Federal Reserve Board or the Department of Justice will request that Fleet or Shawmut divest certain operations in order to alleviate what such agency believes would be an adverse competitive effect. Fleet has not yet formulated a firm divestiture proposal and will not do so until further discussions with the Federal Reserve Board and the Department of Justice are held; accordingly, as of the date of this Joint Proxy Statement-Prospectus neither Fleet nor Shawmut can predict what the aggregate amount of any such divestitures may be. While any potential divestitures may affect certain pro forma combined financial statement amounts, merger and restructuring costs, cost savings and revenues, Fleet believes that the aggregate amount and financial impact of any such divestitures will not be material to the business, operations or financial condition of the combined institution and its subsidiaries, taken as a whole. See "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS" and "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS". Fleet and Shawmut also anticipate that they will incur one-time merger expenses and restructuring charges in connection with the Merger, estimated to be approximately $400 million (pre-tax) in the aggregate, principally as a result of expenses to be incurred in connection with anticipated staff reductions, elimination of duplicate headquarters and operational facilities, and branch consolidations. It is anticipated that substantially all of these charges will be recognized during 1995 upon consummation of the Merger with the exception of certain amounts recognized by Shawmut during the first quarter of 1995 (see "RECENT DEVELOPMENTS" for further discussion), and paid during the first 15 months subsequent to the Merger. The following table provides details of the estimated charges by type: (DOLLARS IN THOUSANDS)
ESTIMATED TYPE OF COST COSTS ---------------------------------------------------- -------- Personnel related................................... $255,000 Facilities and equipment............................ 68,000 Branch related...................................... 37,000 Other merger expenses............................... 40,000 -------- Total..................................... $400,000 ========
73 85 Personnel-related costs consist primarily of charges related to employee severance, termination of certain employee benefits plans and employee assistance costs for separated employees. Facilities and equipment charges consist of lease termination costs and other related exit costs resulting from consolidation of duplicate headquarters and operational facilities, and computer equipment and software write-offs due to duplication or incompatibility. Branch-related costs are primarily related to the cost of exiting branches anticipated to be closed, including lease terminations and equipment write-offs. In connection with the Merger, Fleet is currently reviewing the investment securities portfolio of Shawmut and Northeast to determine the classification of such securities as either available for sale or held to maturity. As a result of this review, certain reclassifications of Shawmut and Northeast investment securities may result. See "Unaudited Pro Forma Condensed Combined Financial Statements" and "Notes to Unaudited Pro Forma Condensed Combined Financial Statements". Although Fleet has agreed to move its corporate headquarters to Boston, Massachusetts promptly following the Merger, it intends to continue to operate significant portions of its businesses from its existing locations in Connecticut, New York and Rhode Island. INTERESTS OF CERTAIN PERSONS IN THE MERGER Certain members of Shawmut's management and the Shawmut Board, and Fleet's management and the Fleet Board, respectively, may be deemed to have certain interests in the Merger that are in addition to their interests as stockholders of Shawmut or Fleet, as the case may be, generally. The Shawmut Board and the Fleet Board were aware of these interests and considered them, among other matters, in approving the Merger Agreement and the transactions contemplated thereby. INTERESTS OF SHAWMUT DIRECTORS AND EXECUTIVE OFFICERS Directorships and Officerships. The Merger Agreement provides that, from and after the Effective Time, the Fleet Board shall be comprised of 20 directors, including Mr. Alvord (who will serve as Chairman of Fleet until his 60th birthday), Mr. Murray (who will serve as Chief Executive Officer and President of Fleet and Chairman of Fleet following Mr. Alvord's 60th birthday), 11 additional persons, who are not executive officers of Fleet or Shawmut, to be selected prior to the Effective Time by Mr. Murray and the Fleet Board and 7 additional persons, who are not executive officers of Fleet or Shawmut, to be selected prior to the Effective Time by Mr. Alvord and the Shawmut Board. In addition, after the Effective Time, Mr. Overstrom will serve as a Vice Chairman of Fleet and Mr. Eyles will serve as an Executive Vice President and Chief Credit Policy Officer of Fleet. See "BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS OF FLEET FOLLOWING THE MERGER." Indemnification; Directors and Officers Insurance. The Merger Agreement provides that, in the event of any threatened or actual claim or proceeding in which any person who is or has been a director, officer or employee of Shawmut, its subsidiaries or any of their predecessors (the "Indemnified Parties") is, or is threatened to be, made a party based in whole or in part on, or pertaining to (i) the fact that such person was a director, officer or employee of Shawmut, its subsidiaries or any of their predecessors, or (ii) the Merger Agreement, the Option Agreements or the transactions contemplated thereby, Fleet will, subject to the conditions set forth in the Merger Agreement, indemnify such person to the fullest extent permitted by law against any liability or expense incurred in connection with any such claim or proceeding. The Merger Agreement provides that Fleet's obligation to indemnify any Indemnified Party will continue for a period of six years following the Effective Time provided that rights to indemnification in respect of any claim asserted or made within such period will continue until final disposition of such claim. The Merger Agreement further provides that Fleet will, subject to the conditions set forth in the Merger Agreement, use its best efforts to cause the persons serving as officers and directors of Shawmut immediately prior to the Merger to be covered for a period of six years following the Effective Time by Shawmut's directors and officers liability insurance policy (or any equivalent substitute therefor), provided that Fleet will not be required to expend more than 200% of the current amount expended by Shawmut to procure such insurance. 74 86 Existing Severance Agreements and Similar Arrangements. Messrs. Alvord, Overstrom, Alan R. Buffington, Eyles, Robert B. Hedges, John O. Huston, Niels C. Jensen, Mrs. Eileen S. Kraus, Ms. Susan E. Lester and Messrs. Michael J. Rothmeier and J. Michael Shepherd, all of whom are executive officers of Shawmut, are parties to severance agreements (each an "Existing Severance Agreement") with Shawmut which provide that if termination of such executive's employment occurs within the two-year period following a change in control of Shawmut and such termination is by Shawmut (or its successor) other than for cause (as defined in the agreements) or by the executive for good reason (as defined in the agreements), the executive will be entitled to receive, among other things, (i) an amount equal to the sum of annual base salary and any amount awarded under Shawmut's short-term incentive plan for the year preceding the year of termination or, in the case of all of the foregoing persons other than Messrs. Alvord and Overstrom, if higher, for the year preceding the change in control, multiplied by three or the number of years remaining to the executive's 65th birthday, whichever is shorter (the "Applicable Period"); (ii) a pro rata portion of any award related to any uncompleted performance award period under Shawmut's performance plan; and (iii) in the case of Messrs. Alvord and Overstrom, an amount in cash generally equal to the aggregate difference between the exercise price of certain stock options held by the executive and the higher of the closing price of Shawmut Common Stock on the date of termination of employment or the highest per share price paid in connection with any change in control of Shawmut. The Existing Severance Agreements also provide for the continuation of health, medical and life insurance coverage and other employee welfare plans and programs for each executive after termination of employment until the expiration of the Applicable Period or, if sooner, until such benefits are provided through the executive's reemployment, and provide each executive with pension benefits equal to the amount which the executive would have received under the applicable pension plans had the executive been fully vested and remained employed for the Applicable Period, reduced by the pension benefits the executive will actually receive under such pension plans. The Existing Severance Agreements confer no benefits prior to a change in control. In the event that any payments received by Messrs. Alvord and Overstrom in connection with a change in control are subject to the excise tax imposed upon certain change in control payments under federal tax laws, the Existing Severance Agreements for such executives provide for an additional payment sufficient to restore the executive to the same after-tax position the executive would have been in if the excise tax had not been imposed. The Existing Severance Agreements with the persons listed above other than Messrs. Alvord and Overstrom provide that payments received in connection with a change in control will be reduced to the extent necessary to avoid the imposition of any such excise tax. In the case of all of the Existing Severance Agreements, the Merger will constitute a change in control and, without limiting any executive's rights under the Existing Severance Agreements, any change in the title, authorities or duties of such executive following the Merger from those in effect prior to the Merger will constitute good reason. Fleet has agreed to honor each of the Existing Severance Agreements in accordance with its terms, with the exception of the Existing Severance Agreements of Messrs. Alvord and Overstrom, which will terminate at the Effective Time. However, the benefits payable to Messrs. Alvord and Overstrom under their Existing Severance Agreements have generally been incorporated into, and may be paid pursuant to, the New Employment Agreements (as hereinafter defined). See "-- New Fleet Employment Agreements". As described above, several of the participants in the Separation Policy may be deemed to be executive officers of Shawmut. See "THE MERGER-- Employee Benefits and Plans." Existing Employment Agreements. Shawmut has entered into an employment agreement (each an "Existing Employment Agreement") with each of Mr. Alvord and Mr. Overstrom, effective as of February 24, 1994, each of which contains the following terms and conditions: (i) an initial term of three years, subject to extension for an additional one-year period on each successive anniversary of the effective date unless Shawmut gives notice of nonrenewal at least 60 days prior to such anniversary; (ii) annual salary at least equal to that in effect on the effective date of the Existing Employment Agreements; (iii) participation in all compensation and employee benefit arrangements available to other executive officers of Shawmut; and (iv) noncompetition and confidentiality covenants by the officers. Pursuant to each of the Existing Employment Agreements, in the event that the executive is terminated by Shawmut without cause (as defined in the agreements) or the executive terminates his employment for good reason (as defined in the agreements) then the affected executive will be entitled to receive, for the then remaining term of the agreement, salary, short- and long-term incentive compensation and coverage or credited service, as 75 87 applicable, under Shawmut's employee benefit plans. In addition, if any of such events occurs, the outstanding equity awards for the affected executive would vest, but would continue to become exercisable or nonrestricted, as applicable, as originally scheduled. At the Effective Time, the New Employment Agreements (as hereinafter defined) will replace the Existing Employment Agreements. Additional information concerning the salary and other benefits paid to each of Messrs. Alvord and Overstrom by Shawmut during 1994 is incorporated by reference to Shawmut's 1994 Annual Report on Form 10-K which is incorporated herein by reference. See "INFORMATION INCORPORATED BY REFERENCE". Such information is also set forth in the section entitled, "ELECTION OF SHAWMUT DIRECTORS; APPOINTMENT OF INDEPENDENT ACCOUNTANTS" which is included in the Joint Proxy Statement-Prospectus to be delivered to Shawmut stockholders only. New Fleet Severance Agreements. In connection with the execution of the Merger Agreement, Messrs. Alvord and Overstrom have entered into severance agreements with Fleet. The severance agreements provide that if termination of such executive's employment occurs within the two-year period following a change in control of Fleet and such termination is by Fleet (or its successor) other than for cause (as defined in the agreements) or by the executive for good reason (as defined in the agreements), the executive will be entitled to receive, among other things, (i) an amount equal to the sum of annual base salary and any amount awarded under Fleet's short-term incentive plan for the year preceding the year of termination multiplied by three or the number of years remaining to the executive's 65th birthday, whichever is shorter (the "Fleet Applicable Period"), and (ii) a pro rata portion of such executive's outstanding long-term incentive award. These agreements also provide for the continuation of health, medical and life insurance coverage and other employee welfare plans and programs for each executive after termination of employment until the expiration of the Fleet Applicable Period or, if sooner, until such benefits are provided through the executive's reemployment, and provide each executive with pension benefits equal to the amount which the executive would have received under the applicable pension plans had he been fully vested and remained employed for the Fleet Applicable Period, reduced by the pension benefits the executive will actually receive under such pension plans. These agreements confer no benefits prior to a change in control. In the event that any payments received by Messrs. Alvord and Overstrom in connection with a change in control are subjected to the excise tax imposed upon certain change in control payments under federal tax laws, these agreements provide for an additional payment sufficient to restore the executive to the same after-tax position the executive would have been in if the excise tax had not been imposed. New Fleet Employment Agreements. In connection with the execution of the Merger Agreement, Messrs. Alvord and Overstrom have entered into employment agreements (the "New Employment Agreements") with Fleet which, as of the Effective Time, will replace the Existing Employment Agreements. Mr. Alvord's New Employment Agreement contains the following terms and conditions: (i) a term commencing on the Effective Time and ending on Mr. Alvord's 60th birthday; (ii) annual salary and bonus at a rate no less than 90% of the base salary and bonus of the Chief Executive Officer of Fleet; (iii) long-term bonus and equity-based compensation awards at a rate no less than 90% of the long-term bonus and equity-based compensation awards of the Chief Executive Officer of Fleet; (iv) participation in all employee benefit arrangements available to other similarly situated executive officers of Fleet (only to the extent that the benefits provided thereunder do not duplicate benefits received by Mr. Alvord under certain continued Shawmut insurance, retirement and long-term disability plans); and (v) nonsolicitation and confidentiality covenants by Mr. Alvord. Pursuant to Mr. Alvord's New Employment Agreement, except as described in the following sentence, in the event that Mr. Alvord's employment is terminated by Fleet or Mr. Alvord for any reason other than death, cause (as defined therein) or disability (as defined therein), then Mr. Alvord will be entitled to receive, among other things, an amount equal to the product of (A) the number of years (including fractions thereof) remaining in the term of the New Employment Agreement and (B) the sum of (i) Mr. Alvord's base salary then in effect and (ii) the highest annual and long-term bonuses awarded to and earned by Mr. Alvord during the three fiscal years prior to termination, and will be entitled to coverage or credited service, as applicable, under Fleet's employee benefit plans (or certain continued Shawmut insurance, retirement and long-term disability plans). Pursuant to Mr. Alvord's new severance agreement with Fleet, any benefits payable to Mr. Alvord upon a termination of his employment subsequent to a change in control of Fleet will be paid pursuant to such severance agreement, and no amounts will be payable in such circumstance 76 88 pursuant to Mr. Alvord's New Employment Agreement. In the event that any payments received by Mr. Alvord in connection with the New Employment Agreement are subject to the excise tax imposed under federal tax laws, the New Employment Agreement provides for an additional payment sufficient to restore Mr. Alvord to the same after-tax position he would have had if the excise tax had not been imposed. The benefits payable to Mr. Alvord pursuant to Mr. Alvord's New Employment Agreement in the event of a termination of his employment with Fleet are in lieu of, and replace, the benefits which may have been payable to Mr. Alvord upon consummation of the Merger pursuant to his Existing Severance Agreement had Mr. Alvord not entered into the New Employment Agreement. Mr. Alvord's New Employment Agreement also provides that Fleet will sponsor Mr. Alvord's election and reelection to the Fleet Board during the term of the agreement and until Mr. Alvord's attainment of age 65 and that following Mr. Alvord's 60th birthday and until his 65th birthday, Mr. Alvord will serve as Chairman of the Executive Committee of the Fleet Board or in such other capacity as Fleet and Mr. Alvord shall agree. Mr. Overstrom's New Employment Agreement contains the following terms and conditions: (i) an initial term of two years, subject to extension for an additional one-year period on each successive anniversary of the effective date unless Fleet gives notice of nonrenewal at least 60 days prior to such anniversary; (ii) annual salary and bonus and long-term bonus at a rate equal to the base salary and bonus and long-term bonus of the other vice chairmen of Fleet; (iii) participation in all employee benefit arrangements available to other similarly situated executive officers of Fleet (only to the extent that the benefits provided thereunder do not duplicate benefits received by Mr. Overstrom under certain continued Shawmut plans); and (iv) nonsolicitation and confidentiality covenants by Mr. Overstrom. Mr. Overstrom also will be entitled to receive amounts equal to the excess of the highest base salary and annual bonus earned by any executive of Fleet (other than the Chairman or Chief Executive Officer) during 1995 over the base salary and annual bonus earned by Mr. Overstrom during 1995 with Shawmut. Pursuant to Mr. Overstrom's New Employment Agreement, except as described in the following sentence, in the event that Mr. Overstrom's employment is terminated by Fleet or Mr. Overstrom for any reason other than death, cause (as defined therein) or disability (as defined therein), then Mr. Overstrom will be entitled to receive, among other things, an amount equal to the product of (A) three and (B) the sum of (i) Mr. Overstrom's base salary then in effect (or if greater, immediately prior to the Effective Time) and (ii) the highest annual and long-term bonuses awarded to and earned by Mr. Overstrom during the three fiscal years prior to termination, and will be entitled to coverage or credited service, as applicable, under Fleet's employee benefit plans (or certain continued Shawmut insurance and retirement plans). Pursuant to Mr. Overstrom's new severance agreement with Fleet, any benefits payable to Mr. Overstrom upon a termination of his employment subsequent to a change in control of Fleet will be paid pursuant to such severance agreement, and no amounts will be payable in such circumstance pursuant to Mr. Overstrom's New Employment Agreement. In the event that any payments received by Mr. Overstrom in connection with the New Employment Agreement are subject to the excise tax imposed under federal tax laws, the New Employment Agreement provides for an additional payment sufficient to restore Mr. Overstrom to the same after-tax position he would have had if the excise tax had not been imposed. The benefits payable to Mr. Overstrom pursuant to Mr. Overstrom's New Employment Agreement in the event of a termination of his employment with Fleet are in lieu of, and replace, the benefits that may have been payable to Mr. Overstrom upon consummation of the Merger pursuant to his Existing Severance Agreement had Mr. Overstrom not entered into the New Employment Agreement. The actual salary and other benefits payable to each of Messrs. Alvord and Overstrom pursuant to their respective New Employment Agreements will depend upon the salary and benefits paid by Fleet to Mr. Murray (in the case of Mr. Alvord) and the other vice chairmen of Fleet (in the case of Mr. Overstrom) following the Merger, and accordingly cannot be determined at this time. Information concerning the amounts paid by Fleet to its five most highly compensated executive officers during 1994 is set forth in the section entitled, "AMENDMENT AND RESTATEMENT OF FLEET EXISTING ARTICLES; ELECTION OF FLEET DIRECTORS; RATIFICATION OF INDEPENDENT AUDITORS" which is included in the Joint Proxy Statement-Prospectus to be delivered to Fleet stockholders only and is also set forth in Exhibit G to the Joint Proxy Statement-Prospectus to be delivered to Shawmut stockholders only. 77 89 Other Shawmut Plans. As described below, Shawmut maintains for the benefit of the members of the Shawmut Board and its executive officers certain benefit plans or arrangements containing provisions that will become operative upon a change in control of Shawmut. Under the Shawmut Stock Option and Restricted Stock Award Plan, which authorizes grants of stock options, restricted stock, stock appreciation rights and restricted stock units (including awards under Shawmut's Performance Equity Plan) to employees of Shawmut and its subsidiaries, all outstanding stock options and stock appreciation rights, whether or not vested, will become fully exercisable and all restrictions on outstanding restricted stock and restricted stock unit awards will lapse upon a change in control (as defined therein). The approval of the Merger by the holders of Shawmut Common Stock will constitute a change in control for purposes of such plans. Under the Shawmut 1989 Nonemployee Directors' Restricted Stock Plan, which provides for annual grants of restricted stock to plan participants in lieu of the annual fees otherwise payable to such participants, all restrictions on outstanding awards will lapse upon the consummation of the Merger. Additional information concerning awards granted to Shawmut's directors and executive officers under these plans is incorporated by reference to Shawmut's 1994 Annual Report on Form 10-K which is incorporated herein by reference. See "INFORMATION INCORPORATED BY REFERENCE". Such information is also set forth in the section entitled, "ELECTION OF SHAWMUT DIRECTORS; APPOINTMENT OF SHAWMUT INDEPENDENT ACCOUNTANTS" which is included in the Joint Proxy Statement-Prospectus to be delivered to Shawmut stockholders only. Under Shawmut's Executive Supplemental Retirement Plan, which is a nonqualified defined benefit plan maintained for the purpose of providing supplemental retirement income to approximately 30 key employees of Shawmut (including all of its executive officers), all nonvested benefits (which nonvested benefits equaled $100,000 in the aggregate, all of which is attributable to Shawmut's executive officers) accrued under such plan will become fully vested upon a change in control (as defined therein). The consummation of the Merger will constitute a change in control under such plan. Further, the Merger Agreement permits Shawmut to and Shawmut will amend the Shawmut Split-Dollar Life Insurance Plan, which provides supplemental life insurance coverage and retirement income to approximately 30 key employees of Shawmut, (including all of its executive officers) and the Shawmut Executive Group Life Insurance Plan, which provides supplemental life insurance coverage to key employees of Shawmut (including all of its executive officers), to provide that all nonvested benefits accrued thereunder (which nonvested benefits equaled $1.7 million and $2.7 million in the aggregate, respectively, of which $600,000 and $1.4 million, respectively, are attributable to Shawmut's executive officers) as of the Effective Time will become fully vested as of such time. Shawmut also maintains employee benefit trusts for certain of its employee benefit plans and arrangements. The trust agreement for each such trust requires that any contributions necessary to fund in full all obligations covered thereby be made following a "potential change in control," which term is defined to include the execution of the Merger Agreement by the parties thereto. Accordingly, funding occurred on March 15, 1995. All of the amount placed in such trust on such date represents funding that would have occurred during 1995 whether or not the Merger Agreement had been executed. Further, the trust covering Shawmut's nonqualified supplemental retirement plans and supplemental executive life insurance plan, to the extent such coverage is elected by participants in such plans, provides that, upon the occurrence of a change in control, individual annuities and life insurance contracts shall be purchased and distributed to those participants in such plans whose benefits are funded through such trust. The consummation of the Merger will constitute a change in control for these purposes. INTERESTS OF FLEET DIRECTORS AND EXECUTIVE OFFICERS. The Merger Agreement provides that from and after the Effective Time, the Fleet Board shall be comprised of 20 directors, including Mr. Murray (who will serve as Chief Executive Officer and President of Fleet), 11 additional persons, who are not executive officers of Fleet or Shawmut, to be selected prior to the Effective Time by Mr. Murray and the Fleet Board and 7 additional persons, who are not executive officers of Fleet or Shawmut, to be selected prior to the Effective Time by Mr. Alvord and the Shawmut Board. In addition, after the Effective Time, Messrs. Higgins, Sarles and Zucchini will serve as Vice Chairmen of Fleet 78 90 and Mr. McQuade will serve as an Executive Vice President and Chief Financial Officer of Fleet. See "BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS OF FLEET FOLLOWING THE MERGER." INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS Shortly following the announcement on February 21, 1995, that Fleet and Shawmut had executed the Merger Agreement, certain alleged stockholders of Shawmut filed seven purported class action lawsuits in the Court of Chancery of the State of Delaware in and for New Castle County (the "Court") against Shawmut, the members of the Shawmut Board and Fleet. The complaints all make similar allegations concerning the proposed Merger. The plaintiffs allege, among other things, that the defendants have engaged in a plan and scheme to enrich themselves at the expense of Shawmut's public stockholders; that the defendants have failed to fully disclose the true value of Shawmut's assets and earnings power and the future financial benefits which the defendants expect to derive from the Merger; that the defendants have wrongfully failed and refused to seek a purchase of Shawmut at the highest possible price and have sought to chill potential offers for Shawmut; that the defendant members of the Shawmut Board have breached the fiduciary duties owed by them to the plaintiffs and the members of the purported class; and that defendant Fleet has induced and aided and abetted breaches of fiduciary duty by the members of the Shawmut Board. The plaintiffs seek, among other things, a declaration that the proposed transaction is unfair, unjust and inequitable; an injunction preliminarily enjoining the defendants from taking any steps necessary to accomplish or implement the proposed Merger; and an order requiring the defendants to compensate plaintiffs and the members of the class for all losses and damages suffered and to be suffered by them as a result of the acts and transactions complained of in the complaints. The plaintiffs also seek the award of the costs and disbursements of the action, including reasonable attorneys', accountants' and experts' fees. The defendants believe the allegations contained in the complaints are entirely without merit and intend to contest them vigorously. In addition, an alleged former stockholder of Shawmut who claims to have sold shares of Shawmut Common Stock between December 11, 1994 and February 21, 1995 filed a purported class action lawsuit on behalf of himself and all other persons who sold Shawmut Common Stock between such dates in the United States District Court for the Eastern District of New York against Shawmut. The plaintiff alleges, among other things, that, prior to the execution of the Merger Agreement, Shawmut violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder by disseminating false information and/or failing to disclose material facts necessary in order not to mislead the investing public and by artificially depressing the market price of the Shawmut Common Stock as a result of these alleged acts and omissions. In particular, the plaintiff alleges that on December 11, 1994 a newspaper article reported that Mr. Alvord had "stated that a merger for Shawmut was not in the cards and that he would be charting a course for Shawmut as an independent institution." The plaintiff contends that this newspaper article constituted a representation by Shawmut, that such alleged representation was materially false and misleading when made and/or became materially misleading, and that Shawmut had a duty to correct this alleged representation as soon as it believed that the alleged representation was no longer accurate. The plaintiff seeks an order requiring Shawmut to compensate plaintiff and the members of the class for all losses and damages suffered by them as a result of the acts and omissions complained of in the complaint. The plaintiff also seeks an award of the costs and disbursements of the action, including reasonable attorneys', accountants' and experts' fees. Shawmut denies that the newspaper article referred to by the plaintiff contains any such statement by Mr. Alvord and further believes the allegations contained in the complaint are entirely without merit and intends to contest them vigorously. John A. Reeves, a director of Fleet, is an executive officer and stockholder of Mid-Continent Minerals Corporation ("MCM"). One of MCM's wholly-owned subsidiaries, Mid-Continent Resources, Inc., filed for reorganization under Chapter 11 of the Federal Bankruptcy Code in 1992. A plan under Chapter 11 was approved in 1993. John S. Scott, a director of Fleet, is a director and former Chairman of Cambridge Biotech Corporation ("Cambridge Biotech"), which filed for reorganization under Chapter 11 of the Federal Bankruptcy Code in July, 1994. 79 91 CERTAIN REGULATORY CONSIDERATIONS GENERAL As bank holding companies, Fleet and Shawmut are subject to regulation by the Federal Reserve Board. As a result of Shawmut's acquisition of the Guardian Bank, FSB (now known as Shawmut-FSB), a federal savings bank located in Boca Raton, Florida, Shawmut is subject to supervision and regulation by the OTS as a savings and loan holding company under HOLA. Fleet Bank of Maine, Fleet-NH and Fleet-NY are state-chartered banks that are members of the Federal Reserve System; as such, they are subject to regulation by the Federal Reserve Board and bank regulators in their respective states. Fleet-RI, Fleet-CT, Fleet-MA, Shawmut-CT and Shawmut-MA are national banks subject to regulation and supervision by the OCC. Shawmut-NH, a state non-member bank, is supervised by the State of New Hampshire Banking Department and the FDIC. Shawmut-FSB is supervised by the OTS. Each of Fleet's and Shawmut's subsidiary banks' deposits are insured by the FDIC and are therefore subject to FDIC supervision and regulation. Fleet and Shawmut are also subject to the reporting and other requirements of the Exchange Act. Following the consummation of the Northeast Merger, Shawmut intends to transfer the assets and liabilities of Northeast to the national bank subsidiaries of Shawmut as follows: (i) Northeast's banking subsidiary, Northeast Savings F.A. ("Northeast Savings") will relocate its home office from Hartford, Connecticut to Saratoga Springs, New York, (ii) Shawmut-CT will acquire each Connecticut branch of Northeast Savings and Shawmut-MA will acquire each Massachusetts branch of Northeast Savings, (iii) Northeast Savings will convert into Shawmut Savings and Loan Association, a New York stock-form savings and loan association ("Shawmut-SLA"), (iv) Shawmut Bank New York, National Association ("Shawmut-NY") will be chartered and (v) Shawmut-SLA will be merged with and into Shawmut-NY. The Northeast Merger and the transactions contemplated thereby are subject to the prior receipt of certain regulatory approvals and the approval of the Northeast stockholders, and there can be no assurance that such approvals will be obtained or that the above transactions will be consummated. The credit quality of the assets held by certain of Fleet's and Shawmut's subsidiaries is subject to periodic review by the state and federal bank regulatory agencies noted above. While Fleet and Shawmut believe their present reserves for credit losses are adequate in light of prevailing economic conditions, there can be no assurance that Fleet's and Shawmut's subsidiaries will not be required to make certain adjustments to their reserves for credit losses and charge-off policies in response to changing economic conditions or regulatory examinations. Neither Fleet, Shawmut nor any of their subsidiaries is subject to formal written agreements with state and federal regulators. Fleet, Shawmut and their respective subsidiaries continue to evaluate and refine oversight and reporting systems and procedures to enhance the ability of such companies to respond to changes in the economic environment. PAYMENT OF DIVIDENDS Fleet is a legal entity separate and distinct from its subsidiaries. The ability of holders of debt and equity securities of Fleet, including Shawmut stockholders who will become holders of Fleet Common Stock, Fleet New Preferred Stock, Fleet New Depositary Shares and Fleet Warrants upon consummation of the Merger, to benefit from the distribution of assets of a subsidiary upon the liquidation or reorganization of such subsidiary is subordinate to prior claims of creditors of the subsidiary (including depositors, in the case of banking subsidiaries) except to the extent that a claim of Fleet as a creditor may be recognized. There are various statutory and regulatory limitations on the extent to which banking subsidiaries of Fleet can finance or otherwise transfer funds to Fleet or its nonbanking subsidiaries, whether in the form of loans, other extensions of credit, investments or asset purchases. Such transfers by any subsidiary bank to Fleet or any nonbanking subsidiary of Fleet are limited in amount to 10% of the bank's capital and surplus and, with respect to Fleet and all its nonbanking subsidiaries, to an aggregate of 20% of each such bank's capital and surplus. Furthermore, loans and extensions of credit by Fleet's banking subsidiaries to Fleet's nonbanking 80 92 subsidiaries are required to be secured in specified amounts and are required to be on terms and conditions consistent with safe and sound banking practices. Under applicable banking statutes, at December 31, 1994, Fleet's banking subsidiaries could have declared additional dividends of approximately $620 million, of which $328 million could have been declared by Fleet-MA and Fleet-CT. Federal and state regulatory agencies also have the authority to limit further Fleet's banking subsidiaries' payment of dividends based on other factors, such as the maintenance of adequate capital for such subsidiary bank. Further, holders of Fleet's Dual Convertible Preferred Stock are entitled to dividends equal to one-half of the total dividends declared (after the first $15 million in dividends) to Fleet, if any, on the common stock of Fleet Banking Group, Inc., a wholly owned subsidiary of Fleet and the holder of all of the outstanding capital stock of Fleet-MA and Fleet-CT ("Fleet Banking Group"). As of the date of this Joint Proxy Statement-Prospectus, Fleet Banking Group has not paid any dividends on its common stock to Fleet. Under the policies of the Federal Reserve Board, Fleet is expected to act as a source of financial strength to each of its subsidiary banks and to commit resources to support such subsidiary bank in circumstances where it might not do so absent such policy. In addition, any subordinated loans by Fleet to any of the subsidiary banks would also be subordinate in right of payment to deposits and obligations to general creditors of such subsidiary bank. Further, the Crime Control Act of 1990 amended the federal bankruptcy laws to provide that in the event of the bankruptcy of Fleet, any commitment by Fleet to its regulators to maintain the capital of a banking subsidiary will be assumed by the bankruptcy trustee and entitled to a priority of payment. LEGISLATION AND RELATED MATTERS General. In addition to extensive existing government regulation, Federal and state statutes and regulations are subject to changes that may have significant impact on the way in which banks may conduct business. The likelihood and potential effects of any such changes cannot be predicted. Legislation enacted in recent years has substantially increased the level of competition among commercial banks, thrift institutions and non-banking institutions, including insurance companies, brokerage firms, mutual funds, investment banks, finance companies and major retailers. In addition, the existence of banking legislation such as the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and the FDICIA have affected the banking industry by, among other things, broadening the regulatory powers of the federal banking agencies in a number of areas. The following summary is qualified in its entirety by the text of the relevant statutes and regulations. FIRREA. As a result of the enactment of FIRREA on August 9, 1989, any or all of Fleet's subsidiary depository institutions can be held liable for any loss incurred by, or reasonably expected to be incurred by, the FDIC after August 9, 1989, in connection with (a) the default of any other of Fleet's subsidiary depository institutions or (b) any assistance provided by the FDIC to any other of Fleet's subsidiary depository institutions in danger of default. "Default" is defined generally as the appointment of a conservator or receiver and "in danger of default" is defined generally as the existence of certain conditions indicating that a "default" is likely to occur without regulatory assistance. FDICIA. The FDICIA, which was enacted on December 19, 1991, provides for, among other things, increased funding for the BIF of the FDIC and expanded regulation of depository institutions and their affiliates, including parent holding companies. A summary of certain material provisions of FDICIA and its regulations is provided below. Prompt Corrective Action. The FDICIA provides the federal banking agencies with broad powers to take prompt corrective action to resolve problems of insured depository institutions, depending upon a particular institution's level of capital. The FDICIA establishes five tiers of capital measurement for regulatory purposes ranging from "well-capitalized" to "critically undercapitalized." A depository institution may be deemed to be in a capitalization category that is lower than is indicated by its actual capital position under certain circumstances. At December 31, 1994, each of Fleet's and Shawmut's subsidiary depository institutions was classified as "well-capitalized" under the applicable prompt corrective action regulations. Brokered Deposits. Under the FDICIA, a depository institution that is well-capitalized may accept brokered deposits. A depository institution that is adequately capitalized may accept brokered deposits only if 81 93 it obtains a waiver from the FDIC, and may not offer interest rates on deposits "significantly higher" than the prevailing rate in its market. An undercapitalized depository institution may not accept brokered deposits. In Fleet's and Shawmut's opinion, these limitations do not have a material effect on Fleet and Shawmut. Safety and Soundness Standards. The FDICIA, as amended, directs each federal banking agency to prescribe safety and soundness standards for depository institutions relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, asset-quality, earnings and stock valuation. Final interagency regulations to implement these new safety and soundness standards are being adopted by the federal banking agencies and are expected to be released imminently. The ultimate cumulative effect of these standards cannot currently be forecast. The FDICIA also contains a variety of other provisions that may affect Fleet's and Shawmut's respective operations, including new reporting requirements, regulatory standards for real estate lending, "truth in savings" provisions, and the requirement that a depository institution give 90 days' prior notice to customers and regulatory authorities before closing any branch. Capital Guidelines. Under the Federal Reserve Board's capital guidelines, the minimum ratio of total capital to risk-adjusted assets (including certain off-balance sheet items, such as standby letters of credit) is 8%. At least half of the total capital is to be comprised of common equity, retained earnings, minority interests in the equity accounts of consolidated subsidiaries and a limited amount of noncumulative perpetual preferred stock, less deductible intangibles ("Tier 1 capital"). The remainder may consist of perpetual debt, mandatory convertible debt securities, a limited amount of subordinated debt, other preferred stock and a limited amount of loan loss reserves ("Tier 2 capital"). In addition, the Federal Reserve Board requires a leverage ratio (Tier 1 capital to average quarterly assets, net of goodwill) of 3% for bank holding companies that meet certain specified criteria, including that they have the highest regulatory rating. The rule indicates that the minimum leverage ratio should be 1% to 2% higher for holding companies undertaking major expansion programs or that do not have the highest regulatory rating. Fleet's and Shawmut's national banking subsidiaries are subject to similar capital requirements adopted by the OCC. The federal banking agencies continue to indicate their desire to raise capital requirements applicable to banking organizations, and recently proposed amendments to their risk-based capital regulations to provide for the consideration of interest rate risk in the determination of a bank's minimum capital requirements. The proposed amendments are intended to require that banks effectively measure and monitor their interest rate risk and that they maintain capital adequate for that risk. Under the proposed amendments, banks with interest rate risk in excess of a defined supervisory threshold would be required to maintain additional capital beyond that generally required. In addition, effective January 17, 1995, the federal banking agencies adopted amendments to their risk-based capital standards to provide for the concentration of credit risk and certain risks arising from nontraditional activities, as well as a bank's ability to manage these risks, as important factors in assessing a bank's overall capital adequacy. As of December 31, 1994, Fleet's and Shawmut's capital ratios on a historical basis exceeded all minimum regulatory capital requirements. Under federal banking laws, failure to meet the minimum regulatory capital requirements could subject a banking institution to a variety of enforcement remedies available to federal regulatory authorities, including the termination of deposit insurance by the FDIC and seizure of the institution. Interstate Banking Legislation. On September 29, 1994, President Clinton signed the Interstate Act into law. The Interstate Act facilitates the interstate expansion and consolidation of banking organizations by permitting (i) beginning one year after enactment of the legislation, bank holding companies that are adequately capitalized and managed to acquire banks located in states outside their home states regardless of whether such acquisitions are authorized under the law of the host state, (ii) the interstate merger of banks after June 1, 1997, subject to the right of individual states to "opt in" or "opt out" of this authority prior to such date, (iii) banks to establish new branches on an interstate basis provided that such action is specifically authorized by the law of the host state, (iv) foreign banks to establish, with approval of the appropriate regulators in the United States, branches outside their home states to the same extent that national or state 82 94 banks located in such state would be authorized to do so and (v) beginning September 29, 1995, banks to receive deposits, renew time deposits, close loans, service loans and receive payments on loans and other obligations as agent for any bank or thrift affiliate, whether the affiliate is located in the same or different state. Fleet does not currently have any plans to consolidate its banking subsidiaries across state lines or to take any other actions as a result of this new statute. However, Fleet is considering the potential benefits in cost savings and convenience to its customers that might be achieved through combinations of two or more of its banking subsidiaries. 83 95 UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS The following Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 1994, and the Unaudited Pro Forma Condensed Combined Statement of Income for the year ended December 31, 1994, give effect to the Merger, accounted for as a pooling of interests, and the Northeast Merger, the NBB Merger, the Plaza Merger, the Barclays Acquisition and FMG Repurchase, each of which were or will be accounted for by the purchase method of accounting, in each case as if such transactions had occurred on January 1, 1994. The Unaudited Pro Forma Condensed Combined Statements of Income for the years ended December 31, 1993 and December 31, 1992, give effect to the Merger as if the Merger had occurred on January 1 in each such year and do not take into account the effect of the Northeast Merger, the NBB Merger, the Plaza Merger, the Barclays Acquisition and the FMG Repurchase since such transactions were or will be accounted for under the purchase method of accounting. The pro forma information is based on the historical consolidated financial statements of Fleet, Shawmut, Northeast, NBB, Plaza, Barclays and FMG and their subsidiaries under the assumptions and adjustments set forth in the accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Statements. The pro forma condensed combined financial statements do not give effect to the anticipated cost savings in connection with the Merger, the Northeast Merger, the NBB Merger and the Plaza Merger or the effects of any required regulatory divestitures. See "BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS OF FLEET FOLLOWING THE MERGER -- Operations". The information shown below should be read in conjunction with the consolidated historical financial statements of Fleet and Shawmut, including the respective notes thereto, which are incorporated by reference in this Joint Proxy Statement-Prospectus and the unaudited pro forma condensed combined per share financial information, including the notes thereto, which appear elsewhere in this Joint Proxy Statement-Prospectus. The pro forma data is presented for comparative purposes only and is not necessarily indicative of the combined financial position or results of operations in the future or of the combined financial position or results of operations which would have been realized had the acquisitions been consummated during the periods or as of the dates for which the pro forma data is presented. Pro forma per share amounts for the combined Fleet and Shawmut entity are based on the Common Exchange Ratio of 0.8922 shares of Fleet Common Stock for each share of Shawmut Common Stock. In addition, the pro forma data assumes the issuance of approximately 6,165,912 shares of Fleet Common Stock in the NBB Merger. The pro forma data also assumes an exchange ratio of 0.415 shares of Shawmut Common Stock for each outstanding share and stock option of Northeast, calculated as set forth in the Shawmut/Northeast merger agreement, assuming for illustrative purposes only, that the average closing price of Shawmut Common Stock used to determine such exchange ratio is $ , the closing price of the Shawmut Common Stock on May 3, 1995. See "INFORMATION INCORPORATED BY REFERENCE", "SUMMARY OF JOINT PROXY STATEMENT-PROSPECTUS -- Comparative Stock Prices and Dividends; Pro Forma Equivalent Market Value Per Share", "SELECTED HISTORICAL AND PRO FORMA PER SHARE DATA" and "SELECTED CONSOLIDATED FINANCIAL DATA". 84 96 FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET DECEMBER 31, 1994(a)
FLEET & SHAWMUT FLEET SHAWMUT PRO FORMA PRO FORMA PRO FORMA PRO FORMA ADJUSTMENTS COMBINED ----------- --------- ----------- ----------- (DOLLARS IN THOUSANDS) ASSETS: Cash and cash equivalents......................................... $ 5,109,009 $ 2,377,273 $ -- $ 7,486,282 Federal funds sold and securities purchased under agreements to resell............................................ 648,681 331,425 -- 980,106 Securities available for sale, at market.......................... 10,359,441 2,099,363 (95,169)(d) 12,363,635 Securities held to maturity....................................... 891,076 9,877,281(b) -- 10,768,357(b) Loans and leases.................................................. 28,816,314 21,871,784 -- 50,688,098 Reserve for credit losses......................................... (980,509) (595,605) -- (1,576,114) Mortgages held for resale......................................... 658,077 77,017 -- 735,094 Premises and equipment............................................ 852,171 353,851 -- 1,206,022 Purchased mortgage servicing rights............................... 1,066,670 47,851 -- 1,114,521 Excess cost over net assets of subsidiaries acquired.............. 464,681 531,961 -- 996,642 Other intangibles................................................. 209,186 17,473 -- 226,659 Other assets...................................................... 2,723,673 1,417,641 147,405(d)(e) 4,288,719 ----------- ----------- ---------- ---------- Total assets...................................................... $50,818,470 $38,407,315 $ 52,236 $89,278,021 =========== =========== ========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY: Deposits: Demand.......................................................... $ 6,974,389 $ 5,189,589 $ -- $12,163,978 Regular savings, NOW, money market.............................. 16,191,444 9,434,493 -- 25,625,937 Time............................................................ 14,009,389 8,513,589 -- 22,522,978 ----------- ----------- ---------- ----------- Total deposits.................................................. 37,175,222 23,137,671 -- 60,312,893 ----------- ----------- ---------- ----------- Federal funds purchased and securities sold under agreements to repurchase........................................ 2,846,197 8,190,001 -- 11,036,198 Other short-term borrowings....................................... 2,487,291 1,715,697 -- 4,202,988 Accrued expenses and other liabilities............................ 1,210,814 454,587 398,721(d)(e) 2,064,122 Long-term debt.................................................... 3,503,866 2,421,788 -- 5,925,654 ----------- ----------- ---------- ----------- Total liabilities................................................. 47,223,390 35,919,744 398,721 83,541,855 ----------- ----------- ---------- ----------- Stockholders' equity: Preferred stock................................................. 378,815 303,185 --(c) 682,000 Common stock.................................................... 141,574 1,274 107,156(c) 250,004 Common surplus.................................................. 1,547,228 1,454,157 (230,615)(c) 2,770,770 Retained earnings............................................... 1,936,165 783,223 (240,000)(e) 2,479,388 Net unrealized gain/(loss) on securities available for sale...................................................... (374,200) (54,268)(b) 16,974(d) (411,494)(b) Treasury stock, at cost......................................... (34,502) -- -- (34,502) ----------- ----------- ---------- ----------- Total stockholders' equity........................................ 3,595,080 2,487,571 (346,485) 5,736,166 ----------- ----------- ---------- ----------- Total liabilities and stockholders' equity........................ $50,818,470 $38,407,315 $ 52,236 $89,278,021 =========== =========== ========== ===========
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS". 85 97 FLEET FINANCIAL GROUP, INC. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET DECEMBER 31, 1994, CONTINUED(a)
PRO FORMA FLEET FLEET NBB PLAZA ADJUSTMENTS PRO FORMA ----------- ---------- -------- ----------- ----------- (DOLLARS IN THOUSANDS) ASSETS: Cash and cash equivalents.............................. $ 5,208,938 $ 79,698 $ 31,188 $ (210,815 )(f) $ 5,109,009 Federal funds sold and securities purchased under agreements to resell........................... 648,681 -- -- -- 648,681 Securities available for sale, at market............... 10,352,656 663,461 164,215 (820,891 )(g) 10,359,441 Securities held to maturity............................ 891,076 322,384 -- (322,384 )(g) 891,076 Loans and leases....................................... 27,540,644 1,325,990 5,832 (56,152 )(h) 28,816,314 Reserve for credit losses.............................. (953,449) (27,060) -- -- (980,509) Mortgages held for resale.............................. 488,898 -- 405,253 (236,074 )(g)(h) 658,077 Premises and equipment................................. 823,822 22,104 15,087 (8,842 )(h) 852,171 Purchased mortgage servicing rights.................... 826,559 -- 53,701 186,410 (h)(m) 1,066,670 Excess cost over net assets of subsidiaries acquired... 180,257 9,222 -- 275,202 (i)(m) 464,681 Other intangibles...................................... 159,186 3,614 -- 46,386 (h) 209,186 Other assets........................................... 2,589,822 68,767 46,961 18,123 (h) 2,723,673 ----------- ---------- -------- ----------- ----------- Total assets........................................... $48,757,090 $2,468,180 $722,237 $(1,129,037) $50,818,470 ========== ========== ======== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY: Deposits: Demand............................................... $ 6,889,763 $ 84,626 $ 4,472 $ (4,472 )(g) $ 6,974,389 Regular savings, NOW, money market................... 15,220,444 971,000 2,341 (2,341 )(g) 16,191,444 Time................................................. 12,695,896 1,134,948 189,132 (10,587 )(g)(h) 14,009,389 ----------- ---------- -------- ----------- ----------- Total deposits....................................... 34,806,103 2,190,574 195,945 (17,400 ) 37,175,222 ----------- ---------- -------- ----------- ----------- Federal funds purchased and securities sold under agreements to repurchase....................... 2,846,197 -- -- -- 2,846,197 Other short-term borrowings............................ 3,105,188 -- 427,797 (1,045,694 )(g)(m) 2,487,291 Accrued expenses and other liabilities 1,162,256 23,032 18,846 6,680 (h)(m) 1,210,814 Long-term debt......................................... 3,457,266 -- 46,600 -- 3,503,866 ----------- ---------- -------- ----------- ----------- Total liabilities...................................... 45,377,010 2,213,606 689,188 (1,056,414 ) 47,223,390 ----------- ---------- -------- ----------- ----------- Stockholders' equity: Preferred stock...................................... 378,815 -- -- -- (l) 378,815 Common stock......................................... 141,574 963 116 (1,079 )(l) 141,574 Common surplus....................................... 1,547,228 136,557 25,767 (162,324 )(l) 1,547,228 Retained earnings.................................... 1,936,165 140,337 7,166 (147,503 )(l) 1,936,165 Net unrealized gain/(loss) on securities available for sale........................................... (374,200) (13,342) -- 13,342 (l) (374,200) Treasury stock, at cost.............................. (249,502) (9,941) -- 224,941 (l) (34,502) ----------- ---------- -------- ----------- ----------- Total stockholders' equity............................. 3,380,080 254,574 33,049 (72,623 ) 3,595,080 ----------- ---------- -------- ----------- ----------- Total liabilities and stockholders' equity............. $48,757,090 $2,468,180 $722,237 $(1,129,037) $50,818,470 =========== ========== ======== =========== ============
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS". 86 98 SHAWMUT NATIONAL CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET DECEMBER 31, 1994, CONTINUED (a)
PRO FORMA SHAWMUT SHAWMUT NORTHEAST BARCLAYS ADJUSTMENTS PRO FORMA ----------- ---------- ---------- ----------- ----------- (DOLLARS IN THOUSANDS) ASSETS: Cash and cash equivalents....................... $ 2,426,118 $ 34,145 $ 4,614 $ (87,604)(f) $ 2,377,273 Federal funds sold and securities purchased under agreements to resell.......................... 308,700 22,725 -- -- 331,425 Securities available for sale, at market........ 1,991,853 107,510 -- -- 2,099,363 Securities held to maturity..................... 8,000,382(b) 1,960,699(b) -- (83,800)(g) 9,877,281(b) Loans and leases................................ 18,487,143 959,648 2,388,293 36,700(h) 21,871,784 Reserve for credit losses....................... (542,116) (11,746) (41,743) -- (595,605) Mortgages held for resale....................... 72,205 4,812 -- -- 77,017 Premises and equipment.......................... 329,780 27,401 2,670 (6,000)(h) 353,851 Purchased mortgage servicing rights............. 13,851 1,686 -- 32,314(h) 47,851 Excess cost over net assets of subsidiaries acquired...................................... 137,143 -- -- 394,818(i) 531,961 Other intangibles............................... 17,345 128 -- -- 17,473 Other assets.................................... 1,156,207 238,564 3,915 18,955(h) 1,417,641 ----------- ---------- ---------- ----------- ----------- Total assets.................................... $32,398,611 $3,345,572 $2,357,749 $ 305,383 $38,407,315 =========== ========== ========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY: Deposits: Demand........................................ $ 5,161,182 $ 28,407 -- $ -- $ 5,189,589 Regular savings, NOW, money market............ 8,649,988 784,505 -- -- 9,434,493 Time.......................................... 6,935,083 1,580,172 -- (1,666)(h) 8,513,589 ----------- ---------- ---------- ---------- ----------- Total deposits.................................. 20,746,253 2,393,084 -- (1,666) 23,137,671 ----------- ---------- ---------- ---------- ----------- Federal funds purchased and securities sold under agreements to repurchase................ 6,076,808 -- -- 2,113,193(j) 8,190,001 Other short-term borrowings..................... 1,009,771 707,772 -- (1,846)(h) 1,715,697 Accrued expenses and other liabilities.......... 346,818 63,573 13,556 30,640(h) 454,587 Long-term debt.................................. 2,021,788 42,243 -- 357,757(j)(k) 2,421,788 ----------- ---------- ---------- ---------- ----------- Total liabilities............................... 30,201,438 3,206,672 13,556 2,498,078 35,919,744 ----------- ---------- ---------- ---------- ----------- Stockholders' equity: Preferred stock............................... 178,185 4 -- 124,996(j)(l) 303,185 Common stock.................................. 1,208 144 -- (78)(l) 1,274 Common surplus................................ 1,288,825 191,756 -- (26,424)(l) 1,454,157 Retained earnings............................. 783,223 (54,892) -- 54,892(l) 783,223 Net unrealized gain/(loss) on securities available for sale.......................... (54,268) 1,888 -- (1,888)(l) (54,268)(b) Treasury stock, at cost....................... -- -- -- -- -- ----------- ---------- ---------- ---------- ----------- Total stockholders' equity...................... 2,197,173 138,900 -- 151,498 2,487,571 ----------- ---------- ---------- ---------- ----------- Total liabilities and stockholders' equity...... $32,398,611 $3,345,572 $ 13,556 $2,649,576 $38,407,315 =========== ========== ========== ========== ===========
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS." 87 99 FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1994(A)
FLEET & SHAWMUT FLEET SHAWMUT PRO FORMA PRO FORMA PRO FORMA PRO FORMA ADJUSTMENTS COMBINED ---------- ---------- ----------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Interest and fees on loans and leases............................ $2,513,235 $1,576,256 $ -- $4,089,491 Interest on securities........................................... 907,065 733,853 (2,346)(d) 1,638,572 ---------- ---------- ----------- ---------- Total interest income........................................ 3,420,300 2,310,109 (2,346) 5,728,063 Interest expense: Deposits....................................................... 847,475 509,065 -- 1,356,540 Short-term borrowings.......................................... 263,997 476,815 -- 740,812 Long-term debt................................................. 255,170 109,916 -- 365,086 ---------- ---------- ----------- ---------- Total interest expense....................................... 1,366,642 1,095,796 -- 2,462,438 ---------- ---------- ----------- ---------- Net interest income.............................................. 2,053,658 1,214,313 (2,346) 3,265,625 Provision for credit losses...................................... 65,076 14,383 -- 79,459 ---------- ---------- ----------- ---------- Net interest income after provision for credit losses............ 1,988,582 1,199,930 (2,346) 3,186,166 ---------- ---------- ----------- ---------- Mortgage banking................................................. 390,311 47,583 -- 437,894 Investment services revenue...................................... 174,764 117,501 -- 292,265 Service charges, fees and commissions............................ 326,807 201,842 -- 528,649 Securities available for sale gains (losses)..................... (2,779) 7,283 -- 4,504 Other noninterest income......................................... 319,045 74,452 -- 393,497 ---------- ---------- ----------- ---------- Total noninterest income..................................... 1,208,148 448,661 -- 1,656,809 ---------- ---------- ----------- ---------- Employee compensation and benefits............................... 1,005,961 537,221 -- 1,543,182 Occupancy and equipment.......................................... 324,721 177,020 -- 501,741 Purchased mortgage servicing rights amortization................. 119,574 10,471 -- 130,045 FDIC assessment.................................................. 74,962 52,470 -- 127,432 Marketing........................................................ 66,220 19,902 -- 86,122 Core deposit and goodwill amortization........................... 82,928 28,525 -- 111,453 OREO expense..................................................... 42,665 24,905 -- 67,570 Restructuring charges............................................ 44,000 39,800 -- 83,800 Merger-related charges........................................... -- 100,900 -- 100,900 Other noninterest expense........................................ 490,332 232,003 -- 722,335 ---------- ---------- ----------- ---------- Total noninterest expense.................................... 2,251,363 1,223,217 -- 3,474,580 ---------- ---------- ----------- ---------- Income before taxes.............................................. 945,367 425,374 (2,346) 1,368,395 Applicable income taxes.......................................... 373,210 155,637 (938) 527,909 ---------- ---------- ---------- ---------- Net income before minority interest.............................. 572,157 269,737 (1,408) 840,486 Minority interest................................................ -- -- -- -- ---------- ---------- ----------- ---------- Net income....................................................... $ 572,157 $ 269,737 $ (1,408) $ 840,486 ========= ========= ========= ========= Net income applicable to common shares........................... $ 557,035 $ 242,615 $ 798,242(o) Weighted average common shares outstanding: Primary...................................................... 165,648,933 125,549,233 272,478,583(o) Fully diluted ............................................... 165,648,933 125,549,233 272,478,583(o) Income from continuing operations per common share: Primary...................................................... $3.36 $1.93 $2.93 Fully diluted................................................ $3.36 $1.93 $2.93
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS". 88 100 FLEET FINANCIAL GROUP, INC. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1994, CONTINUED(A)
PRO FORMA FLEET FLEET NBB PLAZA ADJUSTMENTS PRO FORMA ---------- -------- -------- ----------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Interest and fees on loans and leases...................... $2,366,923 $108,081 $ 42,838 $ (4,607)(g)(h) $2,513,235 Interest on securities..................................... 905,350 59,507 6,119 (63,911)(g) 907,065 ---------- -------- -------- ----------- ---------- Total interest income.................................. 3,272,273 167,588 48,957 (68,518) 3,420,300 Interest expense: Deposits............................................... 764,186 71,137 14,304 (2,152)(g)(h) 847,475 Short-term borrowings.................................. 294,186 -- 22,486 (52,675)(g)(m) 263,997 Long-term debt......................................... 232,211 -- 1,586 21,373(f) 255,170 ---------- -------- -------- ----------- ---------- Total interest expense................................. 1,290,583 71,137 38,376 (33,454) 1,366,642 ---------- -------- -------- ----------- ---------- Net interest income........................................ 1,981,690 96,451 10,581 (35,064) 2,053,658 Provision for credit losses................................ 62,130 500 2,446 -- 65,076 ---------- -------- -------- ----------- ---------- Net interest income after provision for credit losses...... 1,919,560 95,951 8,135 (35,064) 1,988,582 ---------- -------- -------- ----------- ---------- Mortgage banking........................................... 362,587 -- 27,724 -- 390,311 Investment services revenue................................ 174,764 -- -- -- 174,764 Service charges, fees and commissions...................... 321,170 5,637 -- -- 326,807 Securities available for sale gains (losses)............... (620) 68 (2,227) -- (2,779) Other noninterest income................................... 315,240 1,191 2,614 -- 319,045 ---------- -------- -------- ----------- ---------- Total noninterest income............................... 1,173,141 6,896 28,111 -- 1,208,148 ---------- -------- -------- ----------- ---------- Employee compensation and benefits......................... 949,251 21,823 34,887 -- 1,005,961 Occupancy and equipment.................................... 300,646 4,352 20,891 (1,168)(h) 324,721 Purchased mortgage servicing rights amortization........... 85,349 -- 7,361 26,864(h)(m) 119,574 FDIC assessment............................................ 69,965 4,997 -- -- 74,962 Marketing.................................................. 64,520 1,113 587 -- 66,220 Core deposit and goodwill amortization..................... 57,309 2,615 -- 23,004(h)(i)(m) 82,928 OREO expense............................................... 39,471 3,194 -- -- 42,665 Restructuring charges...................................... 44,000 -- -- -- 44,000 Merger-related charges..................................... -- -- -- -- -- Other noninterest expense.................................. 459,334 13,898 17,100 -- 490,332 ---------- -------- -------- ----------- ---------- Total noninterest expense.............................. 2,069,845 51,992 80,826 48,700 2,251,363 ---------- -------- -------- ----------- ---------- Income before taxes........................................ 1,022,856 50,855 (44,580) (83,764) 945,367 Applicable income taxes.................................... 397,708 20,445 (16,199) (28,744) 373,210 ---------- -------- -------- ----------- ---------- Net income before minority interest........................ 625,148 30,410 (28,381) (55,020) 572,157 Minority interest.......................................... (12,217) -- -- 12,217(m) -- ---------- -------- -------- ----------- ---------- Net income................................................. $ 612,931 $ 30,410 $(28,381) $ (42,803) $ 572,157 ========== ======== ======== =========== ========== Net income applicable to common shares..................... $ 597,809 $ 557,035(n) Weighted average common shares outstanding: Primary................................................ 159,483,021 165,648,933(n) Fully diluted.......................................... 159,483,021 165,648,933(n) Income from continuing operations per common share: Primary................................................ $3.75 $3.36 Fully diluted.......................................... $3.75 $3.36
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS". 89 101 SHAWMUT NATIONAL CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1994, CONTINUED(A)
PRO FORMA SHAWMUT SHAWMUT NORTHEAST BARCLAYS ADJUSTMENTS PRO FORMA ---------- --------- -------- ----------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Interest and fees on loans and leases.................. $1,326,542 $ 84,212 $180,782 $ (15,280)(h) $1,576,256 Interest on securities................................. 611,387 108,499 -- 13,967(g) 733,853 ---------- -------- -------- --------- ---------- Total interest income.............................. 1,937,929 192,711 180,782 (1,313) 2,310,109 Interest expense: Deposits........................................... 406,346 101,886 -- 833(h) 509,065 Short-term borrowings.............................. 368,347 28,215 79,638 615(h) 476,815 Long-term debt..................................... 95,651 3,858 -- 10,407(j)(k) 109,916 ---------- -------- -------- --------- ---------- Total interest expense............................. 870,344 133,959 79,638 11,855 1,095,796 ---------- -------- -------- --------- ---------- Net interest income.................................... 1,067,585 58,752 101,144 (13,168) 1,214,313 Provision for credit losses............................ 3,000 4,900 6,483 -- 14,383 ---------- -------- -------- --------- ---------- Net interest income after provision for credit losses............................................... 1,064,585 53,852 94,661 (13,168) 1,199,930 ---------- -------- -------- --------- ---------- Mortgage banking....................................... 28,852 18,731 -- -- 47,583 Investment services revenue............................ 117,501 -- -- -- 117,501 Service charges, fees and commissions.................. 195,774 6,068 -- -- 201,842 Securities available for sale gains (losses)........... -- 7,283 -- -- 7,283 Other noninterest income............................... 40,841 9,537 24,074 -- 74,452 ---------- -------- -------- --------- ---------- Total noninterest income........................... 382,968 41,619 24,074 -- 448,661 ---------- -------- -------- --------- ---------- Employee compensation and benefits..................... 478,142 27,459 31,620 -- 537,221 Occupancy and equipment................................ 154,511 16,168 6,941 (600)(h) 177,020 Purchased mortgage servicing rights amortization....... 4,486 1,946 -- 4,039(h) 10,471 FDIC assessment........................................ 43,711 8,759 -- -- 52,470 Marketing.............................................. 19,902 -- -- -- 19,902 Core deposit and goodwill amortization................. 8,068 136 -- 20,321(i) 28,525 OREO expense........................................... 11,702 13,203 -- -- 24,905 Restructuring charges.................................. 39,800 -- -- -- 39,800 Merger-related charges................................. 100,900 -- -- -- 100,900 Other noninterest expense.............................. 214,727 17,276 -- -- 232,003 ---------- -------- -------- --------- ---------- Total noninterest expense.......................... 1,075,949 84,947 38,561 23,760 1,223,217 ---------- -------- -------- --------- ---------- Income before taxes.................................... 371,604 10,524 80,174 (36,928) 425,374 Applicable income taxes................................ 134,252 (442) 32,070 (10,243) 155,637 ---------- -------- -------- --------- ---------- Net income before minority interest.................... 237,352 10,966 48,104 (26,685) 269,737 Minority interest...................................... -- -- -- -- -- ---------- -------- -------- --------- ---------- Net income............................................. $ 237,352 $ 10,966 $ 48,104 $ (26,685) $ 269,737 ========== ======== ======== ========= ========== Net income applicable to common shares................. $ 221,917 $ 242,615(n) Weighted average common shares outstanding: Primary............................................ 118,977,173 125,549,233(n) Fully diluted...................................... 118,977,173 125,549,233(n) Income from continuing operations per common share: Primary............................................ $1.87 $1.93 Fully diluted...................................... $1.87 $1.93
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS". 90 102 FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1993(A)
FLEET & SHAWMUT PRO FORMA PRO FORMA FLEET SHAWMUT ADJUSTMENTS COMBINED ----------- ----------- ----------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Interest and fees on loans and leases.................................. $2,339,609 $1,272,319 $ -- $3,611,928 Interest on securities................................................. 872,886 554,663 (80)(d) 1,427,469 ---------- ---------- ----- ---------- Total interest income.............................................. 3,212,495 1,826,982 (80) 5,039,397 Interest expense: Deposits............................................................. 744,080 420,966 -- 1,165,046 Short-term borrowings................................................ 180,507 262,413 -- 442,920 Long-term debt....................................................... 236,794 72,040 -- 308,834 ---------- ---------- ----- ---------- Total interest expense............................................. 1,161,381 755,419 -- 1,916,800 ---------- ---------- ----- ---------- Net interest income.................................................... 2,051,114 1,071,563 (80) 3,122,597 Provision for credit losses............................................ 270,724 55,944 -- 326,668 ---------- ---------- ----- ---------- Net interest income after provision for credit losses.................. 1,780,390 1,015,619 (80) 2,795,929 ---------- ---------- ----- ---------- Mortgage banking....................................................... 414,086 30,737 -- 444,823 Service charges, fees and commissions.................................. 310,095 186,452 -- 496,547 Investment services revenue............................................ 173,762 116,845 -- 290,607 Securities available for sale gains (losses)........................... 282,444 12,468 -- 294,912 Other noninterest income............................................... 284,888 71,690 -- 356,578 ---------- ---------- ----- ---------- Total noninterest income........................................... 1,465,275 418,192 -- 1,883,467 ---------- ---------- ----- ---------- Employee compensation and benefits..................................... 1,018,124 500,254 -- 1,518,378 Occupancy and equipment................................................ 303,953 163,792 -- 467,745 Purchased mortgage servicing rights amortization....................... 239,940 7,343 -- 247,283 FDIC assessment........................................................ 75,854 52,302 -- 128,156 Marketing.............................................................. 53,141 22,240 -- 75,381 Core deposit and goodwill amortization................................. 53,594 6,289 -- 59,883 OREO expense........................................................... 57,364 105,173 -- 162,537 Restructuring charges.................................................. 125,000 36,319 -- 161,319 Other noninterest expense.............................................. 497,256 250,623 -- 747,879 ---------- ---------- ----- ---------- Total noninterest expense.......................................... 2,424,226 1,144,335 -- 3,568,561 ---------- ---------- ----- ---------- Income before income taxes and cumulative effect of changes in accounting principles and minority interest............... 821,439 289,476 (80) 1,110,835 Applicable income taxes................................................ 327,407 6,628 (32) 334,003 ---------- ---------- ----- ---------- Income before cumulative effect of changes in accounting principles and minority interest..................................... 494,032 282,848 (48) 776,832 Minority interest...................................................... (5,983) (5,983) ---------- ---------- ----- ---------- Income before cumulative effect of changes in accounting principles.............................................. $ 488,049 $ 282,848 $ (48) $ 770,849 ========== ========== ===== ========== Net income applicable to common shares................................. $ 465,840 $ 267,379 $ 733,171(o) ========== ========== ========== Weighted average common shares outstanding: Primary.............................................................. 154,666,307 113,908,148 255,938,277(o) Fully diluted........................................................ 154,899,995 113,908,148 256,171,965(o) Income from continuing operations per share before cumulative effect of changes in accounting principles: Primary.............................................................. $3.01 $2.35 $2.86 Fully diluted........................................................ $3.01 $2.35 $2.86
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS". 91 103 FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1992(A)
FLEET & SHAWMUT PRO FORMA PRO FORMA FLEET SHAWMUT ADJUSTMENTS COMBINED ---------- ---------- ----------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Interest and fees on loans and leases.................................. $2,513,587 $1,328,876 -- $3,842,463 Interest on securities................................................. 902,702 527,650 -- 1,430,352 -- ---------- ---------- ---------- Total interest income.............................................. 3,416,289 1,856,526 -- 5,272,815 Interest expense: Deposits............................................................. 1,076,368 622,436 -- 1,698,804 Short-term borrowings................................................ 164,171 192,240 -- 356,411 Long-term debt....................................................... 222,104 59,321 -- 281,425 ---------- ---------- ---------- Total interest expense............................................. 1,462,643 873,997 -- 2,336,640 ---------- ---------- ---------- Net interest income.................................................... 1,953,646 982,529 -- 2,936,175 Provision for credit losses............................................ 485,823 242,128 -- 727,951 ---------- ---------- ---------- Net interest income after provision for credit losses.................. 1,467,823 740,401 -- 2,208,224 ---------- ---------- ---------- Mortgage banking....................................................... 364,011 29,071 -- 393,082 Service charges, fees and commissions.................................. 285,562 187,459 -- 473,021 Investment services revenue............................................ 160,083 115,103 -- 275,186 Securities available for sale gains (losses)........................... 206,713 94,103 -- 300,816 Gain on sale of FMG.................................................... 121,274 -- -- 121,274 Other noninterest income............................................... 230,147 103,327 -- 333,474 ---------- ---------- ---------- Total noninterest income........................................... 1,367,790 529,063 -- 1,896,853 ---------- ---------- ---------- Employee compensation and benefits..................................... 957,654 474,725 -- 1,432,379 Occupancy and equipment................................................ 283,191 179,507 -- 462,698 Purchased mortgage servicing rights amortization....................... 106,716 6,258 -- 112,974 FDIC assessment........................................................ 75,444 44,937 -- 120,381 Marketing.............................................................. 50,971 16,004 -- 66,975 Core deposit and goodwill amortization................................. 44,799 6,084 -- 50,883 OREO expense........................................................... 154,170 177,813 -- 331,983 Loss on sale of problem assets......................................... 115,000 -- -- 115,000 Other noninterest expense.............................................. 530,118 255,511 -- 785,629 ---------- ---------- ---------- Total noninterest expense.......................................... 2,318,063 1,160,839 -- 3,478,902 ---------- ---------- ---------- Income before income taxes and extraordinary tax credit and minority interest............................................................. 517,550 108,625 -- 626,175 Applicable income taxes................................................ 228,526 40,898 -- 269,424 ---------- ---------- ---------- Income before extraordinary tax credit and minority interest........... 289,024 67,727 -- 356,751 Minority interest...................................................... (9,181) (9,181) ---------- ---------- ---------- Income before extraordinary tax credit................................. $ 279,843 $ 67,727 -- $ 347,570 ========== ========= ======= =========== Net income applicable to common shares................................. $ 252,801 $ 62,944 $ 315,745(o) ========== ========= ======= =========== Weighted average common shares outstanding: Primary.............................................................. 141,469,658 104,379,621 234,597,156(o) Fully diluted........................................................ 142,778,665 104,379,621 235,906,163(o) Income from continuing operations per share before cumulative effect of changes in accounting principles: Primary.............................................................. $1.78 $0.60 $1.35 Fully diluted........................................................ $1.77 $0.60 $1.34
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS." 92 104 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (a) The pro forma information presented is not necessarily indicative of the results of operations or the combined financial position that would have resulted had the Merger, the Northeast Merger, the NBB Merger, the Plaza Merger, the Barclays Acquisition and the FMG Repurchase been consummated at the beginning of the periods indicated, nor is it necessarily indicative of the results of operations in future periods or the future financial position of the combined entities. The NBB Merger was consummated on January 27, 1995, the Barclays Acquisition was consummated on January 31, 1995, and the Plaza Merger was consummated on March 3, 1995. It is anticipated that the Merger will be consummated in the fourth quarter of 1995 and the Northeast Merger and the FMG Repurchase will be consummated in the second quarter of 1995. Under generally accepted accounting principles ("GAAP"), the assets and liabilities of Shawmut will be combined with those of Fleet at book value. In addition, the statements of income of Shawmut will be combined with the statements of income of Fleet as of the earliest period presented. Certain reclassifications have been included in the Unaudited Pro Forma Condensed Combined Balance Sheet and Unaudited Pro Forma Condensed Combined Statements of Income to conform to Fleet's presentation. Certain transactions conducted in the ordinary course of business between Fleet, Shawmut, Northeast, NBB, Barclays, Plaza and FMG are immaterial and, accordingly, have not been eliminated. All dollar amounts included in these Notes to Unaudited Pro Forma Condensed Combined Financial Statements are in thousands unless otherwise indicated. (b) Fleet is currently reviewing the investment securities portfolios of Shawmut and Northeast to determine the classification of such securities as either available for sale or held to maturity in connection with Fleet's existing interest-rate risk position. As a result of this review, certain reclassifications of Shawmut and Northeast investment securities may result. No adjustments have been made to either the available for sale or the held to maturity portfolios in the accompanying pro forma combined balance sheet to reflect any such reclassification as management has not made a final determination with respect to such matters. Any such reclassification will be accounted for in accordance with Financial Accounting Standards Board Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which requires that securities transferred from held to maturity to available for sale be transferred at fair value with any unrealized gain or loss, net of taxes, at the date of transfer recognized as a separate component of stockholders' equity. At December 31, 1994, securities held to maturity at Shawmut and Northeast had unrealized losses of $438,492 and $83,800, respectively. (c) Pro forma adjustments to common shares and capital surplus at December 31, 1994, reflect the Merger accounted for as a pooling of interests, through: (a) the exchange of 108,429,899 shares of Fleet Common Stock (using the Common Exchange Ratio of 0.8922) for the 121,530,934 outstanding shares of Shawmut Common Stock at December 31, 1994 (which includes the 6,572,060 shares of Shawmut Common Stock issued to acquire all the outstanding shares of Northeast common stock and stock options, and excludes the 5,811,900 shares of Shawmut Common Stock held by Fleet as of such date, which are assumed to be retired for combining purposes), and (b) the exchange of shares of Fleet New Preferred Stock for all shares of Shawmut Preferred on a share-for-share basis. (d) Pro forma adjustments to securities available for sale at December 31, 1994, and to dividend income on securities for the years ended December 31, 1994 and December 31, 1993 reflect the elimination of the 5,811,900 shares of Shawmut Common Stock held by Fleet at December 31, 1994, and the corresponding dividend income recorded on such shares during each of the years in the three-year period ending December 31, 1994. Pro forma adjustments to other assets and accrued expenses and other liabilities at December 31, 1994, include the elimination of Fleet's dividend receivable related to such shares and the elimination of Shawmut's corresponding dividend payable. The Unaudited Pro Forma Condensed Combined Balance Sheet also eliminates the after-tax unrealized loss on these securities recorded in equity and the related deferred tax benefit. 93 105 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED) (e) A liability of $400,000 has been recorded in the Unaudited Pro Forma Condensed Combined Balance Sheet to reflect management's best estimate of merger and restructuring related charges in connection with the Merger. This liability resulted in a $240,000 after-tax charge to retained earnings in the Unaudited Pro Forma Condensed Combined Balance Sheet. It is anticipated that substantially all of these charges will be recognized during 1995 upon consummation of the Merger, with the exception of certain amounts recognized by Shawmut during the first quarter of 1995 (see "RECENT DEVELOPMENTS" for further discussion), and paid during the first 15 months subsequent to the Merger. The following table provides details of the estimated charges by type:
ESTIMATED COSTS TYPE OF COST ---------------------- ----------------------------------------- (DOLLARS IN THOUSANDS) Personnel related........................ $255,000 Facilities and equipment................. 68,000 Branch related........................... 37,000 Other merger expenses.................... 40,000 -------- Total.................................... $400,000 ========
Personnel related costs consist primarily of charges related to employee severance, termination of certain employee benefits plans and employee assistance costs for separated employees. Facilities and equipment charges consist of lease termination costs and other facilities related exit costs resulting from consolidation of duplicate headquarters and operational facilities, and computer equipment and software write-offs due to duplication or incompatibility. Branch related costs are primarily related to the cost of exiting branches anticipated to be closed, including lease terminations and equipment write-offs. The effect of the proposed charge has been reflected in the Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 1994; however, since the proposed charge is nonrecurring, it has not been reflected in the pro forma combined statements of income. (f) The pro forma adjustments to cash include the redemption of the Northeast $8.50 Cumulative Preferred Stock, Series B based on the redemption value of such stock at December 31, 1994 ($42,879), and the redemption of all of the Northeast Uncertificated Debentures ("the Northeast Debentures") based on the face value of the Northeast Debentures at December 31, 1994 ($44,725), as if such redemptions had occurred on January 1, 1994. Also included in the pro forma adjustments to cash is the amount paid in cash by Fleet in connection with the NBB Merger. The total consideration paid to NBB shareholders in the NBB Merger was $425,815. Fleet paid $210,815 in cash and issued $215,000 of Fleet Common Stock to NBB shareholders, which was repurchased by Fleet in the open market in the fourth quarter of 1994 and held in treasury at December 31, 1994. Proceeds from Fleet's senior debt issuances during the third and fourth quarters of 1994 were used to fund both the cash payment made to NBB shareholders and such repurchase of shares of Fleet Common Stock. The 1994 Unaudited Pro Forma Condensed Combined Income Statement also includes an adjustment increasing interest expense for the year ended December 31, 1994, by $21,373 to reflect the estimated interest expense that would have been recorded on Fleet's senior indebtedness if such indebtedness had been outstanding as of January 1, 1994. (g) The pro forma adjustments also include fair value adjustments of ($83,800) and ($11,373) to securities held to maturity of Northeast and NBB, respectively. The pro forma adjustments also reflect Fleet's sale of NBB's available for sale and held to maturity securities portfolios as if such sales occurred on January 1, 1994, and includes adjustments to eliminate the corresponding interest income for such period. The proceeds from the sale of $974,472 were assumed to have reduced Fleet's short-term borrowings as of January 1, 1994 and, accordingly, interest expense on short-term borrowings has also been reduced by $47,307 for such period reflecting a weighted average short-term borrowing rate of 4.75%. 94 106 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED) The pro forma adjustments also reflect the sale of $157,430 of Plaza's mortgage-backed securities, the sale of $230,000 of Plaza's adjustable rate loans, and the sale of $18,445 of Plaza's retail consumer deposits, in each case as if such sales had occurred on January 1, 1994, and includes adjustments to eliminate the corresponding interest income and expense for such period. The net proceeds from the sales of $368,985 were assumed to have reduced short-term borrowings as of January 1, 1994 and, accordingly, interest expense on short-term borrowings has also been reduced by $17,904 for such period reflecting a weighted average short-term borrowings rate of 4.75%. The pro forma adjustments also assume that Fleet funded the Plaza Merger by the issuance of commercial paper on January 1, 1994, and accordingly reflect the corresponding incremental interest expense of $4,358 for such period. (h) These pro forma adjustments reflect the purchase accounting adjustments related to the assets acquired and liabilities assumed for the Northeast Merger, NBB Merger, Barclays Acquisition, Plaza Merger and the FMG Repurchase. These adjustments are based on the best available information and may be different from the actual adjustments to reflect the fair value of the net assets purchased as of the date of the acquisition. The core deposit intangible is being amortized over seven years. (i) The 1994 pro forma statements include adjustments for the excess cost over net assets of subsidiaries acquired for each of the material pending and/or completed mergers and acquisitions calculated as follows:
NORTHEAST NBB BARCLAYS PLAZA FMG -------- -------- ---------- ------- -------- (DOLLARS IN THOUSANDS) Purchase price.............................. $171,398 $425,815 $2,634,193 $88,015 $194,241 Historical net tangible assets acquired... 95,893 241,738 2,344,193 33,049 93,604 Estimated fair value adjustments....... (94,313) (33,700) 65,000 17,491 71,465 -------- -------- ---------- ------- -------- Estimated fair value of net assets.......... 1,580 208,038 2,409,193 50,540 165,069 -------- -------- ---------- ------- -------- Excess cost over net assets of subsidiaries acquired.................. $169,818 $217,777 $ 225,000 $37,475 $ 29,172 ======== ======== ========= ======= ========
Adjustments have been made to the Unaudited Pro Forma Condensed Combined Balance Sheet to reflect the recording of these intangibles as calculated above as well as to eliminate any intangible balances previously recorded at these companies, in accordance with the purchase method of accounting. Reflected in the 1994 Unaudited Pro Forma Condensed Combined Income Statement are adjustments to reflect the amortization of Northeast's, NBB's and Plaza's excess cost over net assets of subsidiaries acquired ("goodwill") over 15 years, the amortization of Barclays' goodwill over 25 years, and the amortization of FMG's goodwill over 20 years. (j) The pro forma adjustments to these items show the effects of the funding of the Barclays Acquisition as if such funding transactions occurred on January 1, 1994. Such funding transactions included short-term borrowings (primarily federal funds purchased and repurchase agreements) of $2,113,193, the issuance of $250,000 of subordinated notes, the issuance of $150,000 of senior bank notes, and the issuance of $125,000 of Shawmut 9.35% Preferred Stock. Adjustments to increase interest expense in the amount of $14,265 for the year ended December 31, 1994 were made to reflect an estimate of the incremental interest expense which would have been incurred as if such borrowings had occurred on January 1, 1994. (k) These pro forma adjustments include the redemption of all of the Northeast Debentures based on the face value of the Debentures ($44,725), as if such redemption had occurred on January 1, 1994, and a related adjustment to eliminate the interest expense recorded on such debentures ($3,858) for the year ended December 31, 1994. (l) The pro forma stockholders' equity accounts of Northeast, NBB and Plaza have been adjusted in the Unaudited Pro Forma Condensed Combined Balance Sheet to reflect the elimination of the stockholders' equity accounts in accordance with the purchase method of accounting. The Fleet Pro Forma adjustments reflect the issuance of 6,165,912 shares of Fleet Common Stock in connection with the NBB Merger. The 95 107 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Shawmut Pro Forma adjustments reflect the issuance of 6,572,060 shares of Shawmut Common Stock in exchange for all of the outstanding shares of Northeast common stock and stock options (assuming that the exchange ratio in connection with the Northeast Merger is 0.415 which is based on the closing sales price for Shawmut Common Stock on the Stock Exchange on May 3, 1995, the latest practicable trading day before the printing of this Joint Proxy Statement-Prospectus) and the redemption of the Northeast Series B preferred stock. Also included in Shawmut's pro forma adjustments is the $125,000 of Shawmut 9.35% Preferred Stock, proceeds from which were used to fund the Barclays Acquisition. Shawmut's pro forma net income applicable to common shares was decreased to include the effect of additional preferred dividends of $11,688, as if such Shawmut 9.35% Preferred Stock had been issued on January 1, 1994. (m) Pro forma adjustments reflect the payment of $194,241 for the 19.3% publicly-held shares of FMG Common Stock in connection with the FMG Repurchase as if such transaction had occurred on January 1, 1994. The excess of such purchase price over the fair value of net assets acquired of $165,069 resulted in $29,172 of excess cost over net assets acquired that will be amortized over 20 years. Pro forma adjustments for such period reflect the fair market value adjustment of $118,867 to FMG's purchased mortgage servicing rights as well as the related amortization expense of $14,264, the corresponding deferred tax liability and the elimination of the minority interest in both the balance sheet and income statement. The pro forma adjustments also assume that Fleet funded the FMG Repurchase by the issuance of commercial paper on January 1, 1994, and accordingly reflect the corresponding $8,178 incremental interest expense for such period. (n) The Fleet Pro Forma weighted average shares outstanding for the year ended December 31, 1994 reflect Fleet's historical weighted average shares outstanding plus the issuance of 6,165,912 shares of Fleet Common Stock in connection with the NBB Merger. The Shawmut Pro Forma weighted average shares outstanding for the year ended December 31, 1994 reflect Shawmut's historical weighted average shares outstanding plus the issuance of 6,572,060 shares of Shawmut Common Stock in connection with the Northeast Merger. Shawmut's pro forma net income applicable to common shares was decreased to include the effect of additional preferred dividends of $11,688, as if such Shawmut 9.35% Preferred Stock had been issued on January 1, 1994. (o) The Fleet/Shawmut Pro Forma weighted average shares outstanding for the year ended December 31, 1994 reflect the Fleet Pro Forma weighted average shares plus the converted Shawmut Pro Forma weighted average shares outstanding (after adjustment to eliminate the 5,811,900 shares of Shawmut Common Stock owned by Fleet, which are assumed to be retired for combining purposes). Each share of Shawmut Common Stock is converted into 0.8922 shares of Fleet Common Stock. The Fleet/Shawmut Pro Forma net income applicable to common shares reflects the sum of the Fleet Pro Forma net income applicable per common share and the Fleet Pro Forma net income applicable per common shares adjusted for any Fleet/Shawmut Pro Forma adjustments. 96 108 DESCRIPTION OF FLEET CAPITAL STOCK, FLEET NEW PREFERRED STOCK, FLEET NEW DEPOSITARY SHARES AND FLEET WARRANTS GENERAL The Fleet Existing Articles currently authorize the issuance of 300,000,000 shares of Fleet Common Stock, 16,000,000 shares of Preferred Stock, $1.00 par value (the "Fleet $1 Par Preferred Stock"), issuable in one or more series from time to time by action of the Fleet Board, and 1,500,000 shares of Preferred Stock with Cumulative and Adjustable Dividends, $20.00 par value (the "Fleet $20 Par Adjustable Rate Preferred Stock" and, together with any series of issued and outstanding Fleet $1 Par Preferred Stock, the "Existing Preferred Stock"). At December 31, 1994, 135,024,262 shares of Fleet Common Stock were outstanding. In addition, as of December 31, 1994, Fleet had outstanding three series of Fleet $1 Par Preferred Stock as follows: (i) 1,100,000 shares of Series III Preferred, having a liquidation value of $100 per share, plus accrued and unpaid dividends, were designated and 519,758 shares were outstanding, (ii) 1,000,000 shares of Series IV Preferred, having a liquidation value of $100 per share, plus accrued and unpaid dividends, were designated and 478,838 shares were outstanding and (iii) 1,415,000 shares of Dual Convertible Preferred Stock, having a liquidation preference of $200 per share, plus accrued and unpaid dividends, were designated and 1,415,000 shares were outstanding. In addition, as of December 31, 1994, the Fleet Board had established a series of 1,500,000 shares of Cumulative Participating Junior Preferred Stock, par value $1 per share (the "Junior Preferred Stock") issuable upon exercise of the Preferred Share Purchase Rights described below of which no shares were outstanding. As of December 31, 1994, Fleet also had authorized 1,500,000 shares of a separate class of the Fleet $20 Par Adjustable Rate Preferred Stock, having a liquidation value of $50 per share, plus accrued and unpaid dividends, none of which were outstanding as of December 31, 1994. Each such outstanding series and class is described below under "-- Existing Preferred Stock". Prior to the consummation of the Merger, and subject to the approval of holders of Fleet Common Stock sought herein, the Fleet Existing Articles will be amended and restated as the Fleet New Articles which will (i) increase the authorized shares of Fleet Common Stock from 300,000,000 to 600,000,000, (ii) to change the par value of the Fleet Common Stock from $1.00 to $0.01 and (iii) delete therefrom the terms of the Fleet $20 Par Adjustable Rate Preferred Stock and certain series of the Fleet $1 Par Preferred Stock, all of which have been redeemed or converted in full. See "-- Description of Fleet New Preferred Stock and Fleet New Depositary Shares". The following summary does not purport to be complete and is subject in all respects to the applicable provisions of the Rhode Island law and the Fleet Existing Articles and Fleet By-Laws. FLEET COMMON STOCK General. Holders of the Fleet Common Stock are entitled to receive dividends when, as and if declared by the Fleet Board out of any funds legally available therefor, and are entitled upon liquidation, after claims of creditors and preferences of the Existing Preferred Stock, the Fleet New Preferred Stock and any other series of preferred stock at the time outstanding, to receive pro rata the net assets of Fleet. Dividends are paid on the Fleet Common Stock only if all dividends on the outstanding classes or series of Existing Preferred Stock, the Fleet New Preferred Stock or any other series of preferred stock at the time outstanding, for the then-current period and, in the case of cumulative Existing Preferred Stock, the Fleet New Preferred Stock or any other series of preferred stock at the time outstanding, all prior periods have been paid or provided for. The Fleet Existing Preferred Stock, the Fleet New Preferred Stock and any other class of preferred stock have, or upon issuance will have, preference over the Fleet Common Stock with respect to the payment of dividends and the distribution of assets in the event of liquidation or dissolution of Fleet and such other preferences as may be fixed by the Fleet Board. The holders of the Fleet Common Stock are entitled to one vote for each share held and are vested with all of the voting power except as the Fleet Board has provided with respect to the Existing Preferred Stock, the Fleet New Preferred Stock or may provide, in the future, with respect to any other series of preferred stock 97 109 which it may hereafter authorize. The Fleet Common Stock does not have cumulative voting rights. See "-- Existing Preferred Stock" and "-- Description of Fleet New Preferred Stock and Fleet New Depositary Shares". Shares of Fleet Common Stock are not redeemable and have no subscription, conversion or preemptive rights. The affirmative vote of not less than 80% of Fleet's outstanding voting stock, voting separately as a class, is required for certain Business Combinations (as hereinafter defined) between Fleet and/or its subsidiaries and persons owning 10% or more of its voting stock. See "-- Selected Provisions in the Fleet Existing Articles and Fleet New Articles -- Business Combinations with Related Persons". The Fleet Common Stock is listed on the Stock Exchange. The outstanding shares of Fleet Common Stock are, and the shares to be issued to holders of Shawmut Common Stock upon consummation of the Merger will be, validly issued, fully paid and non-assessable and the holders thereof are not, and will not be, subject to any liability as stockholders. Restrictions on Ownership. The BHCA requires any "bank holding company", as such term is defined therein, to obtain the approval of the Federal Reserve Board prior to the acquisition of 5% or more of the Fleet Common Stock. Any person other than a bank holding company is required to obtain prior approval of the Federal Reserve Board to acquire 10% or more of the Fleet Common Stock under the Change in Bank Control Act (the "CBCA"). The partnerships which purchased the Dual Convertible Preferred Stock (the "Partnerships") made a filing under the CBCA because of their acquisition of such stock. Any holder of 25% or more of the Fleet Common Stock (or a holder of 5% or more if such holder otherwise exercises a "controlling influence" over Fleet) is subject to regulation as a bank holding company under the BHCA. Preferred Share Purchase Rights. On November 21, 1990, the Fleet Board declared a dividend of one Fleet Right for each outstanding share of Fleet Common Stock. The dividend was paid on December 4, 1990 to the shareholders of record on that date. Each Fleet Right, when exercisable, will entitle the registered holder to purchase from Fleet one one-hundredth of a share of the Junior Preferred Stock of Fleet, at an exercise price of $50 per one one-hundredth of a share of Junior Preferred Stock (the "Purchase Price"), subject to certain adjustments. Until the earlier to occur of the Distribution Date and the Expiration Date (each as hereinafter defined), Fleet will issue one Fleet Right with each share of Fleet Common Stock; accordingly, each holder of Shawmut Common Stock who receives Fleet Common Stock upon consummation of the Merger shall automatically receive one Fleet Right with each such share issued. The following summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all of the provisions of the Rights Agreement dated as of November 21, 1990 between Fleet and Fleet Bank-RI, as Rights Agent, a copy of which was filed as an exhibit to the Registration Statement on Form 8-A dated November 29, 1990, as amended by a First Amendment to Rights Agreement dated March 28, 1991 and a Second Amendment to Rights Agreement dated July 12, 1991, copies of which were filed as exhibits to Fleet's Amendment to Application or Report on Form 8 dated September 6, 1991 and a Third Amendment to Rights Agreement dated February 20, 1995, a copy of which was filed as an exhibit to Fleet's Form 8-A/A dated March 17, 1995 (as amended, the "Fleet Rights Agreement"). The Fleet Rights are not represented by separate certificates and are not exercisable or transferable apart from the Fleet Common Stock until the earlier to occur of (i) the tenth day after a public announcement by Fleet (x) that a person or group of affiliated or associated persons has, subsequent to November 21, 1990 (the "Declaration Date") acquired, or obtained the right to acquire, beneficial ownership (as defined in the Fleet Rights Agreement) of 10% or more (or, in the case of a qualifying institutional investor, acting in the ordinary course of business and not with the purpose of changing or influencing control of Fleet (a "Qualifying Investor"), 15% or more) of the outstanding shares of Fleet Common Stock, (y) that any person or group of affiliated or associated persons, which beneficially owned 10% or more (or, in the case of a Qualifying Investor, 15% or more) of the outstanding shares on the Declaration Date, or which acquired beneficial ownership of 10% or more (or, in the case of a Qualifying Investor, 15% or more) of the outstanding shares as a result of any repurchase of shares by Fleet, thereafter acquired beneficial ownership of additional shares constituting 1% or more of the outstanding shares, or (z) that any person who was a Qualifying Investor owning 10% or more of the outstanding shares of Fleet Common Stock ceased to qualify as a Qualifying 98 110 Investor and thereafter acquired beneficial ownership of additional shares constituting 1% or more of the outstanding shares (any person described in clause (x), (y) or (z) being an "Acquiring Person"); and (ii) the tenth day (or such later day as may be determined by action of the Fleet Board prior to such time as any person becomes an Acquiring Person) after the date of the commencement of a tender or exchange offer by any person (other than Fleet) to acquire (when added to any shares as to which such person is the beneficial owner immediately prior to such commencement) beneficial ownership of 10% or more of the issued and outstanding shares of Fleet Common Stock (the earlier of such dates being called the "Distribution Date"). On March 28, 1991 and July 12, 1991 the Fleet Rights Agreement was amended to change the definition of an "Acquiring Person" (i) to permit the sale of the Dual Convertible Preferred Stock and issuance of rights to purchase Fleet Common Stock to the Partnerships and (ii) to permit the Fleet Board to determine that a person who would otherwise be an "Acquiring Person" had become such inadvertently and therefore allow divestiture of a sufficient number of shares to avoid such designation. The Fleet Rights Agreement was further amended on February 20, 1995 to permit the execution and delivery of the Merger Agreement and the Option Agreements. The Fleet Rights will first become exercisable on the Distribution Date and could then begin trading separately from the Fleet Common Stock. The Fleet Rights will expire on the earliest of November 21, 2000 (the "Final Expiration Date"), the date on which the Fleet Rights are earlier redeemed by Fleet or the date on which the Fleet Rights are exchanged (such earliest date being referred to as the "Expiration Date"). In the event any person becomes an Acquiring Person, the Fleet Rights would give holders (other than such Acquiring Person and its transferees) the right to buy, for the Purchase Price (and in lieu of Junior Preferred Stock), Fleet Common Stock (or, under certain circumstances, cash, property or other debt or equity securities ("Fleet Common Stock equivalents")) with a market value of twice the Purchase Price. In addition, at any time after any person becomes an Acquiring Person, the Fleet Board may, at its option and in lieu of any transaction described in the preceding sentence, exchange the outstanding and exercisable Fleet Rights (other than Fleet Rights held by any such Acquiring Person and its transferees) for shares of Fleet Common Stock or Fleet Common Stock equivalents at an exchange ratio of one share of Fleet Common Stock per Fleet Right, subject to certain adjustments. In any merger or consolidation involving Fleet after the Fleet Rights become exercisable, each Fleet Right will be converted into the right to purchase, for the Purchase Price, common stock of the surviving corporation (which may be Fleet) with a market value of twice the Purchase Price. The Fleet Board may amend the Fleet Rights Agreement or redeem the Fleet Rights for $.01 each at any time until the date of a public announcement by Fleet that there is an Acquiring Person. Thereafter, the Fleet Board may amend the Fleet Rights Agreement only to eliminate ambiguities or to provide additional benefits to, and if the amendment would not adversely affect, the holders of the Fleet Rights (other than the Acquiring Person). Until a Fleet Right is exercised, the holder thereof, as such, will have no rights as a shareholder of Fleet, including, without limitation, the right to vote or to receive dividends. The Purchase Price payable, and the number of shares of Junior Preferred Stock or other securities or property issuable, upon exercise of the Fleet Rights, and the number of outstanding Fleet Rights, are subject to customary antidilution adjustments. The Fleet Rights have certain "anti-takeover" effects. The Fleet Rights may cause substantial dilution to a person or group that attempts to acquire Fleet on terms not approved by the Fleet Board, except pursuant to an offer conditioned on a substantial number of Fleet Rights being acquired. The Fleet Rights should not interfere with any merger or other business combination approved by the Fleet Board prior to the time that there is an Acquiring Person (at which time holders of the Rights become entitled to exercise their Fleet Rights for shares of Fleet Common Stock at one-half the market price), since until such time the Fleet Rights generally may be redeemed by the Fleet Board at $.01 per Fleet Right. Existing Warrants. Fleet currently has outstanding warrants to issue 2,502,773 shares of Fleet Common Stock which were issued in connection with the NBB Merger (the "NBB Warrants"). The NBB Warrants are 99 111 exercisable at any time beginning January 27, 1996 and ending January 26, 2001 at an exercise price of $43.875 per NBB Warrant, and are subject to customary anti-dilution provisions. Transfer Agent and Registrar. The Transfer Agent and Registrar for the Fleet Common Stock is Fleet-RI. EXISTING PREFERRED STOCK Fleet $1 Par Preferred Stock Fleet $1 Par Preferred Stock is issuable in series, with such relative rights, preferences and limitations of each series (including dividend rights, dividend rate, liquidation preference, voting rights, conversion rights and term of redemption (including sinking fund provisions), redemption price or prices and the number of shares constituting any series) as may be fixed by the Fleet Board. The Fleet New Preferred Stock will be issued as a series of the Fleet $1 Par Preferred Stock. As of the date of this Joint Proxy Statement-Prospectus, Fleet has three series of Fleet $1 Par Preferred Stock outstanding, and one series designated but unissued. Series III Preferred. In the event of the dissolution, liquidation or winding up of Fleet, holders of shares of the outstanding Series III Preferred are entitled to receive a distribution of $100 per share, plus accrued and unpaid dividends, if any. The holders of Series III Preferred are entitled to receive dividends at the rate of 10.12% per annum computed on the basis of the issue price thereof of $100 per share, payable quarterly, before any dividend shall be declared or paid upon the Fleet Common Stock or the Junior Preferred Stock. The dividends on Series III Preferred are cumulative. The Series III Preferred is redeemable, in whole or in part, at Fleet's option, on and after June 1, 1996, commencing at $105.06 per share and declining ratably on June 1 of each year to $100 per share on or after June 1, 2001, plus, in each case, accrued and unpaid dividends, if any. So long as any shares of the Series III Preferred are outstanding, Fleet may not redeem, repurchase or otherwise acquire any shares of the Fleet Common Stock or any other class of Fleet preferred stock ranking junior to or on a parity with the Series III Preferred either as to dividends or upon liquidation unless full cumulative dividends on all outstanding shares of Series III Preferred are paid for all past dividend payment periods. Further, if any dividends on the Series III Preferred are in arrears, Fleet may not redeem, purchase or otherwise acquire any shares of the Series III Preferred unless all outstanding shares of such class are simultaneously redeemed, purchased or otherwise acquired, except pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of the Series III Preferred. Except as indicated below or except as expressly required by applicable law, the holders of the Series III Preferred are not entitled to vote. If the equivalent of six quarterly dividends payable on the Series III Preferred or any other class or series of preferred stock (other than any other class of preferred stock expressly entitled to elect additional directors by a separate and distinct vote) are in default, the number of directors of Fleet will be increased by two (without duplication of any increase made pursuant to the terms of any other series of preferred stock of Fleet), and the holders of the Series III Preferred, voting as a single class with the holders of shares of any one or more other series of Fleet $1 Par Preferred Stock (other than any other class of preferred stock expressly entitled to elect additional directors by a separate and distinct vote) and any other class of Fleet preferred stock ranking on a parity with the Series III Preferred either as to dividends or distribution of assets and upon which like voting rights have been conferred and are exercisable, will be entitled to elect two directors to fill each of the two newly-created directorships. Such right shall continue until full cumulative dividends for all past dividend periods on all preferred shares of Fleet (other than any other class of preferred stock expressly entitled to elect additional directors by a separate and distinct vote), including any shares of the Series III Preferred, have been paid or declared and set apart for payment. Any such elected directors shall serve until Fleet's next annual meeting of stockholders (notwithstanding that prior to the end of such term the dividend default shall cease to exist) or until their respective successors shall be elected and qualify. 100 112 The affirmative vote or consent of the holders of at least 66 2/3% of the outstanding shares of the Series III Preferred is required for any amendment of the Fleet Existing Articles (or any certificate supplemental thereto) which will adversely affect the powers, preferences, privileges or rights of the Series III Preferred. The affirmative vote or consent of the holders of at least 66 2/3% of the outstanding shares of the Series III Preferred and any other series of Fleet $1 Par Preferred Stock ranking on a parity with the Series III Preferred either as to dividends or upon liquidation, voting as a single class without regard to series, is required to issue, authorize or increase the authorized amount of, or issue or authorize any obligation or security convertible into or evidencing a right to purchase, any additional class or series of stock ranking prior to the Series III Preferred as to dividends or upon liquidation, or to reclassify any authorized stock of Fleet into such prior shares. Series IV Preferred. In the event of the dissolution, liquidation or winding up of Fleet, holders of shares of the outstanding Series IV Preferred are entitled to receive a distribution of $100 per share, plus accrued and unpaid dividends, if any. The holders of Series IV Preferred are entitled to receive dividends at the rate of 9.375% per annum computed on the basis of the issue price thereof of $100 per share, payable quarterly, before any dividend shall be declared or paid upon the Fleet Common Stock or the Junior Preferred Stock. The dividends on Series IV Preferred are cumulative. The Series IV Preferred is redeemable, in whole or in part, at Fleet's option, on and after December 1, 1996, at $100 per share, plus accrued and unpaid dividends, if any. So long as any shares of the Series IV Preferred are outstanding, Fleet may not redeem, repurchase or otherwise acquire any shares of the Fleet Common Stock or any other class of Fleet preferred stock ranking junior to or on a parity with the Series IV Preferred either as to dividends or upon liquidation unless full cumulative dividends on all outstanding shares of Series IV Preferred are paid for all past dividend payment periods. Further, if any dividends on the Series IV Preferred are in arrears, Fleet may not redeem, purchase or otherwise acquire any shares of the Series IV Preferred unless all outstanding shares of such class are simultaneously redeemed, purchased or otherwise acquired, except pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of the Series IV Preferred. Except as indicated below or except as expressly required by applicable law, the holders of the Series IV Preferred are not entitled to vote. If the equivalent of six quarterly dividends payable on the Series IV Preferred or any other class or series of preferred stock are in default (other than any other class of preferred stock expressly entitled to elect additional directors by a separate and distinct vote), the number of directors of Fleet will be increased by two (without duplication of any increase made pursuant to the terms of any other series of preferred stock of Fleet), and the holders of the Series IV Preferred, voting as a single class with the holders of shares of any one or more other series of Fleet $1 Par Preferred Stock (other than any other class of preferred stock expressly entitled to elect additional directors by a separate and distinct vote) and any other class of Fleet preferred stock ranking on a parity with the Series IV Preferred either as to dividends or distribution of assets and upon which like voting rights have been conferred and are exercisable, will be entitled to elect such directors to fill each of the two newly-created directorships. Such right shall continue until full cumulative dividends for all past dividend periods on all preferred shares of Fleet (other than any other class of preferred stock expressly entitled to elect additional directors by a separate and distinct vote), including any shares of the Series IV Preferred, have been paid or declared and set apart for payment. Any such elected directors shall serve until Fleet's next annual meeting of stockholders (notwithstanding that prior to the end of such term the dividend default shall cease to exist) or until their respective successors shall be elected and qualify. The affirmative vote or consent of the holders of at least 66 2/3% of the outstanding shares of the Series IV Preferred is required for any amendment of the Fleet Existing Articles (or any certificate supplemental thereto) which will adversely affect the powers, preferences, privileges or rights of the Series IV Preferred. The affirmative vote or consent of the holders of at least 66 2/3% of the outstanding shares of the Series IV Preferred and any other series of Fleet $1 Par Preferred Stock ranking on a parity with the Series IV Preferred either as to dividends or upon liquidation, voting as a single class without regard to series, is required to issue, authorize or increase the authorized amount of, or issue or authorize any obligation or security convertible into or evidencing a right to purchase, any additional class or series of stock ranking prior to the Series IV 101 113 Preferred as to dividends or upon liquidation, or to reclassify any authorized stock of Fleet into such prior shares. Dual Convertible Preferred Stock. The Dual Convertible Preferred Stock has no voting rights except as provided by Rhode Island law or as indicated below. The Dual Convertible Preferred Stock is not entitled to vote for the election of directors in any circumstances, including dividend arrearages, and the holders thereof have agreed to vote the Dual Convertible Preferred Stock as directed by the Fleet Board on any matters upon which the shares are entitled to vote under Rhode Island law, except on those matters adversely affecting the rights of holders of Dual Convertible Preferred Stock. The affirmative vote or consent of the holders of at least 66 2/3% of the outstanding shares of Dual Convertible Preferred Stock, voting as a class, given in person or by proxy, either in writing or by resolution adopted at a special meeting called for the purpose, is required to authorize any new class of equity securities of Fleet to which the Dual Convertible Preferred Stock ranks junior, whether with respect to dividends or upon liquidation, dissolution, winding up or otherwise. In addition, the affirmative vote or consent of the holders of at least 66 2/3% of the outstanding shares of Dual Convertible Preferred Stock, voting as a class, given in person or by proxy, either in writing or by resolution adopted at a special meeting called for the purpose, shall be required for any amendment of the Fleet Existing Articles (or the certificate of designation of the Dual Convertible Preferred Stock), which would affect materially and adversely the specified rights, preferences, privileges or voting rights of shares of Dual Convertible Preferred Stock. The holders of Dual Convertible Preferred Stock are entitled to dividends equal to one-half of the total dividends declared (after the first $15 million in dividends), if any, by Fleet Banking Group on its common stock. Such dividends, if accrued and unpaid, will be cumulative. In the event of the liquidation, dissolution or winding up of Fleet, the holders of the outstanding Dual Convertible Preferred Stock are entitled to receive a distribution of $200 per share, plus accrued and unpaid dividends, if any. So long as any shares of the Dual Convertible Preferred Stock are outstanding, Fleet may not make any payment on account of, or set apart for payment money for a sinking or other similar fund for, the repurchase, redemption or other retirement of any class or series of stock ranking junior to or on a parity with the Dual Convertible Preferred Stock either as to dividends or upon liquidation unless prior to or concurrently with such declaration, payment, setting apart for payment, repurchase, redemption or other retirement or distribution, as the case may be, all accrued and unpaid dividends on shares of the Dual Convertible Preferred Stock shall have been or be paid. On July 31, 1991, the date of issuance of the Dual Convertible Preferred Stock, Fleet granted to the Partnerships which purchased the Dual Convertible Preferred Stock rights (the "DCP Rights") to purchase 6,500,000 shares of Fleet Common Stock at $17.65 per share. The Dual Convertible Preferred Stock is convertible into Fleet Common Stock at a conversion price of $17.65 per share at any time. The total number of shares issuable upon such conversion is 16,033,994 shares, subject to customary anti-dilution adjustments. If any of such stock is converted prior to July 12, 2001, all of such stock must be converted. After July 12, 2001, any holder of Dual Convertible Preferred Stock may convert its stock into Fleet Common Stock independently of any other holder. The Dual Convertible Preferred Stock is also convertible into 50% of the common stock of Fleet Banking Group at any time after the later of (i) July 12, 1995 and (ii) the date on which the Partnerships distribute all the shares of Dual Convertible Preferred Stock then held by them to the partners therein (which distribution date will be July 12, 1997 unless the Federal Reserve Board consents to an alternative distribution date, but in no event earlier than July 12, 1995). The Dual Convertible Preferred Stock is also convertible into Fleet Banking Group common stock on an earlier date in the event that the quotient of (i) Fleet's Tier 1 capital as of the date of determination (adjusted to include goodwill of Fleet as of July 12, 1991) divided by (ii) total assets, falls below 3%. The Dual Convertible Preferred Stock is not convertible into Fleet Banking Group common stock after July 12, 2001 or at any time while it is held by the Partnerships. After the Dual Convertible Preferred Stock becomes convertible into Fleet Banking Group common stock, the holders of the Dual Convertible Preferred Stock will have the right to obtain an appraisal of the fair value of the common stock of Fleet Banking Group (the "Appraisal") as if all such shares were to be sold to a third party in a transaction reflecting a control premium. If such Appraisal is acceptable to the holders of the Dual 102 114 Convertible Preferred Stock, the Dual Convertible Preferred Stock may be converted into 50% of the common stock of Fleet Banking Group on or after the date that is six months after such acceptance or, in the case of the earlier date due to the capital deficiency described above, on or after the date that is 60 days after the notice of such deficiency. During the period after acceptance but prior to the date on which such shares become convertible, Fleet will have the option to redeem the Dual Convertible Preferred Stock at a redemption price equal to 50% of the Appraisal price less the sum of (i) the market value of the shares of Fleet Common Stock into which the Dual Convertible Preferred Stock are then convertible (and such shares of Fleet Common Stock shall be distributed to the holders of Dual Convertible Preferred Stock) and (ii) the value of the DCP Rights. Fleet has the option to pay such redemption price in cash or in any combination of Fleet securities having a realizable market value equal to such redemption price. If Fleet does not exercise this option, the holders of the Dual Convertible Preferred Stock may convert their shares into 50% of the common stock of Fleet Banking Group. Any such conversion must be for all of the Dual Convertible Preferred Stock. Junior Preferred Stock. The Junior Preferred Stock will be issued upon the exercise of a Right issued to holders of the Fleet Common Stock. As of the date of this Joint Proxy Statement-Prospectus, there were 1,500,000 shares of Fleet $1 Par Preferred Stock reserved for issuance upon the exercise of the Fleet Rights. See "-- Fleet Common Stock -- Preferred Share Purchase Rights". Shares of Junior Preferred Stock purchasable upon exercise of the Fleet Rights will rank junior to the Fleet $1 Par Preferred Stock and the Fleet New Preferred Stock and will not be redeemable. Each share of Junior Preferred Stock will, subject to the rights of such senior securities of Fleet, be entitled to a preferential cumulative quarterly dividend payment equal to the greater of $1.00 per share or, subject to certain adjustments, 100 times the dividend declared per share of Fleet Common Stock. Upon the liquidation, dissolution or winding up of Fleet, the holders of the Junior Preferred Stock will, subject to the rights of such senior securities, be entitled to a preferential liquidation payment equal to the greater of $1.00 per share plus all accrued and unpaid dividends or 100 times the payment made per share of Fleet Common Stock. Finally, in the event of any merger, consolidation or other transaction in which shares of Fleet Common Stock are exchanged, each share of Junior Preferred Stock will, subject to the rights of such senior securities, be entitled to receive 100 times the amount received per share of Fleet Common Stock. Each share of Junior Preferred Stock will have 100 votes, voting together with the Fleet Common Stock. The rights of the Junior Preferred Stock are protected by customary antidilution provisions. DESCRIPTION OF FLEET NEW PREFERRED STOCK AND FLEET NEW DEPOSITARY SHARES Fleet New Preferred Stock. The following is a brief description of the Fleet New Preferred Stock. The Fleet New Preferred Stock has preference over the Fleet Common Stock with respect to the payment of dividends and the distribution of assets in the event of liquidation, winding up or dissolution of Fleet. The Fleet New Preferred Stock will be issued as a series of Fleet $1 Par Preferred Stock. Fleet Adjustable Preferred. Dividends on the outstanding Fleet Adjustable Preferred are cumulative. The dividend rate on the Fleet Adjustable Preferred is established quarterly at the rate of 2.25% below the highest of (a) the three-month U.S. Treasury bill rate, (b) the U.S. Treasury ten-year constant maturity rate and (c) the U.S. Treasury twenty-year constant maturity rate, in each case as defined in the terms of the Fleet Adjustable Preferred, but may not be less than 6% per annum or greater than 12% per annum. So long as any shares of the Fleet Adjustable Preferred are outstanding, Fleet may not redeem, repurchase or otherwise acquire any shares of the Fleet Common Stock or any other class of Fleet stock ranking junior to or on a parity with the Fleet Adjustable Preferred either as to dividends or upon liquidation unless full cumulative dividends on all outstanding shares of Fleet Adjustable Preferred are paid for all past dividend payment periods. Further, if any dividends on the Fleet Adjustable Preferred are in arrears, Fleet may not redeem, purchase or otherwise acquire any shares of the Fleet Adjustable Preferred unless all outstanding shares of such class are simultaneously redeemed, purchased or otherwise acquired, except pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of the Fleet Adjustable Preferred. Except as indicated below or except as expressly required by applicable law, the holders of the Fleet Adjustable Preferred are not entitled to vote. If the equivalent of six quarterly dividends payable on the Fleet Adjustable Preferred are in default, the number of directors of Fleet will be increased by two and the holders 103 115 of all outstanding classes and series of Fleet preferred stock, voting as a single class without regard to series, will be entitled to elect two additional directors until all accrued dividends have been paid. In addition, the vote of the holders of two-thirds of the Fleet Adjustable Preferred voting as a separate class, is required in order to amend or alter the Fleet New Articles in a manner which would adversely affect the preferences, rights, powers or privileges of the Fleet Adjustable Preferred; and the vote of two-thirds of the Fleet Adjustable Preferred, and all of the classes and series of Fleet preferred stock ranking on a parity, either as to dividends or upon liquidation, with the Fleet Adjustable Preferred, voting together as a single class, is required in order to reclassify stock of Fleet into stock ranking prior, either as to dividends or upon liquidation, to the Fleet Adjustable Preferred, or to authorize the creation or issuance of stock, or of a security convertible into or evidencing a right to purchase stock, ranking prior, either as to dividends or upon liquidation, to the Fleet Adjustable Preferred. In the event of any liquidation, dissolution or winding up of Fleet, the holders of the Fleet Adjustable Preferred are entitled to receive $50.00 per share plus accrued and unpaid dividends. Shares of Fleet Adjustable Preferred may be redeemed at the option of Fleet at a redemption price per share of $50.00 per share, plus accrued and unpaid dividends. Fleet 9.30% Preferred. Dividends on the outstanding Fleet 9.30% Preferred are cumulative and are payable quarterly at the rate of 9.30% per annum. So long as any shares of the Fleet 9.30% Preferred are outstanding, Fleet may not redeem, repurchase or otherwise acquire any shares of the Fleet Common Stock or any other class of Fleet stock ranking junior to or on a parity with the Fleet 9.30% Preferred either as to dividends or upon liquidation unless full cumulative dividends on all outstanding shares of Fleet 9.30% Preferred are paid for all past dividend payment periods. Further, if any dividends on the Fleet 9.30% Preferred are in arrears, Fleet may not redeem, purchase or otherwise acquire any shares of the Fleet 9.30% Preferred unless all outstanding shares of such class are simultaneously redeemed, purchased or otherwise acquired, except pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of the Fleet 9.30% Preferred. Except as indicated below or except as expressly required by applicable law, the holders of the Fleet 9.30% Preferred are not entitled to vote. If the equivalent of six quarterly dividends payable on any of the Fleet 9.30% Preferred are in default, the number of directors of Fleet will be increased by two and the holders of all outstanding classes and series of Fleet preferred stock, voting as a single class without regard to series, will be entitled to elect two additional directors until all accrued dividends have been paid. In addition, the vote of the holders of two-thirds of the Fleet 9.30% Preferred, voting as a separate class, is required in order to amend or alter the Fleet New Articles in a manner which would adversely affect the preferences, rights, powers or privileges of the Fleet 9.30% Preferred; and the vote of two-thirds of the Fleet 9.30% Preferred, and all of the classes and series of Fleet preferred stock ranking on a parity, either as to dividends or upon liquidation, with the Fleet 9.30% Preferred, voting together as a single class, is required in order to reclassify stock of Fleet into stock ranking prior, either as to dividends or upon liquidation, to the Fleet 9.30% Preferred, or to authorize the creation or issuance of stock, or of a security convertible into or evidencing a right to purchase stock, ranking prior, either as to dividends or upon liquidation, to the Fleet 9.30% Preferred. In the event of any liquidation, dissolution or winding up of Fleet, the holders of the Fleet 9.30% Preferred are entitled to receive $250.00 per share plus accrued and unpaid dividends. The Fleet 9.30% Preferred is redeemable on at least 30 but not more than 60 days notice, at the option of Fleet, as a whole or in part, at any time on and after October 15, 1997 at a redemption price equal to $250 per share plus accrued and unpaid dividends. Fleet 9.35% Preferred. Dividends on the outstanding Fleet 9.35% Preferred are cumulative and are payable quarterly at the rate of 9.35% per annum. So long as any shares of the Fleet 9.35% Preferred are outstanding, Fleet may not redeem, repurchase or otherwise acquire any shares of the Fleet Common Stock or any other class of Fleet stock ranking junior to or on a parity with the Fleet 9.35% Preferred either as to dividends or upon liquidation unless full cumulative dividends on all outstanding shares of Fleet 9.35% Preferred are paid for all past dividend payment periods. Further, if any dividends on the Fleet 9.35% Preferred 104 116 are in arrears, Fleet may not redeem, purchase or otherwise acquire any shares of the Fleet 9.35% Preferred unless all outstanding shares of such class are simultaneously redeemed, purchased or otherwise acquired, except pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of the Fleet 9.35% Preferred. Except as indicated below or except as expressly required by applicable law, the holders of the Fleet 9.35% Preferred are not entitled to vote. If the equivalent of six quarterly dividends payable on any of the Fleet 9.35% Preferred are in default, the number of directors of Fleet will be increased by two and the holders of all outstanding classes and series of Fleet preferred stock, voting as a single class without regard to series, will be entitled to elect two additional directors until all accrued dividends have been paid. In addition, the vote of the holders of two-thirds of the Fleet 9.35% Preferred, voting as a separate class, is required in order to amend or alter the Fleet New Articles in a manner which would adversely affect the preferences, rights, powers or privileges of the Fleet 9.35% Preferred; and the vote of two-thirds of the Fleet 9.35% Preferred, and all of the classes and series of Fleet preferred stock ranking on a parity, either as to dividends or upon liquidation, with the Fleet 9.35% Preferred, voting together as a single class, is required in order to reclassify stock of Fleet into stock ranking prior, either as to dividends or upon liquidation, to the Fleet 9.35% Preferred, or to authorize the creation or issuance of stock, or of a security convertible into or evidencing a right to purchase stock, ranking prior, either as to dividends or upon liquidation, to the Fleet 9.35% Preferred. In the event of any liquidation, dissolution or winding up of Fleet, the holders of the Fleet 9.35% Preferred are entitled to receive $250.00 per share plus accrued and unpaid dividends. The Fleet 9.35% Preferred is redeemable on at least 30 but not more than 60 days notice, at the option of Fleet, as a whole or in part, at any time on and after January 15, 2000 at a redemption price equal to $250 per share plus accrued and unpaid dividends. Fleet New Depositary Shares. The shares of the Fleet 9.30% Preferred are represented by the Fleet 9.30% Depositary Shares. Each Fleet 9.30% Depositary Share represents a one-tenth interest in a share of Fleet 9.30% Preferred and is not subject to any mandatory redemption or sinking fund provisions. The shares of the Fleet 9.35% Preferred are represented by the Fleet 9.35% Depository Shares. Each Fleet 9.35% Depositary Share represents a one-tenth interest in a share of Fleet 9.35% Preferred and is not subject to any mandatory redemption or sinking fund provisions. Fleet has agreed to use its best efforts to list the Fleet New Depositary Shares on the Stock Exchange, subject to official notice of issuance. The Fleet New Depositary Shares will be freely transferable under the Securities Act, subject to the restrictions discussed under "THE MERGER -- Resales of Fleet Common Stock, Fleet New Preferred Stock, Fleet New Depositary Shares and Fleet Warrants Received in the Merger". Each series of the Fleet New Depositary Shares will be deposited under a Deposit Agreement (the "Deposit Agreements") between Fleet and Fleet-RI, as depositary (the "Depositary"). Subject to the terms of each Deposit Agreement, each owner of a Fleet New Depositary Share will be entitled, in proportion to the applicable fraction of a share of Fleet New Preferred Stock represented by such Fleet New Depositary Share, to all the rights and preferences of the Fleet New Preferred Stock represented thereby (including dividend, voting, redemption and liquidation rights). The Fleet New Depositary Shares will be evidenced by depositary receipts issued pursuant to the applicable Deposit Agreement ("Depositary Receipts"). Upon consummation of the Merger and return of a properly completed transmittal letter, Depositary Receipts will be distributed by the Exchange Agent in exchange for Depositary Receipts representing Shawmut Depositary Shares. Copies of the forms of Deposit Agreements and Depositary Receipts are filed as exhibits to the Registration Statement of which this Joint Proxy Statement-Prospectus is a part and the following summary is qualified in its entirety by reference to such exhibits. Pending the preparation of definitive engraved Depositary Receipts, the Depositary may, upon the written order of Fleet, issue temporary Depositary Receipts substantially identical to (and entitling the holders thereof to all the rights pertaining to) the definitive Depositary Receipts but not in definitive form. Definitive 105 117 Depositary Receipts will be prepared thereafter without unreasonable delay, and temporary Depositary Receipts will be exchangeable for definitive Depositary Receipts at Fleet's expense. DIVIDENDS AND OTHER DISTRIBUTIONS. The Depositary will distribute all cash dividends or other cash distributions received in respect of the Fleet New Preferred Stock to the record holders of Fleet New Depositary Shares relating to such Fleet New Preferred Stock in proportion to the numbers of such Fleet New Depositary Shares owned by such holders. In the event of a distribution other than in cash, the Depositary will distribute property received by it to the record holders of Fleet New Depositary Shares entitled thereto, unless the Depositary determines that it is not feasible to make such distribution, in which case the Depositary may, with Fleet's approval, sell such property and distribute the net proceeds from such sale to such holders. REDEMPTION OF FLEET NEW DEPOSITARY SHARES. If a series of Fleet New Preferred Stock represented by Fleet New Depositary Shares is subject to redemption, the Fleet New Depositary Shares will be redeemed from the proceeds received by the Depositary resulting from the redemption, in whole or in part, of such series of Fleet New Preferred Stock held by the Depositary. The redemption price per Fleet New Depositary Share will be equal to the applicable fraction of the redemption price per share payable with respect to such series of the Fleet New Preferred Stock. Whenever Fleet redeems shares of Fleet New Preferred Stock held by the Depositary, the Depositary will redeem as of the same redemption date the number of Fleet New Depositary Shares representing shares of Fleet New Preferred Stock so redeemed. If fewer than all the Fleet New Depositary Shares are to be redeemed, the Fleet New Depositary Shares to be redeemed will be selected by lot or pro rata as may be determined by the Depositary. VOTING THE FLEET NEW PREFERRED STOCK. Upon receipt of notice of any meeting at which the holders of the Fleet New Preferred Stock are entitled to vote, the Depositary will mail the information contained in such notice of meeting to the record holders of the Fleet New Depositary Shares relating to each Fleet New Preferred Stock. Each record holder of such Fleet New Depositary Shares on the record date (which will be the same date as the record date for the Fleet New Preferred Stock) will be entitled to instruct the Depositary as to the exercise of the voting rights pertaining to the amount of the Fleet New Preferred Stock represented by such holder's Depositary Shares. The Depositary will endeavor, insofar as practicable, to vote the amount of the Fleet New Preferred Stock represented by such Fleet New Depositary Shares in accordance with such instructions, and Fleet will agree to take all action which may be deemed necessary by the Depositary in order to enable the Depositary to do so. The Depositary will abstain from voting shares of the Fleet New Preferred Stock to the extent it does not receive specific instructions from the holder of Fleet New Depositary Shares representing such Fleet New Preferred Stock. AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT. The form of the applicable Depositary Receipts evidencing the Fleet New Depositary Shares and any provision of either Deposit Agreement may at any time be amended by agreement between Fleet and the Depositary. However, any amendment which materially and adversely alters the rights of the holders of a respective series of Fleet New Depositary Shares will not be effective unless such amendment has been approved by the holders of at least a majority of such Fleet New Depositary Shares then outstanding. Each Deposit Agreement will only terminate if (i) all outstanding applicable Fleet New Depositary Shares have been redeemed or (ii) there has been a final distribution in respect of the applicable Fleet New Preferred Stock in connection with any liquidation, dissolution or winding up of Fleet and such distribution has been distributed to the holders of the applicable Depositary Receipts. CHARGES OF DEPOSITARY. Fleet will pay all transfer and other taxes and governmental charges arising solely from the existence of the depositary arrangements. Fleet will pay charges of the Depositary in connection with the initial deposit of the Fleet New Preferred Stock and any redemption of the Fleet New Preferred Stock. Holders of Depositary Receipts will pay other transfer and other taxes and governmental charges and such other charges as are expressly provided in the Deposit Agreement to be for their accounts. 106 118 MISCELLANEOUS. The Depositary will forward all reports and communications from Fleet which are delivered to the Depositary and which Fleet is required or otherwise determines to furnish to the holders of the Fleet New Preferred Stock. Neither the Depositary nor Fleet will be liable if it is prevented or delayed by law or any circumstances beyond its control in performing its obligations under the Deposit Agreement. The obligations of Fleet and the Depositary under the Deposit Agreement will be limited to performance in good faith of their duties thereunder and they will not be obligated to prosecute or defend any legal proceeding in respect of any Fleet New Depositary Shares or Fleet New Preferred Stock unless satisfactory indemnity is furnished. Fleet and the Depositary may rely upon written advice of counsel or accountants, or upon information provided by persons presenting Fleet New Preferred Stock for deposit, holders of Fleet New Depositary Receipts or other persons believed to be competent and on documents believed to be genuine. RESIGNATION AND REMOVAL OF DEPOSITARY. The Depositary may resign at any time by delivering to Fleet notice of its election to do so, and Fleet may at any time remove the Depositary, any such resignation or removal to take effect upon the appointment of a successor Depositary and its acceptance of such appointment. Such successor Depositary must be appointed within 60 days after delivery of the notice of resignation or removal and must be a bank or trust company having its principal office in the United States and having a combined capital and surplus of at least $50,000,000. DESCRIPTION OF FLEET WARRANTS At the Effective Time, the Shawmut Warrants will be converted based on the Common Exchange Ratio automatically into the Fleet Warrants, which will be issued under a Warrant Agreement between Fleet and Fleet-RI, as Warrant Agent, to be dated as of the Effective Time ("the "Warrant Agreement"), a copy of which is filed as an exhibit to the Registration Statement of which this Joint Proxy Statement-Prospectus is a part. The following is a general description of the terms and conditions of the Fleet Warrants and Warrant Agreement and is qualified in its entirety by reference to the provisions of the Fleet Warrants and the Warrant Agreement. The Warrant Agreement provides for the issuance of 1,185,836 Fleet Warrants, each representing initially the right to acquire upon exercise one share of Fleet Common Stock at an Exercise Price of $24.78 per Fleet Warrant (the "Exercise Price"), subject to certain adjustments described below. The Fleet Warrants are exercisable for a period commencing on the Effective Time and ending at 5:00 p.m., New York City time, on January 18, 1996. The Exercise Price and/or the securities issuable upon exercise are subject to adjustment as set forth in the Warrant Agreement to account for payment by Fleet of stock dividends payable in shares of Fleet Common Stock, subdivisions, combinations and reclassifications of the Fleet Common Stock into a greater or lesser number of shares, mergers or consolidations of Fleet with or into another company, and the acquisition of all the outstanding Fleet Common Stock by any person or company. The Fleet Warrants permit Fleet to make additional reductions in the Exercise Price in order that any event treated for federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. The Warrant Agreement provides that upon any adjustment to the Exercise Price, as provided therein, Fleet will cause a notice to be given to the holders of the Fleet Warrants of such adjustment. Subject to the terms of the Warrant Agreement, a Fleet Warrant may be exercised upon surrender of the Warrant Certificate evidencing such Warrant (the "Warrant Certificate") to Fleet-RI, as Warrant Agent, with the subscription form on the reverse of such Warrant Certificate duly executed and the signatures thereon guaranteed, accompanied by payment of the Exercise Price by certified or official bank check made payable to the Warrant Agent at the office or agency designated for such purpose, which will initially be the corporate trust office of the Warrant Agent in New York, New York and Providence, Rhode Island. Each Fleet Warrant may only be exercised in whole. No fractional shares of Fleet Common Stock, cash or other consideration in lieu thereof, will be issued. In the case of the exercise of less than all the Fleet Warrants represented by a Warrant Certificate, Fleet will 107 119 execute, and the Warrant Agent will authenticate, a new Warrant Certificate for the balance of such Fleet Warrants. Fleet intends to use its best efforts to list the Fleet Warrants on the Stock Exchange, subject to official notice of issuance. The Fleet Warrants will be freely transferable under the Securities Act, subject to the restrictions discussed under "THE MERGER -- Resales of Fleet Common Stock, Fleet New Preferred Stock, Fleet New Depositary Shares and Fleet Warrants Received in the Merger". SELECTED PROVISIONS IN THE FLEET EXISTING ARTICLES AND THE FLEET NEW ARTICLES Business Combinations with Related Persons. The Fleet Existing Articles require that neither Fleet nor any of its subsidiaries may engage in a Business Combination (as hereinafter defined) with a Related Person (as hereinafter defined) unless such Business Combination (a) was approved by an 80% vote of the Fleet Board prior to the time the Related Person became such; (b) is approved by a vote of 80% of the Continuing Directors and a majority of the entire Fleet Board and certain conditions as to price and procedure are complied with; or (c) is approved by a vote of 80% of Fleet's outstanding shares of Fleet capital stock entitled to vote generally in the election of directors, voting as a single class. Under the Fleet Existing Articles, a "Business Combination" includes any merger or consolidation of Fleet or any of its subsidiaries into or with a Related Person or any of its affiliates or associates; any sale, exchange, lease, transfer or other disposition to or with a Related Person or any of its affiliates or associates of all, substantially all or any Substantial Part (defined as assets having a value of more than 5% of the total consolidated assets of Fleet and its subsidiaries) of the assets of Fleet or any of its subsidiaries; any purchase, exchange, lease or other acquisition by Fleet or any of its subsidiaries of all or any Substantial Part of the assets or business of a Related Person or any of its affiliates or associates; any reclassification of securities, recapitalization or other transaction which has the effect, directly or indirectly, of increasing the proportionate amount of voting shares of Fleet or any subsidiary which are beneficially owned by a Related Person; and the acquisition by a Related Person of beneficial ownership of voting securities, securities convertible into voting securities or any rights, warrants or options to acquire voting securities of a subsidiary of Fleet; a "Related Person" includes any person who is the beneficial owner of 10% or more of Fleet's voting shares, as of the date on which a binding agreement providing for a Business Combination is authorized by the Fleet Board or prior to the consummation of a Business Combination or any person who is an affiliate of Fleet and was the beneficial owner of 10% or more of Fleet's then outstanding voting shares at any time within the five years preceding the date on which a binding agreement providing for a Business Combination is authorized by the Fleet Board; and the "Continuing Directors" are those individuals who were members of the Fleet Board prior to the time a Related Person became the beneficial owner of 10% or more of Fleet's voting stock or those individuals designated as Continuing Directors (prior to their initial election as directors) by a majority of the then Continuing Directors. To amend these provisions, a super majority vote (80%) of the Fleet Board, a majority vote of the Continuing Directors and a super majority vote (80%) of the stockholders is required unless the amendment is recommended to the stockholders by a majority of the Fleet Board and not less than 80% of the Continuing Directors, in which event only the vote provided under Rhode Island law is required. The Fleet New Articles will contain identical provisions. Because, among other things, the Merger was unanimously approved by the Fleet Board, the Merger would not trigger these provisions of the Fleet Existing Articles. Directors. The Fleet Existing Articles contain a number of additional provisions which are intended to delay an insurgent's ability to take control of the Fleet Board, even after an insurgent has obtained majority ownership of the Fleet Common Stock. The Fleet Existing Articles provide for a classified Board of Directors, consisting of three classes of directors serving staggered three-year terms. Directors of Fleet may only be removed for cause and only (a) by a vote of the holders of 80% of the outstanding shares of Fleet stock entitled to vote thereon voting separately as a class at a meeting called for that purpose or (b) by a vote of a majority of the Continuing Directors and a majority of the Fleet Board as constituted at that time. Vacancies on the Fleet Board, whether due to resignation, death, incapacity or an increase in the number of directors, may only be filled by the Fleet Board, acting by a vote of 80% of the directors then in office. The Fleet Existing Articles provide that the number of directors of Fleet (exclusive of directors to be elected by the holders of any one or more series of the Preferred Stock voting separately as a class or classes) that shall constitute the 108 120 Fleet Board shall be 13, unless otherwise determined by resolution adopted by a super majority vote (80%) of the Fleet Board and a majority of the Continuing Directors. Pursuant to such an adopted resolution, the number of directors that may serve is currently fixed at 15, except in the event that quarterly dividends are not paid on non-voting Preferred Stock as described above, and may only be increased by the affirmative vote of 80% of the Fleet Board and a majority of the Continuing Directors. At the Effective Time of the Merger, the Fleet Board will be constituted at 20 members. A super majority vote (80%) of the Fleet Board, a majority vote of the Continuing Directors and a super majority vote (80%) of the outstanding shares of Fleet stock entitled to vote thereon voting separately as a class are required to amend any of these provisions. The Fleet New Articles will contain identical provisions. COMPARISON OF STOCKHOLDERS' RIGHTS GENERAL Fleet and Shawmut are incorporated in Rhode Island and Delaware, respectively. Stockholders of Shawmut receiving Fleet Common Stock in connection with the Merger, whose rights as stockholders are currently governed by the Delaware General Corporation Law ("Delaware law"), Shawmut's Restated Certificate of Incorporation (the "Shawmut Certificate"), and Shawmut's by-laws (the "Shawmut By-laws") will, upon consummation of the Merger, automatically become stockholders of Fleet, and their rights will be governed by Rhode Island law, the Fleet Existing Articles (or the Fleet New Articles if adopted) and Fleet's by-laws (the "Fleet By-laws"). The following is a summary of the material differences between the rights of holders of Fleet Common Stock and those of Shawmut Common Stock. The following does not purport to be a complete description of the differences between the rights of Fleet and Shawmut stockholders. Such differences may be determined in full by reference to Rhode Island law, Delaware law, the Fleet Existing Articles, the Fleet New Articles, the Shawmut Certificate, the Fleet By-laws and the Shawmut By-laws. VOTING RIGHTS Required Vote For Certain Business Combinations. Both Rhode Island law and Delaware law generally require approval of a merger, consolidation, dissolution or sale of all or substantially all of a corporation's assets by the affirmative vote of the holders of a majority of the outstanding shares of the corporation entitled to vote thereon, unless otherwise provided by statute. In addition, under Rhode Island law, if any class of stock is entitled to vote separately, approval of the plan of merger or consolidation, dissolution or sale of all or substantially all assets also requires the affirmative vote of the holders of a majority of the shares of each class of stock entitled to vote as a class thereon. Delaware law, absent a charter provision to the contrary, does not require such a class vote. Rhode Island law provides that unless the corporate charter provides otherwise the vote of the stockholders of a surviving corporation is not required to approve a merger if: (a) the plan of merger does not amend the corporation's charter and (b) the number of shares of common stock to be issued or transferred in the merger plus the number of shares of common stock into which any other securities to be issued in the merger are convertible within one year does not exceed one-third of the total combined voting power of all classes of stock then entitled to vote for the election of directors which would be outstanding immediately after the merger. Pursuant to Delaware law, unless the corporate charter provides otherwise, no vote of the stockholders of a surviving corporation is required to approve a merger if: (a) the agreement of merger does not amend in any respect the corporation's charter; (b) each share of the corporation's stock outstanding immediately prior to the effective date of the merger is to be an identical outstanding or treasury share of the surviving corporation after the effective date of the merger; and (c) either no shares of common stock of the surviving corporation and no shares, securities or obligations convertible into such stock are to be issued or delivered under the plan of merger, or the number of authorized unissued shares or treasury stock of the surviving corporation's common stock to be issued or delivered under the plan of merger plus the number of shares of common stock into which any other shares, securities or obligations to be issued or delivered in the plan of merger are initially 109 121 convertible does not exceed 20% of the surviving corporation's common stock outstanding immediately prior to the effective date of the merger. No provisions relating to the approval of mergers with unrelated third parties by holders of the respective corporation's common stock are contained in the corporate charters of either Fleet or Shawmut. As more fully described above, the Fleet Existing Articles contain, and the Fleet New Articles will contain, certain provisions regarding business combinations with certain persons. See "DESCRIPTION OF FLEET CAPITAL STOCK, FLEET NEW PREFERRED STOCK, FLEET NEW DEPOSITARY SHARES AND FLEET WARRANTS -- Selected Provisions in the Fleet Existing Articles and the Fleet New Articles". The Shawmut Certificate provides that any "Business Combination" involving Shawmut and a person who beneficially owns 10% or more of Shawmut's outstanding voting stock or certain affiliates or associates of Shawmut who beneficially owned, at any time within the 2-year period prior to the date in question, 10% or more of Shawmut's outstanding voting stock (a "Shawmut Related Person") must be approved by the holders of at least 80% of the votes entitled to be cast by the holders of the outstanding shares of Shawmut voting stock (the "Shawmut Voting Requirement") voting together as a single class. The Shawmut Voting Requirement does not apply if (i) the Business Combination is approved by a majority of the "Shawmut Continuing Directors" (defined generally to include any person who is unaffiliated with, and not a representative of, the Shawmut Related Person in the Business Combination and who either was a director immediately prior to the time the Shawmut Related Person became such a person or was recommended or elected to succeed such a Shawmut Continuing Director by a majority of the Shawmut Continuing Directors); or (ii) certain "fair price" (defined generally to mean that the consideration to be received by stockholders in such Business Combination shall be at least equal to the higher of, and in the same form as, the consideration paid by the Shawmut Related Person for such person's acquisition of the applicable Shawmut capital stock within the two year period immediately prior to the first public announcement of the proposal of the Business Combination or in the transaction in which such person became a Shawmut Related Person) and other criteria are met. As defined in the Shawmut Certificate, a "Business Combination" includes, among other things: (i) any merger or consolidation of Shawmut or any Shawmut subsidiary with any Shawmut Related Person or affiliate or associate thereof; (ii) the sale, lease, exchange, mortgage, pledge, transfer or other disposition by Shawmut of assets or securities having a fair market value equal to 10% or more of the total shareholders' equity of Shawmut ("Substantial Assets") to a Shawmut Related Person or an affiliate or associate thereof; (iii) the acquisition by Shawmut of Substantial Assets from a Shawmut Related Person or an affiliate or associate thereof; (iv) the adoption of a plan or proposal for the liquidation or dissolution of Shawmut proposed by or on behalf of a Shawmut Related Person or an affiliate or associate thereof; (v) any transaction that has the effect of increasing the proportionate share of any class of equity or convertible security of Shawmut or any subsidiary that is beneficially owned by a Shawmut Related Person or any affiliate or associate thereof; and (vi) any agreement or arrangement providing for any of the foregoing. This provision of the Shawmut Certificate can only be amended or repealed upon the affirmative vote by the holders of at least 80% of the voting stock entitled to vote, voting together as a single class, unless such amendment or repeal is unanimously recommended by the Shawmut Board and all of such directors are Shawmut Continuing Directors. Charter and By-Law Amendments. Both Delaware law and Rhode Island law generally provide that an amendment to a corporate charter requires (i) that the board of directors adopt a resolution submitting the proposed amendment to the shareholders and (ii) the affirmative vote of the holders of a majority of the outstanding shares entitled to vote thereon. Both Delaware law and Rhode Island law also provide for any class of stock or series to vote as a class on the proposed amendment if the amendment would change the number or par value of the aggregate authorized shares of a class. Rhode Island law also requires separate class voting if the amendment would, among other things, change the designations, preferences, limitations or relative rights of the class, effect an exchange or create a right of exchange of all or any part of the shares of another class into shares of the class, or create a new class of shares having rights and preferences prior and superior to the shares of the class. Delaware law also provides for class voting if the amendment would alter or modify the powers, preferences or special rights of the shares of such class to affect such class adversely. Under both 110 122 Delaware law and Rhode Island law, the board of directors' authority to adopt, amend or repeal the by-laws of a corporation, if provided for in the articles of incorporation, does not divest or limit the power of stockholders to adopt, amend or repeal by-laws; Rhode Island law specifically provides that any amendment by the board of directors to the by-laws may be subsequently changed by the affirmative vote of holders of a majority of the shares entitled to vote thereon. The Fleet Existing Articles provide, and the Fleet New Articles will provide, that any amendment, alteration, change or repeal of the provisions in such charter relating to (i) directors and business combinations requires the affirmative vote of 80% of the Fleet Board and a majority of the Continuing Directors and the affirmative vote of the holders of 80% or more of the outstanding shares of capital stock entitled to vote generally in the election of directors, voting separately as a class; and (ii) the provisions in the Fleet Existing Articles or the Fleet New Articles governing the amendment of such articles require the affirmative vote of the holders of 80% or more of the outstanding shares of capital stock entitled to vote generally in the election of directors, voting separately as a class. The Fleet By-laws provide that such by-laws may be altered, amended or repealed in whole or in part and new by-laws may be adopted in whole or in part, only by the affirmative vote of 80% of the Fleet Board and a majority of the Continuing Directors or by an affirmative vote of the holders of at least 50% of the Fleet Common Stock entitled to vote thereon. The Shawmut Certificate provides that the amendment, repeal or adoption of any provisions inconsistent with the provisions of the Shawmut Certificate relating to business combinations shall require the affirmative vote of at least 80% of the votes entitled to be cast by the holders of the outstanding shares of voting stock, voting together as a single class, provided that no such requirement shall apply to any amendment, repeal or adoption unanimously recommended by the Shawmut Board if all such directors are persons who would be eligible to serve as Shawmut Continuing Directors. Any repeal or modification by the stockholders of Shawmut relating to the provisions regarding the management of the business shall not adversely affect any right or protection of a director of Shawmut existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification. The Shawmut Certificate further provides that directors shall have concurrent power with the stockholders to make, alter, amend, change, add to or repeal the Shawmut By-Laws. Any action by stockholders to effect such alteration, change, addition or appeal requires the affirmative vote of a majority of the shares represented and entitled to vote at the meeting at which the action is to be taken. The Shawmut Certificate further provides that notice of any such action specifying or describing the same shall be contained in or accompany the notice of the meeting at which the action is to be taken. SPECIAL MEETINGS; CORPORATE ACTION WITHOUT A MEETING Special Meetings. Rhode Island law provides that a special meeting of stockholders may be called by the president, the board of directors or the holders of 10% or more of the shares entitled to vote at such meeting, or such other officers or persons specified in the charter or by-laws. The Fleet By-laws permit special meetings of stockholders to be called by the Fleet Board pursuant to a resolution adopted by the majority of the Fleet Board, or by the Chairman of the Fleet Board or the president. In addition, the Fleet By-laws require that the Secretary of Fleet must call a special meeting of stockholders upon written request of three or more stockholders holding at least 80% of the outstanding shares of stock of Fleet entitled to vote at such meeting. Under Delaware law, a special meeting of stockholders may be called by the board of directors or such other persons as are authorized by the certificate of incorporation or by-laws. The Shawmut By-laws provide that special meetings may be called by the Shawmut Board, the Chairman of the Shawmut Board or upon written request of seven or more stockholders holding at least 30% of the outstanding shares of Shawmut Common Stock. Corporate Action Without a Meeting. Except for corporate action relating to a merger or consolidation, acquisition or disposition, Rhode Island law permits corporate action without a meeting if the charter of a corporation authorizes such action and the shareholders consenting to such action would be entitled to cast, at 111 123 a meeting at which all stockholders entitled to vote thereon were present, at least the minimum number of votes which would be required to take such action. Rhode Island law further provides that corporate action relating to a merger, consolidation, acquisition or disposition may be taken without a meeting if all stockholders entitled to vote thereon consent in writing. The Fleet Existing Articles authorize, and the Fleet New Articles will authorize, such action by stockholders if the written consent of stockholders having not less than the minimum percentage of the total vote statutorily required for the proposed corporate action is obtained and provided that notice of such action is given to all Fleet stockholders who would have been entitled to vote upon the action if such meeting were held. Delaware law permits corporate action without a stockholder's meeting, without prior notice and without a vote of stockholders upon receipt of written consent of that number of shares that would be necessary to authorize the proposed corporate action at a meeting at which all shares entitled to vote thereon were present and voting, unless the charter expressly provides otherwise. Prompt notice of the taking of action without a meeting by less than unanimous written consent must be given to all stockholders who have not consented in writing. The Shawmut Certificate does not provide otherwise. DIVIDENDS Under Rhode Island law, the board of directors has the power to declare and pay dividends in cash, property or securities of the corporation unless (a) such corporation is or would be thereby made insolvent or (b) the declaration or payment of such dividend would be contrary to any restrictions contained in the charter. Rhode Island law further provides that no distribution may be made (i) if the corporation would become unable to pay its debts as they become due in the usual course of business or (ii) the corporation's total assets would be less than the sum of its liabilities plus, unless the charter permits otherwise, the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution. Under Delaware law, the directors of a corporation are generally permitted to declare and pay dividends out of surplus or out of net profits for the current and/or preceding fiscal year, provided that such dividends will not reduce capital below the amount of capital represented by all classes of issued and outstanding stock having a preference upon the distribution of assets. Also under Delaware law, a corporation may generally redeem or purchase shares of its stock if such redemption or purchase will not impair the capital of the corporation. APPRAISAL RIGHTS Under Rhode Island law, appraisal rights are available only in connection with (a) a statutory merger or consolidation (unless the corporation is to be the surviving corporation and no vote of its stockholders is required to approve the merger); (b) acquisitions which require shareholder approval; and (c) sales or exchanges of all or substantially all of the property and assets of a corporation in a transaction requiring stockholder approval. In addition, unless otherwise provided in the charter, no appraisal rights are available to holders of shares of any class of stock which, as of the date fixed to determine the stockholders entitled to receive notice of the proposed transaction, are (i) registered on a national securities exchange or included as national market securities in the National Association of Securities Dealer's automated quotation system or (ii) held of record by not less than 2,000 stockholders. There are no provisions in the Fleet Existing Articles nor will there be any provisions in the Fleet New Articles providing for appraisal rights. Under Rhode Island law, holders of Fleet capital stock do not have any appraisal rights in connection with the Merger. See "THE MERGER -- Appraisal Rights". Under Delaware law, appraisal rights are available in connection with a statutory merger or consolidation in certain specified situations. Appraisal rights are not available when a corporation is to be the surviving corporation and no vote of its stockholders is required to approve the merger. In addition, unless otherwise provided in the charter, no appraisal rights are available to holders of shares of any class of stock which is either: (a) listed on a national securities exchange or designated as a national market system security on an 112 124 inter-dealer quotation system by the National Association of Securities Dealers, Inc. or (b) held of record by more than 2,000 stockholders, unless such stockholders are required by the terms of the merger to accept anything other than: (i) shares of stock of the surviving corporation; (ii) shares of stock of another corporation which are or will be so listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more that 2,000 stockholders; (iii) cash in lieu of fractional shares of such stock; or (iv) any combination thereof. The Shawmut Certificate has no provisions for appraisal rights. Given that Shawmut Common Stock, Shawmut 9.30% Depositary Shares and Shawmut 9.35% Depositary Shares are listed on the Stock Exchange and Shawmut stockholders will receive Fleet Common Stock or Fleet Depositary Shares in the Merger, holders of Shawmut Common Stock, Shawmut 9.30% Depositary Shares and Shawmut 9.35% Depositary Shares will not have appraisal rights in connection with the Merger; however, the holders of the Shawmut Adjustable Preferred, which is not listed on a national securities exchange nor held by more than 2,000 holders of record, will have appraisal rights under Delaware law. See "THE MERGER -- Appraisal Rights". PROVISIONS RELATING TO DIRECTORS Number of Directors. Under both Rhode Island law and Delaware law a corporation must have a board of directors consisting of at least one director. The Fleet Existing Articles provide that the Fleet Board shall consist of 13 members (exclusive of directors to be elected by holders of any one or more series or classes of the Existing Preferred Stock voting separately as a class or classes) unless otherwise determined from time to time by resolution adopted by an affirmative vote of at least 80% of the Fleet Board and a majority of the Continuing Directors. Pursuant to such an adopted resolution, the number of directors that may serve is currently fixed at 15. As of the Effective Time of the Merger, the Fleet Board will consist of 20 members (exclusive of directors to be elected by holders of any one or more series or classes of the Existing Preferred Stock and the Fleet New Preferred Stock voting separately as a class or classes) unless otherwise determined from time to time by resolution adopted by an affirmative vote of at least 80% of the Fleet Board and a majority of the Continuing Directors. The Shawmut By-laws provide for not less than three directors. The Shawmut By-laws also provide that the majority of directors then in office may, between annual meetings of stockholders, increase the membership of the Shawmut Board by up to eight members. Shawmut currently has 12 directors. Vacancies. The Fleet Existing Articles provide that vacancies in the Fleet Board may be filled only by the vote of 80% of the directors then in office. The Shawmut By-laws provide that vacancies may be filled by a majority of the directors then in office. Classification. Rhode Island law and Delaware law both permit classification of the board of directors if the corporate charter so provides. Delaware law also permits classification of directors if an initial by-law so provides, or by by-law adopted by a vote of the stockholders. The Fleet's Existing Articles and Fleet By-laws provide, and the Fleet New Articles will provide, for classification of the Fleet Board into three classes as nearly equal in number as possible, with one class being elected annually. Neither the Shawmut Certificate nor the Shawmut By-laws provides for such classification of directors. Stockholder Nominations. The holders of Fleet Common Stock may nominate individuals for election to the Fleet Board. The procedure pursuant to which such nomination must occur is set forth in the Fleet By-laws. The Fleet By-laws specify that nominations of persons for election as director may be made at a meeting of stockholders by or at the direction of the Fleet Board, or by any holder of stock entitled to vote thereon who complies with the requisite notice procedure. The notice procedure requires that a stockholder's nomination of a person for election as a director must be made in writing and received by the Secretary of Fleet not less than 30 days prior to the date of the meeting of stockholders, provided, however, that if fewer than 40 days' notice or prior public disclosure of the date of the meeting is given to stockholders, the stockholder's nomination notice must be received not later than the close of business on the seventh day following the first to occur of the publication or mailing of the notice of the meeting date. The Fleet By-laws require that a stockholder's notice to nominate an individual to the Fleet Board include certain information about the nominee, including the information required to be disclosed in solicitations for proxies for election of directors pursuant to 113 125 Regulation 14A under the Exchange Act (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected), along with the name, address, class and number of shares of Fleet beneficially owned by the stockholder giving such notice and by other stockholders known by such stockholder to be supporting such nominees on the date of such stockholder's notice. The Shawmut By-laws establish procedures that must be followed for stockholders to nominate individuals to the Shawmut Board at the annual meeting of stockholders. In order to properly propose that certain business come before the annual meeting of stockholders, a stockholder must provide timely notice in writing to the Secretary of Shawmut, which notice must include a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, and must otherwise comply with the notice requirements. In order to nominate individuals to the Shawmut Board, a stockholder must provide timely notice of such nomination in writing to the Secretary of Shawmut and a written statement by the candidate of his or her willingness to serve. To be timely, notice must be delivered to and received by Shawmut not less than 50 nor more than 75 days prior to the meeting at which directors are to be elected, or, if Shawmut gives less than 65 days' notice of the meeting, then notice by the stockholder must be received by the close of business on the 15th day following the earlier of the date notice of the meeting was mailed or public disclosure of the meeting was made. Such notice to nominate an individual to the Shawmut Board must include certain information about the nominee, including the information required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Exchange Act. Removal. Under Rhode Island law, a director may be removed by the stockholders without cause, if the charter or by-laws so provide but, in the case of a corporation permitting cumulative voting for the election of directors, only if the number of shares voted against removal would not be sufficient to elect the director if voted cumulatively. For a discussion of provisions regarding the removal of directors in the Fleet Existing Articles (which are identical in the Fleet New Articles), see "DESCRIPTION OF FLEET CAPITAL STOCK, FLEET NEW PREFERRED STOCK, FLEET NEW DEPOSITARY SHARES AND FLEET WARRANTS -- Selected Provisions in the Fleet Existing Articles and the Fleet New Articles". Under Delaware law, any director or the entire board of directors of a corporation may be removed, with or without cause, by the holders of a majority of the shares then entitled to elect directors. In the case of a corporation whose board is classified, stockholders may effect such removal only for cause unless the charter provides otherwise. The Shawmut Certificate does not contain any provisions regarding removal of directors other than the provision stating that any Shawmut Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of Shawmut Preferred Stock, voting as a class. DERIVATIVE SUITS Under both Rhode Island law and Delaware law, stockholders may bring suits on behalf of the corporation to enforce the rights of a corporation. Under both Rhode Island law and Delaware law, a person may institute and maintain a suit only if such person was a stockholder at the time of the transaction which is the subject of the suit. Under Rhode Island law, upon final judgment and a finding that the commencement of a derivative action by a stockholder was without reasonable cause, a court may require the plaintiff(s) to pay to the parties named as defendant(s) the reasonable expenses including legal fees incurred by them in defense of such action. In addition, under Delaware law, the plaintiff generally must be a stockholder not only at the time of the transaction which is the subject of the action but also throughout the duration of the derivative suit. Delaware law also requires that the derivative plaintiff make demand on the directors of the corporation to assert the corporate claim unless such demand would be futile before the suit may be prosecuted by the derivative plaintiff. STATE ANTI-TAKEOVER STATUTES Pursuant to Rhode Island law, a corporation shall not engage in any business combination with an interested stockholder (generally defined as the beneficial owner of 10% or more of the corporation's 114 126 outstanding voting stock or an affiliate of the corporation who within five years prior to the date in question was the beneficial owner of 10% or more of the corporation's outstanding voting stock) for a period of five years following the date the stockholder became an interested stockholder unless either (a) the board of directors of the corporation approved the business combination or transaction prior to the date the stockholder became an interested stockholder; (b) holders of two-thirds of the outstanding voting stock, excluding any stock owned by the interested stockholder or any affiliate or associate of the interested stockholder, have approved the business combination at a meeting called for such purpose no earlier than five years after the interested stockholder's stock acquisition date; or (c) the business combination meets each of the following conditions: (i) the nature, form and adequacy of the consideration to be received by the corporation's stockholders in the business combination transaction satisfies certain specific enumerated criteria; (ii) the holders of all the outstanding shares of stock of the corporation not beneficially owned by the interested stockholder are entitled to receive the specified consideration in the business combination transaction; and (iii) the interested stockholder shall not acquire additional shares of voting stock of the corporation except in certain specifically identified transactions. The restrictions prescribed by the statute will not be applicable to any business combination (a) involving a corporation that does not have a class of voting stock registered under the Exchange Act, unless the charter provides otherwise; (b) involving a corporation which did not have a class of voting stock registered under the Exchange Act at the time the corporation's charter was amended to provide that the corporation shall be subject to the statutory restriction provisions and the interested stockholder's stock acquisition date is prior to the effective date of the charter amendment; (c) involving a corporation whose original charter contains a provision expressly electing not to be subject to the statutory restrictions or which adopted an amendment expressly electing not to be subject to the statutory restrictions either to its by-laws prior to March 31, 1991 or to its charter if such charter amendment is approved by the affirmative vote of holders, other than the interested stockholders, and their affiliates and associates, of two-thirds of the outstanding voting stock, excluding the voting stock of the interested stockholders; provided, that the amendment to the charter shall not be effective until 12 months after the vote of the stockholders and shall not apply to any business combination of the corporation with an interested stockholder whose stock acquisition date is on or prior to the effective date of the amendment; or (d) involving a corporation with an interested stockholder who became an interested stockholder inadvertently, if the interested stockholder divests itself of such number of shares so that it is no longer the beneficial owner of 10% of the outstanding voting stock and, but for such inadvertent ownership, was not an interested stockholder within the five-year period preceding the announcement of the business combination. Neither the Fleet Existing Articles, the Fleet New Articles nor the original Fleet charter contain any provisions expressly relating to the non-applicability of the statute. Pursuant to Delaware law, a corporation shall not engage in any business combination with an interested stockholder (generally defined as the holder of 15% or more of the corporation's voting stock) for a period of three years following the date that such stockholder became an interested stockholder, unless (a) the board of directors approved either the business combination or transaction prior to the date that the interested stockholder became an interested stockholder; (b) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned by (i) any persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or (c) on or subsequent to the date the stockholder became an interested stockholder, the board of directors approved the transaction and the stockholders approved the transaction, not by written consent, but at an annual or special meeting of shareholders, with an affirmative vote of two-thirds of the outstanding voting stock, excluding any stock owned by the interested stockholder. The restrictions prescribed by the statute will not be applicable if (a) a corporation's charter or by-laws contain a provision expressly providing that the corporation shall not be subject to such statutory restrictions; (b) if the corporation does not have a class of voting stock that is (i) listed on a national securities exchange; (ii) authorized for quotation on an inter-dealer quotation system of a registered national securities association; or (iii) held of record by more than 2,000 stockholders, unless any of the foregoing results from action taken directly or indirectly by an interested stockholder or from 115 127 a transaction in which a person becomes an interested stockholder; or (c) a stockholder becomes an interested stockholder inadvertently and divests sufficient shares so that the stockholder ceases to be an interested stockholder and would not at any time during the three year period immediately prior to a business combination between the corporation and the interested stockholder have been an interested stockholder but for the inadvertent acquisition; or (d) the business combination is proposed prior to the consummation or abandonment of and subsequent to the earlier of the public announcement or required notice to interested stockholders of a proposed transaction: (i) involving (A) a merger or consolidation (except a merger in respect of which no vote of the stockholders of the corporation is required); (B) a sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets of the corporation or of any direct or indirect majority-owned subsidiary of the corporation having an aggregate market value equal to 50% or more of either the aggregate market value of all the assets of the corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of the corporation; or (C) a proposed tender offer or exchange offer for 50% or more of the outstanding voting stock of the corporation; (ii) is with or by a person who either was not an interested stockholder during the previous 3 years or who became an interested stockholder with the approval of the corporation's board of directors; and (iii) is approved or not opposed by a majority of the members of the board of directors who were directors prior to any person becoming an interested stockholder during the previous 3 years or were recommended for election or elected to succeed such directors by a majority of directors. Neither the Shawmut Certificate nor the Shawmut By-Laws contain any provision expressly providing that the corporation will not be subject to the restrictions prescribed by the statute. See "-- Voting Rights -- Required Vote for Certain Business Combinations". Material Differences in Rights Agreements. The material differences between the Fleet Rights Agreement (which is summarized in "DESCRIPTION OF FLEET CAPITAL STOCK, FLEET NEW PREFERRED STOCK, FLEET NEW DEPOSITARY SHARES AND FLEET WARRANTS"), and the Shawmut Rights Agreement (a description of which is incorporated herein by reference under "INFORMATION INCORPORATED BY REFERENCE"), relate to the stock ownership thresholds and other conditions which would cause the rights issued under the respective rights agreement to separate from the common stock certificates to which such rights are attached and become exercisable. In particular, the stock ownership thresholds under which the rights become exercisable are lower under the Fleet Rights Agreement than under the Shawmut Rights Agreement. Moreover, under the Shawmut Rights Agreement, but not the Fleets Rights Agreement, the rights become exercisable 10 business days after the Shawmut Board deems that, with respect to any person who has become the beneficial owner of 10% or more of the outstanding Shawmut Common Stock (x) such beneficial ownership by such person is intended to cause Shawmut to repurchase the Shawmut stock owned by such person (or enter into other transactions intended to provide such person with financial gain) under circumstances where the Shawmut Board determines that the best interests of Shawmut would not be served by taking such action or (y) such beneficial ownership is causing or is reasonably likely to cause a material adverse impact on the business or prospects of Shawmut. COMPARATIVE COMMON STOCK PRICES AND DIVIDENDS Fleet. Fleet Common Stock is listed on the Stock Exchange under the symbol FLT. The following table sets forth the high and low sales prices for Fleet Common Stock as reported on the Stock Exchange Composite Tape, and the cash dividends declared, for the calendar periods indicated.
PRICE CASH ------------------- DIVIDENDS YEAR HIGH LOW DECLARED ---------------------------------------------------- ------- ------- --------- 1991 First Quarter..................................... $18.00 $ 9.625 $.20 Second Quarter.................................... 25.875 15.50 .20 Third Quarter..................................... 26.25 21.50 .20 Fourth Quarter.................................... 25.50 20.125 .20
116 128
PRICE CASH ------------------- DIVIDENDS YEAR HIGH LOW DECLARED ---------------------------------------------------- ------- ------- --------- 1992 First Quarter..................................... $ 30.75 $ 24.25 $ .20 Second Quarter.................................... 31.00 26.75 .20 Third Quarter..................................... 30.875 25.75 .20 Fourth Quarter.................................... 33.875 27.50 .225 1993 First Quarter..................................... $ 37.875 $30.25 $ .225 Second Quarter.................................... 37.625 28.25 .25 Third Quarter..................................... 35.50 30.375 .25 Fourth Quarter.................................... 35.625 29.50 .30 1994 First Quarter..................................... $ 38.00 $ 31.75 $ .30 Second Quarter.................................... 41.375 34.375 .35 Third Quarter..................................... 40.50 34.875 .35 Fourth Quarter.................................... 37.875 29.875 .40 1995 First Quarter..................................... $ 35.125 $29.875 .40 Second Quarter (through May 3, 1995).............. .40
Shawmut. Shawmut Common Stock is listed on the Stock Exchange under the symbol SNC. The following table sets forth the high and low sales prices for Shawmut Common Stock as reported on the Stock Exchange Composite Tape, and the cash dividends declared, for the calendar periods indicated.
PRICE CASH ------------------- DIVIDENDS YEAR HIGH LOW DECLARED ---------------------------------------------------- ------- ------- --------- 1991 First Quarter..................................... $ 7.625 $ 2.875 -- Second Quarter.................................... 7.25 4.125 -- Third Quarter..................................... 10.875 4.375 -- Fourth Quarter.................................... 10.25 7.25 -- 1992 First Quarter..................................... $ 15.875 $ 8.875 -- Second Quarter.................................... 19.25 12.125 -- Third Quarter..................................... 18.75 13.375 -- Fourth Quarter.................................... 19.50 14.50 -- 1993 First Quarter..................................... $ 23.875 $17.875 $.10 Second Quarter.................................... 25.125 19.50 .10 Third Quarter..................................... 26.375 22.50 .10 Fourth Quarter.................................... 25.125 19.375 .20
117 129
PRICE CASH ------------------- DIVIDENDS YEAR HIGH LOW DECLARED ---------------------------------------------------- ------- ------- --------- 1994 First Quarter..................................... $ 24.00 $ 19.75 $ .20 Second Quarter.................................... 25.75 19.25 .20 Third Quarter..................................... 23.125 20.25 .20 Fourth Quarter.................................... 21.125 16.375 .22 1995 First Quarter..................................... $ 27.00 $ 16.50 $ .22 Second Quarter (through May 3, 1995)..............
On May 3, 1995, the latest practicable trading day before the printing of this Joint Proxy Statement-Prospectus, the closing sales price for Fleet Common Stock as reported on the Stock Exchange Composite Tape was $ per share and the closing sales price for Shawmut Common Stock as reported on the Stock Exchange Composite Tape was $ per share. On February 17, 1995, the last full trading day prior to the announcement of the proposed Merger, the closing sales price of Fleet Common Stock as so reported was $33.625 per share, and the closing sales price of Shawmut Common Stock as so reported was $20.625 per share. On January 24, 1995, the closing sales price for Fleet Common Stock and Shawmut Common Stock as so reported was $31.25 and $18.00, respectively. Subsequent to January 24, 1995, an increase in the market price for the Shawmut Common Stock occurred. Morgan Stanley believes that such increase was attributable to merger speculation concerning a potential sale of Shawmut. See "THE MERGER -- Fairness Opinions of Financial Advisors -- Shawmut." EXPERTS The consolidated financial statements of Fleet appearing in Fleet's 1994 Annual Report to Stockholders and incorporated by reference in Fleet's 1994 Annual Report on Form 10-K for the year ended December 31, 1994, incorporated by reference herein (and elsewhere in the Registration Statement) have been incorporated by reference herein (and elsewhere in the Registration Statement) in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, and upon the authority of said firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP covering the December 31, 1994 financial statements refers to a change in the method of accounting for investments. The consolidated financial statements of Shawmut incorporated in this Joint Proxy Statement-Prospectus by reference to Shawmut's Annual Report on Form 10-K for the year ended December 31, 1994, have been so incorporated in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The consolidated financial statements of Northeast and subsidiaries as of December 31, 1994 and 1993 and for the years then ended, included in Shawmut's Current Report on Form 8-K filed on April 13, 1995 and incorporated by reference into this Joint Proxy Statement-Prospectus, have been incorporated by reference herein and in the Registration Statement of which the Joint Proxy Statement-Prospectus is a part in reliance upon the report of Deloitte & Touche, LLP, independent accountants, dated January 20, 1995, and upon the authority of said firm as experts in accounting and auditing. The financial statements of the Business Finance Division of Barclays Business Credit, Inc. incorporated in this Joint Proxy Statement-Prospectus by reference to Shawmut's Current Report on Form 8-K, filed on April 13, 1995, have been so incorporated in reliance upon the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. 118 130 LEGAL OPINIONS The legality of the shares of Fleet Common Stock to be issued to the holders of Shawmut Common Stock pursuant to the Merger and certain other legal matters in connection with the Merger, will be passed upon by Edwards & Angell, 2700 Hospital Trust Tower, Providence, Rhode Island 02903. V. Duncan Johnson, a partner of Edwards & Angell, is a director of Fleet-RI, Fleet-CT and Fleet-MA and beneficially owns 4,052 shares of Fleet Common Stock. Edwards & Angell has from time to time acted as counsel in advising Shawmut and its affiliates with respect to certain matters and in connection with various transactions. Edwards & Angell did not act as counsel to Shawmut or its affiliates with respect to the Merger or any transaction in connection therewith. The Merger Agreement provides as a condition to each party's obligation to consummate the Merger that Fleet receive the opinion of Wachtell, Lipton, Rosen & Katz, New York, New York, special counsel to Fleet, substantially to the effect that the Merger will constitute a "reorganization" under Section 368 of the Code. The Merger Agreement also provides as a condition to each party's obligation to consummate the Merger that Shawmut receive the opinion of Skadden, Arps, Slate, Meagher and Flom, New York, New York, special counsel to Shawmut, substantially to the effect that the Merger will constitute a "reorganization" under Section 368 of the Code. SOLICITATION OF PROXIES The cost of solicitation of proxies from holders of Fleet Common Stock and Shawmut Common Stock, including the cost of reimbursing brokerage houses and other custodians, nominees or fiduciaries for forwarding proxies and proxy statements to their principals, will be borne by each respective party. Georgeson & Co. has been retained by Fleet to assist in the solicitation of proxies and will be compensated in the estimated amount of $20,000 plus reasonable out-of-pocket expenses. Morrow & Co. has been retained by Shawmut to assist in the solicitation of proxies and will be compensated in the estimated amount of $11,000 plus reasonable out-of-pocket expenses. In addition to such solicitation and solicitation by use of the mails, solicitation may be made in person or by telephone or telegraph by certain directors, officers and regular employees of Fleet and Shawmut who will not receive additional compensation therefor. Fleet and Shawmut estimate the total cost to solicit proxies to be $450,000, of which $52,000 has been incurred through May 3, 1995. 119 131 [ALTERNATE FLEET PAGE] AMENDMENT AND RESTATEMENT OF FLEET EXISTING ARTICLES; ELECTION OF FLEET DIRECTORS; RATIFICATION OF FLEET INDEPENDENT AUDITORS VOTING REQUIREMENTS The Fleet Board has fixed the close of business on May 3, 1995 as the Record Date. Only the holders of record of the outstanding shares of Fleet Common Stock on the Record Date will be entitled to notice of, and to vote at, the Fleet Meeting and any adjournments or postponements thereof. At the Record Date, shares of Fleet Common Stock were outstanding and entitled to vote. The presence, in person or by proxy, of a majority of the aggregate number of shares of Fleet Common Stock outstanding and entitled to vote on the Record Date is necessary to constitute a quorum at the Fleet Meeting. Abstentions and broker non-votes will be counted as present at the Fleet Meeting for purposes of determining the presence or absence of a quorum for the transaction of business. Under Rhode Island law, if a quorum is present, the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on the subject matter is required to approve an action, unless a greater vote is required under Rhode Island law or a corporation's articles or bylaws. Neither the Fleet Existing Articles nor Fleet's By-laws vary this requirement with regard to the election of directors or the ratification of the selection of independent auditors. The affirmative vote of the holders of a majority of the outstanding shares of Fleet Common Stock entitled to vote on the amendment and restatement of the Fleet Existing Articles is required to approve such action. With regard to the election of directors, votes may be cast in favor or against. Abstentions may not be specified with respect to the election of directors. Abstentions may be specified with respect to the amendment and restatement of the Fleet Existing Articles and the ratification of the selection of independent auditors and will have the same legal effect as a vote against such proposals. Under the Stock Exchange rules, brokers who hold shares in street name for customers who are the beneficial owners of such shares have the authority to vote on certain "routine" items when they have not received instructions from such beneficial owners. With respect to certain non-routine matters, however, a broker does not have authority to vote absent instructions from the beneficial owners. Accordingly, a broker non-vote generally occurs when customers have not provided any voting instructions with respect to certain non-routine matters. The election of directors and the ratification of the selection of auditors are considered routine matters under the Stock Exchange rules. Accordingly, Fleet does not expect to receive any broker non-votes with respect to these matters. Broker non-votes will have no effect on the outcome of the election of directors or the ratification of the selection of independent auditors. The vote to amend and restate the Fleet Existing Articles is considered a "non-routine" matter under the Stock Exchange rules, and brokers who hold shares in street name for customers who are the beneficial owners of such shares will be prohibited from giving a proxy to vote such shares with respect to the vote to amend and restate the Fleet Existing Articles, without specific instructions from such customers. Accordingly, the failure of such customers to provide specific instructions with respect to their shares of Fleet Common Stock to their broker will have the effect of a negative vote on such matter. See "MEETING OF FLEET STOCKHOLDERS -- Proxies; Voting and Revocation" and "-- Votes Required to Approve the Merger; Principal Stockholders" for a discussion of the foregoing with respect to the vote on the Merger. 120 132 [ALTERNATE FLEET PAGE] PRINCIPAL STOCKHOLDERS The following table sets forth information as to the only persons known to the Fleet Board to be the beneficial owners of 5% or more of the outstanding shares of Fleet Common Stock:
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS ---------------------------------------------- ----------------------- ---------- Shawmut National Corporation.................. 28,176,050(1) [ ]%(1) One Federal Street Boston, MA 02211 777 Main Street Hartford, CT 06115 KKR Associates(2)............................. 22,533,994(2) [ ]%(2) 9 West 57th Street New York, NY 10019 - --------------- (1) Based upon information contained in a Schedule 13D dated February 20, 1995 and filed under the Exchange Act by Shawmut. In connection with the execution of the Merger Agreement, Fleet granted Shawmut an option (the "Fleet Option") to purchase up to 28,171,050 shares (the "Fleet Option Shares") of Fleet Common Stock upon the occurrence of certain events, none of which has occurred as of the date hereof. Because the Fleet Option is not currently exercisable, Shawmut has disclaimed beneficial ownership of the Fleet Option Shares. Certain directors and executive officers of Shawmut beneficially own and have sole voting and sole dispositive power with respect to, in the aggregate, 5,000 shares of Fleet Common Stock. Such 28,176,050 shares represent [ ]% of the Fleet Common Stock outstanding as of the Record Date (after giving effect to the exercise of the Fleet Option). (2) KKR Associates, which was organized by Kohlberg, Kravis, Roberts & Co. ("KKR"), a private investment firm, as the general partner of each of Whitehall Associates, L.P. and KKR Partners II, L.P. (the "Partnerships"), filed a Schedule 13D with the Commission on July 22, 1991, stating that it, together with the Partnerships, beneficially owned 1,415,000 shares of Dual Convertible Preferred Stock (100% of the series) and 6,500,000 DCP Rights. The Dual Convertible Preferred Stock is convertible into 16,033,994 shares of Fleet Common Stock. The total number of shares of Fleet Common Stock represented by the DCP Rights and the Dual Convertible Preferred Stock is 22,533,994 shares, or [ ]% of the Fleet Common Stock outstanding as of the Record Date (after giving effect to the conversion into Fleet Common Stock of the Dual Convertible Preferred Stock and the exercise of the DCP Rights). KKR Associates is a Delaware limited partnership consisting of Henry R. Kravis, George R. Roberts, Robert I. MacDonnell, Paul E. Rather, Michael W. Michelson, Saul A. Fox, Michael T. Tokarz and James H. Greene, Jr. as general partners, and certain past and present employees of KKR and partnerships and trusts for the benefit of the families of the general partners and employees of KKR and a former general partner of KKR, as limited partners. KKR, KKR Associates, the Partnerships and Messrs. Kravis, Rather and Tokarz have an address of 9 West 57th Street, New York, New York 10019. Messrs. Roberts, MacDonnell, Michelson, Fox and Greene have an address of 101 California Street, San Francisco, California 94111. KKR Associates has sole voting and investment power for the Partnerships.
Fleet knows of no other person who beneficially owned more than 5% of the outstanding Fleet Common Stock as of the Record Date. 121 133 [ALTERNATE FLEET PAGE] SECURITIES OF FLEET OWNED BY MANAGEMENT The following table shows the number of shares of Fleet Common Stock and the percent of outstanding Fleet Common Stock beneficially owned by directors, nominees, the Named Executive Officers (as defined under "Compensation of Directors and Officers") and all directors and executive officers as a group, as of the Record Date. "Beneficial ownership" means, pursuant to Commission regulations, the sole or shared power to vote, or to direct the voting of, a security and/or investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security) and/or the right to acquire such ownership within sixty days.
NAME OF INDIVIDUAL AMOUNT PERCENT OR IDENTITY OF BENEFICIALLY OF GROUP OWNED(1)(2) CLASS(1)(3) ----------------- ----------- ----------- William Barnet, III................................................. 8,807 * Bradford R. Boss.................................................... 14,476 * Paul J. Choquette, Jr............................................... 7,909 * James F. Hardymon................................................... 3,339 * Robert M. Kavner.................................................... 3,240 * Lafayette Keeney.................................................... 2,708 * Raymond C. Kennedy.................................................. 20,564 [ ] Ruth R. McMullin.................................................... 2,195 * Arthur C. Milot..................................................... 239,610 [ ] Terrence Murray..................................................... 430,135 [ ] Thomas D. O'Connor.................................................. 25,808 [ ] Michael B. Picotte.................................................. 30,243 [ ] John A. Reeves...................................................... 77,117 [ ] John R. Riedman..................................................... 363,222 [ ] John S. Scott....................................................... 12,309 * Robert J. Higgins................................................... 182,804 [ ] H. Jay Sarles....................................................... 219,534 [ ] Michael R. Zucchini................................................. 135,833 [ ] Eugene M. McQuade................................................... 41,836 [ ] All directors and executive officers as a group (25 persons)...................................................... 2,063,330 - --------------- (1) Includes 225,000, 97,800, 107,402, 85,100, 20,800 and 195,000 shares, respectively, that may be acquired by Mr. Murray, Mr. Higgins, Mr. Sarles, Mr. Zucchini and Mr. McQuade, and all other directors and executive officers as a group within sixty days of the Record Date pursuant to employee stock options. (2) All of the Fleet directors, nominees and Named Executive Officers tendered any and all of their publicly-held shares of FMG common stock in connection with the FMG Repurchase. (3) For purposes of this calculation, the number of shares of Fleet Common Stock deemed to be outstanding includes shares that may be issued to Fleet's directors and executive officers upon conversion of other securities of Fleet within sixty days of the Record Date. * Less than .01%
AMENDMENT AND RESTATEMENT OF FLEET EXISTING ARTICLES The Fleet Existing Articles presently provide for authorized capital stock of Fleet consisting of 300,000,000 shares of Fleet Common Stock, 16,000,000 shares of Fleet $1 Par Preferred Stock and 1,500,000 shares of Fleet $20 Par Adjustable Rate Preferred Stock. The Fleet Board has recommended to the stockholders that the Fleet Existing Articles be amended (i) to increase the authorized shares of Fleet Common Stock from 300,000,000 to 600,000,000; (ii) to change the par value of the Fleet Common Stock from $1.00 to $0.01; and (iii) to delete from the Fleet Existing Articles certain series of the Fleet $1 Par Preferred Stock and the Fleet $20 Par Adjustable Rate Preferred Stock which have been redeemed or converted in full. The affirmative vote of the holders of a majority of the outstanding shares of Fleet Common Stock entitled to vote is required to amend the Fleet Existing Articles. 122 134 [ALTERNATE FLEET PAGE] Proposed Increase in Fleet Common Stock. On the Record Date, the number of shares of Fleet Common Stock either issued or reserved for issuance totaled approximately . Fleet expects to issue approximately shares of Fleet Common Stock to holders of Shawmut Common Stock in the Merger. Thus, out of the 300,000,000 shares currently authorized, Fleet would have only approximately shares of Fleet Common Stock available for future issuance following the Merger. Fleet intends to continue to finance its operations through the issuance from time to time of various debt and equity securities, and to continue the acquisition of banking and other financial services businesses using Fleet Common Stock as consideration under certain conditions. The continued availability of sufficient shares of Fleet Common Stock is desirable to provide Fleet with the flexibility to take advantage of opportunities to issue Fleet Common Stock in such situations. Fleet currently has no plans, understandings, agreements or arrangements concerning the issuance of additional shares of Fleet Common Stock, except for shares to be issued in the Merger and shares presently reserved for issuance. If any plans, understandings, agreements or arrangements are made concerning the issuance of any such shares, holders of then outstanding shares of Fleet's capital stock may or may not be given the opportunity to vote thereon, depending on the nature of any such transactions, the law applicable thereto and the judgment of the Fleet Board regarding the submission thereof to Fleet's stockholders. See "DESCRIPTION OF FLEET CAPITAL STOCK, FLEET NEW PREFERRED STOCK, FLEET NEW DEPOSITARY SHARES AND FLEET WARRANTS -- Selected Provisions in the Fleet Existing Articles and the Fleet New Articles" for a description of certain antitakeover provisions in the Fleet Existing Articles and the Fleet New Articles. THE FLEET BOARD RECOMMENDS A VOTE "FOR" THIS PROPOSAL. Proposed Change in Par Value from $1.00 to $0.01. The Fleet Board has recommended a change in the par value of the Fleet Common Stock from $1.00 to $0.01. Franchise taxes in the State of Rhode Island are paid based on the par value of a corporation's capital stock. Assuming that stockholders approve the increase in the authorized Fleet Common Stock from 300,000,000 to 600,000,000, this change in par value would have the effect of saving Fleet on an annual basis approximately $150,000 in franchise taxes paid to the State of Rhode Island. A change in par value has no effect on the underlying value of the Fleet Common Stock. THE FLEET BOARD RECOMMENDS A VOTE "FOR" THIS PROPOSAL. Proposed Deletion of Redeemed or Converted Preferred Stock. The Fleet Existing Articles currently provide for the Fleet $20 Par Adjustable Rate Preferred Stock and three series of the Fleet $1 Par Preferred Stock, all of which have been redeemed or converted in full (the "Obsolete Preferred Stock"). As permitted under Rhode Island law, Fleet has cancelled such shares, which have now returned to the status of authorized but unissued shares of Fleet $20 Par Adjustable Rate Preferred Stock and Fleet $1 Par Preferred Stock, respectively. The amendment of the Fleet Existing Articles to delete the provisions of such Obsolete Preferred Stock therefrom, however, requires the approval of the holders of Fleet Common Stock. All of such Obsolete Preferred Stock was added to the Fleet Existing Articles in connection with previous acquisitions by Fleet, and has been redeemed or converted in full in accordance with their terms. Fleet has no intention of issuing preferred stock with terms identical to the Obsolete Preferred Stock. The Fleet Board therefore recommends that the Fleet Existing Articles be amended to delete the provisions of the Obsolete Preferred Stock. THE FLEET BOARD RECOMMENDS A VOTE "FOR" THIS PROPOSAL. 123 135 [ALTERNATE FLEET PAGE] ELECTION OF DIRECTORS The Fleet Board is divided into three classes, with each class serving staggered terms of three years, so that only one class is elected in any one year. Five directors are to be elected at the Fleet Meeting to serve until the 1998 Annual Meeting and until their respective successors are elected and have qualified. Such nominees are Bradford R. Boss, James F. Hardymon, Arthur C. Milot, John A. Reeves and John R. Riedman. Directors are elected by the affirmative vote of a majority of Fleet Common Stock entitled to vote thereon, represented in person or by proxy, at the Fleet Meeting when a quorum is present. Each of the nominees for director is presently a director of Fleet. Each has consented to being named a nominee in this Joint Proxy Statement-Prospectus and has agreed to serve as a director if elected at the Fleet Meeting. In the event that any nominee is unable to serve, the persons named in the proxy have discretion to vote for other persons if such other persons are designated by the Fleet Board. The Fleet Board has no reason to believe that any of the nominees will be unavailable for election. As previously discussed elsewhere in this Joint Proxy Statement-Prospectus, from and after the Effective Time, the Fleet Board will consist of 20 persons, divided into three classes of directors. Messrs. Murray and Alvord will each be directors of Fleet, and with the approval of the respective Boards of Directors of Fleet and Shawmut, will each designate an additional eleven and seven individuals, respectively, to be members of the Fleet Board following the Merger. As of the date of this Joint Proxy Statement-Prospectus, such directors have not been designated by Messrs. Murray and Alvord and their respective Boards of Directors. THE FLEET BOARD RECOMMENDS A VOTE "FOR" ALL NOMINEES FOR ELECTION AS DIRECTORS. NOMINEES FOR DIRECTOR
NOMINEE, AGE AND COMMITTEE PRINCIPAL OCCUPATION AND MEMBERSHIP OTHER INFORMATION - ----------------- -------------------------------------------------------------------------- Terms Expiring in 1998 CHAIRMAN, A.T. CROSS COMPANY BRADFORD R. BOSS Mr. Boss, a graduate of the University of Rhode Island, joined A.T. Cross 62 Company, a manufacturer of writing instruments, in 1958, became President EXECUTIVE in 1971 and was elected Chairman and Chief Executive Officer in 1979. In COMMITTEE; April 1993 Mr. Boss became Chairman of A.T. Cross Company. A former member HUMAN RESOURCES of the Board of Governors of the American Stock Exchange and a director of AND Bausch & Lomb, Inc., Mr. Boss also has served as President and Chairman of PLANNING the Writing Instrument Manufacturers Association. He was elected to the COMMITTEE Fleet Board in 1976.
124 136 [ALTERNATE FLEET PAGE]
NOMINEE, AGE AND COMMITTEE PRINCIPAL OCCUPATION AND MEMBERSHIP OTHER INFORMATION - ----------------- -------------------------------------------------------------------------- CHAIRMAN AND CHIEF EXECUTIVE OFFICER, TEXTRON INC. Mr. Hardymon was elected to the Fleet Board in 1991. Mr. Hardymon joined Textron Inc., a diversified manufacturing company, in November 1989 as JAMES F. HARDYMON President and Chief Operating Officer, at which time he was named to the 60 Textron Board of Directors. In 1992, he was elected Chief Executive EXECUTIVE Officer and, in 1993, was elected Chairman. From 1987 to 1989, Mr. COMMITTEE; Hardymon was President and Chief Operating Officer of Emerson Electric Co. HUMAN RESOURCES Mr. Hardymon received his Bachelor's and Master's degrees in civil AND engineering from the University of Kentucky. Mr. Hardymon has been a PLANNING Trustee of the University of Kentucky since 1991, and a director of the COMMITTEE Paul Revere Corporation since 1993. PRIVATE INVESTOR ARTHUR C. MILOT A graduate of Harvard University, Mr. Milot has been a director of Fleet 62 since 1976. He was President of Brewster Lumber Company, a supplier of EXECUTIVE building materials and household appliances, from 1969 to 1986. Mr. Milot COMMITTEE; also serves as a director of each of Fleet-CT, Fleet-MA and Fleet-RI. HUMAN RESOURCES AND PLANNING COMMITTEE PRESIDENT, MID-CONTINENT RESOURCES, INC. A graduate of the University of Utah, Mr. Reeves has served as President of Mid-Continent Resources, Inc., a coal mining company, since 1979, and as President of Pitkin Iron Corporation, an iron mining company, since 1982. He became a director of Fleet in 1988, having been a director of Norstar Bancorp Inc. ("Norstar") since 1972. Mr. Reeves is a director of JOHN A. REEVES Mid-Continent Resources, Inc. and Pitkin Iron Corporation. He serves as an 69 emeritus member of the Board of Trustees of the Colorado School of Mines AUDIT COMMITTEE and is a member of the American Institute of Mining Engineers. CHAIRMAN, RIEDMAN CORPORATION Mr. Riedman, named a director of Norstar in 1985, was President of Riedman Corporation, which is engaged in the property and casualty insurance marketing and real estate development businesses, for 25 years until he became Chairman in 1991. He became a director of Fleet in 1988. Mr. Riedman serves as a director and past Chairman of the Rochester Museum and Science Center, Treasurer and past Chairman of the Rochester Chamber of Commerce and Chairman of the Monroe County Airport Advisory Committee. He JOHN R. RIEDMAN is a trustee of St. John Fisher College and of Genesee Hospital. He is a 66 member of the National Association of Surety Bond Producers and a member AUDIT COMMITTEE of the Nominating Committee of the United Way of Rochester.
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DIRECTOR, AGE AND COMMITTEE - ---------------------- PRINCIPAL OCCUPATION AND Terms Expiring in 1996 OTHER INFORMATION --------------------------------------------------------------------- PRESIDENT, GILBANE BUILDING COMPANY A graduate of Brown University and Harvard Law School, Mr. Choquette has been President and director of Gilbane Building Company, a building construction company, since 1981 after having served as Executive Vice President since 1975. He was elected to the Fleet Board in 1982. Mr. Choquette is Chairman of the Board of Directors of Gilbane Properties, Inc., a real estate development and management company, a director of Carlisle Corporation and The Rhode Island PAUL J. CHOQUETTE, JR. Foundation, former Chairman of the New England Council, Inc. and a 56 trustee of Eastern Utilities Associates. He is also a trustee EXECUTIVE COMMITTEE; emeritus of Brown University, a director of the National Conference RISK MANAGEMENT of Christians and Jews and a member of the President's Council of COMMITTEE Providence College. EXECUTIVE, CREATIVE ARTISTS AGENCY, INC. Mr. Kavner, elected to the Fleet Board in 1986, has been an executive with Creative Artists Agency, Inc., a talent agency and advisory service business in the entertainment industry, since July 1994. From 1984 until 1994, Mr. Kavner held various positions at American Telephone and Telegraph ("AT&T"), including Senior Vice President and Chief Financial Officer since 1984. He became a member of AT&T's Executive Committee in 1989, and in 1993 was named Chief Executive Officer of the Multimedia Product and Services Group of AT&T. He ROBERT M. KAVNER previously was a partner of Coopers & Lybrand, an international 51 accounting firm, for 10 years. A graduate of Adelphi University, Mr. RISK MANAGEMENT Kavner is a director of Duracell Corporation and the Joint Center for COMMITTEE Political and Economic Studies. CHAIRMAN AND PRESIDENT, MOHAWK PAPER MILLS, INC. Elected a director of Norstar in 1984, Mr. O'Connor joined the Fleet Board in 1988. He has been Chairman and President of Mohawk Paper Mills, Inc., a paper manufacturer, since 1971. A Yale University THOMAS D. O'CONNOR graduate, he is a trustee of Siena College and Marvelwood School, a 64 board member and past Chairman of the Albany Medical Center, and a EXECUTIVE COMMITTEE; director of the Institute of Paper Science and Technology and the HUMAN RESOURCES AND American Forest and Paper Association. Mr. O'Connor is a former board PLANNING COMMITTEE member of St. Gregory's School for Boys and Emma Willard School.
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DIRECTOR, AGE AND COMMITTEE PRINCIPAL OCCUPATION AND MEMBERSHIP OTHER INFORMATION - ---------------------- --------------------------------------------------------------------- Terms Expiring in 1996 MANAGING GENERAL PARTNER AND CHIEF EXECUTIVE OFFICER, PICOTTE COMPANIES Mr. Picotte, elected to the Fleet Board in 1989, is a Managing General Partner and Chief Executive Officer of the real estate ownership and management entities comprising the Picotte Companies, Albany, New York, having worked for such entities since 1970. A graduate of Villanova University and the OPM Program of the Harvard University Graduate School of Business, Mr. Picotte serves on the board of directors of various educational and public service organizations, including The Center for Economic Growth and the MICHAEL B. PICOTTE Albany Institute of History and Art. Mr. Picotte also is the Chairman 47 of St. Peter's Hospital. Mr. Picotte has served on the Governor's EXECUTIVE COMMITTEE; Real Estate Advisory Board of the State of New York and has served as CHAIRMAN, RISK a trustee of WMHT-TV (Public Broadcasting) and the College of St. MANAGEMENT COMMITTEE Rose. RETIRED CHAIRMAN, RICHARDSON-VICKS INC. Mr. Scott, elected to the Fleet Board in 1983, retired as Chairman of Richardson-Vicks Inc. and as a director of The Procter & Gamble Company in 1987. He was President and Chief Executive Officer of Richardson-Vicks Inc., a diversified health care and consumer products company, from 1975 until he was named Chairman in 1986. He was a director of Richardson-Vicks Inc. from 1975 to 1987, and had JOHN S. SCOTT been associated with that company and predecessor companies since 68 1950. A graduate of Brown University, Mr. Scott is a director of CHAIRMAN, HUMAN Fleet NY, Perkin-Elmer Corporation, The Stanley Works, and Creative RESOURCES AND Products Resource, Inc., and a director and former Chairman of PLANNING COMMITTEE Cambridge Biotech. Terms Expiring in 1997 PRESIDENT, WILLIAM BARNET & SON, INC. Mr. Barnet became a director of Fleet in 1988, having served as a Norstar director since 1984. He has been President of William Barnet & Son, Inc., a synthetic fiber processing company, since 1976, and is a graduate of Dartmouth College and its Amos Tuck School of Business Administration. Mr. Barnet serves on the boards of numerous civic and WILLIAM BARNET, III business entities, including the Palmetto Business Forum, the South 52 Carolina Textile Manufacturers Association, Spartanburg County CHAIRMAN, Foundation and Converse College. Mr. Barnet also is a director of AUDIT COMMITTEE Spartan Mills and of FMG.
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DIRECTOR, AGE AND COMMITTEE PRINCIPAL OCCUPATION AND MEMBERSHIP OTHER INFORMATION - ---------------------- --------------------------------------------------------------------- CONSULTANT Elected to the Fleet Board in 1986, Mr. Keeney has been a consultant since he retired as Chairman and Chief Executive Officer of Sage-Allen & Co., Inc. in 1990. A graduate of Nichols College, Mr. LAFAYETTE KEENEY Keeney also is a director of Arthur A. Watson & Co., trustee of 68 Suffield Academy and a corporator of Hartford Hospital -- Saint AUDIT COMMITTEE Francis Hospital. CHAIRMAN, KENDELL HOLDINGS INC. Chairman since 1985 of Kendell Holdings Inc., a personal holding company, Mr. Kennedy was Chief Executive Officer and Publisher of the Hudson (N.Y.) Register-Star, a daily newspaper, from 1956 to 1985. Elected a director of Norstar in 1982, he joined Fleet's Board in 1988. Mr. Kennedy is a graduate of Georgetown University. He is past President of the New York State Publishers Association, a former member of the Governmental Relations Committee of the American Newspaper Publishers Association, a former director of Jackson News- papers (New Haven, CT), former Chairman of the Board of Trustees of RAYMOND C. KENNEDY Olana Historic Preservation Site, a trustee and past Chairman of 66 Siena College, a Board member and past Chairman of the AUDIT COMMITTEE; Columbia-Greene Community College Foundation and a trustee of EXECUTIVE COMMITTEE Columbia-Greene Memorial Hospital. MANAGEMENT FELLOW, YALE SCHOOL OF MANAGEMENT Ms. McMullin, elected to Fleet's Board of Directors in 1992, is a Management Fellow at the Yale School of Management, having served as President and Chief Executive Officer of Harvard Business School Publishing Corporation from 1991 to 1994. Ms. McMullin was with John Wiley & Sons, Inc. from 1987 to 1991, where she served as President and Chief Executive Officer from 1989 to 1990. Ms. McMullin is a graduate of Connecticut College and received her Master's Degree from the Yale School of Management. She serves on the boards of directors of Bausch & Lomb, Inc., UNR Industries and Middlesex Mutual Assurance Co. Ms. McMullin also is a director of the Yale University Press, a RUTH R. MCMULLIN past director of Connecticut Health Plan, a member of the Dean's 53 Advisory Board at the Yale School of Management, a member of the RISK MANAGEMENT American Repertory Theatre Advisory Board, and a member of the COMMITTEE corporation of the Deaconess Hospital.
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DIRECTOR, AGE AND COMMITTEE PRINCIPAL OCCUPATION AND MEMBERSHIP OTHER INFORMATION - ---------------------- --------------------------------------------------------------------- CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, FLEET FINANCIAL GROUP, INC. Mr. Murray joined Fleet-RI in 1962 upon his graduation from Harvard University. He became President of Fleet in 1978 and Chairman and Chief Executive Officer in 1982. On January 1, 1988, Mr. Murray became President and Chief Operating Officer of Fleet and on September 20, 1988, he became Chairman, President and Chief Executive TERRENCE MURRAY Officer. He has been a director since 1976. Mr. Murray is a director 55 of A.T. Cross Company, State Mutual Life Assurance Company of CHAIRMAN, EXECUTIVE America, Stop & Shop Companies and FMG. He also serves as a trustee COMMITTEE of Brown University and of Rhode Island School of Design.
COMMITTEES OF THE BOARD OF DIRECTORS The Fleet Board has an Executive Committee, an Audit Committee, a Human Resources and Planning Committee and a Risk Management Committee. The Executive Committee, which held one meeting in 1994, has the power to exercise the power of the full Fleet Board during intervals between meetings of the Fleet Board. The functions of the Audit Committee, which held five meetings in 1994, were revised in April 1994 to include regulatory compliance, in addition to its audit functions. The audit functions include review of the scope of Fleet's internal auditing, the independence of the outside auditors, the adequacy of Fleet's system of internal accounting controls and procedures and the adequacy of management's action with respect to recommendations thereon by Fleet's auditors. The Audit Committee is no longer responsible for loan review. The Human Resources and Planning Committee (formerly known as the Executive Compensation Committee) met five times in 1994 and is responsible for human resources development, which includes all compensation-related matters (including stock options and bonuses), management succession, personnel policy developments and other matters. The Human Resources and Planning Committee also annually reviews and makes recommendations with respect to Fleet's strategic plan. The Risk Management Committee, which met twice in 1994, was formed in April 1994 and is responsible for certain corporate risk areas including loan review, credit administration and asset and liability management. The Regulatory Committee, which previously was responsible for monitoring compliance with recommendations of regulatory reports, was disbanded in April 1994 and its functions were assumed by the Audit Committee. During 1994, the Fleet Board met ten times. All members of the Fleet Board attended at least 75 percent of the aggregate of the meetings of the Fleet Board and its committees on which they served in 1994, except for Mr. Boss who attended 69 percent of such board and committee meetings. The Fleet Board has no nominating committee, as the Fleet Board as a whole studies the qualifications and recommends to the stockholders the election of directors of Fleet. A stockholder may nominate a person for election as a director by complying with Section 3.15 of the Fleet By-laws, which provides that advance notice of a nomination must be delivered to Fleet, which notice must contain the name and certain information concerning the nominee and the stockholders who support the nominee's election. See "COMPARISON OF STOCKHOLDERS' RIGHTS -- Provisions Relating to Directors -- Stockholder Nominations". A copy of such By-law provision may be obtained upon written request directed to the Secretary of Fleet. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Mr. Murray serves on the Board of Directors of A.T. Cross Company, which determines the compensation of senior executives of A.T. Cross Company. Mr. Boss, Chairman of A.T. Cross Company, serves on Fleet's Human Resources and Planning Committee. John Scott, who serves as Chairman of Fleet's Human Resources and Planning Committee, is a director and former Chairman of Cambridge Biotech. In July 1994, Fleet Credit Corporation, a subsidiary of Fleet ("Fleet Credit"), made a $1,007,000 three month term loan to 129 141 [ALTERNATE FLEET PAGE] Cambridge Biotech which was secured by certain pledged deposits and bore interest at a fixed rate of 9.33% per annum. Shortly after such loan was made, Cambridge Biotech filed for reorganization under Chapter 11 of the Federal Bankruptcy Code in July 1994. In September 1994, the pledged deposits were applied to the outstanding balance, as a result of which the loan was repaid in full. The creditors committee for Cambridge Biotech, however, has challenged Fleet Credit's right to such pledged deposits and a federal bankruptcy court recently ruled against Fleet Credit. Fleet Credit has filed an appeal and intends to contest such ruling vigorously. SECTION 16 COMPLIANCE Section 16(a) of the Exchange Act requires Fleet's executive officers and directors, and persons who own more than 10% of a registered class of Fleet's equity securities ("Insiders") to file reports of ownership and changes in ownership with the Commission. Insiders are required by Commission regulations to furnish Fleet with copies of all Section 16(a) reports they file. Based solely on a review of the copies of such reports furnished to Fleet, Fleet believes that during 1994 all Section 16(a) filing requirements applicable to its Insiders were complied with, except that Mr. Kavner inadvertently failed to disclose on a timely basis (one business day late) his acquisition in January 1994 of 1,500 shares of Fleet Common Stock. HUMAN RESOURCES AND PLANNING COMMITTEE REPORT ON EXECUTIVE COMPENSATION Overview. The Human Resources and Planning Committee of the Fleet Board (the "Committee") is comprised of five independent non-employee members of the Fleet Board. The Committee reviews and approves the compensation for Fleet's executive officers, and initiates all compensation actions for the Chief Executive Officer ("CEO"). The Committee's determinations of the compensation for the CEO and the other executive officers are reviewed with all non-employee directors who constitute a majority of the full Board. Fleet's executive compensation program is designed to attract, retain and motivate high quality and experienced executive talent and to provide a direct link to the enhancement of shareholder value. In 1994, the Committee's compensation decisions with respect to the CEO and the four other most highly compensated executive officers (the "Named Executive Officers") were driven primarily by its strategy to reduce the emphasis on fixed compensation, in the form of base salary, as a component of total pay, and increase the emphasis on variable compensation, in the form of performance-based bonuses and equity-based awards, in order to more closely link the Named Executive Officers' pay with the interests of Fleet's shareholders. This strategy is reflected in Fleet's pay program that has approximately two-thirds of the total compensation opportunity for the Named Executive Officers (and a very significant portion for other executive officers) in at-risk variable cash and equity-based components. The combination of all compensation components is intended to ensure a pay-for-performance linkage and produce total pay for the Named Executive Officers at the median of the compensation paid to executives in comparable positions at the 25 largest (based on asset size) domestic financial institutions (the "Peer Group"). The Peer Group is the peer group shown in the Stock Performance Graph. With respect to the executive officers, other than the Named Executive Officers, references herein to the "Peer Group" shall mean a broader group, which includes the 25 largest (based on asset size) domestic financial institutions and certain additional institutions which fall within the top 50 (based on asset size). Within this policy framework, the exact amounts paid to each of the executive officers in the form of base salary, incentive awards and long-term incentive awards are discretionary based on the Committee's subjective assessment of certain quantitative and qualitative factors. Although the factors considered may differ from year to year, in 1994 the Committee considered primarily: (i) Fleet's performance in 1994, as measured by Return on Equity ("ROE"), Net Income and Return on Assets ("ROA"), and (ii) each individual's performance as it relates to Fleet's financial goals and strategic objectives, including the substantial improvement in Fleet's efficiency ratio, the further reduction in non-performing assets, strong loan growth, the completion of certain strategic acquisitions and the performance of the lines of business for which the officer is responsible. The Committee has retained the discretion to assign relative weights to these factors as it deems appropriate and, in 1994, no relative weights were assigned. As discussed in this report, the CEO makes recommendations to the Committee regarding base salary, bonus amounts and equity awards to the executive officers, other than the CEO and, in 1994, the Committee approved such recommendations without change. 130 142 [ALTERNATE FLEET PAGE] In order to determine compensation practices and levels within the Peer Group, the Committee reviews information contained in Peer Group proxy statements. The Committee also reviews the results of surveys regarding actual and anticipated compensation trends within the Peer Group to determine competitive ranges of Peer Group compensation and ensure the appropriateness of executive officer compensation positioning. Based on the foregoing information, the Committee believes that 1994 salaries for Fleet's Named Executive Officers remain above the median of base salaries; however, total cash compensation (including salary and bonus) appears to be approximately at the median. Further, consistent with the Committee's philosophy of emphasizing performance-based long-term incentive pay, total compensation (including salary, bonus and equity awards) appears to be slightly above the estimated median of compensation paid to executives in similar positions in the Peer Group. In 1994, the Committee carefully considered and reviewed with outside advisors the impact of Section 162(m) of the Code and the preliminary regulations promulgated thereunder (the "IRS Regulations"). Section 162(m) limits the corporate deductions for compensation paid to Fleet's Named Executive Officers to $1 million per year, unless certain requirements are met. In an effort to enable Fleet to achieve maximum tax deductibility of its compensation costs related to bonus awards to its Named Executive Officers and awards under Fleet's stock option and restricted stock plans, the Committee recommended, and the Fleet Board of Directors approved and submitted for shareholder approval, a new bonus plan for the Named Executive Officers (the "NEO Bonus Plan") and certain technical amendments to Fleet's 1992 Stock Option and Restricted Stock Plan (the "1992 Stock Plan"). The NEO Bonus Plan and the 1992 Stock Plan amendments were intended to conform with the performance-based compensation requirements of the IRS Regulations. Shareholder approval was obtained in each instance. Since the proposed IRS Regulations may change significantly before final regulations are adopted under Section 162(m), there can be no assurance that amounts paid under either the NEO Bonus Plan or the 1992 Stock Plan will be fully deductible. The Committee will continue to take the deductibility of executive compensation into consideration while ensuring that Fleet maintains the leadership it requires to further the interests of its shareholders. Executive Compensation Program. Fleet's executive compensation program consists of three primary components: Base Salary. The base salary of each executive officer (including the CEO) is set at an amount within an established salary range which reflects the executive's position, duties and level of responsibility within Fleet. The salary ranges consist of minimum and maximum levels distributed around an average of base salaries paid to executives who hold substantially similar positions within the Peer Group. The base salary level is reviewed every 18 months. Evaluations (including recommendations for salary increases) are made, in the case of executive officers other than the CEO, by the CEO and, in the case of the CEO, by the Committee. The CEO's recommendations are based on the same factors outlined above. The Committee has decided to not seek to qualify the Base Salary component of its compensation program under the IRS Regulations. The Committee believes that any amount of Base Salary which may be paid in excess of $1 million will be immaterial. Annual Incentive. The NEO Bonus Plan and the Management Bonus Plan (which excludes the Named Executive Officers) support Fleet's compensation objective of paying for performance that increases shareholder value by providing for bonuses under the plans only if Fleet achieves specified target levels of ROE and Net Income. (1) NEO Bonus Plan. The NEO Bonus Plan permits the Committee to award bonuses to the Named Executive Officers only if certain performance goals related to Net Income and ROE are achieved for a particular year. Based on Fleet's performance in 1994, the maximum bonus awards payable under the NEO Bonus Plan to the CEO and to each of the other Named Executive Officers were $1,685,750 and $842,875, respectively. The Committee retains the discretion to decrease (but not increase) such bonus award amounts. The Committee's determination of exact bonus awards are discretionary based on a subjective assessment of certain objective quantitative and qualitative factors cited earlier in this report. With respect to the Named Executive Officers, other than the CEO, the CEO submits recommendations to the Committee regarding individual bonus amounts based on the same factors considered by the Committee. 131 143 [ALTERNATE FLEET PAGE] (2) Management Bonus Plan. Fleet's executive officers (except for the Named Executive Officers) and certain other employees are eligible to participate in the Management Bonus Plan. The Management Bonus Plan provides for a bonus pool which is based on Fleet's performance in achieving pre-established target levels (as determined annually by the Committee) of ROE (50% of the bonus pool) and Net Income (20% of the bonus pool). The remaining 30% of the bonus pool is discretionary and intended to account for extraordinary events, measures not specifically reflected in ROE and Net Income, and specific subsidiary performance. The CEO submits proposed individual bonus awards under the Management Bonus Plan to the Committee for approval. Such recommendations are based on the same factors cited earlier herein and generally are intended to fall within an approved bonus range for each executive's position, duties and level of responsibility within Fleet. The bonus ranges are intended to result in actual bonus payments which are at the median of bonuses paid to executives in comparable positions within the Peer Group. Long-Term Incentive. Long-term incentive awards, which include qualified and non-qualified stock options, stock appreciation rights and restricted stock awards, act as a retention tool and link the executive officers' opportunity for financial reward with that of the shareholders. Long-term incentive awards also ensure that short-term performance is adequately balanced with the achievement of longer-range objectives which are in the best interests of the shareholders. The Committee's determinations regarding individual grants of stock options and performance-based restricted stock awards are discretionary based on a subjective assessment of the various factors cited in this report, and are made without regard to the amount or terms of options and restricted stock already held by the executive officers, either individually or as a group. In granting long-term incentive awards in 1994, the Committee gave primary consideration to its stated compensation philosophy of emphasizing variable, at risk compensation in the total mix of compensation paid to its executives. Stock options are generally awarded at the average market price on the date of the grant, so that gains for the executive officers are comparable to those of a shareholder purchasing a share of Fleet Common Stock on the same date. Generally, options vest in 20% annual increments, beginning on the first anniversary of the date of grant, and expire in not more than ten years. The Committee believes that dependence on stock options for a significant portion of executives' compensation more closely aligns such executives' interest with those of Fleet's shareholders, since the ultimate value of such compensation is linked directly to stock price. The CEO, in consultation with Fleet's Human Resources staff, submits proposed stock option grants for the executive officers, other than the CEO, to the Committee for approval. As with proposed salary increases and bonus payments, such recommendations are discretionary based on the factors cited earlier herein, but generally fall within approved option award ranges for particular positions within Fleet. Such option ranges are intended to result in option awards to the executive officers which are at the median of option awards granted to executives in comparable positions within the Peer Group. The Committee did not award any stock appreciation rights in 1994 in order to avoid the negative accounting consequences to Fleet associated with such awards. Restricted stock awards are tied to longer-term business objectives, thereby further strengthening the link of the executive's potential financial gain to that of the shareholders. Such stock awards are also an important vehicle to retain key executives and build stock ownership. The terms of the restricted stock awarded in 1991 and 1992 provide that the transfer restrictions lapse five years from the date of grant; however, if the average closing price of Fleet Common Stock measured over a consecutive four-month period reaches a specified target level during the third year, the restrictions lapse with respect to half of the award as of January 1st of the fourth year from the date of grant. In that regard, as of January 1, 1995, the restrictions lapsed with respect to fifty percent of the restricted stock awarded in 1991. In September 1994, the Committee awarded performance-based restricted stock under the 1992 Stock Plan to each of the Named Executive Officers. This long-term incentive differs from the restricted stock previously awarded and more closely aligns executive pay with increases in shareholder value. The restrictions on such shares will lapse, if at all, based on a formula tied to cumulative earnings per share growth measured over a three-year period (1994 to 1997). The Named Executive Officers will forfeit their restricted stock awards if cumulative earnings per share growth is less than a specified threshold amount. To the extent that Fleet's performance exceeds the threshold target, a varying amount of shares up to 100% of the shares awarded will vest as of October 1, 1997. Thus, the awards are designed to provide the Named Executive Officers with an incentive opportunity linked both to corporate financial performance and shareholder value. 132 144 [ALTERNATE FLEET PAGE] CEO Compensation. In 1994, Fleet's most highly compensated officer was Terrence Murray, Chairman, President and Chief Executive Officer. The Committee believes that Mr. Murray's 1994 compensation appropriately reflects Fleet's performance in 1993 and 1994, as well as Mr. Murray's past and expected future contributions to Fleet in the short and longer term. Mr. Murray was not present during any Committee or Fleet Board discussions concerning his compensation. Based on Mr. Murray's scheduled performance and salary review, the Committee increased Mr. Murray's salary to $992,200, effective January 1994. In determining the amount of Mr. Murray's salary increase, the Committee gave primary consideration to the Corporation's overall financial performance in 1993, as well as the other factors discussed in this report. Mr. Murray's compensation for 1994 also includes a bonus in the amount of $1,400,000 awarded under the NEO Bonus Plan. The Committee exercised its judgment in determining the amount of Mr. Murray's award, which represents approximately 83% of his bonus opportunity under the NEO Bonus Plan. The Committee's decision was endorsed unanimously by the Fleet Board. The Committee took into account the quantitative and qualitative factors cited herein, with particular emphasis placed on Fleet's overall financial performance in 1994. In 1994, despite the increasingly competitive financial services industry and challenging interest rate environment, under Mr. Murray's leadership Fleet reported record earnings of $613 million, an increase of 26% over 1993. The significant increase in earnings was primarily the result of significant expense control combined with lower credit costs and steadily improving loan growth. In addition, Fleet's ROA increased to 1.27% from 1.06% in 1993, and ROE rose to 18.77% from 1993's 16.07%. Nonperforming assets fell 14% during 1994 to their lowest level in five years, and noninterest expense also was reduced by approximately $185 million, or 8%, due to implementation of cost-cutting strategies. In addition, Fleet successfully implemented cost control measures which reduced Fleet's efficiency ratio from 66.25% reported in 1993 to 63.7% at year-end 1994. Finally, Fleet successfully completed certain strategic acquisitions, including Sterling Bancshares Corp. and NBB in early 1995. In September 1994, Mr. Murray was granted options to purchase 100,000 shares of Fleet Common Stock and 31,250 shares of performance-based restricted stock. The Committee's decisions with respect to these awards followed the same principles as those described for executive officers generally. The Committee believes that Mr. Murray's total compensation package for 1994 will place him slightly above the median of total compensation awarded to chief executive officers within the Peer Group. This report has been provided by the Human Resources and Planning Committee. John S. Scott (Chairman) Arthur C. Milot Bradford R. Boss Thomas D. O'Connor James F. Hardymon
COMPENSATION OF DIRECTORS AND OFFICERS DIRECTORS' COMPENSATION. Members of the Fleet Board receive an annual retainer of $25,000, which retainer Fleet believes is commensurate with the retainers paid to directors of companies in the Peer Group. Directors also are paid an attendance fee of $1,500 for each Fleet Board meeting attended. Committee members are paid $750 per committee meeting attended, and all committee chairmen are paid an additional fee of $5,000 per year. Fleet has a standard arrangement pursuant to which directors may elect to defer all or part of their directors' fees. Fees are not paid to directors employed by Fleet. The Supplemental Compensation Plan for former Norstar directors, as assumed by Fleet, provides that, under certain circumstances, Fleet will pay to, or in respect of, each eligible director of Fleet who was previously a Norstar director, upon death or termination of service as a director, 40 quarterly payments of $5,000 each, commencing on the first day of the first calendar quarter following the calendar quarter of death or termination of service as a director. William Barnet, III, Raymond C. Kennedy, John A. Reeves, John R. Riedman and Thomas D. O'Connor were each previously directors of Norstar. 133 145 [ALTERNATE FLEET PAGE] In January 1994, the Fleet Board adopted a new retirement plan for all of its directors who are not former Norstar directors (the "Qualified Directors"). Under the new plan, each Qualified Director (who is not also an employee of Fleet) is entitled to participate after he or she has served on the Fleet Board for at least five years. The plan provides that each Qualified Director is credited with $20,000 for each year of service up to a maximum of 10 years. A Qualified Director may not collect under the plan until he or she retires from the Fleet Board, but in no event before his or her 65th birthday. EXECUTIVE COMPENSATION. The following table shows, for the fiscal years ending December 31, 1994, 1993 and 1992, the compensation of the Chief Executive Officer and the four other most highly compensated executive officers of Fleet (the "Named Executive Officers"). SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------------------------- LONG-TERM COMPENSATION ANNUAL COMPENSATION AWARDS -------------------------------------- -------------------------- OTHER RESTRICTED SECURITIES NAME AND ANNUAL STOCK UNDERLYING ALL OTHER PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS COMPENSATION POSITION YEAR ($) ($) ($)(2) ($)(3)(4)(5) (#)(5)(6) ($)(7) - ---------------------------------------------------------------------------------------------------------------------------- Terrence Murray 1994 $993,936(1) $1,400,000 -- $1,160,156 100,000 $ 86,967 Chairman, President 1993 902,000 990,000 -- -- 90,000 67,622 and Chief Executive Officer 1992 917,461 750,000 -- -- 75,000 55,126 Robert J. Higgins 1994 524,999 600,000 $ 75,276 556,875 45,000 40,632 Vice Chairman 1993 505,769 350,000 -- -- 40,000 37,946 1992 441,346 200,000 -- 468,750 32,500 26,893 H. Jay Sarles 1994 524,999 550,000 -- 556,875 45,000 55,135 Vice Chairman 1993 512,692 350,000 -- -- 40,000 43,343 1992 478,731 225,000 124,532 625,000 32,500 33,485 Michael R. Zucchini 1994 524,999 600,000 -- 556,875 45,000 38,867 Vice Chairman 1993 510,769 350,000 -- -- 40,000 30,503 1992 458,731 250,000 -- -- 32,500 19,832 Eugene M. McQuade 1994 358,654 500,000 -- 556,875 45,000 23,585 Executive Vice President 1993 330,769 300,000 -- -- 35,000 20,451 and Chief Financial Officer 1992 254,808 125,000 159,123 -- 27,000 2,088 - --------------- (1) The discrepancy between Mr. Murray's approved base salary for 1994 ($992,200) and the amount paid in 1994 ($993,936) is the result of Fleet's payroll practice of paying employees on a bi-weekly basis. (2) Perquisites and other personal benefits paid to each of the Named Executive Officers (including tax preparation assistance) in each instance aggregated less than $50,000, other than Messrs. Higgins, Sarles and McQuade and, accordingly, are omitted from the table as permitted by Commission regulations. In 1994, Mr. Higgins' perquisites and other personal benefits included a relocation expense and moving allowance aggregating $60,157. In 1992, each of Messrs. Sarles and McQuade's perquisites and other personal benefits included a relocation expense and moving allowance aggregating $106,119 and $156,746, respectively. (3) In September 1994, Fleet awarded performance-based restricted stock to each of the Named Executive Officers under the 1992 Stock Plan. In accordance with the terms of the awards, the restrictions on transfer will lapse, if at all, only if cumulative earnings per share growth, measured over a three year period, exceeds a threshold target. To the extent cumulative earnings per share growth exceeds the threshold, each Named Executive Officer will vest in a percentage of the shares awarded, ranging from 40% to 100%. The amount and year-end value of the performance-based restricted stock awarded in 1994 under the 1992 Stock Plan, based on a December 30, 1994 closing market price of Fleet Common Stock of $32.50, are: Mr. Murray, 31,250 and $1,015,625; and each of Messrs. Higgins, Sarles, Zucchini and McQuade, 15,000 and $487,500. Dividends will be paid on the shares of performance-based restricted stock if, and to the extent, paid on Fleet Common Stock generally. If a change of control were to occur, the performance-based restricted stock would immediately vest in full. (4) In December 1991, Fleet awarded shares of restricted stock to certain Named Executive Officers under Fleet's Amended and Restated 1988 Stock Option and Restricted Stock Plan (the "1988 Stock Plan"). In accordance with the terms of the awards, the restrictions on fifty percent of the stock lapsed as of January 1, 1995 as a result of the performance of Fleet Common Stock during 1994 when the Average Closing Price of Fleet Common Stock was or exceeded $34 per share for four consecutive months. The Average Closing Price for each of the four consecutive months was deemed to be or exceed $34 per share
134 146 [ALTERNATE FLEET PAGE] when the average of the daily closing prices of Fleet Common Stock on the Stock Exchange for such month was or exceeded $34 per share. The number and year-end value of the remaining fifty percent of the restricted stock shares awarded to certain Named Executive Officers in 1991 under the 1988 Stock Plan, based on a December 30, 1994 closing market price of Fleet Common Stock of $32.50 per share, are: Mr. Murray, 25,000 and $812,500; and Mr. Zucchini, 12,500 and $406,250. Messrs. Higgins and Sarles were not awarded any restricted stock in 1991. In December 1992, Fleet awarded shares of restricted stock to Messrs. Higgins and Sarles under the 1992 Stock Plan. Mr. McQuade, who did not join Fleet until January 1992, was not awarded any restricted stock in 1992. The awards to Messrs. Higgins and Sarles provide that the restrictions will lapse on January 1, 1998 if the executive remains in the continuous employ of Fleet; however, the restrictions on fifty percent of the stock will lapse as of January 1, 1996 if, during 1995, the Average Closing Price of Fleet Common Stock is or exceeds $47 per share for four consecutive months. The Average Closing Price for a month shall be deemed to be or exceed $47 per share if the average of the daily closing prices of Fleet Common Stock on the Stock Exchange for such month is or exceeds $47 per share. The number and year-end value of the shares of restricted stock awarded to certain Named Executive Officers under the 1992 Stock Plan, based on a December 30, 1994 closing market price of Fleet Common Stock of $32.50 per share, are: Mr. Higgins, 15,000 and $487,500; and Mr. Sarles, 20,000 and $650,000. Dividends will be paid on the shares of restricted stock if, and to the extent, paid on Fleet Common Stock generally. If a change of control were to occur, the restricted stock would immediately vest in full. (5) The Merger will not constitute a change of control for purposes of any restricted stock awarded, or any stock options or stock appreciation rights ("SARs") granted, under the 1992 Stock Plan, or any predecessor plan. (6) All stock options include tandem SARs, except for the stock options granted in 1994. (7) Amounts of All Other Compensation include the following: (i) contributions by Fleet under Fleet's Savings Plan or amounts accrued under Fleet's Executive Supplemental Plan for the Named Executive Officers: Mr. Murray, $44,961; Mr. Higgins, $23,852; Mr. Sarles, $23,852; Mr. Zucchini, $23,852; and Mr. McQuade, $16,205; (ii) term life insurance premiums paid by Fleet on behalf of each of the Named Executive Officers in 1994 (the Named Executive Officers have the option of applying these payments to whole life policies): Mr. Murray, $21,040; Mr. Higgins, $4,957; Mr. Sarles, $5,908; Mr. Zucchini, $5,683; and Mr. McQuade, $2,268; (iii) an interest free loan in the amount of $100,000 provided to Mr. Sarles in 1992 which provided a benefit of $6,089 to Mr. Sarles in 1994 based on the applicable federal rate in effect on the date of issuance of such loan; and (iv) preferential earnings on deferred compensation: Mr. Murray, $20,966; Mr. Higgins, $11,823; Mr. Sarles, $19,286; Mr. Zucchini, $9,332; and Mr. McQuade, $5,112. Mr. Sarles repaid his loan on January 13, 1995; see "Indebtedness and Other Transactions". 135 147 [ALTERNATE FLEET PAGE] OPTION/SAR GRANTS IN LAST FISCAL YEAR The following table contains information concerning the grant of stock options pursuant to the 1992 Stock Plan to the Named Executive Officers during the fiscal year ending December 31, 1994. - -------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF INDIVIDUAL GRANTS STOCK PRICE APPRECIATION ----------------------------------------------------- FOR OPTION TERM(3) PERCENT --------------------------- OF TOTAL NUMBER OF OPTIONS/ SECURITIES SARS UNDERLYING GRANTED TO EXERCISE OPTIONS/SARS EMPLOYEES OR BASE GRANTED(1) IN FISCAL PRICE EXPIRATION NAME (#) YEAR(2) ($/SH) DATE AT 5% ($) AT 10% ($) ------------ --------------------------------------------------------------------------------- Terrence Murray........... 100,000 4.85% $36.94 9/21/04 $2,323,687 $5,887,799 Robert J. Higgins......... 45,000 2.18% 36.94 9/21/04 1,045,659 2,649,510 H. Jay Sarles............. 45,000 2.18% 36.94 9/21/04 1,045,659 2,649,510 Michael R. Zucchini....... 45,000 2.18% 36.94 9/21/04 1,045,659 2,649,510 Eugene M. McQuade......... 45,000 2.18% 36.94 9/21/04 1,045,659 2,649,510 - -------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------- Increase in market value of Fleet Common Stock for all stockholders at 5% (TO $60/SHARE) 10% (TO $96/SHARE) assumed annual rates of stock price appreciation (as used in the table ---------------- ----------------- above) from $36.94 per share, over the ten-year period, based on 135 $3.1 billion $7.9 billion million shares outstanding on December 31, 1994. - ------------------------------------------------------------------------------------------------------------- (1) All options granted to the Named Executive Officers were granted on September 21, 1994 under the 1992 Stock Plan. No SARs were awarded in connection with such grants. The options first become exercisable in 20% installments commencing on September 21, 1995, so long as employment with Fleet continues. If a change of control were to occur, the options would become immediately exercisable in full. The Merger will not constitute a change of control for purposes of the options granted in 1994 or for purposes of any other stock options or SARs granted under the 1992 Stock Plan, or any predecessor plan. (2) A total of 2,061,796 options were granted to employees in 1994, of which 1,921,200 were granted on the same material terms described in footnote (1) above. With respect to substantially all of the remaining 139,500 options granted in 1994, the material terms thereof differ to the extent that they become fully exercisable commencing one year from the date of grant, so long as employment with Fleet continues, and expire five years from the date of grant. The percentages set forth in the above table are based on the total 2,061,796 options granted in 1994. The percent of the grant to each of the Named Executive Officers based on the total 1,921,200 options granted in 1994 with the same material terms are: Mr. Murray, 5.21%; Mr. Higgins, 2.35%; Mr. Zucchini, 2.35%; Mr. Sarles, 2.35%; and Mr. McQuade, 2.35%. (3) Potential Realizable Value is based on the assumed annual growth rates for each of the grants shown over their ten-year option term. For example, a 5% annual growth rate for Mr. Murray's grant results in a stock price of $60.18 per share and a 10% rate results in a stock price of $95.82 per share. These potential values are listed in order to comply with Commission regulations, and Fleet cannot predict whether these values can be achieved. Actual gains, if any, on stock option exercises are dependent on the future performance of Fleet Common Stock.
136 148 [ALTERNATE FLEET PAGE] AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES The following table sets forth information with respect to the Named Executive Officers concerning the exercise of options and/or SARs during the fiscal year ending December 31, 1994 and unexercised options and SARs held as of the end of the 1994 fiscal year. - -------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY VALUE OPTIONS/SARS AT OPTIONS/SARS AT SHARES ACQUIRED REALIZED FY-END(#)(1) FY-END($)(2)(3) NAME ON EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE -------------- --------------- ------------ ------------- - ------------------------------------------------------------------------------------------------------------------------------- Terrence Murray.............. -- -- 225,000 230,000 $2,145,140 $ 456,710 Robert J. Higgins............ 9,708 $259,980 97,800 102,200 1,011,616 199,299 H. Jay Sarles................ -- -- 107,402 102,200 1,062,042 199,299 Michael R. Zucchini.......... 19,800 555,588 85,100 103,100 518,489 157,494 Eugene M. McQuade............ -- -- 17,800 89,200 49,776 74,664 - -------------------------------------------------------------------------------------------------------------------------------- (1) The following exercisable/unexercisable options for each of the Named Executive Officers do not have tandem SARs: Mr. Murray, -0-/100,000; Mr. Higgins, 5,602/45,000; Mr. Sarles, 5,602/45,000; Mr. Zucchini, -0-/45,000; and Mr. McQuade, -0-/45,000. (2) Value based on the fair market value of Fleet Common Stock on December 30, 1994 ($32.56) minus the exercise price. Fair market value is deemed to be the average of the high and low market prices of Fleet Common Stock on the Stock Exchange. (3) The following exercisable/unexercisable options for each of the Named Executive Officers are at exercise prices above the fair market value of Fleet Common Stock on December 30, 1994 ($32.56): Mr. Murray, 18,000/172,000; Mr. Higgins, 8,000/77,000; Mr. Sarles, 8,000/77,000; Mr. Zucchini, 8,000/77,000; and Mr. McQuade, 7,000/73,000.
PENSION PLANS The following table shows the estimated pension benefits payable to a covered participant at normal retirement age under the Fleet Pension Plan (the "Pension Plan"), a qualified defined benefit pension plan, based on Final Average Salary (as defined below) and years of service with Fleet and its subsidiaries. PENSION PLAN TABLE
FINAL AVERAGE 15 YEARS 20 YEARS 25 YEARS 30 YEARS SALARY SERVICE(1) SERVICE(1) SERVICE(1) SERVICE(1) - ------------- -------- -------- ---------- ---------- $ 100,000 $ 24,306 $ 32,408 $ 40,510 $ 48,612 200,000 50,556 67,408 84,260 101,112 300,000 76,806 102,408 128,010 153,612 400,000 103,056 137,408 171,760 206,112 500,000 129,306 172,408 215,510 258,612 600,000 155,556 207,408 259,260 311,112 700,000 181,806 242,408 303,010 363,612 800,000 208,056 277,408 346,760 416,112 900,000 234,306 312,408 390,510 468,612 1,000,000 260,556 347,408 434,260 521,112 1,100,000 286,806 382,408 478,010 573,612 1,200,000 313,056 417,408 521,760 626,112 1,300,000 339,306 452,408 565,510 678,612
137 149 [ALTERNATE FLEET PAGE] [FN] - --------------- (1) The Pension Plan provides for accrual of benefits over 30 years of service, with proportionate reduction for years of service less than 30 years. The annual benefits shown in the above table are not reduced to reflect certain limitations imposed by the Code which limit the annual benefits payable from qualified plans to any individual. The years of service accrued and Final Average Salary for purposes of the Pension Plan as of December 31, 1994 for the Named Executive Officers were: Mr. Murray, 32 years and $874,248; Mr. Higgins, 23 years and $439,999; Mr. Sarles, 27 years and $465,992; Mr. Zucchini, 7 years and $454,684; and Mr. McQuade, 3 years and $314,743. The Pension Plan covers employees of Fleet and various Fleet subsidiaries, including the Named Executive Officers. Normal retirement age under the Pension Plan is 65, and benefits vest upon completion of five years of service. Benefits shown in the table are computed as a single life annuity and are not subject to any deduction for Social Security or other offset amounts. In general, the normal benefit at age 65 is equal to 37.5% multiplied by the average annual base salary during the 60 consecutive calendar months in the last 120 calendar months of a participant's employment yielding the highest average annual salary (the "Final Average Salary") up to the Integration Level (as defined below), plus 52.5% multiplied by the amount by which the Final Average Salary exceeds the Integration Level. For 1995, the Integration Level will equal $25,920 (the "Integration Level"). The Integration Level will increase each year based on increases in the Social Security Taxable Wage Base (the maximum amount of wages subject to Social Security Taxes). Final Average Salary for each of the Named Executive Officers is calculated using annual base salary as reported in the Summary Compensation Table. The table above includes benefits under Fleet's Retirement Income Assurance Plan (the "Assurance Plan") and Fleet's Supplemental Executive Retirement Plan (the "SERP"), each of which is a nonqualified deferred compensation plan. The Assurance Plan provides benefits that would otherwise be denied a participant by reason of the limitations imposed by the Code on the Pension Plan. Under the Assurance Plan, highly compensated employees affected by these limitations, including the Named Executive Officers, will receive additional retirement income payments from Fleet. Under the SERP, a participant is entitled to receive additional retirement income payments from Fleet equal to the difference between (a) the amount such participant would have been entitled to receive under the Pension Plan if cash bonuses paid after January 1, 1994 (as reported in the Summary Compensation Table for the Named Executive Officers) were included in the calculation of Final Average Salary, and (b) the benefit payable to the participant under the Pension Plan and the Assurance Plan. Each of the Named Executive Officers is a participant in the SERP. For purposes of calculating total benefits payable under the Pension Plan, the Assurance Plan and the SERP, the Final Average Salary as of December 31, 1994 for Messrs. Murray, Higgins, Sarles, Zucchini and McQuade was $1,054,248, $509,999, $535,992, $524,684 and $414,743, respectively. CHANGE OF CONTROL CONTRACTS Fleet is a party to change of control agreements with 10 key executives (including each of the Named Executive Officers), which are intended to encourage such employees to remain in the employ of Fleet. A change of control is defined to include the acquisition, other than from Fleet, by any person or group of beneficial ownership of 25 percent or more of Fleet's outstanding stock, a change in the majority of the Fleet Board of Directors or, under certain circumstances, approval of a reorganization, merger, consolidation or sale of substantially all Fleet's assets by Fleet's stockholders (a "Change in Control"). The agreements operate only upon a Change in Control. Absent such an event, Fleet is under no obligation under the contracts to retain any employee or to pay any specified level of compensation or benefits. In the event of a Change in Control, the agreement provides that there will be no adverse change in the executive's salary, bonus opportunity, benefits, duties, indemnification and location of employment for a period of three years after the Change in Control. If, during such period, the executive's employment is terminated by his employer other than for cause or disability, or by the executive for good reason (as defined in the agreement), the executive shall receive his accrued salary, pro rata bonus and a lump sum severance payment equal to the product of his base salary and highest annual bonus multiplied by a factor, ranging up to 2.99 to 1, depending upon the length of time from the date of the Change in Control until the date of termination of employment. Payments under the agreements will be reduced to the extent necessary to avoid imposition of excise tax under the Code and to assure the deductibility of payments by Fleet. The Merger will not constitute a Change in Control for purposes of the agreements. 138 150 [ALTERNATE FLEET PAGE] STOCKHOLDER RETURN PERFORMANCE GRAPH Set forth on the following page is a line graph comparing the cumulative total stockholder return on Fleet Common Stock (assuming $100 was invested on December 31, 1989 and all dividends were reinvested) against the cumulative total return of the S&P Composite-500 Stock Index, the Keefe, Bruyette & Woods ("KBW") Eastern Region Bank Index and the top 25 (based on asset size) domestic financial institutions (the "Peer Group"), excluding Fleet, for the five fiscal years ended December 31, 1994. The financial institutions which comprise the Peer Group are Citicorp, BankAmerica Corporation, Chemical Banking Corporation, NationsBank Corporation, J.P. Morgan & Co. Incorporated, The Chase Manhattan Corporation, Bankers Trust New York Corporation, Banc One Corporation, Wells Fargo & Company, PNC Bank Corp., First Union Corporation, First Interstate Bancorp, First Chicago Corporation, KeyCorp., Norwest Corporation, NBD Bancorp, Inc., The Bank of New York Company, Inc., Barnett Banks, Inc., Republic New York Corporation, SunTrust Banks, Inc., Wachovia Corporation, Bank of Boston Corporation, Mellon Bank Corporation, and First Fidelity Bancorporation. National City Corporation is no longer among the top 25 domestic financial institutions, and KeyCorp. now is included within the Peer Group (based on asset size). The returns of each of these corporations have been weighted according to their market capitalization at the beginning of each year presented. [(GRAPH)]
Measurement Period (Fiscal Year Covered) Fleet Financial S&P 500 KBW Eastern Peer Group 1989 $100 $100 $100 $100 1990 46 97 62 76 1991 107 126 108 123 1992 145 136 150 161 1993 153 150 156 176 1994 154 152 139 168
INDEBTEDNESS AND OTHER TRANSACTIONS The banking subsidiaries of Fleet have had transactions in the ordinary course of business, including borrowings, with certain directors of Fleet and their associates, all of which were on substantially the same terms (including the transactions described below other than the loans to Messrs. Higgins and Sarles), including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and did not involve more than the normal risk of collectibility or present other unfavorable features. On August 1, 1992 and January 16, 1992, respectively, Fleet made a $100,000 loan to each of Messrs. Higgins and Sarles to facilitate his relocation, secured in each case by a second mortgage on his residence. Mr. Higgins' loan was interest free until July 1, 1994 and was repaid on December 1, 1993. Mr. Sarles' loan was interest-free until January 1, 1995 and thereafter bore interest at the prime rate of interest of Fleet-RI until its repayment on January 13, 1995. The benefit to each of Messrs. Higgins and Sarles as a result of the interest-free aspects of these loans was $2,671 and $6,451, respectively, in 1992; $5,566 and $6,089, respectively, in 1993; and $6,089 in 1994 with respect to Mr. Sarles' loan. 139 151 [ALTERNATE FLEET PAGE] In 1972, subsidiaries of Fleet and Gilbane Building Company ("Gilbane"), a building construction company of which Paul J. Choquette, Jr., a director of Fleet, is President and a director, formed an equal partnership (the "Gilbane Partnership") to develop an urban renewal project, including a shopping center and residential units, in Narragansett, Rhode Island. The initial phase was an apartment complex developed by a limited partnership of which the Gilbane Partnership is the general partner and in which it has a 5 percent interest. The second phase was a shopping center and condominium development. Fleet Real Estate, Inc., a subsidiary of Fleet ("FRE"), made loans in connection with these projects having an aggregate principal balance as of December 31, 1994 of approximately $684,054 (the highest amount outstanding since January 1, 1994 having been $890,444), including loans aggregating $188,928 which are non-performing and were originally made pursuant to the Gilbane Partnership's commitment to fund certain contingencies relating to the apartment complex. FRE has refinanced the current portion of the loans with a five-year term loan which bears interest at a fixed rate of 9.76% per annum and matures on December 15, 1999. In addition, Fleet-RI leases space from the Partnership in the shopping center for a branch bank at an annual cost of approximately $17,671. In 1984, Fleet-RI issued a $4,136,000 letter of credit (the "Letter of Credit") to enhance a series of tax-exempt bonds issued by the Rhode Island Industrial Facilities Corporation ("RIIFC"). The proceeds of the bonds were loaned to a limited partnership, the general partner of which is Gilbane Properties, Inc. ("Gilbane Properties"), a wholly-owned subsidiary of Gilbane, for the development of an office building in Middletown, Rhode Island. The Letter of Credit was placed on non-performing status in the fourth quarter of 1992 as a result of insufficient collateral coverage, and a September 1994 appraisal showed a further significant diminution in value. In the fourth quarter of 1994, a default occurred under the bonds due to the borrower's inability either to pay off the bonds or obtain a substitute letter of credit prior to the expiration of the Fleet-RI Letter of Credit on December 1, 1994. The Letter of Credit was drawn on December 1, 1994 in the amount of $3,883,538 (the highest amount outstanding under the Letter of Credit since January 1, 1994), and the borrower's obligation was converted to a demand note with a per annum interest rate equal to two percent above Fleet-RI's prime rate of interest. As of December 31, 1994, the principal amount outstanding under the note was $3,494,000. Fleet-RI placed the loan on non-accrual status and foreclosed on the property in January 1995. The Arcade Company, a limited partnership, the co-general partners of which are Mr. Choquette and Gilbane Properties, received a non-recourse $2,150,000 loan from the proceeds of RIIFC tax-exempt bonds which were purchased by Fleet-RI. In 1991, in response to concerns raised by the then most recent appraisal, Gilbane partially guaranteed the bonds. Gilbane's guarantee plus the underlying value of the collateral were, in combination, sufficient at that time to demonstrate full collectibility of such bonds. In the first quarter of 1993, however, a new appraisal was completed on the property which showed a further significant diminution in value. Despite the absence of any payment default since the issuance of the bonds, Fleet-RI was unable to demonstrate full collectibility of the bonds and thus placed the bonds on non-performing status. The principal amount outstanding on the bonds at December 31, 1994 was $1,737,966 (the highest amount outstanding on the bonds since January 1, 1994 having been $1,845,279). In February 1995, Fleet-RI agreed to the Arcade Company's sale of the property to an unrelated third party for $76,000, the net proceeds of which (approximately $13,000) were paid to Fleet-RI. Fleet-RI also collected approximately $400,000 on Gilbane's partial guarantee (which amount represented Gilbane's full legal obligation under the guarantee) and Fleet-RI received approximately $305,000 from the bond trustee. In addition, Fleet-RI applied approximately $256,000 of interest paid to reduce the principal amount outstanding on the bonds. Fleet-RI recognized approximately a $761,000 principal loss on this transaction. A subsidiary of Fleet is a partner in several partnerships with certain other parties, including subsidiaries of, and limited partnerships organized by, Gilbane to construct and manage Fleet's headquarters building, and to rehabilitate an adjacent structure. One of the partnerships has constructed a parking garage on land it is leasing from Fleet-RI. Fleet and Gilbane have 46.55% and 36.75% partnership interests, respectively, in the partnership that developed the new headquarters building. In 1992, FRE provided permanent mortgage financing to three of such partnerships in the amount of $54,000,000, secured by a first mortgage on the Fleet Center office complex and the Arcade garage. As of December 31, 1994, the amount remaining unpaid under the loan was $53,039,147 (the highest amount outstanding since January 1, 1994 having been $53,562,998). 140 152 [ALTERNATE FLEET PAGE] The loan presently carries an interest rate of 8.5% per annum plus a contingent interest feature that serves to enhance FRE's yield. The loan closed and was fully funded on December 31, 1992. Fleet and Fleet-RI have leased space in the Fleet Center for a total annual rental of approximately $2,591,784. A company of which John R. Riedman, a director of Fleet, is an executive officer leases office space to a subsidiary of Fleet. In 1994, the gross rental proceeds from such lease were $127,500. The company also leases space to a second subsidiary of Fleet. The gross rental proceeds from this lease were $385,000 in 1994. Both leases contain escalation clauses for services. In December 1994, Fleet acquired an aircraft from William Barnet & Son, Inc., a company of which William Barnet, a director of Fleet, is President and a 100% stockholder, at a purchase price of $1,275,000. The purchase price was determined by Fleet's controller based on appraisals furnished by two independent consultants regarding the fair market value of the aircraft. An insurance agency of which Mr. Riedman is an executive officer and principal stockholder has assisted Fleet in obtaining coverage under various insurance policies necessary for its business operations. During 1994, the agency received from Fleet commissions and fees of approximately $150,000. Fleet believes that such commissions and fees are at rates customary in the industry. One of Fleet's subsidiaries leases office space for one dollar per annum and shared expenses from Delta Properties. Michael Picotte, a director of Fleet, is a 50% partner in Delta Properties. The lease expires in December 2004. A subsidiary of Fleet is currently a participant in a syndicated bank credit agreement and a working capital facility with The Stop & Shop Companies, Inc. ("Stop & Shop"). Pursuant to such credit agreement and working capital facility in 1994, the subsidiary received approximately $25,894, which amount included commitment fees and a fee relating to the refinancing of the facility in 1994. Automatic teller machines of a Fleet subsidiary are located in a number of Stop & Shop's store and office locations. The subsidiary paid fees to Stop & Shop of approximately $267,550 during 1994 as a result of this activity. A subsidiary of Fleet provides investment services with respect to Stop & Shop's pension master trust. Such subsidiary received fees for these services in 1994 of approximately $33,672. In addition, Fleet's subsidiaries provide certain non-credit banking services (such as bank depositary services) to Stop & Shop and its subsidiaries. KKR, which beneficially owns more than 5% of Fleet Common Stock, beneficially owns in excess of 10% of the common stock of Stop & Shop. Mr. Murray currently serves as a director of Stop & Shop. See also "-- Compensation Committee Interlocks and Insider Participation. RATIFICATION OF THE SELECTION OF FLEET'S INDEPENDENT AUDITORS The ratification of the selection of KPMG Peat Marwick LLP to serve as independent auditors of Fleet for the current fiscal year ending December 31, 1995, will be submitted to the Fleet Meeting. Representatives of KPMG Peat Marwick LLP will be present at the Fleet Meeting, will have the opportunity to make a statement if they so desire and will be available to answer appropriate questions. The firm of KPMG Peat Marwick LLP has advised Fleet that neither it nor any of its members has any direct financial interest in Fleet as a promoter, underwriter, voting trustee, director, officer or employee. All professional services rendered by KPMG Peat Marwick LLP during the year ended December 31, 1994 were furnished at customary rates. The ratification of the selection of independent auditors requires the affirmative vote of a majority of the shares entitled to vote thereon, represented in person or by proxy at the Annual Meeting when a quorum is present. THE FLEET BOARD RECOMMENDS A VOTE "FOR" THIS PROPOSAL. STOCKHOLDER PROPOSALS Any stockholder who wishes to submit a proposal for presentation to the 1996 Annual Meeting of Stockholders must submit the proposal to Fleet, 50 Kennedy Plaza, Providence, Rhode Island 02903, 141 153 [ALTERNATE FLEET PAGE] Attention: Secretary and General Counsel, not later than November 10, 1995 for inclusion, if appropriate, in Fleet's Proxy Statement and the form of proxy relating to the 1996 Annual Meeting. OTHER BUSINESS Fleet management knows of no matters to be brought before the meeting other than those referred to, but if any other business should properly come before the meeting, the persons named in the proxy intend to vote in accordance with their best judgment. 142 154 [ALTERNATE SHAWMUT PAGE] ELECTION OF SHAWMUT DIRECTORS; APPOINTMENT OF SHAWMUT INDEPENDENT ACCOUNTANTS VOTING REQUIREMENTS The Shawmut Board has fixed the close of business on May 3, 1995 as the Record Date. Only the holders of record of the outstanding shares of Shawmut Common Stock on the Record Date will be entitled to notice of, and to vote at, the Shawmut Meeting and any adjournments or postponements thereof. At the Record Date, shares of Shawmut Common Stock were outstanding and entitled to vote. The presence, in person or by proxy, of a majority of the aggregate number of shares of Shawmut Common Stock outstanding and entitled to vote on the Record Date is necessary to constitute a quorum at the Shawmut Meeting. Abstentions and broker non-votes will be counted as present at the Shawmut Meeting for purposes of determining the presence or absence of a quorum for the transaction of business. Under Delaware law, directors will be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote. "Plurality" means that the nominees who receive the largest number of votes cast "For" are elected as directors, up to the maximum number of directors to be chosen at the meeting. Under Delaware law, if a quorum is present, the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on the subject matter is required to approve an action other than election of directors, unless a greater vote is required under Delaware law or a corporation's articles or bylaws. Neither the Shawmut Certificate nor the Shawmut By-laws vary this requirement with regard to the appointment of independent accountants. Accordingly, with regard to the election of directors, votes may be cast in favor or withheld. Votes that are withheld will have the same legal effect as a vote against the election of each director from whom such votes are withheld. Abstentions may not be specified with respect to the election of directors. Abstentions may be specified with respect to appointment of independent accountants and will have the same legal effect as a vote against such proposal. Under the Stock Exchange rules, brokers who hold shares in street name for customers who are the beneficial owners of such shares have the authority to vote on certain "routine" items when they have not received instructions from such beneficial owners. With respect to certain non-routine matters, however, a broker does not have authority to vote absent instructions from the beneficial owners. Accordingly, a broker non-vote generally occurs when customers have not provided any voting instructions with respect to certain non-routine matters. The election of directors and the appointment of independent accountants are considered routine matters under the Stock Exchange rules. Accordingly, Shawmut does not expect to receive any broker non-votes with respect to these matters. Broker non-votes will have no effect on the outcome of the election of directors or the appointment of independent accountants. See "MEETING OF SHAWMUT STOCKHOLDERS -- Proxies; Voting and Revocation" and "-- Votes Required to Approve the Merger; Principal Stockholders" for a discussion of the foregoing with respect to the vote on the Merger. 120 155 [ALTERNATE SHAWMUT PAGE] COMMON STOCK OWNERSHIP The ownership of the Shawmut Common Stock is widely diversified. On [ ], 1995, approximately [ ] shareholders of record owned [121,703,792] shares, excluding 163,511 shares that are reserved for issuance in connection with the completion of the exchange of the securities of certain previously acquired companies. Holders of outstanding shares are entitled to one vote per share. The holders of a majority of the total shares issued and outstanding, whether present in person or represented by proxy, will constitute a quorum for the transaction of business at the annual meeting. The following table sets forth information as to the only persons known to the board to be the beneficial owners of 5% or more of the outstanding Shawmut Common Stock:
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS ---------------------------------------------- ----------------------- ---------- Fleet Financial Group, Inc.................... 30,017,492(1) 20.6%(1) 50 Kennedy Plaza Providence, RI 02903 FMR Corp...................................... 8,614,167(2) 7.16%(2) 82 Devonshire Street Boston, MA 02109 - --------------- (1) Based upon information contained in a Schedule 13D dated February 20, 1995 and filed under the Exchange Act by Fleet. In connection with the execution of the Merger Agreement, Shawmut granted Fleet an option (the "Shawmut Option") to purchase up to 24,195,625 shares (the "Shawmut Option Shares") of Shawmut Common Stock upon the occurrence of certain events, none of which has occurred as of the date hereof. Because the Shawmut Option is not currently exercisable, Fleet has disclaimed beneficial ownership of the Shawmut Option Shares. Other than the Shawmut Option Shares, Fleet beneficially owns and has sole voting and sole dispositive power with respect to 5,811,900 shares of Shawmut Common Stock. Certain directors and executive officers of Fleet beneficially own and have sole voting and sole dispositive power with respect to, in the aggregate, 4,950 shares of Shawmut Common Stock. Terrence Murray, the Chairman, Chief Executive Officer and President of Fleet, beneficially owns 17 currently exercisable Shawmut Warrants, each warrant representing the right to purchase one share of Shawmut Common Stock at an exercise price of $22.11. (2) Based upon information contained in a Schedule 13G dated February 13, 1995 and filed under the Exchange Act by FMR Corp. ("FMR"). Based upon the information contained in the Schedule 13G, FMR is a beneficial owner of these shares as a result of various of its subsidiaries and affiliates providing investment advisory and management services and has sole voting power with respect to 232,455 of the shares, shared voting power with respect to 2,000 of the shares, sole dispositive power with respect to 8,612,167 of the shares and shared dispositive power with respect to 2,000 of the shares.
121 156 [ALTERNATE SHAWMUT PAGE] The table below sets forth beneficial ownership of Shawmut Common Stock by each director, and by all directors and executive officers as a group as of [ ]. As of that date all directors and executive officers as a group [(21 in number)] controlled [ ] shares directly and controlled [ ] shares indirectly, or a total of [ ] shares representing [ %] of the outstanding shares. No director or executive officer beneficially owns or controls directly or indirectly more than [ %] of the outstanding shares. The group [(21 in number)] would have beneficially owned or controlled [ ] shares, representing [ %] of outstanding shares, if all stock options exercisable within [60] days of [ ], 1995 had been exercised. Except as may be indicated below, each director possesses sole voting and investment power with respect to the number of shares described as beneficially owned. Except as set forth below, no director or executive officer reported any ownership of any shares of any series of Shawmut Preferred Stock. All of the directors are being nominated for reelection.
AMOUNT AND NATURE OF NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP ------------------------ -------------------- Joel B. Alvord.................................................... [278,762](1)(2) Stillman B. Brown................................................. [27,316] John T. Collins(5)................................................ [32,911] Ferdinand Colloredo-Mansfeld...................................... [10,666] Bernard M. Fox.................................................... [4,270] Robert J. Matura(6)............................................... [9,435] Gunnar S. Overstrom, Jr........................................... [249,712](2)(3) Lois D. Rice(7)................................................... [3,410] Maurice Segall.................................................... [28,768] Samuel O. Thier................................................... [283] Paul R. Tregurtha................................................. [25,666] Wilson Wilde...................................................... [13,410] Directors and executive officers as a group....................... [945,752](2)(4) --------- - --------------- (1) Includes [ ] shares that are subject to unexercised stock options which are exercisable within 60 days of [ ], 1995, none of which are at option prices in excess of the market price of Shawmut Common Stock on [ ], 1995; and [ ] shares held in the employees' thrift plan. (2) Does not include unexercised stock options to acquire an aggregate of shares which are not exercisable within 60 days of [ ], 1995 and restricted stock units awarded under Shawmut's Performance Equity Plan as follows: options to acquire shares at an average exercise price of $ and restricted stock units held by Mr. Alvord; options to acquire shares at an average exercise price of $ and restricted stock units held by Mr. Overstrom; options to acquire shares at an average exercise price of $ and restricted stock units held by Mr. Eyles; options to acquire shares at an average exercise price of $ and restricted stock units held by Mrs. Kraus; options to acquire shares at an average exercise price of $ and restricted stock units held by Mr. Rothmeier; and, with respect to all other executive officers, options to acquire an aggregate of shares at an average exercise price of $ and restricted stock units. As more fully described above (see "INTERESTS OF CERTAIN PERSONS IN THE MERGER -- Interests of Shawmut Directors and Executive Officers"), the approval of the Merger by the holders of the Shawmut Common Stock will cause all such options to become fully exercisable and all restrictions on such restricted stock units to lapse. (3) Includes [ ] shares that are subject to unexercised stock options which are exercisable within 60 days of [ ], 1995, none of which are at option prices in excess of the market price of the Shawmut Common Stock on [ ], 1995; [ ] shares held in the employees' thrift plan; and [ ] shares held in the names of his wife and children.
122 157 [ALTERNATE SHAWMUT PAGE] (4) With respect to executive officers other than Messrs. Alvord and Overstrom, this number includes (i) shares that are subject to unexercised stock options which are exercisable within 60 days of [ ], 1995, none of which are at option prices in excess of the market price of the Corporation's common stock on [ ], 1995, as follows: Mr. Eyles, [ ] shares, Mrs. Kraus, [ ] shares, Mr. Rothmeier, [ ] shares, and for all other executive officers, [ ] shares; (ii) shares held in the employees' thrift plan as follows: Mr. Eyles, [ ] shares, Mrs. Kraus, [ ] shares, Mr. Rothmeier, [ ] shares, and for all other executive officers, [ ] shares; (iii) shares of restricted stock as follows: Mr. Eyles, [ ] shares, Mrs. Kraus, [ ] shares, Mr. Rothmeier, [ ] shares, and for all other executive officers, [ ] shares; and (iv) with respect to Mr. Eyles, Mrs. Kraus, Mr. Rothmeier, and all other executive officers, [ ] shares held in the name of family members. The approval of the Merger by the holders of the Shawmut Common Stock will cause all such options to become fully exercisable and all restrictions on shares of restricted stock to lapse. (5) In addition, Mr. Collins owns 10,000 Shawmut 9.35% Depositary Shares. (6) In addition, Mr. Matura owns 1,000 Shawmut 9.30% Depositary Shares. (7) In addition, Mrs. Rice owns 124 Shawmut 9.30% Depositary Shares and 1,000 Shawmut 9.35% Depositary Shares. ELECTION OF DIRECTORS The directors are elected annually by the holders of the Shawmut Common Stock and represent the interests of shareholders of Shawmut as a whole. The Shawmut Board holds regular meetings to review significant matters affecting Shawmut and to act on matters requiring board consideration. Shawmut Board and committee meetings are held alternately in Hartford and Boston. The Shawmut Board met 13 times during 1994. Each director attended at least 75% of the aggregate of the number of board meetings and meetings of the committees on which he or she served. Background information about each nominee for director appears on pages [115] through [118] of this Joint Proxy Statement-Prospectus. Under the Shawmut By-laws, the Shawmut Board can increase the number of directorships between annual meetings by not more than eight and fill any vacancy thus created. All of the nominees named below are members of the present Shawmut Board and, with the exception of Dr. Thier, were elected by the holders of the Shawmut Common Stock at the last annual meeting. At the 1995 annual meeting, directors are to be elected for a term of one year, each to hold office until the expiration of his or her term until his or her successor is elected and qualified, or, if earlier, until the Effective Time of the Merger. Unless authority is withheld, it is the intention of the persons named in the proxy, or authorized substitutes, to vote for the election of the following 12 nominees. THE SHAWMUT BOARD RECOMMENDS A VOTE "FOR" ALL NOMINEES FOR ELECTION AS DIRECTORS. JOEL B. ALVORD, 56, is chairman and chief executive officer of Shawmut, chairman and a director of Shawmut-MA and a director of Shawmut-CT. He has served as a director of Shawmut since 1987, and additionally as a director of Shawmut-CT since 1978, and Shawmut-MA since 1988. Mr. Alvord began his 31-year Shawmut-CT tenure in 1963. He became an officer in 1965, a vice president in 1967, and executive vice president in 1976. In January 1978, he was elected president and director of both the bank and its parent holding company, HNC. From 1986 to 1988, he was president, chief executive officer, and director of HNC and chairman, chief executive officer, and director of Shawmut-CT. In February 1988, when SC and HNC merged and became subsidiaries of Shawmut, Mr. Alvord was named president and chief executive officer of the new combined corporation. In August 1988, he additionally assumed his current title of chairman of Shawmut. In September 1994, Mr. Alvord was appointed chairman of Shawmut-MA. He is also a member of the community affairs, trust, and loan and investment committees of Shawmut-CT and Shawmut-MA. Mr. Alvord is active in numerous community, civic, and industry organizations. He is director of the Hartford Steam Boiler Inspection and Insurance Company, and Jobs for Massachusetts. He also serves as a trustee of the Wadsworth Atheneum, and is a member of the Museum of Fine Arts (Boston), the Wang 123 158 [ALTERNATE SHAWMUT PAGE] Center for Performing Arts, the Massachusetts Business Roundtable, The Bankers Roundtable and the Boston Symphony Orchestra. A native of Manchester, Connecticut, Mr. Alvord is a graduate of Dartmouth College where he received his undergraduate degree and earned a Master of Business Administration from the Amos Tuck School of Business Administration in 1961. He is a member of the community affairs committee of Shawmut. STILLMAN B. BROWN, 61, is President of Harcott Corporation (investments), Lake Worth, Florida. Before joining Harcott Corporation (formerly Harcott Associates), Mr. Brown was executive vice president, chief financial officer and a director of United Technologies Corporation, where he served in a variety of executive positions from 1978 to 1986. He is a director of The Stanley Works, and former chairman of the board of regents of the University of Hartford. Mr. Brown has served as a director of Shawmut since 1987 and Shawmut-CT from 1979 to 1988. He is chairman of the audit committee and a member of the human resources committee of Shawmut, and a member of the loan and investment committees of Shawmut-CT and Shawmut-MA. JOHN T. COLLINS, 48, is chairman and chief executive officer of The Collins Group, Inc. (acquisition company), Boston, Massachusetts. Previously, Mr. Collins was president and chief executive officer of Quebecor Printing, (USA) Corp. Mr. Collins joined Quebecor Printing, (USA) Corp in 1990. From 1986 to 1990 he served as president and chief executive officer of Quebecor America, Inc. (printing). Mr. Collins is an advisory board member of Pell Rudman Venture Partners (investments), board member of the National Association of Printers and Lithographers, vice chairman of the board of trustees of Bentley College, and a trustee of Beth Israel Hospital and the Massachusetts Chapter of the Leukemia Society of America. Mr. Collins is also on the advisory council of Junior Achievement of Northern New England. Mr. Collins has served as a director of Shawmut and Shawmut-CT since 1992, and Shawmut-MA since 1987. He is a member of the audit committee and the human resources committee of Shawmut, and a member of the loan and investment committees of Shawmut-CT and Shawmut-MA. FERDINAND COLLOREDO-MANSFELD, 55, is chairman and chief executive officer of Cabot Partners (investment management company), Boston, Massachusetts. Mr. Colloredo-Mansfeld has held his present position since 1990. From 1986 through October 1990 he served as chairman and chief executive officer of Cabot, Cabot & Forbes Realty Advisors, Inc. (predecessor of Cabot Partners) and chairman, chief executive officer and president of the development company Cabot, Cabot & Forbes. He is also a director of Data General Corporation and Raytheon Company. Mr. Colloredo-Mansfeld has served as a director of Shawmut since 1988 and SC from 1983 to 1988. He is a member of the nominating committee of Shawmut. BERNARD M. FOX, 52, is president and chief executive officer and a trustee of the Northeast Utilities System, Hartford, Connecticut. Mr. Fox has held his present position since July 1993. From June 1987 to July 1993, he served as president and chief operating officer and financial officer. He is a director of The Dexter Corporation (specialties materials), CIGNA Corporation, The Connecticut Business and Industry Association, the Institute of Nuclear Power Operations, Mount Holyoke College, the Institute of Living and Hartford Hospital. In addition, Mr. Fox is a fellow and founder of the American Leadership Forum. Mr. Fox has served as a director of Shawmut since January 1993, Shawmut-CT from 1988 to 1994, and Shawmut-MA from 1992 to 1994. He is a member of the audit committee of Shawmut. ROBERT J. MATURA, 61, is chairman and chief executive officer of Robert J. Matura Associates and its subsidiary, Treefort Fellows (consulting firms specializing in textiles and apparel), Stamford, Connecticut. Mr. Matura has held his present position since June 1992. From July 1988 to May 1992 he served as chairman, president and chief executive officer of The William Carter Company (manufacturer of infants' and 124 159 [ALTERNATE SHAWMUT PAGE] childrens' apparel). From July 1986 through June 1988 he served, pro bono, as chief executive officer and chancellor of Sacred Heart University. From March 1976 to June 1986 Mr. Matura was chief executive officer and chairman of the board of Warnaco, Inc. (an international diversified apparel company). He is a director, investor and consultant at Unisa, Inc. (women's shoe manufacturer) and a director of EMI and Ed Mitchell's, Inc. (clothing retailer). Mr. Matura is chairman of the executive committee of the board of trustees and a trustee of Sacred Heart University and a regent of St. Peter's College. Mr. Matura has served as a director of Shawmut and Shawmut-MA since 1992 and Shawmut-CT since 1984. He is a member of the audit committee and the human resources committee of Shawmut. GUNNAR S. OVERSTROM, JR., 52, is president and chief operating officer of Shawmut, chairman, chief executive officer and a director of Shawmut-CT and president, chief executive officer and a director of Shawmut-MA. He has served as a director of Shawmut since 1987, Shawmut-CT since 1986 and Shawmut-MA since 1989. Mr. Overstrom joined Shawmut-CT in 1975 as vice president and was promoted to senior vice president in 1977. In 1979 he was appointed Shawmut-CT's executive vice president and chief financial officer. That same year he was named chief financial officer of HNC and became a director and its executive vice president in 1982. From 1986 to October 1992, Mr. Overstrom served as president of Shawmut-CT. In 1988, he also served as chief executive officer of Shawmut-CT; and in October 1992, he became chairman of Shawmut-CT and chief executive officer of Shawmut-MA. From October 1992 to September 1994, Mr. Overstrom also served as chairman of Shawmut-MA. In February 1988, when SC and HNC merged and became subsidiaries of Shawmut, he was appointed vice chairman and chief financial officer of Shawmut, responsible for Connecticut operations. In August 1988, he assumed his current title of president and chief operating officer of Shawmut. Mr. Overstrom is also a member of the community affairs, trust, and loan and investment committees of Shawmut-CT and Shawmut-MA. An active supporter of numerous organizations, Mr. Overstrom is a corporator of Hartford Hospital, Saint Francis Hospital, Mount Sinai Hospital and the Institute of Living. He is a trustee of Babson College and of the Museum of Science, a director of Connecticut Health Systems, Inc., president of the Old State House in Hartford, and a member of the Emerging Issues Committee of The Bankers Roundtable. He is also a member of Boston's Private Industry Council and serves on its Corporate Diversity Committee. Mr. Overstrom received his undergraduate degree from Babson College, a law degree from Suffolk University, and a master's degree in economics from Trinity College. He is a member of the community affairs committee of Shawmut. LOIS D. RICE, 62, is a guest scholar at the Brookings Institution, Program in Economic Studies, in Washington, D.C. Mrs. Rice joined the Brookings Institution in 1991. From 1981 to 1991 she was a director and senior vice president of Government Affairs at Control Data Corporation. She is a director of Bell Atlantic-Washington, D.C., International Multifoods, McGraw Hill, The Hartford Steam Boiler Inspection and Insurance Company, Unum Corp. (insurance company) and the Center for Naval Analysis. Mrs. Rice is a trustee of The Urban Institute and The Harry Frank Guggenheim Foundation, and is a member of the President's Foreign Intelligence Advisory Board. Mrs. Rice has served as a director of Shawmut since 1992. She is a member of the nominating committee and the community affairs committee of Shawmut. MAURICE SEGALL, 65, is a senior lecturer at the MIT-Sloan School of Management, Cambridge, Massachusetts. Previously, Mr. Segall was chairman, chief executive officer, president and a director of Zayre Corporation (department stores), Framingham, Massachusetts. He retired from Zayre Corporation in June 1989. Mr. Segall joined Zayre Corporation as president and chief executive officer in 1978. He is a director of AMR Corporation and Harcourt General Corporation (publishing and specialty retailing), and a trustee of Beth Israel Hospital, Massachusetts General Hospital and the Museum of Fine Arts (Boston). 125 160 [ALTERNATE SHAWMUT PAGE] Mr. Segall has served as a director of Shawmut since 1987 and SC from 1983 to 1988. He is a member of the audit committee and the human resources committee of Shawmut. SAMUEL O. THIER, 57, is president of Massachusetts General Hospital, Boston, Massachusetts, and professor of medicine at Harvard Medical School, Boston, Massachusetts. Dr. Thier has held his present position since May 1994. Prior to that, he served as president of Brandeis University from 1991 to 1994. From 1985 to 1991, Dr. Thier was president of the Institute of Medicine, National Academy of Sciences. He is a director of Merck & Company and National Health Labs, and a trustee of Johns Hopkins University and the Museum of Science (Boston). Dr. Thier has served as a director of Shawmut since July 1994. PAUL R. TREGURTHA, 59, is chairman, chief executive officer and a director of Mormac Marine Group, Inc. (marine shipping), Stamford, Connecticut and chairman of Moran Transportation Company (tug/barge shipping), Greenwich, Connecticut. Mr. Tregurtha joined Mormac Marine Group in 1988 and Moran Transportation in July 1994. Prior to that, he had served as chairman, president and chief executive officer of Moore McCormack Resources, Inc. (construction materials and oil and gas exploration). He is a director and vice chairman of Interlake Holding Company and Lakes Shipping Company, Inc. (marine shipping) and a director of Brown & Sharpe Manufacturing Company and FPL Group, Inc. (Florida utilities). Mr. Tregurtha is a trustee of Teachers Insurance and Annuity Association of America. Mr. Tregurtha has served as a director of Shawmut since 1987 and Shawmut-CT from 1979 to 1988. He is chairman of the human resources committee of Shawmut. WILSON WILDE, 67, is chairman of the executive committee and a director of The Hartford Steam Boiler Inspection and Insurance Company, Hartford, Connecticut. Mr. Wilde joined Hartford Steam Boiler in 1953, and served as president from November 1971 until September 1993, and as chief executive officer from November 1971 to May 1994. From November 1993 to May 1994 , he served as chairman. In April 1994, Mr. Wilde assumed his current title of chairman of the executive committee. He is a director of Phoenix Home Life Mutual Insurance Company and PXRE Corporation (reinsurance company). Mr. Wilde has served as a director of Shawmut since 1987 and HNC and Shawmut-CT from 1972 to 1988. He is chairman of the nominating committee of Shawmut, and a member of the trust committees of Shawmut-CT and Shawmut-MA. COMMITTEES OF THE BOARD The Shawmut Board has established four standing committees to assist it in the discharge of its responsibilities-the audit committee, the community affairs committee, the human resources committee and the nominating committee. Additional information concerning the committees, including membership, is presented below. The audit committee consists of five members: four nonemployee directors from Shawmut (Messrs. Stillman B. Brown, John T. Collins, Bernard M. Fox and Robert J. Matura), and one member (Mr. S. Caesar Raboy) who is a nonemployee director of Shawmut's principal subsidiaries, Shawmut-CT and Shawmut-MA. The committee has primary oversight responsibility for specific functions within Shawmut and its subsidiaries, including (i) the integrity of financial information and the financial reporting process, (ii) the adequacy of the internal control environment, (iii) the objectivity of the internal and independent audit processes, (iv) review of reports of examination and inspection by regulatory agencies and responses thereto, (v) review of performance under Shawmut's compliance program, including the review of Shawmut's overall processes for establishing and updating policies and procedures and (vi) oversight of an independent credit review function charged with the review of credit and loan administration policies and procedures review of Shawmut's loan portfolio, compliance with the credit review systems policies and procedures, and evaluation of the quality and trends in the loan portfolio. Each year it recommends the appointment of independent 126 161 [ALTERNATE SHAWMUT PAGE] accountants for Shawmut and meets with representatives of that firm and with the internal auditor. The committee met five times during 1994. The community affairs committee consists of eight members: one nonemployee director of Shawmut (Mrs. Lois D. Rice), two employee directors of Shawmut (Messrs. Joel B. Alvord and Gunnar S. Overstrom), four nonemployee directors of Shawmut-CT and Shawmut-MA (Mr. Walter H. Monteith, Ms. Evelyn F. Murphy, Ms. Deborah B. Prothrow-Stith and The Honorable Paul E. Tsongas), and one employee director of Shawmut-CT and Shawmut-MA (Mrs. Eileen S. Kraus). The committee oversees compliance by Shawmut and its subsidiaries with the policies and provisions of the Community Reinvestment Act of 1978, as amended, and establishes and supervises policies relating to voluntary corporate contributions and other matters of business and community conduct, all as the Shawmut Board of directors or the chairman may from time to time specify or request. The committee met four times during 1994. The human resources committee consists of five members, all of whom are nonemployee directors of Shawmut (Messrs. Stillman B. Brown, John T. Collins, Robert J. Matura, Maurice Segall and Paul R. Tregurtha). The committee advises the Shawmut Board on all matters pertaining to compensation programs and policies and establishes guidelines for employee incentive and benefits programs, which it reviews on a continuing basis. It makes specific recommendations relating to salaries of officers with general management responsibility and relating to all incentive awards, including equity-based awards. The committee met six times during 1994. The nominating committee consists of three members, all of whom are nonemployee directors of Shawmut (Mr. Ferdinand Colloredo-Mansfeld, Mrs. Lois D. Rice and Mr. Wilson Wilde). It advises the Shawmut Board on all matters with respect to (i) the appropriate number of directors to serve on the Shawmut Board; (ii) identification of qualified people to sit on the Shawmut Board; (iii) assessment of director performance; and (iv) other recommendations related to the composition or selection of directors for the Shawmut Board. The committee met once during 1994. Holders of Shawmut Common Stock who wish to have the board consider individuals for nomination as directors should submit to the secretary of Shawmut a written statement detailing the qualifications of each such person together with relevant biographical information and a written statement by the candidate of his or her willingness to serve. The secretary will refer each such statement to the nominating committee, which will consider the nominee's demonstrated achievements and recognized abilities in conjunction with corporate needs and any pertinent regulatory considerations. In addition, a shareholder may directly nominate a person for election as a director by complying with Section 4 of the Shawmut By-laws, which provides for timely notice of such nomination in writing to the secretary of Shawmut, and a written statement by the candidate of his or her willingness to serve. Said notice shall include the information required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Exchange Act, along with the name, record address, class and number of shares of Shawmut beneficially owned by the shareholder giving such notice. To be timely, notice must be delivered to Shawmut not less than 50 nor more than 75 days prior to the meeting, or, if Shawmut gives less than 65 days' notice of the meeting, then notice by the shareholder must be received by the close of business on the 15th day following the earlier of the date notice of the meeting was mailed or public disclosure was made. The foregoing summary is not intended to be complete and is qualified in its entirety by the Shawmut By-laws, a copy of which may be obtained from the secretary of Shawmut. As described below, if the Merger Agreement is consummated, there will not be an annual meeting of Shawmut's stockholders in 1996. See "-- Stockholder proposals for Next Year's meeting". TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS Certain directors and executive officers of Shawmut and their associates are customers of and have had transactions with Shawmut-CT and Shawmut-MA and their subsidiaries and affiliates in the ordinary course of business during the last fiscal year. All loans and commitments included in such transactions were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than normal risk of collectibility or 127 162 [ALTERNATE SHAWMUT PAGE] present other unfavorable features. Additional transactions may be expected to take place between such persons and these banks in the ordinary course of business. DIRECTORS' REMUNERATION Directors' remuneration for 1994 was fixed by the Shawmut Board at the board meeting following the annual meeting of shareholders of Shawmut. Each nonemployee director elected at the 1994 annual meeting of shareholders received an annual retainer of $25,000, payable in Shawmut Common Stock pursuant to the restricted stock plan described below, and a fee of $1,500 per meeting attended. In addition, the chairmen of the audit, human resources and nominating committees each received an additional cash retainer of $5,000. Employees who are also directors do not receive any additional compensation for service as directors. Pursuant to Shawmut's deferred compensation plan for directors, directors may elect to defer all of their compensation as directors in any one year. On April 25, 1989, the shareholders of Shawmut approved the adoption of a restricted stock plan for nonemployee members of the Shawmut Board, which plan is administered by the human resources committee. The maximum number of shares of Shawmut Common Stock that may be granted under the plan is 125,000. Awards of restricted stock were made automatically, on the date of the 1994 annual meeting of shareholders, to each nonemployee director who was elected at the 1994 meeting or otherwise continued in office. The number of shares of restricted stock awarded to each nonemployee director so elected equalled the amount payable to the nonemployee director as an annual retainer for the calendar year within which the award date fell, divided by the fair market value of each such share on the award date. Effective December 15, 1994, the Shawmut Board amended the restricted stock plan to allow nonemployee directors to elect to receive the annual retainer in shares of restricted stock of Shawmut, in cash, or in a combination thereof. The annual retainer does not include fees paid for attendance at any board or committee meeting or for chairing a committee of the board. In 1994, a total of 10,390 shares of Shawmut Common Stock were awarded to nonemployee directors under the amended plan. Directors who are not employees are not eligible to participate in any of the plans presently in effect for employees of Shawmut. In January 1995, as part of Shawmut's policy of providing support for charitable institutions and in order to retain and attract qualified directors, the Shawmut Board established a charitable giving program, which will be funded by life insurance on the lives of the members of the Shawmut Board. Each director is permitted to recommend up to three tax-exempt charities to receive contributions. Under the program, directors of Shawmut will be paired up based upon similar life expectancies. When the first director of the pair of directors dies, Shawmut will make a charitable contribution of $1 million, paid out over a period of ten years. Upon the death of the second director of the pair of directors, the insurance company reimburses Shawmut for the money Shawmut has paid out, pays out any balance due for the remaining ten year period from the death of the first director, and pays out the charitable contribution of $1 million over a period of ten years following the death of the second director. Directors derive no financial benefit from the program. Because of the deductibility to Shawmut of contributions and the use of insurance, the long-term cost to Shawmut is not expected to be material. 128 163 [ALTERNATE SHAWMUT PAGE] EXECUTIVE COMPENSATION The tables and descriptive information set forth below are being furnished with respect to those persons who, at December 31, 1994, were Shawmut's chief executive officer, its four most highly compensated executive officers, other than the chief executive officer, as well as a former executive officer, whose salary and bonus exceeded $100,000 for the most recent fiscal year (together, the "named executive officers"). TABLE I Table I sets forth certain information concerning the annual and long-term compensation for services in all capacities to Shawmut for the fiscal years ended December 31, 1994, 1993 and 1992 of the named executive officers. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ---------------------------------- AWARDS ANNUAL COMPENSATION ----------------------- PAYOUTS ------------------------------------------- RESTRICTED SECURITIES -------- OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION PRINCIPAL POSITION YEAR ($) ($) (1)($) (2)($) (3)(#) (4)($) (5)(6)(7)($) - ---------------------------- ----- -------- -------- ------------ ---------- ---------- -------- ------------ Joel B. Alvord.............. 1994 $650,000 $850,000 $ 39,314 $ 0 102,562 $504,987 $ 18,263 Chairman and Chief Executive 1993 650,000 650,000 9,663 0 117,558 0 19,827 Officer 1992 650,000 200,000 255,753 276,250 50,000 0 33,750 Gunnar S. Overstrom, Jr..... 1994 $510,000 $525,000 $ 32,160 $ 0 68,946 $252,483 $ 8,832 President and Chief 1993 510,000 400,000 9,640 0 83,047 0 12,803 Operating Officer 1992 510,000 150,000 127,544 212,500 40,000 0 19,672 David L. Eyles.............. 1994 $330,000(8) $250,000(9) $ 25,366 $ 0 35,946(9) $125,146 $ 7,613 Vice Chairman and Chief 1993 330,000 230,000 13,099 0 35,740 0 9,016 Credit Policy Officer 1992 258,300 155,000 81,624 154,000 16,000 0 94,305 Eileen S. Kraus............. 1994 $330,000 $220,000 $ 3,924 $ 0 35,852 $125,146 $ 9,413 Vice Chairman; President of 1993 330,000 210,000 4,259 0 35,142 0 13,109 Shawmut-CT 1992 310,000 100,000 36,871 148,750 16,000 0 23,138 Michael J. Rothmeier(10).... 1994 $260,000 $210,000 $ 10,848 $ 0 20,000 $ 87,821 $ 3,217 Executive Vice President of Shawmut-CT and Shawmut-MA Allen W. Sanborn(11)........ 1994 $360,000(8) $180,000(9) $ 3,077 $ 0 30,000(9) $125,146 $ 6,754 Vice Chairman; President of 1993 360,000 180,000 3,033 0 20,000 0 8,897 Shawmut-MA 1992 240,000 180,000 1,235 146,250 30,000 0 125,498 - --------------- (1) Amounts reported represent payments or reimbursements of tax liabilities imputed to the named executive officers. Aggregate perquisite amounts less than $50,000 or 10% of salary and bonus are excluded, in accordance with the rules of the Commission. (2) Based upon the closing price per share on date of grant. The number and value of the aggregate restricted stock holdings at December 31, 1994 of the named executive officers, based upon the closing price per share on such date, are as follows: Mr. Alvord, 8,666 shares, $141,906; Mr. Overstrom, 6,666 shares, $109,156; Mr. Eyles, 0 shares, $0; Mrs. Kraus, 4,666 shares, $76,406; Mr. Rothmeier, 2,666 shares, $43,656; and Mr. Sanborn, 3,333 shares, $54,578. Dividends are paid on restricted shares at the same rate as on other shares of Shawmut Common Stock. 1992 grants vest in thirds at one-year intervals from the date of grant. See "INTERESTS OF CERTAIN PERSONS IN THE MERGER -- Interests of Shawmut Directors and Executive Officers" for the effect of approval by the holders of Shawmut Common Stock of the Merger on such shares of restricted stock. Such aggregate holdings at December 31, 1994 also include the following number and value of performance equity share units granted in 1994 (see Table IV), based upon the closing price per share on such date: Mr. Alvord, 69,000 shares and $1,129,875; Mr. Overstrom, 34,500 shares and $564,938; Mr. Eyles, Mrs. Kraus and Mr. Sanborn each, 17,100 shares and $280,013; and Mr. Rothmeier, 13,100 shares and $214,513. Dividend equivalent units accrue on performance equity share units at the same rate as on shares of Shawmut Common Stock. The maturation of all performance equity share units granted
129 164 [ALTERNATE SHAWMUT PAGE] and dividend equivalent units accrued from the date of grant is contingent upon corporate performance. See "INTERESTS OF CERTAIN PERSONS IN THE MERGER -- Interests of Shawmut Directors and Executive Officers" for the effect of approval by the holders of Shawmut Common Stock of the Merger on such performance equity share units. (3) Includes both original options and restoration options granted during 1994. See Table II. (4) Represents earnout of the initial performance equity award reflecting 1994 performance inclusive of dividend equivalent units accrued from the date of grant. (5) 1994 amounts represent (a) Shawmut matching contributions to employees' thrift plan, (b) aggregate insurance premiums (executive group life and split-dollar life policies), respectively, as follows; Mr. Alvord, (a) $5,400, (b) $6,413; Mr. Overstrom, (a) $5,400, (b) $3,432; Mr. Eyles, (a) $3,600, (b) $4,013; Mrs. Kraus, (a) $5,400, (b) $4,013; Mr. Rothmeier (a) $1,800, (b) $1,417; and Mr. Sanborn, (a) $3,600, (b) $3,154. Payout of discontinued stock equivalent plan for Mr. Alvord of $6,450 is also included. (6) 1993 amounts represent (a) Shawmut matching contributions to employees' thrift plan and (b) aggregate insurance premiums (executive group life and split-dollar life policies), respectively, as follows; Mr. Alvord, (a) $5,392, (b) $14,435; Mr. Overstrom, (a) $5,392, (b) $7,411; Mr. Eyles, (a) $3,598, (b) $5,418; Mrs. Kraus (a) $5,392, (b) $7,717; and Mr. Sanborn, (a) $3,598, (b) $5,299. (7) 1992 amounts represent (a) Shawmut matching contributions to employees' thrift plan and (b) aggregate insurance premiums (executive group life and split-dollar life policies), respectively, as follows; Mr. Alvord, (a) $5,237, (b) $28,513; Mr. Overstrom, (a) $5,237, (b) $14,435; Mr. Eyles, (a) $0, (b) $4,294; Mrs. Kraus (a) $5,237, (b) $17,901; and Mr. Sanborn, (a) $0, (b) $498. Also includes (i) payments of $90,011 to Mr. Eyles for services rendered and expenses incurred as a consultant during the first two months of 1992, and (ii) relocation payment of $125,000 to Mr. Sanborn. (8) Salary is pro rata from hire date. (9) Incentive commitments made upon hiring in 1992. (10) Mr. Rothmeier was not an executive officer prior to 1994. (11) Mr. Sanborn ceased to be an executive officer of Shawmut effective September 17, 1994. 130 165 [ALTERNATE SHAWMUT PAGE] TABLE II Table II sets forth certain information concerning options granted during 1994 by Shawmut to the named executive officers. The hypothetical present value on date of grant shown below for Shawmut options granted in 1994 are presented pursuant to the rules of the Commission and are calculated under the modified Black-Scholes model for pricing options. The actual before-tax amount, if any, realized upon the exercise of stock options will depend upon the excess, if any, of the market price of the Shawmut Common Stock (or, if the Merger is consummated, the Fleet Common Stock) over the exercise price per share of such common stock of the Shawmut option at the time the stock option is exercised. There is no assurance that the hypothetical present values of the options reflected in this table will be realized. For a description of the treatment of these options under the Merger Agreement, see "The Merger -- Conversion of Shawmut Capital Stock; Treatment of Shawmut Stock Options and Shawmut Warrants." OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS - ---------------------------------------------------------------------------------------------------------------- NUMBER OF SECURITIES PERCENT OF TOTAL GRANT DATE UNDERLYING OPTIONS GRANTED EXERCISE OR PRESENT OPTIONS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION VALUE(3) NAME (1)(#) IN FISCAL YEAR(2) ($/SHARE) DATE(1) ($) - ------------------------------ -------------------- ----------------- ----------- ---------- ---------- Joel B. Alvord................ 85,000 3.4% $23.125 1/27/2004 $452,094 17,562* 0.7% 23.375 1/17/1999 86,207 Gunnar S. Overstrom, Jr....... 55,000 2.2% $23.125 1/27/2004 $292,531 13,946* 0.6% 23.875 1/17/1999 69,922 David L. Eyles................ 30,000 1.2% $23.125 1/27/2004 $159,563 5,946* 0.2% 20.625 1/28/1999 25,754 Eileen S. Kraus............... 30,000 1.2% $23.125 1/27/2004 $159,563 5,852* 0.2% 20.750 1/17/1999 25,500 Michael J. Rothmeier.......... 20,000 0.8% $23.125 1/27/2004 $106,375 Allen W. Sanborn.............. 30,000 1.2% $23.125 1/27/2004 $159,563 - --------------- * Restoration options replace shares tendered to exercise prior options and shares withheld for tax liability. (1) Ten year stock options granted in 1994 will become exercisable in annual one-third increments, beginning one year from the date of grant. Restoration options will become exercisable one year after grant and will expire at the same time as the original option. All options will become exercisable upon a change in control of Shawmut which will be deemed to include the approval and adoption of the Merger Agreement by the holders of Shawmut Common Stock. (2) During 1994 a total of 2,472,746 options were granted. (3) The hypothetical present values on grant date are calculated under the modified Black-Scholes Model, which is a mathematical formula used to value options traded on stock exchanges. This formula considers a number of factors in hypothesizing an option's present value. Factors used to value options include the stock's expected volatility rate (28%), risk free rate of return (6%), dividend yield (4%), projected time of exercise (7 years) and projected risk of forfeiture rate for vesting period (5% per annum). Restoration option values are calculated using the same model and factors as original options, except that the projected date of exercise is the remaining term of the original grant (5 years) and the assumed risk free rate of return is 5%.
131 166 [ALTERNATE SHAWMUT PAGE] TABLE III Table III sets forth certain information concerning options exercised during 1994 by the named executive officers and the number and value of specified options at December 31, 1994. The value of unexercised in-the-money stock options at December 31, 1994 shown below are presented pursuant to the Commission's rules. The actual amount, if any, realized upon exercise of stock options will depend upon the excess, if any, of the market price of the Shawmut Common Stock (or, if the Merger is consummated, the Fleet Common Stock (see "THE MERGER -- Treatment of Shawmut Capital Stock; Treatment of Shawmut Stock Options and Shawmut Warrants")) over the exercise price per share of such common stock of the stock option at the time the option is exercised. There is no assurance that the values of unexercised in-the-money options reflected in this table will be realized. AGGREGATED OPTION EXERCISES IN LAST YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(2) SHARES ACQUIRED VALUE --------------------------- --------------------------- ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE NAME (1)(#) ($) (#) (#) ($) (#) - -------------------------- --------------- -------- ----------- ------------- ----------- ------------- Joel B. Alvord............ 25,000 $318,750 120,558 172,562 $ 0 $ 0 Gunnar S. Overstrom, Jr... 20,000 265,000 95,047 113,946 0 0 David L. Eyles............ 8,000 77,000 5,740 65,946 0 0 Eileen S. Kraus........... 8,000 81,000 30,642 55,852 0 0 Michael J. Rothmeier...... 0 0 14,000 29,000 36,750 0 Allen W. Sanborn.......... 0 0 30,000 50,500 52,500 0 - --------------- (1) The named executive officers used already owned shares to pay the exercise price of options exercised during 1994. The options noted above were exercised under the restoration option program, pursuant to which such officers are required to retain, for a minimum of three years, the number of newly acquired shares equal in value to the after-tax value realized on the option exercise. (2) Based upon the difference between exercise price and closing price per share at December 31, 1994.
132 167 [ALTERNATE SHAWMUT PAGE] TABLE IV Table IV sets forth certain information concerning long-term incentive awards granted to the named executive officers during 1994. LONG-TERM INCENTIVE PLAN-AWARDS IN LAST FISCAL YEAR(1)
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS(3) NUMBER OF -------------------------------- SHARE UNITS PERFORMANCE OR THRESHOLD TARGET MAXIMUM MATURATION OR PAYMENT NAME (2)(#) OTHER PERIOD UNTIL (#) (#) (#) - --------------------------------- ----------- ------------------ --------- ------ ------- Joel B. Alvord................... 23,000 12/31/96 0 23,000 23,000 Gunnar S. Overstrom, Jr. ........ 11,500 12/31/96 0 11,500 11,500 David L. Eyles................... 5,700 12/31/96 0 5,700 5,700 Eileen S. Kraus.................. 5,700 12/31/96 0 5,700 5,700 Michael J. Rothmeier............. 5,100 12/31/96 0 5,100 5,100 Allen W. Sanborn................. 5,700 12/31/96 0 5,700 5,700 - --------------- (1) The performance equity plan was adopted during 1993 to provide significant and fully competitive long-term reward opportunities for key senior members of management. Participants have the opportunity to earn their target performance equity share units if predetermined strategic business goals are achieved, and shareholder value is thereby created. (2) Under the 1994-1996 cycle, the named executive officers received awards of target performance equity share units based on individual performance as determined by the human resources committee. (3) Awards are earned, based on an accelerating scale, if Shawmut achieves a preestablished threshold return on average common equity. If the target return on average common equity is met, the number of shares of Shawmut Common Stock paid out will equal the number of performance equity share units granted, plus dividend equivalents. Performance below the threshold goal will result in no payout; there is no minimum payout under the plan. Under the plan, all restrictions on outstanding performance equity share units will lapse upon a change of control which will be deemed to include the approval of the Merger by the holders of Shawmut Common Stock. See "INTERESTS OF CERTAIN PERSONS IN THE MERGER -- Interests of Shawmut Directors and Executive Officers."
TABLE V PENSION TABLE
YEARS OF CREDITED SERVICE FINAL -------------------------------------------------------- COMPENSATION 15 20 25 30 35 - ------------ -------- -------- -------- -------- -------- $ 400,000.......................... 120,000 160,000 200,000 240,000 240,000 500,000.......................... 150,000 200,000 250,000 300,000 300,000 600,000.......................... 180,000 240,000 300,000 360,000 360,000 700,000.......................... 210,000 280,000 350,000 420,000 420,000 800,000.......................... 240,000 320,000 400,000 480,000 480,000 900,000.......................... 270,000 360,000 450,000 540,000 540,000 1,000,000.......................... 300,000 400,000 500,000 600,000 600,000 1,100,000.......................... 330,000 440,000 550,000 660,000 660,000 1,200,000.......................... 360,000 480,000 600,000 720,000 720,000 1,300,000.......................... 390,000 520,000 650,000 780,000 780,000
Table V sets forth information for determining the estimated annual retirement benefits commencing at age 65 that would be payable to participants under Shawmut's defined benefit plans pursuant to which benefits are determined by final compensation and years of service ("retirement plans"). Compensation for purposes of the pension table means the final year's salary and the average of the short-term incentive awards for the five 133 168 [ALTERNATE SHAWMUT PAGE] highest consecutive calendar years after 1984 (see summary compensation table for salary). The amounts set forth in the table are offset by social security benefits and assume payment in the form of a 50% joint and survivor annuity, but do not reflect the reduction for tax payments discussed below. As of December 31, 1994, remuneration covered by the retirement plans and years of credited service as defined therein are as follows for the named executive officers: Mr. Alvord, $1,042,000 and 35 years; Mr. Overstrom, $788,600 and 24 years; Mr. Eyles, $522,500 and 7 years; Mrs. Kraus, $459,000 and 15 years; and Mr. Rothmeier, $406,667 and 2 years; and Mr. Sanborn, $540,000 and 2 years. Shawmut also maintains a split-dollar life insurance program which, in addition to supplemental insurance benefits, provides a choice of postretirement death benefits or supplemental retirement income. The formula by which any retirement benefits for executive officers are determined under the split-dollar life insurance program is 4% of cumulative base salary (6% for Mr. Alvord) for all years of participation in the plan. The retirement plans include a tax-qualified pension plan and a supplemental, nonqualified pension plan. At the election of individual participants, Shawmut funds the supplemental plan and the split-dollar life insurance plan discussed above through contributions to an irrevocable trust (the "trust"). Such contributions will constitute taxable income to an electing participant to the extent and at the time that the participant's benefit becomes vested; income of the trust may also constitute taxable income to such participants. The trust provides for the distribution annually to each electing participant (or the remittance by Shawmut to the appropriate tax authority on behalf of the participant) of an amount sufficient to pay all income taxes imposed on the participant in connection with the trust; the trust also provides for the retirement benefits to which electing participants will be entitled to be reduced to their after-tax equivalents. EXECUTIVE SEVERANCE AND EMPLOYMENT AGREEMENTS Shawmut entered into two-year employment agreements with Messrs. Eyles and Sanborn on March 1, 1992 and May 11, 1992, respectively, providing for annual salaries of $310,000 and $360,000, respectively. These agreements also prescribe the 1993 grants of stock options, awards of restricted stock and awards of short-term bonuses made to the executives for 1993, as disclosed above on the summary compensation table. In the event of termination of employment by Shawmut other than for cause (as defined in the agreements) or by the executive for good reason (as defined in the agreements), these agreements provide for the continuation of salary payments for the remainder of their terms and, with respect to other matters, generally provide as set forth in the employment agreements described in "INTERESTS OF CERTAIN PERSONS IN THE MERGER -- Interests of Shawmut Directors and Executive Officers". On May 11, 1994, Mr. Sanborn's employment agreement expired in accordance with its terms. On May 16, 1994, Mr. Eyles's employment agreement with Shawmut was amended to provide for a termination date of May 15, 1997, subject to automatic one year extension periods unless written notice to the contrary is provided by either party on or before the March 17th immediately prior to such May 16th renewal date. In the event of a termination of Mr. Eyles's employment after a change in control of Shawmut, any benefits payable to Mr. Eyles as a result of such termination will be paid pursuant to Mr. Eyles's existing severance agreement described above, and no amounts will be payable in such circumstance pursuant to Mr. Eyles's employment agreement. See "INTERESTS OF CERTAIN PERSONS IN THE MERGER -- Interests of Shawmut Directors and Executive Officers." Shawmut entered into a letter agreement (the "Letter Agreement") with Mr. Sanborn as of September 16, 1994 in connection with his termination of employment. Pursuant to the Letter Agreement, Shawmut has agreed to provide to Mr. Sanborn (1) continued base salary and certain welfare benefits until December 31, 1995, (2) his bonus with respect to 1994, (3) the payment to which he would have been entitled under Shawmut's Performance Equity Plan, with respect to the performance cycle ended on December 31, 1994, had his employment continued until December 31, 1994, and (4) an election, exercisable only at the times specified in the Letter Agreement, to receive a cash payment with respect to all options held by him in an amount equal to the fair market value of the stock subject thereto on the date of such election over the exercise price thereof. The Letter Agreement also includes covenants relating to non-competition and confidential information, as well as mutual releases. 134 169 [ALTERNATE SHAWMUT PAGE] For a description of Shawmut's other executive severance and employment agreements, see "INTERESTS OF CERTAIN PERSONS IN THE MERGER -- Interests of Shawmut Directors and Executive Officers." COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Mr. Alvord is chairman of the compensation committee of the board of directors of The Hartford Steam Boiler Inspection and Insurance Company ("HSB"). Mr. Wilde, who is chairman of the executive committee and a director of HSB, is a director of Shawmut; however, Mr. Wilde does not serve on Shawmut's human resources committee. The following directors, all of whom are nonemployees of Shawmut, serve on the human resources committee of Shawmut: Stillman B. Brown, John T. Collins, Robert J. Matura, Maurice Segall, and Paul R. Tregurtha (chairman). HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION COMPENSATION POLICIES APPLICABLE TO EXECUTIVE OFFICERS The human resources committee of the Shawmut Board, which is composed entirely of independent outside directors, is responsible for establishing, implementing and monitoring Shawmut's strategy, policies and plans for executive compensation. Shawmut's strategy is to (i) attract high-caliber managerial and professional talent at both entry level and mid-career to meet the organization's growing needs, (ii) assess and develop such talent for careers at Shawmut through internal promotion under its performance planning and evaluation policy, (iii) select and retain top-performing executive officers at the corporate level and in each sector of Shawmut's financial services businesses, (iv) provide compensation opportunities that are fair and competitive with those provided by comparable organizations, and (v) motivate and reward its executives based on corporate, business line and individual annual performance and long-term creation of shareholder value. Incentive awards are related to the financial results of Shawmut and its business lines. This focus on performance-related compensation may cause individual long-term total remuneration to change significantly from year to year. As a result, compensation for Shawmut's executive officers involves a high proportion of pay that is at risk: the variable annual bonus (which permits individual performance to be recognized annually, based, in part, on an evaluation of the contribution made by the officer to Shawmut's performance) and equity participation in the form of stock options and performance equity share units (which relate a significant portion of the executive officer's remuneration to the market value of Shawmut's stock and other measures of Shawmut's performance). In accordance with its responsibilities, at the beginning of each performance year, the committee reviews Shawmut's overall mission, strategy and objectives. Shawmut's 1994 performance objectives included profitability, improved asset quality, expense control, and expansion through acquisitions. Using those objectives, the individual business lines developed performance initiatives that directly aligned business line goals to overall corporate performance. Executive officers were assessed by the committee on the basis of the accomplishments of their individual business lines vis-a-vis their goals and results. No specific numerical weight was assigned to any factor. The committee determines the elements and levels of compensation on the basis of this assessment, taking into consideration prevailing economic conditions and opportunities, shareholder well-being and performance and marketplace pay levels and practices among a peer group of 28 banks considered comparable for compensation purposes. This peer group is composed of a national sample of financial institutions with similar emphasis and business mix and is therefore representative of pay practices at institutions against which Shawmut competes for talented, experienced executives. Of the eleven eastern regional institutions (other than Shawmut) included in the Keefe, Bruyette & Woods Eastern Regional Index used on the performance graph set forth below, eight are included in the national peer group that is used to assess competitive pay practices. The committee is assisted in its review and evaluation by an independent outside executive compensation consultant retained by the committee. 135 170 [ALTERNATE SHAWMUT PAGE] Section 162(m) of the Code imposes an annual, individual limit of $1 million on the deductibility of Shawmut's compensation payments (excluding "performance-based" compensation) to the named executive officers. It is the committee's policy to maximize the effectiveness, as well as the tax-efficiency, of Shawmut's executive compensation programs. With regard to future executive compensation actions, the committee's policy is to maintain flexibility to take actions which it deems to be in the best interests of Shawmut and its stockholders, but which may not qualify for tax deductibility under Section 162(m) or other Sections of the Code. ELEMENTS OF COMPENSATION For 1994, the compensation of Shawmut's named executive officers was consistent with the policies and plans in place for several years, which provide for three major elements of compensation, all subject to board approval: 1. Competitive base salaries -- Base salaries reflect the competitive marketplace at the appropriate job level, the individual performance of each executive officer, time in position, prior experience and accomplishments, and the relative importance of the job to Shawmut. Base salaries are reviewed periodically for adjustment by the committee. Adjustments may be recommended based on individual performance and overall corporate results, subject to the minimum amount set forth in any applicable employment agreement. As an executive's level of responsibility increases, a larger portion of the executive's total annual compensation is performance-based and a smaller portion consists of salary. Consistent with this philosophy, base salaries for executive officers are changed infrequently. Specifically, none of the named executive officers received an increase in salary during the past year. Mr. Alvord's last salary increase was in January 1989. 2. Annual incentive awards -- Annual incentive awards are based on the committee's year-end assessment of annual performance achievement for the year. All executive officers are eligible to participate in Shawmut's short-term incentive plan under which such awards are generally made in cash early in the following year. Shawmut's 1994 performance objectives are discussed in general above. Individual performance evaluation factors included leadership, organizational management, administration and control. Executive officers managing specific business lines/subsidiaries were also responsible for profit plan goals in their areas of responsibility. Based on 1994 results, which included the closing of five acquisitions totaling $4.2 billion in assets, the improvement in core earnings, the reduction of recurring expenses by $94 million, the elimination of the asset quality problem, and other major achievements, bonuses were awarded by the committee as shown in Table I to the named executive officers in accordance with the committee's assessment of their performance and relative contribution. Executive officers influence corporate performance depending upon their specific responsibilities and their effective execution of those responsibilities. Therefore, individual performance factors receive different emphasis depending on the particular executive officer being assessed. In all instances (except in the case of the chief executive officer as discussed below), performance factors specific to each business line's profit plan were the principal determinants of annual incentive awards. Comparative pay practices in the peer group of 28 banks discussed above served as useful benchmarks in making these decisions. 3. Equity participation -- Equity participation is provided in the form of stock options, restricted stock, and performance equity share units, which strengthen the coincidence of interest of executive officers and Shawmut's shareholders in Shawmut's growth in real value over the long-term. Options granted in 1994 will become exercisable over three years from the date of grant, and expire ten years after date of grant. OPTIONS Option grants have generally been made annually to executive officers at 100 percent of fair market value at date of grant. These grants to executive officers are discretionary within a guideline range based on competitive practice and reflect the relative value of the individual's position as well as the current performance assessment, continuing contribution and prospective effect of that executive officer on Shawmut's future success. 136 171 [ALTERNATE SHAWMUT PAGE] The value of options granted to executive officers is fixed at a percentage of salary, with the value of the options established by using the Black-Scholes option valuation model. This percentage varies, within the guideline range discussed above, based on each executive's prior year performance as judged on individual performance evaluation factors including leadership, organizational management, administration and control. The percentages are set at levels which, together with the performance equity share unit grants, are designed to provide target long-term incentive compensation opportunities at approximately the average level of executives in similar positions in the peer group of 28 banks discussed above. Shawmut options which will become exercisable in annual one-third increments, beginning one year from the date of grant, and expire ten years after date of grant were granted in 1994 as shown in Table II. The committee decided in 1993 to include a restoration option feature to specific existing grants to encourage early exercise of Shawmut options and further increase actual ownership to provide greater linkage to stockholder interests. The restoration option feature allows a participant who exercises the original stock option prior to the participant's retirement, and who pays all or a part of the exercise price of the stock option with shares of Shawmut Common Stock held by the participant for at least six months, to receive a restoration option to purchase the number of shares of Shawmut Common Stock equal to the number of whole shares used by the participant in payment of the exercise price and applicable taxes of the original stock option. A restoration option may be exercised between the date of its grant and the date of expiration of the original stock option to which the restoration option is related, and the exercise price may not be less than 100% of the fair market value of the Shawmut Common Stock on the date the restoration option is granted. A participant must retain for a minimum of three years that number of newly acquired shares equal in value to the after-tax gain realized on the option exercised. The principal factors taken into account in determining these awards were the need to retain and motivate these key employees, to recognize Shawmut's successful transition, to increase alignment of managers' and shareholders' interests and to increase managers' ownership, but did not include the level of outstanding awards. Restoration options were granted in 1994 as shown in Table II. Under the Shawmut Stock Option and Restricted Stock Award Plan, all outstanding stock options and stock appreciation rights, whether or not vested, will become fully exercisable upon a change in control (as defined therein). The approval of the Merger by the holders of the Shawmut Common Stock will constitute a change in control for purposes of such plan. See "INTERESTS OF CERTAIN PERSONS IN THE MERGER -- Interests of Shawmut Directors and Executive Officers." RESTRICTED STOCK Restricted stock, which provides executive officers with an immediate at-risk equity interest in Shawmut, may be granted annually to executive officers; however, restricted stock has generally been granted less frequently. Such awards, which may require attainment of financial performance objectives, always impose future service requirements of up to ten years. Vesting may occur ratably over the restriction period or 100% on completion of the period. No restricted stock awards were made to the named executive officers in 1993 or 1994. Under the Shawmut Stock Option and Restricted Stock Award Plan, all restrictions on outstanding restricted stock will lapse upon a change in control (as defined therein). The approval of the Merger by the holders of the Shawmut Common Stock will constitute a change in control for purposes of such plan. See "INTERESTS OF CERTAIN PERSONS IN THE MERGER -- Interests of Shawmut Directors and Executive Officers." PERFORMANCE EQUITY SHARE UNITS Performance equity share units, which provide executive officers with a partnership-oriented, long-term performance incentive, may be granted annually. Award opportunities, payable in stock, focus executives on earning an equity stake in Shawmut and enhance team motivation. The committee meets each year to select the key executives who will participate based upon its evaluation of a potential participant's current 137 172 [ALTERNATE SHAWMUT PAGE] performance and future ability to contribute. It also looks at the critical nature of the skills and the strategic importance of a participant's position in the organization. The committee selects financial performance targets taking into account Shawmut's long-range strategic plan, the current economic climate, and return on average common equity, stock market price, and dividend expectations for Shawmut. For each selected performance criteria, the committee will determine a performance objective and a minimum performance level. Full achievement of the performance objectives will result in the award of the entire share target plus reinvested dividends accrued during the cycle on that number of shares. Performance below the minimum level will result in no award for the cycle. Performance equity share units were awarded in 1994 as shown in Table IV. Under the Shawmut Stock Option and Restricted Stock Award Plan, all restrictions on outstanding performance equity share units will lapse upon a change in control (as defined therein). The approval of the Merger by the holders of the Shawmut Common Stock will constitute a change in control for purposes of such plans. See "INTERESTS OF CERTAIN PERSONS IN THE MERGER -- Interests of Shawmut Directors and Executive Officers." BASES FOR THE COMPENSATION OF THE CHIEF EXECUTIVE OFFICER As discussed above, the chief executive officer participates in Shawmut's executive compensation program. Mr. Alvord did not receive a salary increase in 1994, reflecting the committee's decision to continue the shift from fixed (base salary) to variable (performance-based) compensation. The chief executive officer's 1994 performance was assessed on the basis of specific corporate objectives, the most important of which were Shawmut's improved income before merger related charges and the effect of accounting changes, expense reduction and control (improved efficiency ratio), generation of revenues, improvement of the profitability of the loan portfolio, and achievement of other annual objectives in Shawmut's 1994 profit plan, as well as fulfillment of his personal performance initiatives. As a result of the successful achievement of these key objectives, the chief executive officer was awarded an annual bonus for 1994 performance as set forth above in Table I. Based upon Shawmut's results, and strategic repositioning in order to compete effectively in the years ahead, the chief executive officer was granted the stock options described above in Table II and the performance equity share unit award described above in Table IV. Based on the competitive compensation of the 28 peer group CEOs, the committee believes Mr. Alvord's total remuneration is reasonable and appropriate given the size, complexity and performance of Shawmut. Like those of other executives, the chief executive officer's options were granted at 100 percent of fair market value on the date of grant, will become exercisable over a three-year vesting period, and will expire ten years after the date of grant; his performance equity share unit award will mature on completion of the 1994-1996 performance cycle. Under the Shawmut Stock Option and Restricted Stock Award Plan, all outstanding stock options and stock appreciation rights, whether or not vested, will become fully exercisable and all restrictions on outstanding restricted stock and performance equity share units will lapse upon a change in control (as defined therein). The approval of the Merger by the holders of the Shawmut Common Stock will constitute a change in control for purposes of such plans. See "INTERESTS OF CERTAIN PERSONS IN THE MERGER -- Interests of Shawmut Directors and Executive Officers." Submitted by the members of the Human Resources Committee Paul R. Tregurtha, Chairman Stillman B. Brown John T. Collins Robert J. Matura Maurice Segall 138 173 [ALTERNATE SHAWMUT PAGE] PERFORMANCE GRAPH The following graph compares the yearly percentage change in Shawmut's cumulative total shareholder return on the Shawmut Common Stock over the prior five years (assuming reinvestment of dividends at date of payment into Shawmut Common Stock) with the cumulative total return on the published Standard & Poor's 500 Stock Index and the cumulative total return on the Keefe, Bruyette & Woods Eastern Regional Index, described in note (1) below. Shawmut believes that while total shareholder return is a most important criterion of corporate performance, it is subject to the vagaries of the market. In addition to the creation of shareholder value, Shawmut's executive compensation program is based on operating and strategic results, and the other factors set forth and discussed in the committee report on page 132. [(GRAPH)] S&P 500 $100 97 126 136 150 152 KBW Index 100 62 108 150 156 139 Shawmut 100 27 52 103 124 97
139 174 [ALTERNATE SHAWMUT PAGE] APPOINTMENT OF INDEPENDENT ACCOUNTANTS The Shawmut Board, on recommendation of the audit committee, favors the appointment of Price Waterhouse LLP as independent accountants for Shawmut for the year ending December 31, 1995 and, unless otherwise directed, the proxies will be voted in favor of this appointment. Price Waterhouse LLP has advised that neither the firm nor any present member or associate of it has any financial interest, direct or indirect, in Shawmut or its subsidiaries, nor has had any connection with Shawmut or its subsidiaries in the capacity of promoter, underwriter, voting trustee, director, officer or employee. Representatives of Price Waterhouse LLP will be present at the meeting, as in the past, to make a statement if they should desire to do so and to respond to appropriate questions raised by shareholders at the meeting. Adoption of this proposal requires the affirmative vote of a majority of the votes cast at the meeting. THE SHAWMUT BOARD RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF PRICE WATERHOUSE, AS INDEPENDENT ACCOUNTANTS. STOCKHOLDER PROPOSALS FOR NEXT YEAR'S MEETING Shawmut intends to hold an annual meeting of stockholders in 1996 only if the Merger is not consummated on or before February 20, 1996. To the extent that an annual meeting of stockholders in 1996 is scheduled, Shawmut anticipates that next year's proxy statement will be mailed on or about March 14, 1996, and the annual meeting will be held on April 25, 1996. Any eligible stockholder who wishes to submit written proposals for possible inclusion in next year's proxy statement must be sure that all such proposals are received by Shawmut on or before November 14, 1995. Any such proposal or nomination should be mailed to Shawmut National Corporation, One Federal Street, Boston, Massachusetts 02211, Attention: Secretary. ANNUAL REPORT The 1994 annual report of Shawmut, including financial statements, was mailed on or about March 31, 1995 to each stockholder of record as of March 28, 1995 and is being mailed to each stockholder of record as of the Record Date, who was not a stockholder of record on March 28, 1995, together with the notice of annual meeting of stockholders, this Joint Proxy Statement-Prospectus and proxy on or about May 11, 1995. OTHER MATTERS The Shawmut Board knows of no other matters that are to be presented for action at the Shawmut Meeting. If any other matters are properly presented to the Shawmut Meeting, the proxies, who are all directors of Shawmut and who were appointed to this capacity by the Shawmut Board and are named in the enclosed proxy, or authorized substitutes, will vote on such matters in accordance with their best judgment. 140 175 EXHIBIT A AGREEMENT AND PLAN OF MERGER BETWEEN FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATION DATED AS OF FEBRUARY 20, 1995 176 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of February 20, 1995, by and among Fleet Financial Group, Inc., a Rhode Island corporation ("Parent") and Shawmut National Corporation, a Delaware corporation ("Subject Company"). WHEREAS, the Boards of Directors of Parent and Subject Company have determined that it is in the best interests of their respective companies and their stockholders to consummate the business combination transaction provided for herein in which Subject Company will, subject to the terms and conditions set forth herein, merge (the "Merger") with and into Parent, so that Parent is the surviving corporation in the Merger; and WHEREAS, as a condition to, and immediately after the execution of, this Agreement, Parent and Subject Company are entering into a Parent Stock Option Agreement (the "Parent Option Agreement") attached hereto as Exhibit A; and WHEREAS, as a condition to, and immediately after the execution of, this Agreement, Parent and Subject Company are entering into a Subject Company Stock Option Agreement (the "Subject Company Option Agreement"; and together with the Parent Option Agreement, the "Option Agreements") attached hereto as Exhibit B; and WHEREAS, the parties desire to make certain representations, warranties and agreements in connection with the Merger and also to prescribe certain conditions to the Merger. NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained herein, and intending to be legally bound hereby, the parties agree as follows: ARTICLE I THE MERGER 1.1 The Merger. Subject to the terms and conditions of this Agreement, in accordance with the Delaware General Corporation Law (the "DGCL") and the Rhode Island Business Corporation Act (the "RIBCA"), at the Effective Time (as defined in Section 1.2 hereof), Subject Company shall merge with and into Parent. Parent shall be the surviving corporation (hereinafter sometimes called the "Surviving Corporation") in the Merger, and shall continue its corporate existence under the laws of the State of Rhode Island. Upon consummation of the Merger, the separate corporate existence of Subject Company shall terminate. 1.2 Effective Time. The Merger shall become effective as set forth in the certificate of merger (the "Certificate of Merger") which shall be filed with the Secretary of State of the State of Delaware (the "Delaware Secretary") and the articles of merger (the "Articles of Merger") which shall be filed with the Secretary of State of the State of Rhode Island (the "Rhode Island Secretary"), in each case, on the Closing Date (as defined in Section 9.1 hereof). The term "Effective Time" shall be the date and time when the Merger becomes effective, as set forth in the Certificate of Merger and the Articles of Merger. 1.3 Effects of the Merger. At and after the Effective Time, the Merger shall have the effects set forth in Section 261 of the DGCL and Section 7-1.1-69 of the RIBCA. 1.4 Conversion of Subject Company Common Stock; Subject Company Preferred Stock. At the Effective Time, in each case, subject to Section 2.2(e) hereof, by virtue of the Merger and without any action on the part of Parent, Subject Company or the holder of any of the following securities: (a) Each share of the common stock, par value $0.01 per share, of Subject Company (the "Subject Company Common Stock"; the Subject Company Common Stock and the Subject Company Preferred Stock, as defined below, being referred to herein as, the "Subject Company Capital Stock") issued and outstanding immediately prior to the Effective Time (other than shares of Subject Company Common Stock held (x) in Subject Company's treasury or (y) directly or indirectly by Parent or Subject Company or any of their respective Subsidiaries (as defined below) (except for Trust Account Shares and DPC shares, as such A-1 177 terms are defined below)) shall be converted into the right to receive 0.8922 shares (the "Common Exchange Ratio") of the common stock, par value $1.00 per share, of Parent ("Parent Common Stock"; the Parent Common Stock and the Parent New Preferred, as defined below, being referred to herein as, the "Parent Capital Stock") (together with the number of parent rights ("Parent Rights") issued pursuant to the Parent Rights Agreement (as defined in Section 4.2 hereof) associated therewith). (b) Each share of preferred stock with cumulative and adjustable dividends, stated value $50.00 per share, of Subject Company (the "Subject Company Adjustable Preferred") issued and outstanding immediately prior to the Effective Time (other than Dissenting Preferred Shares (as defined below)) shall be converted into the right to receive one share of preferred stock with cumulative and adjustable dividends of Parent (the "Parent Adjustable Preferred"). The terms of the Parent Adjustable Preferred shall be substantially the same as the terms of the Subject Company Adjustable Preferred. (c) Each share of 9.30% cumulative preferred stock, stated value of $250 per share, of Subject Company (the "Subject Company 9.30% Preferred") issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive one share of 9.30% preferred stock of Parent (the "Parent 9.30% Preferred"). The terms of the Parent 9.30% Preferred shall be substantially the same as the terms of the Subject Company 9.30% Preferred. (d) Each share of 9.35% cumulative preferred stock of Subject Company (the "Subject Company 9.35% Cumulative Preferred"; and together with the Subject Company Adjustable Preferred and the Subject Company 9.30% Preferred, the "Subject Company Preferred") issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive one share of 9.35% cumulative preferred stock of Parent (the "Parent 9.35% Cumulative Preferred"; and together with the Parent Adjustable Preferred and the Parent 9.30% Preferred, the "Parent New Preferred"). The terms of the Parent 9.35% Cumulative Preferred shall be substantially the same as the terms of the Subject Company 9.35% Cumulative Preferred. (e) All of the shares of Subject Company Common Stock converted into Parent Common Stock pursuant to this Article I shall no longer be outstanding and shall automatically be cancelled and shall cease to exist as of the Effective Time, and each certificate (each a "Common Certificate") previously representing any such shares of Subject Company Common Stock shall thereafter represent the right to receive (i) a certificate representing the number of whole shares of Parent Common Stock and (ii) cash in lieu of fractional shares into which the shares of Subject Company Common Stock represented by such Common Certificate have been converted pursuant to this Section 1.4 and Section 2.2(e) hereof. Common Certificates previously representing shares of Subject Company Common Stock shall be exchanged for certificates representing whole shares of Parent Common Stock and cash in lieu of fractional shares issued in consideration therefor upon the surrender of such Common Certificates in accordance with Section 2.2 hereof, without any interest thereon. If prior to the Effective Time the outstanding shares of Parent Common Stock shall have been increased, decreased, changed into or exchanged for a different number or kind of shares or securities as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar change in Parent's capitalization, then an appropriate and proportionate adjustment shall be made to the Common Exchange Ratio. (f) All of the shares of Subject Company Preferred Stock converted into Parent New Preferred Stock pursuant to this Article I shall no longer be outstanding and shall automatically be cancelled and shall cease to exist as of the Effective Time, and each certificate (each a "Preferred Certificate"; and together with a Common Certificate, a "Certificate") previously representing any such shares of Subject Company Preferred Stock shall thereafter represent the right to receive a certificate representing the number of whole shares of corresponding Parent New Preferred into which the shares of Subject Company Preferred Stock represented by such Preferred Certificate have been converted pursuant to this Section 1.4. Preferred Certificates previously representing shares of Subject Company Preferred Stock shall be exchanged for certificates representing whole shares of corresponding Parent New Preferred issued in consideration therefor upon the surrender of such Preferred Certificates in accordance with Section 2.2 hereof, without any interest thereon. (g) At the Effective Time, all shares of Subject Company Capital Stock that are owned by Subject Company as treasury stock and all shares of Subject Company Capital Stock that are owned directly or A-2 178 indirectly by Parent or Subject Company or any of their respective Subsidiaries (other than shares of Subject Company Capital Stock held directly or indirectly in trust accounts, managed accounts and the like or otherwise held in a fiduciary capacity that are beneficially owned by third parties (any such shares, and shares of Parent Common Stock which are similarly held, whether held directly or indirectly by Parent or Subject Company, as the case may be, being referred to herein as "Trust Account Shares") and other than any shares of Subject Company Capital Stock held by Parent or Subject Company or any of their respective Subsidiaries in respect of a debt previously contracted (any such shares of Subject Company Capital Stock, and shares of Parent Common Stock which are similarly held, whether held directly or indirectly by Parent or Subject Company or any of their respective Subsidiaries, being referred to herein as "DPC Shares")) shall be cancelled and shall cease to exist and no stock of Parent or other consideration shall be delivered in exchange therefor. All shares of Parent Common Stock that are owned by Subject Company or any of its Subsidiaries (other than Trust Account Shares and DPC Shares) shall become treasury stock of Parent. (h) Notwithstanding anything in this Agreement to the contrary, shares of Subject Company Adjustable Preferred which are outstanding immediately prior to the Effective Time, the holders of which shall have delivered to Subject Company a written demand for appraisal of such shares in the manner provided in Section 262 of the DGCL ("Dissenting Preferred Shares"), shall not be converted into the right to receive, or be exchangeable for, the shares of Parent Adjustable Preferred otherwise issuable in exchange for such shares of Subject Company Adjustable Preferred pursuant to this Section 1.4 but, instead, the holders thereof shall be entitled to payment of the appraised value of such Dissenting Preferred Adjustable Shares in accordance with the provisions of Section 262 of the DGCL; provided, however, that (i) if any holder of Dissenting Preferred Shares shall subsequently deliver a written withdrawal of his demand for appraisal of such shares (with the written approval of the Surviving Corporation, if such withdrawal is not tendered within 60 days after the Effective Time), or (ii) if any holder fails to establish his entitlement to appraisal rights as provided in such Section 262 of the DGCL, or (iii) if neither any holder of Dissenting Preferred Shares nor the Surviving Corporation has filed a petition demanding a determination of the value of all Dissenting Preferred Shares within the time provided in Section 262 of the DGCL, such holder or holders (as the case may be) shall forfeit the right to appraisal of such shares of Subject Company Adjustable Preferred and each of such shares shall thereupon be deemed to have been converted into the right to receive, and to have become exchangeable for, as of the Effective Time, the shares of Parent Adjustable Preferred otherwise issuable in exchange for such shares of Subject Company Adjustable Preferred pursuant to this Section 1.4, without any interest thereon. 1.5 Parent Common Stock; Parent Preferred Stock. At and after the Effective Time, each share of Parent Common Stock and each share of Parent Preferred Stock issued and outstanding immediately prior to the Closing Date shall remain an issued and outstanding share of common stock or preferred stock, as the case may be, of the Surviving Corporation and shall not be affected by the Merger. 1.6 Options and Warrants. (a) At the Effective Time, each option and warrant granted by Subject Company to purchase shares of Subject Company Common Stock which is outstanding and unexercised immediately prior thereto shall cease to represent a right to acquire shares of Subject Company Common Stock and shall be converted automatically into an option or warrant, as the case may be, to purchase shares of Parent Common Stock in an amount and at an exercise price determined as provided below (and otherwise, in the case of options, subject to the terms of the Subject Company Stock Option and Restricted Stock Award Plan, the Subject Company Secondary Stock Option and Restricted Stock Award Plan and the Subject Company 1989 Nonemployee Directors' Restricted Stock Plan (collectively, the "Subject Company Stock Plans") and the agreements evidencing grants thereunder or, in the case of warrants, otherwise subject to the terms of the Stock Warrants, each dated January 18, 1994, of Subject Company (the "Subject Company Warrants")): (1) The number of shares of Parent Common Stock to be subject to the new option or warrant shall be equal to the product of the number of shares of Subject Company Common Stock subject to the original option or warrant and the Common Exchange Ratio, provided that any fractional shares of Parent Common Stock resulting from such multiplication shall be rounded down to the nearest share; and A-3 179 (2) The exercise price per share of Parent Common Stock under the new option or warrant shall be equal to the exercise price per share of Subject Company Common Stock under the original option or warrant, as the case may be, divided by the Common Exchange Ratio, provided that such exercise price shall be rounded up to the nearest cent. The adjustment provided herein with respect to any options which are "incentive stock options" (as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")) shall be and is intended to be effected in a manner which is consistent with Section 424(a) of the Code. The duration and other terms of the new option or warrant shall be the same as the original option or warrant, as the case may be, except that all references to Subject Company shall be deemed to be references to Parent. 1.7 Articles of Incorporation. At the Effective Time, the Articles of Incorporation of Parent, as in effect at the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation. 1.8 Bylaws. At the Effective Time, the Bylaws of Parent, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter amended in accordance with applicable law. 1.9 Tax Consequences. It is intended that the Merger shall constitute a reorganization within the meaning of Section 368(a) of the Code, and that this Agreement shall constitute a "plan of reorganization" for the purposes of Section 368 of the Code. 1.10 Board of Directors. From and after the Effective Time, the Board of Directors of Parent shall consist of 20 persons, including Mr. Alvord, who shall serve as the Chairman of Parent from and after the Effective Time, and Mr. Murray, who shall serve as the Chief Executive Officer and President of Parent from and after the Effective Time, 11 additional persons who are not executive officers of Parent or Subject Company to be named by Mr. Murray and the Board of Directors of Parent and 7 additional persons who are not executive officers of Parent or Subject Company to be named by Mr. Alvord and the Board of Directors of Subject Company. The representatives selected by Parent and Subject Company, respectively, shall be divided as equally as practicable among the three classes of directors in proportion to the aggregate representation set forth above. From and after the Effective Time, the representatives of Parent and Subject Company shall also be represented in proportion to the aggregate representation set forth above on all committees of the Parent Board of Directors. Promptly following the Effective Time, the Parent Board of Directors shall establish and maintain for a period of 18 months an Integration Committee to oversee the integration of the operations of Parent, Subject Company and their respective Subsidiaries, which committee shall be comprised of Messrs. Murray and Alvord, two additional representatives of Parent and two additional representatives of Subject Company. 1.11 Headquarters of Parent. Promptly following the Effective Time, the headquarters and principal executive offices of Parent shall be moved to Boston, Massachusetts. ARTICLE II EXCHANGE OF SHARES 2.1 Parent to Make Shares Available. At or prior to the Effective Time, Parent shall deposit, or shall cause to be deposited, with a bank or trust company selected by Parent and reasonably acceptable to Subject Company (which may be a Subsidiary of Parent) (the "Exchange Agent"), for the benefit of the holders of Certificates, for exchange in accordance with this Article II, certificates representing the shares of Parent Common Stock and Parent New Preferred and the cash in lieu of any fractional shares (such cash and certificates for shares of Parent Common Stock and Parent New Preferred, together with any dividends or distributions with respect thereto, being hereinafter referred to as the "Exchange Fund") to be issued pursuant to Section 1.4 and paid pursuant to Section 2.2(a) in exchange for outstanding shares of Subject Company Capital Stock. 2.2 Exchange of Shares. (a) As soon as practicable after the Effective Time, and in no event later than five business days thereafter, the Exchange Agent shall mail to each holder of record of a Certificate or A-4 180 Certificates a form letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent) and instructions for use in effecting the surrender of the Certificates in exchange for certificates representing, as the case may be, the shares of Parent Common Stock or Parent New Preferred and the cash in lieu of fractional shares, if any, into which the shares of Subject Company Capital Stock represented by such Certificate or Certificates shall have been converted pursuant to this Agreement. Upon proper surrender of a Certificate for exchange and cancellation to the Exchange Agent, together with such properly completed letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor, as applicable, (i) a certificate representing that number of whole shares of Parent Common Stock to which such holder of Subject Company Common Stock shall have become entitled pursuant to the provisions of Article I hereof, (ii) a certificate representing that number of whole shares of Parent Adjustable Preferred, if any, to which such holder of Subject Company Adjustable Preferred shall have become entitled pursuant to the provisions of Article I hereof, (iii) a certificate representing that number of whole shares of Parent 9.30% Preferred, if any, to which such holder of Subject Company 9.30% Preferred shall have become entitled pursuant to the provisions of Article I hereof, (iv) a certificate representing that number of whole shares of Parent 9.35% Preferred, if any, to which such holder of Subject Company 9.35% Preferred shall have become entitled pursuant to the provisions of Article I hereof, and (v) a check representing the amount of cash in lieu of fractional shares, if any, which such holder has the right to receive in respect of the Certificate surrendered pursuant to the provisions of this Article II, and the Certificate so surrendered shall forthwith be cancelled. No interest will be paid or accrued on the cash in lieu of fractional shares and unpaid dividends and distributions, if any, payable to holders of Certificates. Notwithstanding anything to the contrary contained herein, no certificate representing Parent Common Stock or Parent New Preferred or cash in lieu of a fractional share interest shall be delivered to a person who is an Affiliate (as defined in Section 6.5) of Subject Company unless such Affiliate has theretofore executed and delivered to Parent the agreement referred to in Section 6.5. (b) No dividends or other distributions declared after the Effective Time with respect to Parent Common Stock or Parent New Preferred shall be paid to the holder of any unsurrendered Certificate until the holder thereof shall surrender such Certificate in accordance with this Article II. After the surrender of a Certificate in accordance with this Article II, the record holder thereof shall be entitled to receive any such dividends or other distributions, without any interest thereon, which theretofore had become payable with respect to shares of Parent Common Stock or Parent New Preferred represented by such Certificate. (c) If any certificate representing shares of Parent Common Stock or Parent New Preferred is to be issued in a name other than that in which the Certificate surrendered in exchange therefor is registered, it shall be a condition of the issuance thereof that the Certificate so surrendered shall be properly endorsed (or accompanied by an appropriate instrument of transfer) and otherwise in proper form for transfer, and that the person requesting such exchange shall pay to the Exchange Agent in advance any transfer or other taxes required by reason of the issuance of a certificate representing shares of Parent Common Stock or Parent New Preferred in any name other than that of the registered holder of the Certificate surrendered, or required for any other reason, or shall establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable. (d) After the Effective Time, there shall be no transfers on the stock transfer books of Subject Company of the shares of Subject Company Capital Stock which were issued and outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates representing such shares are presented for transfer to the Exchange Agent, they shall be cancelled and exchanged for certificates representing shares of Parent Capital Stock as provided in this Article II. (e) Notwithstanding anything to the contrary contained herein, no certificates or scrip representing fractional shares of Parent Common Stock shall be issued upon the surrender for exchange of Certificates, no dividend or distribution with respect to Parent Common Stock shall be payable on or with respect to any fractional share, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a stockholder of Subject Company. In lieu of the issuance of any such fractional share, Parent shall pay to each former stockholder of Subject Company who otherwise would be entitled to receive such fractional share an amount in cash determined by multiplying (i) the average of the closing-sale prices of A-5 181 Parent Common Stock on the New York Stock Exchange as reported by The Wall Street Journal for the five trading days immediately preceding the date of the Effective Time by (ii) the fraction of a share of Parent Common Stock to which such holder would otherwise be entitled to receive pursuant to Section 1.4 hereto. (f) Any portion of the Exchange Fund that remains unclaimed by the stockholders of Subject Company for twelve months after the Effective Time shall be paid to Parent. Any stockholders of Subject Company who have not theretofore complied with this Article II shall thereafter look only to Parent for payment of the shares of Parent Common Stock or Parent New Preferred, cash in lieu of any fractional shares and unpaid dividends and distributions on the Parent Common Stock or Parent New Preferred deliverable in respect of each share of Subject Company Common Stock or Subject Company Preferred Stock, as the case may be, such stockholder holds as determined pursuant to this Agreement, in each case, without any interest thereon. Notwithstanding the foregoing, none of Parent, Subject Company, the Exchange Agent or any other person shall be liable to any former holder of shares of Subject Company Common Stock or Subject Company Preferred for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. (g) In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such person of a bond in such amount as Parent may determine is reasonably necessary as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the shares of Parent Common Stock and cash in lieu of fractional shares deliverable in respect thereof pursuant to this Agreement. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SUBJECT COMPANY Subject Company hereby represents and warrants to Parent as follows: 3.1 Corporate Organization. (a) Subject Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Subject Company has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified would not have a Material Adverse Effect (as defined below) on Subject Company. As used in this Agreement, the term "Material Adverse Effect" means, with respect to Parent, Subject Company or the Surviving Corporation, as the case may be, a material adverse effect on the business, results of operations or financial condition of such party and its Subsidiaries taken as a whole. As used in this Agreement, the word "Subsidiary" when used with respect to any party means any bank, corporation, partnership or other organization, whether incorporated or unincorporated, which is consolidated with such party for financial reporting purposes. Subject Company is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the "BHC Act") and as a savings and loan holding company under the Home Owners' Loan Act ("HOLA"). The Certificate of Incorporation and Bylaws of Subject Company, copies of which have previously been made available to Parent, are true, complete and correct copies of such documents as in effect as of the date of this Agreement. (b) Each Subject Company Subsidiary is (i) duly organized and validly existing as a bank, corporation or partnership under the laws of its jurisdiction of organization, (ii) is duly qualified to do business and in good standing in all jurisdictions (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so qualified and in which the failure to be so qualified would have a Material Adverse Effect on Subject Company, and (iii) has all requisite corporate power and authority to own or lease its properties and assets and to carry on its business as now conducted. A-6 182 (c) The minute books of Subject Company accurately reflect in all material respects all corporate actions held or taken since January 1, 1993 of its stockholders and Board of Directors (including committees of the Board of Directors of Subject Company). 3.2 Capitalization. (a) The authorized capital stock of Subject Company consists of 300,000,000 shares of Subject Company Common Stock and 10,000,000 shares of preferred stock, no par value. At the close of business on January 31, 1995 there were 121,586,053 shares of Subject Company Common Stock outstanding and 1,775,000 shares of Subject Company Preferred Stock outstanding (comprised of 700,000 shares of Subject Company Adjustable Preferred, 5,750,000 shares of Subject Company Depositary Shares (each representing a one-tenth interest in a share of Subject Company 9.30% Preferred and 5,000,000 shares of Subject Company Depositary Shares (each representing a one-tenth interest in a share of Subject Company 9.35% Cumulative Preferred), and 13,390 shares of Subject Company Common Stock held in Subject Company's treasury. On January 31, 1995, no shares of Subject Company Common Stock or Subject Company Preferred Stock were reserved for issuance, except that (i) 10,314,108 shares of Subject Company Common Stock were reserved for issuance pursuant to Subject Company's dividend reinvestment and stock purchase plans, (ii) 9,409,380 shares of Subject Company Common Stock were reserved for issuance upon the exercise of stock options pursuant to the Subject Company Stock Plans, (iii) 1,329,115 shares of Subject Company Common Stock were reserved for issuance upon the exercise of the Subject Company Warrants, (iv) 8,023,915 shares of Subject Company Common Stock were reserved for issuance upon consummation of the merger of Northeast Federal Corp. ("Northeast") with a Subsidiary of Subject Company, pursuant to the Agreement and Plan of Merger (the "Northeast Agreement"), dated as of June 11, 1994, between Subject Company and Northeast, (v) 3,000,000 shares of Subject Company Series A Junior Participating Preferred Stock were reserved for issuance upon exercise of the rights (the "Subject Company Rights") distributed to holders of Subject Company Common Stock pursuant to the Shareholder Rights Agreement, dated as of February 28, 1989, between Subject Company and Manufacturers Hanover Trust Company, as Rights Agent (the "Subject Company Shareholder Rights Agreement"), and (vi) the shares of Subject Company Common Stock issuable pursuant to the Subject Company Option Agreement. All of the issued and outstanding shares of Subject Company Common Stock and Subject Company Preferred Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. As of the date of this Agreement, except as set forth in Section 3.2(a) of the Subject Company Disclosure Schedule and except for the Subject Company Shareholder Rights Agreement and the Subject Company Option Agreement, Subject Company does not have and is not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of Subject Company Common Stock or Subject Company Preferred Stock or any other equity securities of Subject Company or any securities representing the right to purchase or otherwise receive any shares of Subject Company Common Stock or Subject Company Preferred Stock. Subject Company has previously provided Parent with a list of the option holders, the date of each option to purchase Subject Company Common Stock granted, the number of shares subject to each such option, the expiration date of each such option, and the price at which each such option may be exercised under an applicable Subject Company Stock Plan. Except as set forth in Section 3.2(a) of the disclosure schedule of Subject Company delivered to Parent concurrently herewith (the "Subject Company Disclosure Schedule"), since January 31, 1995, Subject Company has not issued any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock, other than pursuant to the exercise of employee stock options granted prior to such date and as disclosed in Section 3.2(a) of the Subject Company Disclosure Schedule, pursuant to the Northeast Agreement in amounts not exceeding the amounts disclosed in Section 3.2(a) of the Subject Company Disclosure Schedule, pursuant to the exercise of any Subject Company Warrants in amounts not exceeding the amounts disclosed in Section 3.2(a) of the Subject Company Disclosure Schedule and pursuant to the Subject Company Shareholder Rights Agreement. (b) Except as set forth in Section 3.2(b) of the Subject Company Disclosure Schedule, Subject Company owns, directly or indirectly, all of the issued and outstanding shares of capital stock of each of the Subject Company Subsidiaries, free and clear of any liens, charges, encumbrances and security interests whatsoever, and all of such shares are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. No Subject Company A-7 183 Subsidiary has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Subsidiary. Assuming compliance by Parent with Section 1.6 hereof, at the Effective Time, there will not be any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character by which Subject Company or any of its Subsidiaries will be bound calling for the purchase or issuance of any shares of the capital stock of Subject Company or any of its Subsidiaries. 3.3 Authority; No Violation. (a) Subject Company has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved by the Board of Directors of Subject Company. The Board of Directors of Subject Company has directed that this Agreement and the transactions contemplated hereby be submitted to Subject Company's stockholders for approval at a meeting of such stockholders and, except for the adoption of this Agreement by the affirmative vote of the holders of a majority of the outstanding shares of Subject Company Common Stock, no other corporate proceedings on the part of Subject Company are necessary to approve this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Subject Company and (assuming due authorization, execution and delivery by Parent) constitutes a valid and binding obligation of Subject Company, enforceable against Subject Company in accordance with its terms, except as enforcement may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally. (b) Except as set forth in Section 3.3(b) of the Subject Company Disclosure Schedule, neither the execution and delivery of this Agreement by Subject Company nor the consummation by Subject Company of the transactions contemplated hereby, nor compliance by Subject Company with any of the terms or provisions hereof, will (i) violate any provision of the Certificate of Incorporation or Bylaws of Subject Company or (ii) assuming that the consents and approvals referred to in Section 3.4 are duly obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Subject Company or any of its Subsidiaries or any of their respective properties or assets, or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any lien, pledge, security interest, charge or other encumbrance upon any of the respective properties or assets of Subject Company or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Subject Company or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except (in the case of clause (y) above) for such violations, conflicts, breaches or defaults which, either individually or in the aggregate, will not have or be reasonably likely to have a Material Adverse Effect on Subject Company. 3.4 Consents and Approvals. Except for (i) the filing of applications and notices, as applicable, with the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") under the BHC Act and approval of such applications and notices, (ii) the filing of applications with the Office of the Thrift Supervision (the "OTS") under HOLA and approval of such applications, (iii) the filing of any requisite applications with the Office of the Comptroller of the Currency (the "OCC"), (iv) the filing of any required applications or notices with any state agencies and approval of such applications and notices (the "State Approvals"), (v) the filing with the SEC of a joint proxy statement in definitive form relating to the meetings of Parent's and Subject Company's stockholders to be held in connection with this Agreement and the transactions contemplated hereby (the "Joint Proxy Statement") and the registration statement on Form S-4 (the "S-4") in which the Proxy Statement will be included as a prospectus, (vi) the filing of the Certificate of Merger with the Delaware Secretary pursuant to the DGCL, (vii) the Articles of Merger with the Rhode Island Secretary pursuant to the RIBCA, (viii) such filings and approvals as are required to be made or A-8 184 obtained under the securities or "Blue Sky" laws of various states in connection with the issuance of the shares of Parent Common Stock pursuant to this Agreement, (ix) the approval of this Agreement by the requisite vote of the stockholders of Parent and Subject Company, and (x) the consents and approvals set forth in Section 3.4 of the Subject Company Disclosure Schedule, no consents or approvals of or filings or registrations with any court, administrative agency or commission or other governmental authority or instrumentality (each a "Governmental Entity") or with any third party are necessary in connection with (A) the execution and delivery by Subject Company of this Agreement and (B) the consummation by Subject Company of the Merger and the other transactions contemplated hereby. 3.5 Reports. Subject Company and each of its Subsidiaries have timely filed all material reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file since January 1, 1993 with (i) the Federal Reserve Board, (ii) the OTS, (iii) any state regulatory authority (each a "State Regulator"), (iv) the OCC and (v) any other self-regulatory organization ("SRO") (collectively "Regulatory Agencies"), and all other material reports and statements required to be filed by them since January 1, 1993, including, without limitation, any report or statement required to be filed pursuant to the laws, rules or regulations of the United States, any state, the Federal Reserve Board, the FDIC, the OCC, the OTS, any State Regulator or any SRO, and have paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by a Regulatory Agency in the regular course of the business of Subject Company and its Subsidiaries, no Regulatory Agency has initiated any proceeding or, to the best knowledge of Subject Company, investigation into the business or operations of Subject Company or any of its Subsidiaries since January 1, 1993. There is no material unresolved violation, criticism, or exception by any Regulatory Agency with respect to any report or statement relating to any examinations of Subject Company or any of its Subsidiaries. 3.6 Financial Statements. Subject Company has previously delivered to Parent copies of (a) the consolidated balance sheets of Subject Company and its Subsidiaries as of December 31, for the fiscal years 1992 and 1993, and the related consolidated statements of income, changes in stockholders' equity and cash flows for the fiscal years 1991 through 1993, inclusive, as reported in Subject Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 filed with the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in each case accompanied by the audit report of Price Waterhouse, independent public accountants with respect to Subject Company, (b) the unaudited consolidated balance sheet of Subject Company and its Subsidiaries as of December 31, 1994, and the related consolidated statements of income and changes in stockholders' equity for the fiscal year 1994, substantially in the form that is proposed to be reported in Subject Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (the "Subject Company Delivered December 1994 Financials"), and (c) the unaudited consolidated balance sheet of Subject Company and its Subsidiaries as of September 30, 1993 and September 30, 1994 and the related unaudited consolidated statements of income, cash flows and changes in stockholders' equity for the nine month periods then ended as reported in Subject Company's Quarterly Report on Form 10-Q for the period ended September 30, 1994 filed with the SEC under the Exchange Act. The December 31, 1994 consolidated balance sheet of Subject Company (including the related notes, where applicable) fairly presents the consolidated financial position of Subject Company and its Subsidiaries as of the date thereof, and the other financial statements referred to in this Section 3.6 (including the related notes, where applicable) fairly present (subject, in the case of the unaudited statements, to recurring audit adjustments normal in nature and amount), the results of the consolidated operations and changes in stockholders' equity and consolidated financial position of Subject Company and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth; each of such statements (including the related notes, where applicable) comply in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto and each of such statements (including the related notes, where applicable) has been prepared in accordance with generally accepted accounting principles ("GAAP") consistently applied during the periods involved, except in each case as indicated in such statements or in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q. The books and records of Subject Company and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. A-9 185 3.7 Broker's Fees. Except as set forth in Section 3.7 of the Subject Company Disclosure Schedule, neither Subject Company nor any Subject Company Subsidiary nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with any of the transactions contemplated by this Agreement or the Option Agreements. 3.8 Absence of Certain Changes or Events. (a) Except as publicly disclosed in Subject Company Reports (as defined below) filed prior to the date hereof, since December 31, 1994, (i) neither Subject Company nor any of its Subsidiaries has incurred any material liability, except in the ordinary course of their business consistent with their past practices, and (ii) no event has occurred which has had, individually or in the aggregate, a Material Adverse Effect on Subject Company. (b) Except as publicly disclosed in Subject Company Reports filed prior to the date hereof, and except as set forth in Section 3.8(b) of the Subject Company Disclosure Schedule, since December 31, 1994, Subject Company and its Subsidiaries have carried on their respective businesses in the ordinary and usual course consistent with their past practices. (c) Except as set forth in Section 3.8(c) of the Subject Company Disclosure Schedule, since December 31, 1994, neither Subject Company nor any of its Subsidiaries has (i) except for normal increases in the ordinary course of business consistent with past practice or except as required by applicable law, increased the wages, salaries, compensation, pension, or other fringe benefits or perquisites payable to any executive officer, employee, or director from the amount thereof in effect as of December 31, 1994, granted any severance or termination pay, entered into any contract to make or grant any severance or termination pay, or paid any bonus other than customary year-end bonuses for fiscal 1993 and 1994 or (ii) suffered any strike, work stoppage, slow-down, or other labor disturbance. 3.9 Legal Proceedings. (a) Neither Subject Company nor any of its Subsidiaries is a party to any, and there are no pending or, to the best of Subject Company's knowledge, threatened, material legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Subject Company or any of its Subsidiaries or challenging the validity or propriety of the transactions contemplated by this Agreement or the Subject Company Option Agreement as to which there is a reasonable probability of an adverse determination and which, if adversely determined, would, individually or in the aggregate, have a Material Adverse Effect on Subject Company. (b) There is no injunction, order, judgment, decree, or regulatory restriction imposed upon Subject Company, any of its Subsidiaries or the assets of Subject Company or any of its Subsidiaries which has had, or might reasonably be expected to have, a Material Adverse Effect on Subject Company. 3.10 Taxes and Tax Returns. (a) Each of Subject Company and its Subsidiaries has duly filed all material Federal, state and, to the best of Subject Company's knowledge, material local information returns and tax returns required to be filed by it on or prior to the date hereof (all such returns being accurate and complete in all material respects) and has duly paid or made provisions for the payment of all material Taxes (as defined below) and other governmental charges which have been incurred or are due or claimed to be due from it by Federal, state, county or local taxing authorities on or prior to the date of this Agreement (including, without limitation, if and to the extent applicable, those due in respect of its properties, income, business, capital stock, deposits, franchises, licenses, sales and payrolls) other than Taxes or other charges (1) which are not yet delinquent or are being contested in good faith and (2) have not been finally determined. The income tax returns of Subject Company and its Subsidiaries have been examined by the Internal Revenue Service (the "IRS") and any liability with respect thereto has been satisfied for all years to and including 1987, and no material deficiencies were asserted as a result of such examination or all such deficiencies were satisfied. To the best of Subject Company's knowledge, there are no material disputes pending, or claims asserted for, Taxes or assessments upon Subject Company or any of its Subsidiaries, nor has Subject Company or any of its Subsidiaries been requested to give any currently effective waivers extending the statutory period of limitation applicable to any Federal, state, county or local income tax return for any period. In addition, (i) proper and accurate amounts have been withheld by Subject Company and its Subsidiaries from their employees for all prior periods in compliance in all material respects with the tax withholding provisions of applicable Federal, state and local laws, except where failure to do so would not have A-10 186 a Material Adverse Effect on Subject Company, (ii) Federal, state, county and local returns which are accurate and complete in all material respects have been filed by Subject Company and its Subsidiaries for all periods for which returns were due with respect to income tax withholding, Social Security and unemployment taxes, except where failure to do so would not have a Material Adverse Effect on Subject Company, (iii) the amounts shown on such Federal, state, local or county returns to be due and payable have been paid in full or adequate provision therefor has been included by Subject Company in its consolidated financial statements as of December 31, 1994, except where failure to do so would not have a Material Adverse Effect on Subject Company and (iv) there are no Tax liens upon any property or assets of the Subject Company or its Subsidiaries except liens for current taxes not yet due. To the knowledge of Subject Company, no property of Subject Company or any of its Subsidiaries is property that Subject Company or any of its Subsidiaries is or will be required to treat as being owned by another person pursuant to the provisions of Section 168(f)(8) of the Code (as in effect prior to its amendment by the Tax Reform Act of 1986) or is "tax-exempt use property" within the meaning of Section 169(h) of the Code. Neither Subject Company nor any of its Subsidiaries has been required to include in income any adjustment pursuant to Section 481 of the Code by reason of a voluntary change in accounting method initiated by Subject Company or any of its Subsidiaries, and the Internal Revenue Service has not initiated or proposed any such adjustment or change in accounting method. Except as set forth in the financial statements described in Section 3.6 hereof, neither Subject Company nor any of its Subsidiaries has entered into a transaction which is being accounted for as an installment obligation under Section 453 of the Code, which would be reasonably likely to have a Material Adverse Effect on Subject Company. (b) As used in this Agreement, the term "Tax" or "Taxes" means all federal, state, county, local, and foreign income, excise, gross receipts, ad valorem, profits, gains, property, sales, transfer, use, payroll, employment, severance, withholding, duties, intangibles, franchise, and other taxes, charges, levies or like assessments together with all penalties and additions to tax and interest thereon. (c) Except as set forth in Section 3.10(c) of the Subject Company Disclosure Schedule, any amount that could be received (whether in cash or property or the vesting of property) as a result of any of the transactions contemplated by this Agreement by any employee, officer or director of Subject Company or any of its affiliates who is a "Disqualified Individual" (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or Subject Company Benefit Plan currently in effect would not be characterized as an "excess parachute payment" (as such term is defined in Section 280G(b)(1) of the Code). (d) No disallowance of a deduction under Section 162(m) of the Code for employee remuneration of any amount paid or payable by Subject Company or any Subsidiary of Subject Company under any contract, plan, program, arrangement or understanding would be reasonably likely to have a Material Adverse Effect on Subject Company. 3.11 Employees. (a) Section 3.11(a) of the Subject Company Disclosure Schedule sets forth a true and complete list of each material employee benefit plan, arrangement or agreement that is maintained as of the date of this Agreement (the "Plans") by Subject Company or any of its Subsidiaries or by any trade or business, whether or not incorporated (an "ERISA Affiliate"), all of which together with Subject Company would be deemed a "single employer" within the meaning of Section 4001 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). (b) Subject Company has heretofore delivered to Parent true and complete copies of each of the Plans and all related documents, including but not limited to (i) the actuarial report for such Plan (if applicable) for each of the last two years, and (ii) the most recent determination letter from the Internal Revenue Service (if applicable) for such Plan. (c) Except as set forth in Section 3.11(c) of the Disclosure Schedule, (i) each of the Plans has been operated and administered in all material respects with applicable laws, including but not limited to ERISA and the Code, (ii) each of the Plans intended to be "qualified" within the meaning of Section 401(a) of the Code is so qualified, (iii) with respect to each Plan which is subject to Title IV of ERISA, the present value of accrued benefits under such Plan, based upon the actuarial assumptions used for funding purposes in the most A-11 187 recent actuarial report prepared by such Plan's actuary with respect to such Plan, did not, as of its latest valuation date, exceed the then current value of the assets of such Plan allocable to such accrued benefits, (iv) no Plan provides benefits, including without limitation death or medical benefits (whether or not insured), with respect to current or former employees of Subject Company, its Subsidiaries or any ERISA Affiliate beyond their retirement or other termination of service, other than (w) coverage mandated by applicable law, (x) death benefits or retirement benefits under any "employee pension plan," as that term is defined in Section 3(2) of ERISA, (y) deferred compensation benefits accrued as liabilities on the books of Subject Company, its Subsidiaries or the ERISA Affiliates or (z) benefits the full cost of which is borne by the current or former employee (or his beneficiary), (v) no liability under Title IV of ERISA has been incurred by Subject Company, its Subsidiaries or any ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a material risk to Subject Company, its Subsidiaries or any ERISA Affiliate of incurring a material liability thereunder, (vi) no Plan is a "multiemployer pension plan," as such term is defined in Section 3(37) of ERISA, (vii) all contributions or other amounts payable by Subject Company or its Subsidiaries as of the Effective Time with respect to each Plan in respect of current or prior plan years have been paid or accrued in accordance with generally accepted accounting practices and Section 412 of the Code, (viii) neither Subject Company, its Subsidiaries nor any ERISA Affiliate has engaged in a transaction in connection with which Subject Company, its Subsidiaries or any ERISA Affiliate could be subject to either a material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code, and (ix) to the best knowledge of Subject Company there are no pending, threatened or anticipated claims (other than routine claims for benefits) by, on behalf of or against any of the Plans or any trusts related thereto. (d) Except as set forth in Section 3.11(d) of the Subject Company Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any material payment (including, without limitation, severance, unemployment compensation, golden parachute or otherwise) becoming due to any director or any employee of Subject Company or any of its affiliates from Subject Company or any of its affiliates under any Subject Company Benefit Plan or otherwise, (ii) materially increase any benefits otherwise payable under any Subject Company Benefit Plan or (iii) result in any acceleration of the time of payment or vesting of any such benefits to any material extent. 3.12 SEC Reports. Subject Company has previously made available to Parent an accurate and complete copy of each (a) final registration statement, prospectus, report, schedule and definitive proxy statement filed since January 1, 1993 by Subject Company with the SEC pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act (the "Subject Company Reports") and prior to the date hereof and (b) communication mailed by Subject Company to its stockholders since January 1, 1993 and prior to the date hereof, and no such registration statement, prospectus, report, schedule, proxy statement or communication contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading, except that information as of a later date shall be deemed to modify information as of an earlier date. Subject Company has timely filed all Subject Company Reports and other documents required to be filed by it under the Securities Act and the Exchange Act, and, as of their respective dates, all Subject Company Reports complied in all material respects with the published rules and regulations of the SEC with respect thereto. 3.13 Compliance with Applicable Law. Except as disclosed in Section 3.13 of the Subject Company Disclosure Schedule, Subject Company and each of its Subsidiaries hold, and have at all times held, all material licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses under and pursuant to all, and have complied with and are not in default in any material respect under any, applicable law, statute, order, rule, regulation, policy and/or guideline of any Governmental Entity relating to Subject Company or any of its Subsidiaries, except where the failure to hold such license, franchise, permit or authorization or such noncompliance or default would not, individually or in the aggregate, have a Material Adverse Effect on Subject Company, and neither Subject Company nor any of its Subsidiaries knows of, or has received notice of, any material violations of any of the above. A-12 188 3.14 Certain Contracts. (a) Except as set forth in Section 3.14(a) of the Subject Company Disclosure Schedule, neither Subject Company nor any of its Subsidiaries is a party to or bound by any contract, arrangement, commitment or understanding (whether written or oral) (i) with respect to the employment of any directors, officers, employees or consultants, (ii) which, upon the consummation of the transactions contemplated by this Agreement will (either alone or upon the occurrence of any additional acts or events) result in any payment (whether of severance pay or otherwise) becoming due from Parent, Subject Company, the Surviving Corporation, or any of their respective Subsidiaries to any officer or employee thereof, (iii) which is a material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this Agreement that has not been filed or incorporated by reference in the Subject Company Reports, (iv) which materially restricts the conduct of any line of business by Subject Company, (v) with or to a labor union or guild (including any collective bargaining agreement) or (vi) (including any stock option plan, stock appreciation rights plan, restricted stock plan or stock purchase plan) any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement, or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. Subject Company has previously delivered to Parent true and correct copies of all employment, consulting and deferred compensation agreements which are in writing and to which Subject Company or any of its Subsidiaries is a party. Each contract, arrangement, commitment or understanding of the type described in this Section 3.14(a), whether or not set forth in Section 3.14(a) of the Subject Company Disclosure Schedule, is referred to herein as a "Subject Company Contract", and neither Subject Company nor any of its Subsidiaries knows of, or has received notice of, any violation of the above by any of the other parties thereto which, individually or in the aggregate, would have a Material Adverse Effect on Subject Company. (b) (i) Each Subject Company Contract is valid and binding and in full force and effect, (ii) Subject Company and each of its Subsidiaries has in all material respects performed all obligations required to be performed by it to date under each Subject Company Contract, except where such noncompliance, individually or in the aggregate, would not have a Material Adverse Effect on Subject Company, and (iii) no event or condition exists which constitutes or, after notice or lapse of time or both, would constitute, a material default on the part of Subject Company or any of its Subsidiaries under any such Subject Company Contract, except where such default, individually or in the aggregate, would not have a Material Adverse Effect on Subject Company. 3.15 Agreements with Regulatory Agencies. Except as set forth in Section 3.15 of the Subject Company Disclosure Schedule, neither Subject Company nor any of its Subsidiaries is subject to any cease-and-desist or other order issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or is a recipient of any extraordinary supervisory letter from, or has adopted any board resolutions at the request of (each, whether or not set forth in Section 3.15 of the Subject Company Disclosure Schedule, a "Regulatory Agreement"), any Regulatory Agency or other Governmental Entity that restricts the conduct of its business or that in any manner relates to its capital adequacy, its credit policies, its management or its business, nor has Subject Company or any of its Subsidiaries been advised by any Regulatory Agency or other Governmental Entity that it is considering issuing or requesting any Regulatory Agreement. 3.16 Undisclosed Liabilities. Except for those liabilities that are fully reflected or reserved against on the consolidated balance sheet of Subject Company included in the Subject Company Delivered December 1994 Financials and for liabilities incurred in the ordinary course of business consistent with past practice, since December 31, 1994, neither Subject Company nor any of its Subsidiaries has incurred any liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due) that, either alone or when combined with all similar liabilities, has had, or could reasonably be expected to have, a Material Adverse Effect on Subject Company. 3.17 State Takeover Laws. The Board of Directors of Subject Company has approved the transactions contemplated by this Agreement and the Option Agreements such that the provisions of Section 203 of the A-13 189 DGCL and Article Sixth of Subject Company's Certificate of Incorporation will not apply to this Agreement or the Option Agreements or any of the transactions contemplated hereby or thereby. 3.18 Rights Agreement. Subject Company has taken all action (including, if required, redeeming all of the outstanding preferred stock purchase rights issued pursuant to the Subject Company Rights Agreement or amending or terminating the Subject Company Rights Agreement) so that the entering into of this Agreement and the Option Agreements, the Merger, the acquisition of shares pursuant to the Option Agreements and the other transactions contemplated hereby and thereby do not and will not result in the grant of any rights to any person under the Subject Company Rights Agreement or enable or require the Subject Company Rights to be exercised, distributed or triggered. 3.19 Pooling of Interests. As of the date of this Agreement, Subject Company has no reason to believe that the Merger will not qualify as a pooling of interests for accounting purposes. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT Parent hereby represents and warrants to Subject Company as follows: 4.1 Corporate Organization. (a) Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Rhode Island. Parent has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified would not have a Material Adverse Effect on Parent. Parent is duly registered as a bank holding company under the BHC Act. The Articles of Incorporation and Bylaws of Parent, copies of which have previously been made available to Subject Company, are true, complete and correct copies of such documents as in effect as of the date of this Agreement. (b) Each Parent Subsidiary is (i) duly organized and validly existing as a bank, corporation or partnership under the laws of its jurisdiction of organization, (ii) is duly qualified to do business and in good standing in all jurisdictions (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so qualified and in which the failure to be so qualified would have a Material Adverse Effect on Parent, and (iii) has all requisite corporate power and authority to own or lease its properties and assets and to carry on its business as now conducted. (c) The minute books of Parent accurately reflect in all material respects all corporate actions held or taken since January 1, 1993 of its stockholders and Board of Directors (including committees of the Board of Directors of Parent). 4.2 Capitalization. (a) The authorized capital stock of Parent consists of (i) 300,000,000 shares of Parent Common Stock, of which as of January 31, 1995, 141,563,067 shares were issued and outstanding and held in treasury, (ii) 16,000,000 shares of Preferred Stock, par value $1.00 per share, ("Parent Preferred Stock"), of which as of January 31, 1995, (A) with respect to Cumulative and Adjustable Dividends, 1,000,000 shares were designated and no shares were issued and outstanding, (B) 12,553 shares were designated and no shares were issued and outstanding as Series I 12% Cumulative Convertible Preferred Stock ("Parent Series I Preferred Stock"), (C) 96,000 shares were designated and no shares were issued and outstanding as Series II 6 1/2% Cumulative Convertible Preferred Stock, (D) 1,100,000 shares were designated and 519,758 shares were issued and outstanding as Series III 10.12% Perpetual Preferred Stock ("Parent Series III Preferred Stock"), (E) 1,000,000 shares were designated and 478,838 shares were issued and outstanding as Series IV 9.375% Preferred Stock ("Parent Series IV Preferred Stock"), (F) 1,500,000 shares were designated and no shares were issued and outstanding as Cumulative Participating Junior Preferred Stock pursuant to the Parent Rights Agreement, as amended ("Parent Rights Agreement"), and (G) 1,415,000 shares were designated and outstanding as Dual Convertible Preferred Stock ("Parent DCP A-14 190 Stock") and (iii) 1,500,000 shares of Preferred Stock with Cumulative and Adjustable Dividends, par value $20.00 (the "Parent $20 Par Value Preferred Stock"), of which at such date, no shares were issued and outstanding. All of the issued and outstanding shares of Parent Common Stock and Parent Preferred Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. As of the date of this Agreement, except as set forth in Section 4.2(a) of the disclosure schedule of Parent delivered to Subject Company concurrently herewith (the "Parent Disclosure Schedule"), and except for the Parent Shareholder Rights Agreement and the Parent Option Agreement, Parent does not have and is not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of Parent Common Stock or Parent Preferred Stock or any other equity securities of Parent or any securities representing the right to purchase or otherwise receive any shares of Parent Common Stock or Parent Preferred Stock. As of January 31, 1995, 41,598,590 shares of Parent Common Stock were reserved for issuance pursuant to outstanding warrants, rights, options and the employee benefit plans set forth in Section 4.11(a) of the Parent Disclosure Schedule and no shares of Parent Preferred Stock were reserved for issuance. Since January 31, 1995, Parent has not issued any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock, other than pursuant to the exercise of employee stock options granted prior to such date and as disclosed in Section 4.2(a) of the Parent Disclosure Schedule. The shares of Parent Capital Stock to be issued pursuant to the Merger will be duly authorized and validly issued and, at the Effective Time, all such shares will be fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. (b) Except as set forth in Section 4.2(b) of the Parent Disclosure Schedule, Parent owns, directly or indirectly, all of the issued and outstanding shares of capital stock of each of the Parent Subsidiaries, free and clear of any liens, charges, encumbrances and security interests whatsoever, and all of such shares are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. No Parent Subsidiary has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Subsidiary. 4.3 Authority; No Violation. (a) Parent has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved by the Board of Directors of Parent. The Board of Directors of Parent has directed that this Agreement and the transactions contemplated hereby be submitted to Parent's stockholders for approval at a meeting of such stockholders and except for the adoption of this Agreement by the affirmative vote of the holders of a majority of the outstanding shares of Parent Common Stock, no other corporate proceedings on the part of Parent are necessary to approve this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Parent and (assuming due authorization, execution and delivery by Subject Company) constitutes a valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except as enforcement may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally. (b) Except as set forth in Section 4.3(b) of the Parent Disclosure Schedule, neither the execution and delivery of this Agreement by Parent, nor the consummation by Parent of the transactions contemplated hereby, nor compliance by Parent with any of the terms or provisions hereof, will (i) violate any provision of the Articles of Incorporation or Bylaws of Parent or (ii) assuming that the consents and approvals referred to in Section 4.4 are duly obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Parent or any of its Subsidiaries or any of their respective properties or assets, or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance A-15 191 required by, or result in the creation of any lien, pledge, security interest, charge or other encumbrance upon any of the respective properties or assets of Parent or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Parent or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except (in the case of clause (y) above) for such violations, conflicts, breaches or defaults which either individually or in the aggregate will not have or be reasonably likely to have a Material Adverse Effect on Parent. 4.4 Consents and Approvals. Except for (i) the filing of applications and notices, as applicable, with the Federal Reserve Board under the BHC Act and approval of such applications and notices, (ii) the filing of applications with the OTS under HOLA and approval of such applications, (iii) the filing of any requisite applications with the OCC, (iv) the filing of the State Approvals, (v) the filing with the SEC of the Joint Proxy Statement and the S-4, (vi) the filing of the Certificate of Merger with the Delaware Secretary pursuant to the DGCL, (vii) the filing of the Articles of Merger with the Rhode Island Secretary pursuant to the RIBCA, (viii) such filings and approvals as are required to be made or obtained under the securities or "Blue Sky" laws of various states in connection with the issuance of the shares of Parent Common Stock pursuant to this Agreement, and (ix) the approval of this Agreement by the requisite vote of the stockholders of Parent and Subject Company, no consents or approvals of or filings or registrations with any Governmental Entity or with any third party are necessary in connection with (A) the execution and delivery by Parent of this Agreement and (B) the consummation by Parent of the Merger and the other transactions contemplated hereby. 4.5 Reports. Parent and each of its Subsidiaries have timely filed all material reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file since January 1, 1993 with the Regulatory Agencies, and all other material reports and statements required to be filed by them since January 1, 1993, including, without limitation, any report or statement required to be filed pursuant to the laws, rules or regulations of the United States, any state, the Federal Reserve Board, the FDIC, the OCC, the OTS, any State Regulator or any SRO, and have paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by a Regulatory Agency in the regular course of the business of Parent and its Subsidiaries, no Regulatory Agency has initiated any proceeding or, to the best knowledge of Parent, investigation into the business or operations of Parent or any of its Subsidiaries since January 1, 1993. There is no material unresolved violation, criticism, or exception by any Regulatory Agency with respect to any report or statement relating to any examinations of Parent or any of its Subsidiaries. 4.6 Financial Statements. Parent has previously delivered to Subject Company copies of (a) the consolidated balance sheets of Parent and its Subsidiaries as of December 31, for the fiscal years 1992 and 1993, and the related consolidated statements of income, changes in stockholders' equity and cash flows for the fiscal years 1991 through 1993, inclusive, as reported in Parent's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 filed with the SEC under the Exchange Act, in each case accompanied by the audit report of KPMG Peat Marwick, independent public accountants with respect to Parent, (b) the unaudited consolidated balance sheet of Parent and its Subsidiaries as of December 31, 1994, and the related consolidated statements of income and changes in stockholders' equity for the fiscal year 1994, substantially in the form that is proposed to be reported in Parent's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (the "Parent Delivered December 1994 Financials"), and (c) the unaudited consolidated balance sheet of Parent and its Subsidiaries as of September 30, 1993 and September 30, 1994 and the related unaudited consolidated statements of income, cash flows and changes in stockholders' equity for the nine month periods then ended as reported in Parent's Quarterly Report on Form 10-Q for the period ended September 30, 1994 filed with the SEC under the Exchange Act. The December 31, 1994 consolidated balance sheet of Parent (including the related notes, where applicable) fairly presents the consolidated financial position of Parent and its Subsidiaries as of the date thereof, and the other financial statements referred to in this Section 4.6 (including the related notes, where applicable) fairly present (subject, in the case of the unaudited statements, to recurring audit adjustments normal in nature and amount), the results of the consolidated operations and changes in stockholders' equity and consolidated financial position of Parent A-16 192 and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth; each of such statements (including the related notes, where applicable) comply in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto; and each of such statements (including the related notes, where applicable) has been prepared in accordance with GAAP consistently applied during the periods involved, except in each case as indicated in such statements or in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q. The books and records of Parent and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. 4.7 Broker's Fees. Except as set forth in Section 4.7 of the Parent Disclosure Schedule, neither Parent nor any Parent Subsidiary nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with any of the transactions contemplated by this Agreement or the Option Agreements. 4.8 Absence of Certain Changes or Events. (a) Except as publicly disclosed in Parent Reports (as defined below) filed prior to the date hereof, since December 31, 1994, (i) neither Parent nor any of its Subsidiaries has incurred any material liability, except in the ordinary course of their business consistent with their past practices, and (ii) no event has occurred which has had, individually or in the aggregate, a Material Adverse Effect on Parent. (b) Except as publicly disclosed in Parent Reports filed prior to the date hereof, and except as set forth in Section 4.8(b) of the Parent Disclosure Schedule, since December 31, 1994, Parent and its Subsidiaries have carried on their respective businesses in the ordinary and usual course consistent with their past practices. (c) Except as set forth in Section 4.8(c) of the Parent Disclosure Schedule, since December 31, 1994, neither Parent nor any of its Subsidiaries has (i) except for normal increases in the ordinary course of business consistent with past practice or except as required by applicable law, increased the wages, salaries, compensation, pension, or other fringe benefits or perquisites payable to any executive officer, employee, or director from the amount thereof in effect as of December 31, 1994, granted any severance or termination pay, entered into any contract to make or grant any severance or termination pay, or paid any bonus other than customary year-end bonuses for fiscal 1993 and 1994 or (ii) suffered any strike, work stoppage, slow-down, or other labor disturbance. 4.9 Legal Proceedings. (a) Neither Parent nor any of its Subsidiaries is a party to any and there are no pending or, to the best of Parent's knowledge, threatened, material legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Parent or any of its Subsidiaries or challenging the validity or propriety of the transactions contemplated by this Agreement or the Parent Option Agreement as to which there is a reasonable probability of an adverse determination and which, if adversely determined, would, individually or in the aggregate, have a Material Adverse Effect on Parent. (b) There is no injunction, order, judgment, decree, or regulatory restriction imposed upon Parent, any of its Subsidiaries or the assets of Parent or any of its Subsidiaries which has had, or might reasonably be expected to have, a Material Adverse Effect on Parent or the Surviving Corporation. 4.10 Taxes and Tax Returns. (a) Each of Parent and its Subsidiaries has duly filed all material Federal, state and, to the best of Parent's knowledge, material local information returns and tax returns required to be filed by it on or prior to the date hereof (all such returns being accurate and complete in all material respects) and has duly paid or made provisions for the payment of all material Taxes (as defined below) and other governmental charges which have been incurred or are due or claimed to be due from it by Federal, state, county or local taxing authorities on or prior to the date of this Agreement (including, without limitation, if and to the extent applicable, those due in respect of its properties, income, business, capital stock, deposits, franchises, licenses, sales and payrolls) other than Taxes or other charges (1) which are not yet delinquent or are being contested in good faith and (2) have not been finally determined. The income tax returns of Parent and its Subsidiaries have been examined by the Internal Revenue Service (the "IRS") and A-17 193 any liability with respect thereto has been satisfied for all years to and including 1989, and no material deficiencies were asserted as a result of such examination or all such deficiencies were satisfied. To the best of Parent's knowledge, there are no material disputes pending, or claims asserted for, Taxes or assessments upon Parent or any of its Subsidiaries, nor has Parent or any of its Subsidiaries been requested to give any currently effective waivers extending the statutory period of limitation applicable to any Federal, state, county or local income tax return for any period. In addition, (i) proper and accurate amounts have been withheld by Parent and its Subsidiaries from their employees for all prior periods in compliance in all material respects with the tax withholding provisions of applicable Federal, state and local laws, except where failure to do so would not have a Material Adverse Effect on Parent, (ii) Federal, state, county and local returns which are accurate and complete in all material respects have been filed by Parent and its Subsidiaries for all periods for which returns were due with respect to income tax withholding, Social Security and unemployment taxes, except where failure to do so would not have a Material Adverse Effect on Parent, (iii) the amounts shown on such Federal, state, local or county returns to be due and payable have been paid in full or adequate provision therefor has been included by Parent in its consolidated financial statements as of December 31, 1994, except where failure to do so would not have a Material Adverse Effect on Parent and (iv) there are no Tax liens upon any property or assets of the Parent or its Subsidiaries except liens for current taxes not yet due. To the knowledge of Parent, no property of Parent or any of its Subsidiaries is property that Parent or any of its Subsidiaries is or will be required to treat as being owned by another person pursuant to the provisions of Section 168(f)(8) of the Code (as in effect prior to its amendment by the Tax Reform Act of 1986) or is "tax-exempt use property" within the meaning of Section 169(h) of the Code. Neither Parent nor any of its Subsidiaries has been required to include in income any adjustment pursuant to Section 481 of the Code by reason of a voluntary change in accounting method initiated by Parent or any of its Subsidiaries, and the Internal Revenue Service has not initiated or proposed any such adjustment or change in accounting method. Except as set forth in the financial statements described in Section 4.6 hereof, neither Parent nor any of its Subsidiaries has entered into a transaction which is being accounted for as an installment obligation under Section 453 of the Code, which would be reasonably likely to have a Material Adverse Effect on Parent. (b) Any amount that could be received (whether in cash or property or the vesting of property) as a result of any of the transactions contemplated by this Agreement by any employee, officer or director of Parent or any of its affiliates who is a "Disqualified Individual" (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or Parent Benefit Plan currently in effect would not be characterized as an "excess parachute payment" (as such term is defined in Section 280G(b)(1) of the Code). (c) No disallowance of a deduction under Section 162(m) of the Code for employee remuneration of any amount paid or payable by Parent or any Subsidiary of Subject Company under any contract, plan, program, arrangement or understanding would be reasonably likely to have a Material Adverse Effect on Parent. 4.11 Employees. (a) Section 4.11(a) of the Parent Disclosure Schedule sets forth a true and complete list of each material employee benefit plan, arrangement or agreement that is maintained as of the date of this Agreement (the "Parent Plans") by Parent, any of its Subsidiaries or by any trade or business; whether or not incorporated (a "Parent ERISA Affiliate"), all of which together with Parent would be deemed a "single employer" within the meaning of Section 4001 of ERISA. (b) Parent has heretofore delivered to Subject Company true and complete copies of each of the Parent Plans and all related documents, including but not limited to (i) the actuarial report for such Parent Plan (if applicable) for each of the last two years, and (ii) the most recent determination letter from the Internal Revenue Service (if applicable) for such Parent Plan. (c) Except as set forth in Section 4.11(c) of the Parent Disclosure Schedule, (i) each of the Parent Plans has been operated and administered in all material respects with applicable laws, including but not limited to ERISA and the Code, (ii) each of the Parent Plans intended to be "qualified" within the meaning of Section 401(a) of the Code is so qualified, (iii) with respect to each Parent Plan which is subject to Title IV of ERISA, the present value of accrued benefits under such Parent Plan, based upon the actuarial A-18 194 assumptions used for funding purposes in the most recent actuarial report prepared by such Parent Plan's actuary with respect to such Parent Plan, did not, as of its latest valuation date, exceed the then current value of the assets of such Parent Plan allocable to such accrued benefits, (iv) no Parent Plan provides benefits, including without limitation death or medical benefits (whether or not insured), with respect to current or former employees of Parent, its Subsidiaries or any Parent ERISA Affiliate beyond their retirement or other termination of service, other than (w) Coverage mandated by applicable law, (x) death benefits or retirement benefits under any "employee pension plan," as that term is defined in Section 3(2) of ERISA, (y) deferred compensation benefits accrued as liabilities on the books of Parent, its Subsidiaries or the Parent ERISA Affiliates or (z) benefits the full cost of which is borne by the current or former employee (or his beneficiary), (v) no liability under Title IV of ERISA has been incurred by Parent, its Subsidiaries or any Parent ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a material risk to Parent, its Subsidiaries or any Parent ERISA Affiliate of incurring a material liability thereunder, (vi) no Parent Plan is a "multiemployer pension plan", as such term is defined in Section 3(37) of ERISA, (vii) all contributions or other amounts payable by Parent or its Subsidiaries as of the Effective Time with respect to each Parent Plan in respect of current or prior plan years have been paid or accrued in accordance with generally accepted accounting practices and Section 412 of the Code, (viii) neither Parent, its Subsidiaries nor any Parent ERISA Affiliate has engaged in a transaction in connection with which Parent, its Subsidiaries or any Parent ERISA Affiliate could be subject to either a material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code, and (ix) to the best knowledge of Parent there are no pending, threatened or anticipated claims (other than routine claims for benefits) by, on behalf of or against any of the Parent Plans or any trusts related thereto. (d) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any material payment (including, without limitation, severance, unemployment compensation, golden parachute or otherwise) becoming due to any director or any employee of Parent or any of its affiliates from Parent or any of its affiliates under any Parent Benefit Plan or otherwise, (ii) materially increase any benefits otherwise payable under any Parent Benefit Plan or (iii) result in any acceleration of the time of payment or vesting of any such benefits to any material extent. 4.12 SEC Reports. Parent has previously made available to Subject Company an accurate and complete copy of each (a) final registration statement, prospectus, report, schedule and definitive proxy statement filed since January 1, 1993 by Parent with the SEC pursuant to the Securities Act or the Exchange Act (the "Parent Reports") and prior to the date hereof and (b) communication mailed by Parent to its stockholders since January 1, 1993 and prior to the date hereof, and no such registration statement, prospectus, report, schedule, proxy statement or communication contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading, except that information as of a later date shall be deemed to modify information as of an earlier date. Parent has timely filed all Parent Reports and other documents required to be filed by it under the Securities Act and the Exchange Act, and, as of their respective dates, all Parent Reports complied in all material respects with the published rules and regulations of the SEC with respect thereto. 4.13 Compliance with Applicable Law. Except as disclosed in Section 4.13 of the Parent Disclosure Schedule, Parent and each of its Subsidiaries hold, and have at all times held, all material licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses under and pursuant to all, and have complied with and are not in default in any material respect under any, applicable law, statute, order, rule, regulation, policy and/or guideline of any Governmental Entity relating to Parent or any of its Subsidiaries, except where the failure to hold such license, franchise, permit or authorization or such noncompliance or default would not, individually or in the aggregate, have a Material Adverse Effect on Parent, and neither Parent nor any of its Subsidiaries knows of, or has received notice of, any material violations of any of the above. 4.14 Certain Contracts. (a) Except as set forth in Section 4.14(a) of the Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries is a party to or bound by any contract, arrangement, commitment or understanding (whether written or oral) (i) with respect to the employment of any directors, officers, A-19 195 employees or consultants, (ii) which, upon the consummation of the transactions contemplated by this Agreement will (either alone or upon the occurrence of any additional acts or events) result in any payment (whether of severance pay or otherwise) becoming due from Parent, Subject Company, the Surviving Corporation, or any of their respective Subsidiaries to any officer or employee thereof, (iii) which is a material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this Agreement that has not been filed or incorporated by reference in the Parent Reports, (iv) which materially restricts the conduct of any line of business by Parent, (v) with or to a labor union or guild (including any collective bargaining agreement) or (vi) (including any stock option plan, stock appreciation rights plan, restricted stock plan or stock purchase plan) any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement, or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. Parent has previously delivered to Subject Company true correct copies of all employment, consulting and deferred compensation agreements which are in writing and to which Parent or any of its Subsidiaries is a party. Each contract, arrangement, commitment or understanding of the type described in this Section 4.14(a), whether or not set forth in Section 4.14(a) of the Parent Disclosure Schedule, is referred to herein as a "Parent Contract", and neither Parent nor any of its Subsidiaries knows of, or has received notice of, any violation of the above by any of the other parties thereto which, individually or in the aggregate, would have a Material Adverse Effect on Parent. (b) (i) Each Parent Contract is valid and binding and in full force and effect, (ii) Parent and each of its Subsidiaries has in all material respects performed all obligations required to be performed by it to date under each Parent Contract, except where such noncompliance, individually or in the aggregate, would not have a Material Adverse Effect on Parent, and (iii) no event or condition exists which constitutes or, after notice or lapse of time or both, would constitute, a material default on the part of Parent or any of its Subsidiaries under any such Parent Contract, except where such default, individually or in the aggregate, would not have a Material Adverse Effect on Parent. 4.15 Agreements with Regulatory Agencies. Except as set forth in Section 4.15 of the Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries is subject to any cease-and-desist or other order issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or is a recipient of any extraordinary supervisory letter from, or has adopted any board resolutions at the request of (each, whether or not set forth in Section 4.15 of the Parent Disclosure Schedule, a "Parent Regulatory Agreement"), any Regulatory Agency or other Governmental Entity that restricts the conduct of its business or that in any manner relates to its capital adequacy, its credit policies, its management or its business, nor has Parent or any of its Subsidiaries been advised by any Regulatory Agency or other Governmental Entity that it is considering issuing or requesting any Regulatory Agreement. 4.16 Undisclosed Liabilities. Except for those liabilities that are fully reflected or reserved against on the consolidated balance sheet of Parent included in the Parent Delivered December 1994 Financials and for liabilities incurred in the ordinary course of business consistent with past practice, since December 31, 1994, neither Parent nor any of its Subsidiaries has incurred any liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due) that, either alone or when combined with all similar liabilities, has had, or could reasonably be expected to have, a Material Adverse Effect on Parent. 4.17 State Takeover Laws. The Board of Directors of Parent has approved the transactions contemplated by this Agreement and the Option Agreements such that the provisions of the Business Combination Act of Rhode Island and Article Ninth of Parent's Articles of Incorporation will not apply to this Agreement or the Option Agreements or any of the transactions contemplated hereby or thereby. 4.18 Rights Agreement. Parent has taken all action (including, if required, redeeming all of the outstanding preferred stock purchase rights issued pursuant to the Parent Rights Agreement or amending or terminating the Parent Rights Agreement) so that the entering into of this Agreement and the Option Agreements, the Merger, the acquisition of shares pursuant to the Option Agreements and the other A-20 196 transactions contemplated hereby and thereby do not and will not result in the grant of any rights to any person under the Parent Rights Agreement or enable or require the Parent Rights to be exercised, distributed or triggered. 4.19 Pooling of Interests. As of the date of this Agreement, Parent has no reason to believe that the Merger will not qualify as a pooling of interests for accounting purposes. ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS 5.1 Conduct of Businesses Prior to the Effective Time. During the period from the date of this Agreement to the Effective Time, except as expressly contemplated or permitted by this Agreement or the Option Agreements, each of Parent and Subject Company shall, and shall cause each of their respective Subsidiaries to, (i) conduct its business in the usual, regular and ordinary course consistent with past practice, (ii) use reasonable best efforts to maintain and preserve intact its business organization, employees and advantageous business relationships and retain the services of its officers and key employees and (iii) take no action which would adversely affect or delay the ability of either Parent or Subject Company to obtain any necessary approvals of any Regulatory Agency or other governmental authority required for the transactions contemplated hereby or to perform its covenants and agreements under this Agreement or the Option Agreements. 5.2 Forbearances. During the period from the date of this Agreement to the Effective Time, except as set forth in Section 5.2 of the Parent Disclosure Schedule or Section 5.2 of the Subject Company Disclosure Schedule, as the case may be, and, except as expressly contemplated or permitted by this Agreement or the Option Agreements, neither Parent nor Subject Company shall, and neither Parent nor Subject Company shall permit any of their respective Subsidiaries to, without the prior written consent of the other: (a) other than in the ordinary course of business consistent with past practice, incur any indebtedness for borrowed money (other than short-term indebtedness incurred to refinance short-term indebtedness and indebtedness of Subject Company or any of its Subsidiaries to Subject Company or any of its Subsidiaries, on the one hand, or of Parent or any of its Subsidiaries to Parent or any of its Subsidiaries, on the other hand; it being understood and agreed that incurrence of indebtedness in the ordinary course of business shall include, without limitation, the creation of deposit liabilities, purchases of federal funds, sales of certificates of deposit and entering into repurchase agreements), assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other individual, corporation or other entity, or make any loan or advance; (b) adjust, split, combine or reclassify any capital stock; make, declare or pay any dividend or make any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or any securities or obligations convertible into or exchangeable for any shares of its capital stock, or grant any stock appreciation rights or grant any individual, corporation or other entity any right to acquire any shares of its capital stock (except, in the case of Subject Company, for regular quarterly cash dividends at a rate not in excess of $0.22 per share of Subject Company Common Stock, and in the case of Parent, for regular quarterly cash dividends on Parent Common Stock at a rate not in excess of $0.50 per share of Parent Common Stock, and, in the case of Subject Company Preferred Stock and Parent Preferred Stock, for regular quarterly or semiannual cash dividends thereon at the rates set forth in the applicable certificate of incorporation or certificate of designation for such securities and except for dividends paid by any of the wholly owned Subsidiaries of each of Parent and Subject Company to Parent or Subject Company or any of their wholly owned Subsidiaries, respectively); or issue any additional shares of capital stock except pursuant to (A) the exercise of stock options or warrants outstanding as of the date hereof, (B) the conversion of shares of the Parent Series I Preferred Stock or the Parent DCP Stock or (C) the Option Agreements, (D) the Subject Company Shareholder Rights Agreement, (E) the Parent Shareholder Rights Agreement, (F) the Northeast Agreement or (G) the Option Agreements; A-21 197 (c) sell, transfer, mortgage, encumber or otherwise dispose of any of its properties or assets to any individual, corporation or other entity other than a direct or indirect wholly owned Subsidiary, or cancel, release or assign any indebtedness to any such person or any claims held by any such person, except in the ordinary course of business consistent with past practice or pursuant to contracts or agreements in force at the date of this Agreement; (d) except for transactions in the ordinary course of business consistent with past practice, make any material investment either by purchase of stock or securities, contributions to capital, property transfers, or purchase of any property or assets of any other individual, corporation or other entity other than a wholly owned Subsidiary thereof; (e) except for transactions in the ordinary course of business consistent with past practice, enter into or terminate any material contract or agreement, or make any change in any of its material leases or contracts, other than renewals of contracts and leases without material adverse changes of terms; (f) increase in any manner the compensation or fringe benefits of any of its employees or pay any pension or retirement allowance not required by any existing plan or agreement to any such employees or become a party to, amend or commit itself to any pension, retirement, profit-sharing or welfare benefit plan or agreement or employment agreement with or for the benefit of any employee other than in the ordinary course of business consistent with past practice or accelerate the vesting of any stock options or other stock-based compensation; (g) solicit, encourage or authorize any individual, corporation or other entity to solicit from any third party any inquiries or proposals relating to the disposition of its business or assets, or the acquisition of its voting securities, or the merger of it or any of its Subsidiaries with any corporation or other entity other than as provided by this Agreement (and each party shall promptly notify the other of all of the relevant details relating to all inquiries and proposals which it may receive relating to any of such matters); (h) settle any claim, action or proceeding involving money damages, except in the ordinary course of business consistent with past practice; (i) take any action that would prevent or impede the Merger from qualifying (i) for pooling of interests accounting treatment or (ii) as a reorganization within the meaning of Section 368 of the Code; provided, however, that nothing contained herein shall limit the ability of Parent or Subject Company to exercise its rights under the Subject Company Option Agreement or the Parent Option Agreement, as the case may be; (j) amend its certificate of incorporation or articles of incorporation, as the case maybe, or its bylaws; or (k) other than in prior consultation with the other party to this Agreement, restructure or materially change its investment securities portfolio or its gap position, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported; (l) take any action that is intended or may reasonably be expected to result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time prior to the Effective Time, or in any of the conditions to the Merger set forth in Article VII not being satisfied or in a violation of any provision of this Agreement, except, in every case, as may be required by applicable law; or (m) agree to, or make any commitment to, take any of the actions prohibited by this Section 5.2. A-22 198 ARTICLE VI ADDITIONAL AGREEMENTS 6.1 Regulatory Matters. (a) Parent and Subject Company shall promptly prepare and file with the SEC the Joint Proxy Statement and Parent shall promptly prepare and file with the SEC the S-4, in which the Joint Proxy Statement will be included as a prospectus. Each of Parent and Subject Company shall use all reasonable efforts to have the S-4 declared effective under the Securities Act as promptly as practicable after such filing, and Parent and Subject Company shall thereafter mail the Joint Proxy Statement to their respective stockholders. Parent shall also use all reasonable efforts to obtain all necessary state securities law or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement, and Subject Company shall furnish all information concerning Subject Company and the holders of Subject Company Capital Stock as may be reasonably requested in connection with any such action. (b) The parties hereto shall cooperate with each other and use their best efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and Governmental Entities which are necessary or advisable to consummate the transactions contemplated by this Agreement (including without limitation the Merger), and to comply with the terms and conditions of all such permits, consents, approvals and authorizations of all such Governmental Entities. Parent and Subject Company shall have the right to review in advance, and to the extent practicable each will consult the other on, in each case subject to applicable laws relating to the exchange of information, all the information relating to Subject Company or Parent, as the case may be, and any of their respective Subsidiaries, which appear in any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the parties hereto shall act reasonably and as promptly as practicable. The parties hereto agree that they will consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated by this Agreement and each party will keep the other apprised of the status of matters relating to completion of the transactions contemplated herein. (c) Parent and Subject Company shall, upon request, furnish each other with all information concerning themselves, their Subsidiaries, directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with the Joint Proxy Statement, the S-4 or any other statement, filing, notice or application made by or on behalf of Parent, Subject Company or any of their respective Subsidiaries to any Governmental Entity in connection with the Merger and the other transactions contemplated by this Agreement. (d) Parent and Subject Company shall promptly advise each other upon receiving any communication from any Governmental Entity whose consent or approval is required for consummation of the transactions contemplated by this Agreement which causes such party to believe that there is a reasonable likelihood that any Requisite Regulatory Approval will not be obtained or that the receipt of any such approval will be materially delayed. 6.2 Access to Information. (a) Upon reasonable notice and subject to applicable laws relating to the exchange of information, each of Parent and Subject Company shall, and shall cause each of their respective Subsidiaries to, afford to the officers, employees, accountants, counsel and other representatives of the other party, access, during normal business hours during the period prior to the Effective Time, to all its properties, books, contracts, commitments and records and, during such period, each of Parent and Subject Company shall, and shall cause their respective Subsidiaries to, make available to the other party (i) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of Federal securities laws or Federal or state banking laws, savings and loan or savings association laws (other than reports or documents which Parent or Subject Company, as the case may be, is not permitted to disclose under applicable law) and (ii) all other information concerning its business, properties and personnel as such party may reasonably request. Neither Parent nor Subject Company nor any of their respective Subsidiaries shall be required to provide access to or to disclose information where such A-23 199 access or disclosure would violate or prejudice the rights of Parent's or Subject Company's, as the case may be, customers, jeopardize the attorney-client privilege of the institution in possession or control of such information or contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or binding agreement entered into prior to the date of this Agreement. The parties hereto will make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply. (b) Each of Parent and Subject Company shall hold all information furnished by the other party or any of such party's Subsidiaries or representatives pursuant to Section 6.2(a) in confidence to the extent required by, and in accordance with, the provisions of the confidentiality agreement, dated February 13, 1995 between Parent and Subject Company (the "Confidentiality Agreement"). (c) No investigation by either of the parties or their respective representatives shall affect the representations and warranties of the other set forth herein. 6.3 Stockholders' Approvals. Each of Parent and Subject Company shall call a meeting of its stockholders to be held as soon as practicable for the purpose of voting upon the requisite stockholder approvals required in connection with this Agreement and the Merger, and each shall use its best efforts to cause such meetings to occur on the same date. 6.4 Legal Conditions to Merger. Each of Parent and Subject Company shall, and shall cause its Subsidiaries to, use their best efforts (a) to take, or cause to be taken, all actions necessary, proper or advisable to comply promptly with all legal requirements which may be imposed on such party or its Subsidiaries with respect to the Merger or the Subsidiary Merger and, subject to the conditions set forth in Article VII hereof, to consummate the transactions contemplated by this Agreement and (b) to obtain (and to cooperate with the other party to obtain) any consent, authorization, order or approval of, or any exemption by, any Governmental Entity and any other third party which is required to be obtained by Subject Company or Parent or any of their respective Subsidiaries in connection with the Merger and the Subsidiary Merger and the other transactions contemplated by this Agreement. 6.5 Affiliates; Publication of Combined Financial Results. (a) Each of Parent and Subject Company shall use its best efforts to cause each director, executive officer and other person who is an "affiliate" (for purposes of Rule 145 under the Securities Act and for purposes of qualifying the Merger for "pooling-of-interests" accounting treatment) of such party to deliver to the other party hereto, as soon as practicable after the date of this Agreement, and prior to the date of the stockholders meetings called by Parent and Subject Company to approve this Agreement, a written agreement, in the form of Exhibit 6.5(a) hereto, providing that such person will not sell, pledge, transfer or otherwise dispose of any shares of Parent Capital Stock or Subject Company Capital Stock held by such "affiliate" and, in the case of the "affiliates" of Subject Company, the shares of Parent Capital Stock to be received by such "affiliate" in the Merger: (1) in the case of shares of Parent Capital Stock to be received by "affiliates" of Subject Company in the Merger, except in compliance with the applicable provisions of the Securities Act and the rules and regulations thereunder; and (2) during the period commencing 30 days prior to the Merger and ending at the time of the publication of financial results covering at least 30 days of combined operations of Parent and Subject Company. (b) Parent shall use its best efforts to publish no later than ninety (90) days after the end of the first month after the Effective Time in which there are at least thirty (30) days of post-Merger combined operations (which month may be the month in which the Effective Time occurs), combined sales and net income figures as contemplated by and in accordance with the terms of SEC Accounting Series Release No. 135. 6.6 Stock Exchange Listing. Parent shall cause the shares of Parent Common Stock to be issued in the Merger to be approved for listing on the New York Stock Exchange, Inc. (the "NYSE"), subject to official notice of issuance, prior to the Effective Time and shall use its best efforts to cause the shares of Parent 9.30% Preferred and Parent 9.35% Cumulative Preferred to be so approved. 6.7 Employee Benefit Plans. (a) From and after the Effective Time, and subject to applicable law, Parent shall provide to the employees of Parent and its Subsidiaries who formerly were employees of Subject A-24 200 Company and its Subsidiaries employee benefits, including but not limited to pension plans, thrift plans, management incentive plans, group life plans, accidental death and dismemberment plans, travel accident plans, medical and hospitalization plans and long term disability plans, substantially the same as those provided to similarly situated employees of Parent and its Subsidiaries. From and after the Effective Time, employees of Parent or its Subsidiaries who were employees of the Subject Company and its Subsidiaries immediately prior to the Effective Time shall receive full credit for all purposes under such plans, except the accrual of benefits, for their years of service prior to the Effective Time with the Subject Company or any of its Subsidiaries (and any predecessors thereto). (b) Parent agrees to honor in accordance with their terms (i) all Plans and (ii) all contracts, arrangements, commitments, or understandings described in Section 3.14(a)(i) disclosed on the Subject Company Disclosure Schedule and (iii) all benefits vested thereunder as of the Effective Time; provided, however, that nothing in this sentence shall be interpreted as preventing Parent from amending, modifying or terminating any Plans, contracts, arrangements, commitments or understandings, in accordance with their terms. The provisions of this Section 6.7(b) are intended to be for the benefit for, and enforceable by, each of the persons set forth in Section 6.7(b) of the Subject Company Disclosure Schedule and their heirs and representatives. (c) Subject Company shall take all actions necessary, including securing the consent of optionees, to amend the terms of the Subject Company Stock Option Plans and any severance or other agreements that provide for the surrender of stock options issued under the Subject Company Stock Option Plans in exchange for a cash payment ("LSARs") to provide that such LSARs shall be settled in stock with a fair market value equal to the cash that would otherwise have been payable thereunder. (d) Parent and Subject Company acknowledge and agree that awards under the Subject Company's Performance Equity Plan ("PEP") are subject to Section 11(f) of the Subject Company Stock Option and Restricted Stock Award Plan. 6.8 Indemnification; Directors' and Officers' Insurance. (a) In the event of any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal or administrative, including, without limitation, any such claim, action, suit, proceeding or investigation in which any person who is now, or has been at any time prior to the date of this Agreement, or who becomes prior to the Effective Time, a director or officer or employee of Subject Company or any of its Subsidiaries (the "Indemnified Parties") is, or is threatened to be, made a party based in whole or in part on, or arising in whole or in part out of, or pertaining to (i) the fact that he is or was a director, officer or employee of Subject Company, any of the Subject Company Subsidiaries or any of their respective predecessors or (ii) this Agreement, the Option Agreements or any of the transactions contemplated hereby or thereby, whether in any case asserted or arising before or after the Effective Time, the parties hereto agree to cooperate and use their best efforts to defend against and respond thereto. It is understood and agreed that after the Effective Time, Parent shall indemnify and hold harmless, as and to the fullest extent permitted by law, each such Indemnified Party against any losses, claims, damages, liabilities, costs, expenses (including reasonable attorney's fees and expenses in advance of the final disposition of any claim, suit, proceeding or investigation to each Indemnified Party to the fullest extent permitted by law upon receipt of any undertaking required by applicable law), judgments, fines and amounts paid in settlement in connection with any such threatened or actual claim, action, suit, proceeding or investigation, and in the event of any such threatened or actual claim, action, suit, proceeding or investigation (whether asserted of arising before or after the Effective Time), the Indemnified Parties may retain counsel reasonably satisfactory to them after consultation with Parent; provided, however, that (1) Parent shall have the right to assume the defense thereof and upon such assumption Parent shall not be liable to any Indemnified Party for any legal expenses of other counsel or any other expenses subsequently incurred by any Indemnified Party in connection with the defense thereof, except that if Parent elects not to assume such defense or counsel for the Indemnified Parties reasonably advises the Indemnified Parties that there are issues which raise conflicts of interest between Parent and the Indemnified Parties, the Indemnified Parties may retain counsel reasonably satisfactory to them after consultation with Parent, and Parent shall pay the reasonable fees and expenses of such counsel for the Indemnified Parties, (2) Parent shall be obligated pursuant to this paragraph to pay for only one firm of counsel for all Indemnified Parties, (3) Parent shall not A-25 201 be liable for any settlement effected without its prior written consent (which consent shall not be unreasonably withheld) and (4) Parent shall have no obligation hereunder to any Indemnified Party when and if a court of competent jurisdiction shall ultimately determine, and such determination shall have become final and nonappealable, that indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law. Any Indemnified Party wishing to claim Indemnification under this Section 6.8, upon learning of any such claim, action, suit, proceeding or investigation, shall notify Parent thereof, provided that the failure to so notify shall not affect the obligations of Parent under this Section 6.8 except to the extent such failure to notify materially prejudices Parent. Parent's obligations under this Section 6.8 continue in full force and effect for a period of six (6) years from the Effective Time; provided, however, that all rights to indemnification in respect of any claim (a "Claim") asserted or made within such period shall continue until the final disposition of such Claim. (b) Parent shall use its best efforts to cause the persons serving as officers and directors of Subject Company immediately prior to the Effective Time to be covered for a period of six (6) years from the Effective Time by the directors' and officers' liability insurance policy maintained by Subject Company (provided that Parent may substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are not less advantageous than such policy) with respect to acts or omissions occurring prior to the Effective Time which were committed by such officers and directors in their capacity as such; provided, however, that in no event shall Parent be required to expend more than 200% of the current amount expended by Subject Company (the "Insurance Amount") to maintain or procure insurance coverage pursuant hereto and further provided that if Parent is unable to maintain or obtain the insurance called for by this Section 6.8(b), Parent shall use its best efforts to obtain as much comparable insurance as available for the Insurance Amount. (c) In the event Parent or any of its successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of Parent assume the obligations set forth in this section. (d) The provisions of this Section 6.8 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives. 6.9 Additional Agreements. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement (including, without limitation, any merger between a Subsidiary of Parent and a Subsidiary of Subject Company) or to vest the Surviving Corporation with full title to all properties, assets, rights, approvals, immunities and franchises of any of the parties to the Merger, the proper officers and directors of each party to this Agreement and their respective Subsidiaries shall take all such necessary action as may be reasonably requested by, and at the sole expense of, Parent. 6.10 Advice of Changes. Parent and Subject Company shall promptly advise the other party of any change or event having a Material Adverse Effect on it or which it believes would or would be reasonably likely to cause or constitute a material breach of any of its representations, warranties or covenants contained herein. 6.11 Dividends. After the date of this Agreement, each of Parent and Subject Company shall coordinate with the other the declaration of any dividends in respect of Parent Common Stock and Subject Company Common Stock and the record dates and payment dates relating thereto, it being the intention of the parties hereto that holders of Parent Common Stock or Subject Company Common Stock shall not receive two dividends, or fail to receive one dividend, for any single calendar quarter with respect to their shares of Parent Common Stock and/or Subject Company Common Stock and any shares of Parent Common Stock any such holder receives in exchange therefor in the Merger. A-26 202 ARTICLE VII CONDITIONS PRECEDENT 7.1 Conditions to Each Party's Obligation To Effect the Merger. The respective obligation of each party to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) Stockholder Approval. This Agreement and the transactions contemplated hereby shall have been approved and adopted by the respective requisite affirmative votes of the holders of Subject Company Common Stock and Parent Common Stock entitled to vote thereon. (b) NYSE Listing. The shares of Parent Common Stock which shall be issued to the stockholders of Subject Company upon consummation of the Merger shall have been authorized for listing on the NYSE, subject to official notice of issuance. (c) Other Approvals. All regulatory approvals required to consummate the transactions contemplated hereby shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired (all such approvals and the expiration of all such waiting periods being referred to herein as the "Requisite Regulatory Approvals"). (d) S-4. The S-4 shall have become effective under the Securities Act and no stop order suspending the effectiveness of the S-4 shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. (e) No Injunctions or Restraints; Illegality. No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition (an "Injunction") preventing the consummation of the Merger or any of the other transactions contemplated by this Agreement shall be in effect. No statute, rule, regulation, order, injunction or decree shall have been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits, restricts or makes illegal consummation of the Merger. (f) Federal Tax Opinion. Parent shall have received an opinion of Wachtell, Lipton, Rosen & Katz, counsel to Parent, and Subject Company shall have received an opinion of Skadden, Arps, Slate, Meagher & Flom, counsel to Subject Company, in form and substance reasonably satisfactory to Parent and Subject Company, dated as of the Effective Time, substantially to the effect that, on the basis of facts, representations and assumptions set forth in such opinion which are consistent with the state of facts existing at the Effective Time, the Merger will be treated for Federal income tax purposes as part of one or more reorganizations within the meaning of Section 368 of the Code and that accordingly: (i) No gain or loss will be recognized by Parent or Subject Company as a result of the Merger; (ii) No gain or loss will be recognized by the stockholders of Subject Company who exchange their Subject Company Capital Stock solely for Parent Capital Stock pursuant to the Merger (except with respect to cash received in lieu of a fractional share interest in Parent Capital Stock); and (iii) The tax basis of the Parent Capital Stock received by stockholders who exchange all of their Subject Company Capital Stock solely for Parent Capital Stock in the Merger will be the same as the tax basis of the Subject Company Capital Stock surrendered in exchange therefor (reduced by any amount allocable to a fractional share interest for which cash is received). In rendering such opinion, counsel may require and rely upon representations contained in certificates of officers of Parent, Subject Company and others. (g) Pooling of Interests. Parent and Subject Company shall each have received a letter from KPMG Peat Marwick addressed to Subject Company and Parent, to the effect that the Merger will qualify for "pooling of interests" accounting treatment. A-27 203 7.2 Conditions to Obligations of Parent. The obligation of Parent to effect the Merger is also subject to the satisfaction or waiver by Parent at or prior to the Effective Time of the following conditions: (a) Representations and Warranties. The representations and warranties of Subject Company set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date. Parent shall have received a certificate signed on behalf of Subject Company by the Chief Executive Officer and the Chief Financial Officer of Subject Company to the foregoing effect. (b) Performance of Obligations of Subject Company. Subject Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Parent shall have received a certificate signed on behalf of Subject Company by the Chief Executive Officer and the Chief Financial Officer of Subject Company to such effect. (c) Subject Company Rights Agreement. The rights issued pursuant to the Subject Company Rights Agreement shall not have become nonredeemable, exercisable, distributed or triggered pursuant to the terms of such agreement. 7.3 Conditions to Obligations of Subject Company. The obligation of Subject Company to effect the Merger is also subject to the satisfaction or waiver by Subject Company at or prior to the Effective Time of the following conditions: (a) Representations and Warranties. The representations and warranties of Parent set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date. Subject Company shall have received a certificate signed on behalf of Parent by the Chief Executive Officer and the Chief Financial Officer of Parent to the foregoing effect. (b) Performance of Obligations of Parent. Parent shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Subject Company shall have received a certificate signed on behalf of Parent by the Chief Executive Officer and the Chief Financial Officer of Parent to such effect. (c) Parent Rights Agreement. The rights issued pursuant to the Parent Rights Agreement shall not have become nonredeemable, exercisable, distributed or triggered pursuant to the terms of such agreement. ARTICLE VIII TERMINATION AND AMENDMENT 8.1 Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of the matters presented in connection with the Merger by the stockholders of Subject Company: (a) by mutual consent of Parent and Subject Company in a written instrument, if the Board of Directors of each so determines by a vote of a majority of the members of its entire Board; (b) by either the Board of Directors of Parent or the Board of Directors of Subject Company if any Governmental Entity which must grant a Requisite Regulatory Approval has denied approval of the Merger and such denial has become final and nonappealable or (ii) any Governmental Entity of competent jurisdiction shall have issued a final nonappealable order enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement; (c) by either the Board of Directors of Parent or the Board of Directors of Subject Company if the Merger shall not have been consummated on or before February 20, 1996, unless the failure of the Closing to occur by such date shall be due to the failure of the party seeking to terminate this Agreement to perform or observe the covenants and agreements of such party set forth herein; A-28 204 (d) by either the Board of Directors of Parent or the Board of Directors of Subject Company (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a material breach of any of the covenants or agreements or any of the representations or warranties set forth in this Agreement on the part of the other party, which breach is not cured within forty-five (45) days following written notice to the party committing such breach, or which breach, by its nature, cannot be cured prior to the Closing; or (e) by either Parent or the Subject Company if any approval of the stockholders of Parent or the Subject Company required for the consummation of the Merger shall not have been obtained by reason of the failure to obtain the required vote at a duly held meeting of stockholders or at any adjournment or postponement thereof. 8.2 Effect of Termination. In the event of termination of this Agreement by either Parent or Subject Company as provided in Section 8.1, this Agreement shall forthwith become void and have no effect, and none of Parent, Subject Company, any of their respective Subsidiaries or any of the officers or directors of any of them shall have any liability of any nature whatsoever hereunder, or in connection with the transactions contemplated hereby, except (i) Sections 6.2(b), 8.2, 9.2 and 9.3, shall survive any termination of this Agreement, and (ii) notwithstanding anything to the contrary contained in this Agreement, neither Parent nor Subject Company shall be relieved or released from any liabilities or damages arising out of its willful breach of any provision of this Agreement. 8.3 Amendment. Subject to compliance with applicable law, this Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Merger by the stockholders of Subject Company; provided, however, that after any approval of the transactions contemplated by this Agreement by Subject Company's stockholders, there may not be, without further approval of such stockholders, any amendment of this Agreement which reduces the amount or changes the form of the consideration to be delivered to the Subject Company stockholders hereunder other than as contemplated by this Agreement. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 8.4 Extension; Waiver. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Board of Directors, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein; provided, however, that after any approval of the transactions contemplated by this Agreement by Subject Company's stockholders, there may not be, without further approval of such stockholders, any extension or waiver of this Agreement or any portion thereof which reduces the amount or changes the form of the consideration to be delivered to the Subject Company stockholders hereunder other than as contemplated by this Agreement. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. A-29 205 ARTICLE IX GENERAL PROVISIONS 9.1 Closing. Subject to the terms and conditions of this Agreement and the Merger Agreement, the closing of the Merger (the "Closing") will take place at 10:00 a.m. on a date to be specified by the parties, which shall be no later than two business days after the satisfaction or waiver (subject to applicable law) of the latest to occur of the conditions set forth in Article VII hereof (the "Closing Date"). 9.2 Nonsurvival of Representations, Warranties and Agreements. None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement (other than pursuant to the Option Agreements, which shall terminate in accordance with its terms) shall survive the Effective Time, except for those covenants and agreements contained herein and therein which by their terms apply in whole or in part after the Effective Time. 9.3 Expenses. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expense, provided, however, that the costs and expenses of printing and mailing the Joint Proxy Statement, and all filing and other fees paid to the SEC in connection with the Merger, shall be borne equally by Parent and Subject Company. 9.4 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with confirmation) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent, to: Fleet Financial Group, Inc. 50 Kennedy Plaza Providence, Rhode Island 02903 Fax: (401) 278-5527 Attn: William C. Mutterperl, Esq. with a copy to each of: Edwards & Angell 2700 Hospital Trust Tower Providence, Rhode Island 02903 Fax: (401) 276-6611 Attn: V. Duncan Johnson, Esq. Wachtell, Lipton, Rosen & Katz 51 West 52nd New York, New York 10019 Fax: (212) 402-2000 Attn: Edward D. Herlihy, Esq. and (b) if to Subject Company, to: Shawmut National Corporation 777 Main Street Hartford, Connecticut 06115 Fax: (203) 728-4205 Attn: J. Michael Shepherd, Esq. A-30 206 with a copy to: Skadden, Arps, Slate, Meagher & Flom 919 Third Avenue New York, New York 10022 Fax: (212) 735-2000 Attn: William S. Rubenstein, Esq. 9.5 Interpretation. When a reference is made in this Agreement to Sections, Exhibits or Schedules, such reference shall be to a Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". No provision of this Agreement shall be construed to require Subject Company, Parent or any of their respective Subsidiaries or affiliates to take any action which would violate any applicable law, rule or regulation. 9.6 Counterparts. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. 9.7 Entire Agreement. This Agreement (including the documents and the instruments referred to herein) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof other than the Option Agreements and the Confidentiality Agreement. 9.8 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Rhode Island, without regard to any applicable conflicts of law. 9.9 Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. 9.10 Publicity. Except as otherwise required by applicable law or the rules of the NYSE, neither Parent nor Subject Company shall, or shall permit any of its Subsidiaries to, issue or cause the publication of any press release or other public announcement with respect to, or otherwise make any public statement concerning, the transactions contemplated by this Agreement without the consent of the other party, which consent shall not be unreasonably withheld. 9.11 Assignment. Neither this Agreement nor any of the rights, interests or obligations shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Except as otherwise specifically provided in Section 6.7(b) and Section 6.8 hereof, this Agreement (including the documents and instruments referred to herein) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. A-31 207 IN WITNESS WHEREOF, Parent and Subject Company have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written. FLEET FINANCIAL GROUP, INC. By: /s/ TERRENCE MURRAY ---------------------------------- Name: Title: SHAWMUT NATIONAL CORPORATION By: /s/ JOEL B. ALVORD ---------------------------------- Name: Title: A-32 208 EXHIBIT B STOCK OPTION AGREEMENT THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO CERTAIN PROVISIONS CONTAINED HEREIN AND TO RESALE RESTRICTIONS UNDER THE SECURITIES ACT OF 1933, AS AMENDED STOCK OPTION AGREEMENT, dated February 20, 1995, between FLEET FINANCIAL GROUP, INC., a Rhode Island corporation ("Issuer"), and SHAWMUT NATIONAL CORPORATION, a Delaware corporation ("Grantee"). W I T N E S S E T H: WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of Merger of even date herewith (the "Merger Agreement"), which agreement has been executed by the parties hereto immediately prior to this Agreement; and WHEREAS, as a condition to Grantee's entering into the Merger Agreement and in consideration therefor, Issuer has agreed to grant Grantee the Option (as hereinafter defined): NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth herein and in the Merger Agreement, the parties hereto agree as follows: 1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option (the "Option") to purchase, subject to the terms hereof, up to 28,171,050 fully paid and nonassessable shares of Issuer's Common Stock, par value $1.00 per share ("Common Stock"), at a price of $33.625 per share (the "Option Price"); provided further that in no event shall the number of shares of Common Stock for which this Option is exercisable exceed 19.9% of the Issuer's issued and outstanding shares of Common Stock. The number of shares of Common Stock that may be received upon the exercise of the Option and the Option Price are subject to adjustment as herein set forth. (b) In the event that any additional shares of Common Stock are issued or otherwise become outstanding after the date of this Agreement (other than pursuant to this Agreement), the number of shares of Common Stock subject to the Option shall be increased so that, after such issuance, it equals 19.9% of the number of shares of Common Stock then issued and outstanding without giving effect to any shares subject or issued pursuant to the Option. Nothing contained in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee to breach any provision of the Merger Agreement. 2. (a) The Holder (as hereinafter defined) may exercise the Option, in whole or part, and from time to time, if, but only if, both an Initial Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as hereinafter defined) shall have occurred prior to the occurrence of an Exercise Termination Event (as hereinafter defined), provided that the Holder shall have sent the written notice of such exercise (as provided in subsection (e) of this Section 2) within 90 days following such Subsequent Triggering Event. Each of the following shall be an Exercise Termination Event: (i) the Effective Time of the Merger; (ii) termination of the Merger Agreement in accordance with the provisions thereof if such termination occurs prior to the occurrence of an Initial Triggering Event except a termination by Grantee pursuant to Section 8.1(d) of the Merger Agreement (unless the breach by Issuer giving rise to such right of termination is non-volitional); or (iii) the passage of twelve months after termination of the Merger Agreement if such termination follows the occurrence of an Initial Triggering Event or is a termination by Grantee pursuant to Section 8.1(d) of the Merger Agreement (unless the breach by Issuer giving rise to such right of termination is non-volitional) (provided that if an Initial Triggering Event continues or occurs beyond such termination and prior to the passage of such twelve-month period, the Exercise Termination Event shall be twelve months from the expiration of the Last Triggering Event but in no event more than 18 months after such termination). B-1 209 The "Last Triggering Event" shall mean the last Initial Triggering Event to expire. The term "Holder" shall mean the holder or holders of the Option. (b) The term "Initial Triggering Event" shall mean any of the following events or transactions occurring after the date hereof: (i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"), without having received Grantee's prior written consent, shall have entered into an agreement to engage in an Acquisition Transaction (as hereinafter defined) with any person (the term "person" for purposes of this Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules and regulations thereunder) other than Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or the Board of Directors of Issuer shall have recommended that the stockholders of Issuer approve or accept any Acquisition Transaction. For purposes of this Agreement, "Acquisition Transaction" shall mean (w) a merger or consolidation, or any similar transaction, involving Issuer or any Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange Commission (the "SEC")) of Issuer, (x) a purchase, lease or other acquisition of all or a substantial portion of the assets of Issuer or any Significant Subsidiary of Issuer, (y) a purchase or other acquisition (including by way of merger, consolidation, share exchange or otherwise) of securities representing 10% or more of the voting power of Issuer or any Significant Subsidiary of Issuer, or (z) any substantially similar transaction; provided, however, that in no event shall any (i) merger, consolidation or similar transaction involving Issuer or any Significant Subsidiary in which the voting securities of Issuer outstanding immediately prior thereto continue to represent (by either remaining outstanding or being converted into the voting securities of the surviving entity of any such transaction) at least 65% of the combined voting power of the voting securities of the Issuer or the surviving entity outstanding immediately after the consummation of such merger, consolidation, or similar transaction, or (ii) any merger, consolidation, purchase or similar transaction involving only the Issuer and one or more of its Subsidiaries or involving only any two or more of such Subsidiaries, be deemed to be an Acquisition Transaction, provided any such transaction is not entered into in violation of the terms of the Merger Agreement; (ii) Issuer or any Issuer Subsidiary, without having received Grantee's prior written consent, shall have authorized, recommended, proposed or publicly announced its intention to authorize, recommend or propose, to engage in an Acquisition Transaction with any person other than Grantee or a Grantee Subsidiary, or the Board of Directors of Issuer shall have publicly withdrawn or modified, or publicly announced its interest to withdraw or modify, in any manner adverse to Grantee, its recommendation that the stockholders of Issuer approve the transactions contemplated by the Merger Agreement; (iii) Any person other than Grantee, any Grantee Subsidiary or any Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of its business shall have acquired beneficial ownership or the right to acquire beneficial ownership of 10% or more of the outstanding shares of Common Stock (the term "beneficial ownership" for purposes of this Option Agreement having the meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules and regulations thereunder); (iv) Any person other than Grantee or any Grantee Subsidiary shall have made a bona fide proposal to Issuer or its stockholders by public announcement or written communication that is or becomes the subject of public disclosure to engage in an Acquisition Transaction; (v) After an overture is made by a third party to Issuer or its stockholders to engage in an Acquisition Transaction, Issuer shall have breached any covenant or obligation contained in the Merger Agreement and such breach (x) would entitle Grantee to terminate the Merger Agreement and (y) shall not have been cured prior to the Notice Date (as defined below); or (vi) Any person other than Grantee or any Grantee Subsidiary, other than in connection with a transaction to which Grantee has given its prior written consent, shall have filed an application or notice with the Federal Reserve Board, or other federal or state bank regulatory authority, which application or notice has been accepted for processing, for approval to engage in an Acquisition Transaction. B-2 210 (c) The term "Subsequent Triggering Event" shall mean either of the following events or transactions occurring after the date hereof: (i) The acquisition by any person of beneficial ownership of 20% or more of the then outstanding Common Stock; or (ii) The occurrence of the Initial Triggering Event described in clause (i) of subsection (b) of this Section 2, except that the percentage referred to in clause (y) shall be 20%. (d) Issuer shall notify Grantee promptly in writing of the occurrence of any Initial Triggering Event or Subsequent Triggering Event (together, a "Triggering Event"), it being understood that the giving of such notice by Issuer shall not be a condition to the right of the Holder to exercise the Option. (e) In the event the Holder is entitled to and wishes to exercise the Option, it shall send to Issuer a written notice (the date of which being herein referred to as the "Notice Date") specifying (i) the total number of shares it will purchase pursuant to such exercise and (ii) a place and date not earlier than three business days nor later than 60 business days from the Notice Date for the closing of such purchase (the "Closing Date"); provided that if prior notification to or approval of the Federal Reserve Board or any other regulatory agency is required in connection with such purchase, the Holder shall promptly file the required notice or application for approval and shall expeditiously process the same and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which any required notification periods have expired or been terminated or such approvals have been obtained and any requisite waiting period or periods shall have passed. Any exercise of the Option shall be deemed to occur on the Notice Date relating thereto. (f) At the closing referred to in subsection (e) of this Section 2, the Holder shall pay to Issuer the aggregate purchase price for the shares of Common Stock purchased pursuant to the exercise of the Option in immediately available funds by wire transfer to a bank account designated by Issuer, provided that failure or refusal of Issuer to designate such a bank account shall not preclude the Holder from exercising the Option. (g) At such closing, simultaneously with the delivery of immediately available funds as provided in subsection (f) of this Section 2, Issuer shall deliver to the Holder a certificate or certificates representing the number of shares of Common Stock purchased by the Holder and, if the Option should be exercised in part only, a new Option evidencing the rights of the Holder thereof to purchase the balance of the shares purchasable hereunder, and the Holder shall deliver to Issuer a copy of this Agreement and a letter agreeing that the Holder will not offer to sell or otherwise dispose of such shares in violation of applicable law or the provisions of this Agreement. (h) Certificates for Common Stock delivered at a closing hereunder may be endorsed with a restrictive legend that shall read substantially as follows: "The transfer of the shares represented by this certificate is subject to certain provisions of an agreement between the registered holder hereof and Issuer and to resale restrictions arising under the Securities Act of 1933, as amended. A copy of such agreement is on file at the principal office of Issuer and will be provided to the holder hereof without charge upon receipt by Issuer of a written request therefor." It is understood and agreed that: (i) the reference to the resale restrictions of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend shall be removed by delivery of substitute certificate(s) without such reference if the Holder shall have delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel, in form and substance reasonably satisfactory to Issuer, to the effect that such legend is not required for purposes of the 1933 Act; (ii) the reference to the provisions to this Agreement in the above legend shall be removed by delivery of substitute certificate(s) without such reference if the shares have been sold or transferred in compliance with the provisions of this Agreement and under circumstances that do not require the retention of such reference; and (iii) the legend shall be removed in its entirety if the conditions in the preceding clauses (i) and (ii) are both satisfied. In addition, such certificates shall bear any other legend as may be required by law. B-3 211 (i) Upon the giving by the Holder to Issuer of the written notice of exercise of the Option provided for under subsection (e) of this Section 2 and the tender of the applicable purchase price in immediately available funds, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of Issuer shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. Issuer shall pay all expenses, and any and all United States federal, state and local taxes and other charges that may be payable in connection with the preparation, issue and delivery of stock certificates under this Section 2 in the name of the Holder or its assignee, transferee or designee. 3. Issuer agrees: (i) that it shall at all times maintain, free from preemptive rights, sufficient authorized but unissued or treasury shares of Common Stock so that the Option may be exercised without additional authorization of Common Stock after giving effect to all other options, warrants, convertible securities and other rights to purchase Common Stock; (ii) that it will not, by charter amendment or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by Issuer; (iii) promptly to take all action as may from time to time be required (including (x) complying with all premerger notification, reporting and waiting period requirements specified in 15 U.S.C. sec.18a and regulations promulgated thereunder and (y) in the event, under the Bank Holding Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as amended, or any state banking law, prior approval of or notice to the Federal Reserve Board or to any state regulatory authority is necessary before the Option may be exercised, cooperating fully with the Holder in preparing such applications or notices and providing such information to the Federal Reserve Board or such state regulatory authority as they may require) in order to permit the Holder to exercise the Option and Issuer duly and effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly to take all action provided herein to protect the rights of the Holder against dilution. 4. This Agreement (and the Option granted hereby) are exchangeable, without expense, at the option of the Holder, upon presentation and surrender of this Agreement at the principal office of Issuer, for other Agreements providing for Options of different denominations entitling the holder thereof to purchase, on the same terms and subject to the same conditions as are set forth herein, in the aggregate the same number of shares of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein include any Stock Option Agreements and related Options for which this Agreement (and the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Agreement, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like tenor and date. Any such new Agreement executed and delivered shall constitute an additional contractual obligation on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed or mutilated shall at any time be enforceable by anyone. 5. In addition to the adjustment in the number of shares of Common Stock that are purchasable upon exercise of the Option pursuant to Section 1 of this Agreement, the number of shares of Common Stock purchasable upon the exercise of the Option and the Option Price shall be subject to adjustment from time to time as provided in this Section 5. In the event of any change in, or distributions in respect of, the Common Stock by reason of stock dividends, split-ups, mergers, recapitalizations, combinations, subdivisions, conversions, exchanges of shares, distributions on or in respect of the Common Stock that would be prohibited under the terms of the Merger Agreement, or the like, the type and number of shares of Common Stock purchasable upon exercise hereof and the Option Price shall be appropriately adjusted in such manner as shall fully preserve the economic benefits provided hereunder and proper provision shall be made in any agreement governing any such transaction to provide for such proper adjustment and the full satisfaction of the Issuer's obligations hereunder. 6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to an Exercise Termination Event, Issuer shall, at the request of Grantee delivered within 90 days of such Subsequent Triggering Event (whether on its own behalf or on behalf of any subsequent holder of this Option (or part thereof) or any of the shares of Common Stock issued pursuant hereto), promptly prepare, file and keep current a shelf registration B-4 212 statement under the 1933 Act covering this Option and any shares issued and issuable pursuant to this Option and shall use its reasonable best efforts to cause such registration statement to become effective and remain current in order to permit the sale or other disposition of this Option and any shares of Common Stock issued upon total or partial exercise of this Option ("Option Shares") in accordance with any plan of disposition requested by Grantee. Issuer will use its reasonable best efforts to cause such registration statement first to become effective and then to remain effective for such period not in excess of 180 days from the day such registration statement first becomes effective or such shorter time as may be reasonably necessary to effect such sales or other dispositions. Grantee shall have the right to demand two such registrations. The foregoing notwithstanding, if, at the time of any request by Grantee for registration of the Option or Option Shares as provided above, Issuer is in registration with respect to an underwritten public offering of shares of Common Stock, and if in the good faith judgment of the managing underwriter or managing underwriters, or, if none, the sole underwriter or underwriters, of such offering the inclusion of the Holder's Option or Option Shares would interfere with the successful marketing of the shares of Common Stock offered by Issuer, the number of Option Shares otherwise to be covered in the registration statement contemplated hereby may be reduced; and provided, however, that after any such required reduction the number of Option Shares to be included in such offering for the account of the Holder shall constitute at least 25% of the total number of shares to be sold by the Holder and Issuer in the aggregate; and provided further, however, that if such reduction occurs, then the Issuer shall file a registration statement for the balance as promptly as practical and no reduction shall thereafter occur. Each such Holder shall provide all information reasonably requested by Issuer for inclusion in any registration statement to be filed hereunder. If requested by any such Holder in connection with such registration, Issuer shall become a party to any underwriting agreement relating to the sale of such shares, but only to the extent of obligating itself in respect of representations, warranties, indemnities and other agreements customarily included in such underwriting agreements for the Issuer. Upon receiving any request under this Section 6 from any Holder, Issuer agrees to send a copy thereof to any other person known to Issuer to be entitled to registration rights under this Section 6, in each case by promptly mailing the same, postage prepaid, to the address of record of the persons entitled to receive such copies. Notwithstanding anything to the contrary contained herein, in no event shall Issuer be obligated to effect more than two registrations pursuant to this Section 6 by reason of the fact that there shall be more than one Grantee as a result of any assignment or division of this Agreement. 7. (a) Immediately prior to the occurrence of a Repurchase Event (as defined below), (i) following a request of the Holder, delivered prior to an Exercise Termination Event, Issuer (or any successor thereto) shall repurchase the Option from the Holder at a price (the "Option Repurchase Price") equal to the amount by which (A) the market/offer price (as defined below) exceeds (B) the Option Price, multiplied by the number of shares for which this Option may then be exercised and (ii) at the request of the owner of Option Shares from time to time (the "Owner"), delivered within 90 days of such occurrence (or such later period as provided in Section 10), Issuer shall repurchase such number of the Option Shares from the Owner as the Owner shall designate at a price (the "Option Share Repurchase Price") equal to the market/offer price multiplied by the number of Option Shares so designated. The term "market/offer price" shall mean the highest of (i) the price per share of Common Stock at which a tender offer or exchange offer therefor has been made, (ii) the price per share of Common Stock to be paid by any third party pursuant to an agreement with Issuer, (iii) the highest closing price for shares of Common Stock within the six-month period immediately preceding the date the Holder gives notice of the required repurchase of this Option or the Owner gives notice of the required repurchase of Option Shares, as the case may be, or (iv) in the event of a sale of all or a substantial portion of Issuer's assets, the sum of the price paid in such sale for such assets and the current market value of the remaining assets of Issuer as determined by a nationally recognized investment banking firm selected by the Holder or the Owner, as the case may be, divided by the number of shares of Common Stock of Issuer outstanding at the time of such sale. In determining the market/offer price, the value of consideration other than cash shall be determined by a nationally recognized investment banking firm selected by the Holder or Owner, as the case may be and reasonably acceptable to the Issuer. (b) The Holder and the Owner, as the case may be, may exercise its right to require Issuer to repurchase the Option and any Option Shares pursuant to this Section 7 by surrendering for such purpose to Issuer, at its principal office, a copy of this Agreement or certificates for Option Shares, as applicable, accompanied by a B-5 213 written notice or notices stating that the Holder or the Owner, as the case may be, elects to require Issuer to repurchase this Option and/or the Option Shares in accordance with the provisions of this Section 7. Within the latter to occur of (x) five business days after the surrender of the Option and/or certificates representing Option Shares and the receipt of such notice or notices relating thereto and (y) the time that is immediately prior to the occurrence of a Repurchase Event, Issuer shall deliver or cause to be delivered to the Holder the Option Repurchase Price and/or to the Owner the Option Share Repurchase Price therefor or the portion thereof that Issuer is not then prohibited under applicable law and regulation from so delivering. (c) To the extent that Issuer is prohibited under applicable law or regulation from repurchasing the Option and/or the Option Shares in full, Issuer shall immediately so notify the Holder and/or the Owner and thereafter deliver or cause to be delivered, from time to time, to the Holder and/or the Owner, as appropriate, the portion of the Option Repurchase Price and the Option Share Repurchase Price, respectively, that it is no longer prohibited from delivering, within five business days after the date on which Issuer is no longer so prohibited; provided, however, that if Issuer at any time after delivery of a notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited under applicable law or regulation from delivering to the Holder and/or the Owner, as appropriate, the Option Repurchase Price and the Option Share Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its best efforts to obtain all required regulatory and legal approvals and to file any required notices as promptly as practicable in order to accomplish such repurchase), the Holder or Owner may revoke its notice of repurchase of the Option or the Option Shares either in whole or to the extent of the prohibition, whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder and/or the Owner, as appropriate, that portion of the Option Repurchase Price or the Option Share Repurchase Price that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the Holder, a new Stock Option Agreement evidencing the right of the Holder to purchase that number of shares of Common Stock obtained by multiplying the number of shares of Common Stock for which the surrendered Stock Option Agreement was exercisable at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Option Repurchase Price less the portion thereof theretofore delivered to the Holder and the denominator of which is the Option Repurchase Price, or (B) to the Owner, a certificate for the Option Shares it is then so prohibited from repurchasing. (d) For purposes of this Section 7, a Repurchase Event shall be deemed to have occurred (i) upon the consummation of any merger, consolidation or similar transaction involving Issuer or any purchase, lease or other acquisition of all or a substantial portion of the assets of Issuer, other than any such transaction which would not constitute an Acquisition Transaction pursuant to the proviso to Section 2(b)(i) hereof or (ii) upon the acquisition by any person of beneficial ownership of 50% or more of the then outstanding shares of Common Stock, provided that no such event shall constitute a Repurchase Event unless a Subsequent Triggering Event shall have occurred prior to an Exercise Termination Event. The parties hereto agree that Issuer's obligations to repurchase the Option or Option Shares under this Section 7 shall not terminate upon the occurrence of an Exercise Termination Event unless no Subsequent Triggering Event shall have occurred prior to the occurrence of an Exercise Termination Event. 8. (a) In the event that prior to an Exercise Termination Event, Issuer shall enter into an agreement (i) to consolidate with or merge into any person, other than Grantee or one of its Subsidiaries, and shall not be the continuing or surviving corporation of such consolidation or merger, (ii) to permit any person, other than Grantee or one of its Subsidiaries, to merge into Issuer and Issuer shall be the continuing or surviving corporation, but, in connection with such merger, the then outstanding shares of Common Stock shall be changed into or exchanged for stock or other securities of any other person or cash or any other property or the then outstanding shares of Common Stock shall after such merger represent less than 50% of the outstanding voting shares and voting share equivalents of the merged company, or (iii) to sell or otherwise transfer all or substantially all of its assets to any person, other than Grantee or one of its Subsidiaries, then, and in each such case, the agreement governing such transaction shall make proper provision so that the Option shall, upon the consummation of any such transaction and upon the terms and conditions set forth herein, be converted into, or exchanged for, an option (the "Substitute Option"), at the election of the Holder, of either (x) the Acquiring Corporation (as hereinafter defined) or (y) any person that controls the Acquiring Corporation. B-6 214 (b) The following terms have the meanings indicated: (1) "Acquiring Corporation" shall mean (i) the continuing or surviving corporation of a consolidation or merger with Issuer (if other than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or surviving person, and (iii) the transferee of all or substantially all of Issuer's assets. (2) "Substitute Common Stock" shall mean the common stock issued by the issuer of the Substitute Option upon exercise of the Substitute Option. (3) "Assigned Value" shall mean the market/offer price, as defined in Section 7. (4) "Average Price" shall mean the average closing price of a share of the Substitute Common Stock for the one year immediately preceding the consolidation, merger or sale in question, but in no event higher than the closing price of the shares of Substitute Common Stock on the day preceding such consolidation, merger or sale; provided that if Issuer is the issuer of the Substitute Option, the Average Price shall be computed with respect to a share of common stock issued by the person merging into Issuer or by any company which controls or is controlled by such person, as the Holder may elect. (c) The Substitute Option shall have the same terms as the Option, provided, that if the terms of the Substitute Option cannot, for legal reasons, be the same as the Option, such terms shall be as similar as possible and in no event less advantageous to the Holder. The issuer of the Substitute Option shall also enter into an agreement with the then Holder or Holders of the Substitute Option in substantially the same form as this Agreement, which shall be applicable to the Substitute Option. (d) The Substitute Option shall be exercisable for such number of shares of Substitute Common Stock as is equal to the Assigned Value multiplied by the number of shares of Common Stock for which the Option is then exercisable, divided by the Average Price. The exercise price of the Substitute Option per share of Substitute Common Stock shall then be equal to the Option Price multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock for which the Option is then exercisable and the denominator of which shall be the number of shares of Substitute Common Stock for which the Substitute Option is exercisable. (e) In no event, pursuant to any of the foregoing paragraphs, shall the Substitute Option be exercisable for more than 19.9% of the shares of Substitute Common Stock outstanding prior to exercise of the Substitute Option. In the event that the Substitute Option would be exercisable for more than 19.9% of the shares of Substitute Common Stock outstanding prior to exercise but for this clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer") shall make a cash payment to Holder equal to the excess of (i) the value of the Substitute Option without giving effect to the limitation in this clause (e) over (ii) the value of the Substitute Option after giving effect to the limitation in this clause (e). This difference in value shall be determined by a nationally recognized investment banking firm selected by the Holder or the Owner, as the case may be, and reasonably acceptable to the Acquiring Corporation. (f) Issuer shall not enter into any transaction described in subsection (a) of this Section 8 unless the Acquiring Corporation and any person that controls the Acquiring Corporation assume in writing all the obligations of Issuer hereunder. 9. (a) At the request of the holder of the Substitute Option (the "Substitute Option Holder"), the issuer of the Substitute Option (the "Substitute Option Issuer") shall repurchase the Substitute Option from the Substitute Option Holder at a price (the "Substitute Option Repurchase Price") equal to (x) the amount by which (i) the Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by the number of shares of Substitute Common Stock for which the Substitute Option may then be exercised plus (y) Grantee's Out-of-Pocket Expenses (to the extent not previously reimbursed), and at the request of the owner (the "Substitute Share Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall repurchase the Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to (x) the Highest Closing Price multiplied by the number of Substitute Shares so designated plus (y) Grantee's Out-of-Pocket Expenses (to the extent not previously reimbursed). The term "Highest Closing Price" shall mean the highest closing price for shares of Substitute B-7 215 Common Stock within the six-month period immediately preceding the date the Substitute Option Holder gives notice of the required repurchase of the Substitute Option or the Substitute Share Owner gives notice of the required repurchase of the Substitute Shares, as applicable. (b) The Substitute Option Holder and the Substitute Share Owner, as the case may be, may exercise its respective right to require the Substitute Option Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to this Section 9 by surrendering for such purpose to the Substitute Option Issuer, at its principal office, the agreement for such Substitute Option (or, in the absence of such an agreement, a copy of this Agreement) and certificates for Substitute Shares accompanied by a written notice or notices stating that the Substitute Option Holder or the Substitute Share Owner, as the case may be, elects to require the Substitute Option Issuer to repurchase the Substitute Option and/or the Substitute Shares in accordance with the provisions of this Section 9. As promptly as practicable, and in any event within five business days after the surrender of the Substitute Option and/or certificates representing Substitute Shares and the receipt of such notice or notices relating thereto, the Substitute Option Issuer shall deliver or cause to be delivered to the Substitute Option Holder the Substitute Option Repurchase Price and/or to the Substitute Share Owner the Substitute Share Repurchase Price therefor or the portion thereof which the Substitute Option Issuer is not then prohibited under applicable law and regulation from so delivering. (c) To the extent that the Substitute Option Issuer is prohibited under applicable law or regulation from repurchasing the Substitute Option and/or the Substitute Shares in part or in full, the Substitute Option Issuer shall immediately so notify the Substitute Option Holder and/or the Substitute Share Owner and thereafter deliver or cause to be delivered, from time to time, to the Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the portion of the Substitute Share Repurchase Price, respectively, which it is no longer prohibited from delivering, within five business days after the date on which the Substitute Option Issuer is no longer so prohibited; provided, however, that if the Substitute Option Issuer is at any time after delivery of a notice of repurchase pursuant to subsection (b) of this Section 9 prohibited under applicable law or regulation from delivering to the Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option Repurchase Price and the Substitute Share Repurchase Price, respectively, in full (and the Substitute Option Issuer shall use its best efforts to receive all required regulatory and legal approvals as promptly as practicable in order to accomplish such repurchase), the Substitute Option Holder or Substitute Share Owner may revoke its notice of repurchase of the Substitute Option or the Substitute Shares either in whole or to the extent of the prohibition, whereupon, in the latter case, the Substitute Option Issuer shall promptly (i) deliver to the Substitute Option Holder or Substitute Share Owner, as appropriate, that portion of the Substitute Option Repurchase Price or the Substitute Share Repurchase Price that the Substitute Option Issuer is not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new Substitute Option evidencing the right of the Substitute Option Holder to purchase that number of shares of the Substitute Common Stock obtained by multiplying the number of shares of the Substitute Common Stock for which the surrendered Substitute Option was exercisable at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Substitute Option Repurchase Price less the portion thereof theretofore delivered to the Substitute Option Holder and the denominator of which is the Substitute Option Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the Substitute Option Shares it is then so prohibited from repurchasing. 10. The 90-day period for exercise of certain rights under Sections 2, 6, 7 and 13 shall be extended: (i) to the extent necessary to obtain all regulatory approvals for the exercise of such rights, and for the expiration of all statutory waiting periods; and (ii) to the extent necessary to avoid liability under Section 16(b) of the 1934 Act by reason of such exercise. 11. Issuer hereby represents and warrants to Grantee as follows: (a) Issuer has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Issuer and no other corporate proceedings on the part of Issuer are necessary to B-8 216 authorize this Agreement or to consummate the transactions so contemplated. This Agreement has been duly and validly executed and delivered by Issuer. (b) Issuer has taken all necessary corporate action to authorize and reserve and to permit it to issue, and at all times from the date hereof through the termination of this Agreement in accordance with its terms will have reserved for issuance upon the exercise of the Option, that number of shares of Common Stock equal to the maximum number of shares of Common Stock at any time and from time to time issuable hereunder, and all such shares, upon issuance pursuant hereto, will be duly authorized, validly issued, fully paid, nonassessable, and will be delivered free and clear of all claims, liens, encumbrance and security interests and not subject to any preemptive rights. (c) Issuer has taken all action (including if required redeeming all of the Rights or amending or terminating the Rights Agreement) so that the entering into of this Option Agreement, the acquisition of shares of Common Stock hereunder and the other transactions contemplated hereby do not and will not result in the grant of any rights to any person under the Rights Agreement or enable or require the Rights to be exercised, distributed or triggered. 12. Grantee hereby represents and warrants to Issuer that: (a) Grantee has all requisite corporate power and authority to enter into this Agreement and, subject to any approvals or consents referred to herein, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Grantee. This Agreement has been duly executed and delivered by Grantee. (b) The Option is not being, and any shares of Common Stock or other securities acquired by Grantee upon exercise of the Option will not be, acquired with a view to the public distribution thereof and will not be transferred or otherwise disposed of except in a transaction registered or exempt from registration under the Securities Act. 13. Neither of the parties hereto may assign any of its rights or obligations under this Option Agreement or the Option created hereunder to any other person, without the express written consent of the other party, except that in the event a Subsequent Triggering Event shall have occurred prior to an Exercise Termination Event, Grantee, subject to the express provisions hereof, may assign in whole or in part its rights and obligations hereunder within 90 days following such Subsequent Triggering Event (or such later period as provided in Section 10); provided, however, that until the date 15 days following the date on which the Federal Reserve Board approves an application by Grantee under the BHCA to acquire the shares of Common Stock subject to the Option, Grantee may not assign its rights under the Option except in (i) a widely dispersed public distribution, (ii) a private placement in which no one party acquires the right to purchase in excess of 2% of the voting shares of Issuer, (iii) an assignment to a single party (e.g., a broker or investment banker) for the purpose of conducting a widely dispersed public distribution on Grantee's behalf, or (iv) any other manner approved by the Federal Reserve Board. 14. Each of Grantee and Issuer will use its best efforts to make all filings with, and to obtain consents of, all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement, including without limitation making application to list the shares of Common Stock issuable hereunder on the New York Stock Exchange upon official notice of issuance and applying to the Federal Reserve Board under the BHCA for approval to acquire the shares issuable hereunder, but Grantee shall not be obligated to apply to state banking authorities for approval to acquire the shares of Common Stock issuable hereunder until such time, if ever, as it deems appropriate to do so. 15. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement by either party hereto and that the obligations of the parties hereto shall be enforceable by either party hereto through injunctive or other equitable relief. 16. If any term, provision, covenant or restriction contained in this Agreement is held by a court or a federal or state regulatory agency of competent jurisdiction to be invalid, void or unenforceable, the remainder B-9 217 of the terms, provisions and covenants and restrictions contained in this Agreement shall remain in full force and effect, and shall in no way be affected, impaired or invalidated. If for any reason such court or regulatory agency determines that the Holder is not permitted to acquire, or Issuer is not permitted to repurchase pursuant to Section 7, the full number of shares of Common Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5 hereof), it is the express intention of Issuer to allow the Holder to acquire or to require Issuer to repurchase such lesser number of shares as may be permissible, without any amendment or modification hereof. 17. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by cable, telegram, telecopy or telex, or by registered or certified mail (postage prepaid, return receipt requested) at the respective addresses of the parties set forth in the Merger Agreement. 18. This Agreement shall be governed by and construed in accordance with the laws of the State of Rhode Island, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 19. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 20. Except as otherwise expressly provided herein, each of the parties hereto shall bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants and counsel. 21. Except as otherwise expressly provided herein or in the Merger Agreement, this Agreement contains the entire agreement between the parties with respect to the transactions contemplated hereunder and supersedes all prior arrangements or understandings with respect thereof, written or oral. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, expressed or implied, is intended to confer upon any party, other than the parties hereto, and their respective successors except as assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein. 22. Capitalized terms used in this Agreement and not defined herein shall have the meanings assigned thereto in the Merger Agreement. IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the date first above written. FLEET FINANCIAL GROUP, INC. By: /s/ TERRENCE MURRAY ---------------------------------- SHAWMUT NATIONAL CORPORATION By: /s/ JOEL B. ALVORD ---------------------------------- B-10 218 EXHIBIT C STOCK OPTION AGREEMENT THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO CERTAIN PROVISIONS CONTAINED HEREIN AND TO RESALE RESTRICTIONS UNDER THE SECURITIES ACT OF 1933, AS AMENDED STOCK OPTION AGREEMENT, dated February 20, 1995, between SHAWMUT NATIONAL CORPORATION, a Delaware corporation ("Issuer"), and FLEET FINANCIAL GROUP, INC., a Rhode Island corporation ("Grantee"). W I T N E S S E T H: WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of Merger of even date herewith (the "Merger Agreement"), which agreement has been executed by the parties hereto immediately prior to this Agreement; and WHEREAS, as a condition to Grantee's entering into the Merger Agreement and in consideration therefor, Issuer has agreed to grant Grantee the Option (as hereinafter defined): NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth herein and in the Merger Agreement, the parties hereto agree as follows: 1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option (the "Option") to purchase, subject to the terms hereof, up to 24,195,625 fully paid and nonassessable shares of Issuer's Common Stock, par value $0.01 per share ("Common Stock"), at a price of $24.50 per share (the "Option Price"); provided further that in no event shall the number of shares of Common Stock for which this Option is exercisable exceed 19.9% of the Issuer's issued and outstanding shares of Common Stock. The number of shares of Common Stock that may be received upon the exercise of the Option and the Option Price are subject to adjustment as herein set forth. (b) In the event that any additional shares of Common Stock are issued or otherwise become outstanding after the date of this Agreement (other than pursuant to this Agreement), the number of shares of Common Stock subject to the Option shall be increased so that, after such issuance, it equals 19.9% of the number of shares of Common Stock then issued and outstanding without giving effect to any shares subject or issued pursuant to the Option. Nothing contained in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee to breach any provision of the Merger Agreement. 2. (a) The Holder (as hereinafter defined) may exercise the Option, in whole or part, and from time to time, if, but only if, both an Initial Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as hereinafter defined) shall have occurred prior to the occurrence of an Exercise Termination Event (as hereinafter defined), provided that the Holder shall have sent the written notice of such exercise (as provided in subsection (e) of this Section 2) within 90 days following such Subsequent Triggering Event. Each of the following shall be an Exercise Termination Event: (i) the Effective Time of the Merger; (ii) termination of the Merger Agreement in accordance with the provisions thereof if such termination occurs prior to the occurrence of an Initial Triggering Event except a termination by Grantee pursuant to Section 8.1(d) of the Merger Agreement (unless the breach by Issuer giving rise to such right of termination is non-volitional); or (iii) the passage of twelve months after termination of the Merger Agreement if such termination follows the occurrence of an Initial Triggering Event or is a termination by Grantee pursuant to Section 8.1(d) of the Merger Agreement (unless the breach by Issuer giving rise to such right of termination is non-volitional) (provided that if an Initial Triggering Event continues or occurs beyond such termination and prior to the passage of such twelve-month period, the Exercise Termination Event shall be twelve months from the expiration of the Last Triggering Event but in no event more than 18 months after such termination). The "Last Triggering Event" shall mean the last Initial Triggering Event to expire. The term "Holder" shall mean the holder or holders of the Option. C-1 219 (b) The term "Initial Triggering Event" shall mean any of the following events or transactions occurring after the date hereof: (i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"), without having received Grantee's prior written consent, shall have entered into an agreement to engage in an Acquisition Transaction (as hereinafter defined) with any person (the term "person" for purposes of this Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules and regulations thereunder) other than Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or the Board of Directors of Issuer shall have recommended that the stockholders of Issuer approve or accept any Acquisition Transaction. For purposes of this Agreement, "Acquisition Transaction" shall mean (w) a merger or consolidation, or any similar transaction, involving Issuer or any Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange Commission (the "SEC")) of Issuer, (x) a purchase, lease or other acquisition of all or a substantial portion of the assets of Issuer or any Significant Subsidiary of Issuer, (y) a purchase or other acquisition (including by way of merger, consolidation, share exchange or otherwise) of securities representing 10% or more of the voting power of Issuer or any Significant Subsidiary of Issuer, or (z) any substantially similar transaction; provided, however, that in no event shall any (i) merger, consolidation or similar transaction involving Issuer or any Significant Subsidiary in which the voting securities of Issuer outstanding immediately prior thereto continue to represent (by either remaining outstanding or being converted into the voting securities of the surviving entity of any such transaction) at least 65% of the combined voting power of the voting securities of the Issuer or the surviving entity outstanding immediately after the consummation of such merger, consolidation, or similar transaction, or (ii) any merger, consolidation, purchase or similar transaction involving only the Issuer and one or more of its Subsidiaries or involving only any two or more of such Subsidiaries, be deemed to be an Acquisition Transaction, provided any such transaction is not entered into in violation of the terms of the Merger Agreement; (ii) Issuer or any Issuer Subsidiary, without having received Grantee's prior written consent, shall have authorized, recommended, proposed or publicly announced its intention to authorize, recommend or propose, to engage in an Acquisition Transaction with any person other than Grantee or a Grantee Subsidiary, or the Board of Directors of Issuer shall have publicly withdrawn or modified, or publicly announced its interest to withdraw or modify, in any manner adverse to Grantee, its recommendation that the stockholders of Issuer approve the transactions contemplated by the Merger Agreement; (iii) Any person other than Grantee, any Grantee Subsidiary or any Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of its business shall have acquired beneficial ownership or the right to acquire beneficial ownership of 10% or more of the outstanding shares of Common Stock (the term "beneficial ownership" for purposes of this Option Agreement having the meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules and regulations thereunder); (iv) Any person other than Grantee or any Grantee Subsidiary shall have made a bona fide proposal to Issuer or its stockholders by public announcement or written communication that is or becomes the subject of public disclosure to engage in an Acquisition Transaction; (v) After an overture is made by a third party to Issuer or its stockholders to engage in an Acquisition Transaction, Issuer shall have breached any covenant or obligation contained in the Merger Agreement and such breach (x) would entitle Grantee to terminate the Merger Agreement and (y) shall not have been cured prior to the Notice Date (as defined below); or (vi) Any person other than Grantee or any Grantee Subsidiary, other than in connection with a transaction to which Grantee has given its prior written consent, shall have filed an application or notice with the Federal Reserve Board, or other federal or state bank regulatory authority, which application or notice has been accepted for processing, for approval to engage in an Acquisition Transaction. C-2 220 (c) The term "Subsequent Triggering Event" shall mean either of the following events or transactions occurring after the date hereof: (i) The acquisition by any person of beneficial ownership of 20% or more of the then outstanding Common Stock; or (ii) The occurrence of the Initial Triggering Event described in clause (i) of subsection (b) of this Section 2, except that the percentage referred to in clause (y) shall be 20%. (d) Issuer shall notify Grantee promptly in writing of the occurrence of any Initial Triggering Event or Subsequent Triggering Event (together, a "Triggering Event"), it being understood that the giving of such notice by Issuer shall not be a condition to the right of the Holder to exercise the Option. (e) In the event the Holder is entitled to and wishes to exercise the Option, it shall send to Issuer a written notice (the date of which being herein referred to as the "Notice Date") specifying (i) the total number of shares it will purchase pursuant to such exercise and (ii) a place and date not earlier than three business days nor later than 60 business days from the Notice Date for the closing of such purchase (the "Closing Date"); provided that if prior notification to or approval of the Federal Reserve Board or any other regulatory agency is required in connection with such purchase, the Holder shall promptly file the required notice or application for approval and shall expeditiously process the same and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which any required notification periods have expired or been terminated or such approvals have been obtained and any requisite waiting period or periods shall have passed. Any exercise of the Option shall be deemed to occur on the Notice Date relating thereto. (f) At the closing referred to in subsection (e) of this Section 2, the Holder shall pay to Issuer the aggregate purchase price for the shares of Common Stock purchased pursuant to the exercise of the Option in immediately available funds by wire transfer to a bank account designated by Issuer, provided that failure or refusal of Issuer to designate such a bank account shall not preclude the Holder from exercising the Option. (g) At such closing, simultaneously with the delivery of immediately available funds as provided in subsection (f) of this Section 2, Issuer shall deliver to the Holder a certificate or certificates representing the number of shares of Common Stock purchased by the Holder and, if the Option should be exercised in part only, a new Option evidencing the rights of the Holder thereof to purchase the balance of the shares purchasable hereunder, and the Holder shall deliver to Issuer a copy of this Agreement and a letter agreeing that the Holder will not offer to sell or otherwise dispose of such shares in violation of applicable law or the provisions of this Agreement. (h) Certificates for Common Stock delivered at a closing hereunder may be endorsed with a restrictive legend that shall read substantially as follows: "The transfer of the shares represented by this certificate is subject to certain provisions of an agreement between the registered holder hereof and Issuer and to resale restrictions arising under the Securities Act of 1933, as amended. A copy of such agreement is on file at the principal office of Issuer and will be provided to the holder hereof without charge upon receipt by Issuer of a written request therefor." It is understood and agreed that: (i) the reference to the resale restrictions of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend shall be removed by delivery of substitute certificate(s) without such reference if the Holder shall have delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel, in form and substance reasonably satisfactory to Issuer, to the effect that such legend is not required for purposes of the 1933 Act; (ii) the reference to the provisions to this Agreement in the above legend shall be removed by delivery of substitute certificate(s) without such reference if the shares have been sold or transferred in compliance with the provisions of this Agreement and under circumstances that do not require the retention of such reference; and (iii) the legend shall be removed in its entirety if the conditions in the preceding clauses (i) and (ii) are both satisfied. In addition, such certificates shall bear any other legend as may be required by law. C-3 221 (i) Upon the giving by the Holder to Issuer of the written notice of exercise of the Option provided for under subsection (e) of this Section 2 and the tender of the applicable purchase price in immediately available funds, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of Issuer shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. Issuer shall pay all expenses, and any and all United States federal, state and local taxes and other charges that may be payable in connection with the preparation, issue and delivery of stock certificates under this Section 2 in the name of the Holder or its assignee, transferee or designee. 3. Issuer agrees: (i) that it shall at all times maintain, free from preemptive rights, sufficient authorized but unissued or treasury shares of Common Stock so that the Option may be exercised without additional authorization of Common Stock after giving effect to all other options, warrants, convertible securities and other rights to purchase Common Stock; (ii) that it will not, by charter amendment or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by Issuer; (iii) promptly to take all action as may from time to time be required (including (x) complying with all premerger notification, reporting and waiting period requirements specified in 15 U.S.C. sec.18a and regulations promulgated thereunder and (y) in the event, under the Bank Holding Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as amended, or any state banking law, prior approval of or notice to the Federal Reserve Board or to any state regulatory authority is necessary before the Option may be exercised, cooperating fully with the Holder in preparing such applications or notices and providing such information to the Federal Reserve Board or such state regulatory authority as they may require) in order to permit the Holder to exercise the Option and Issuer duly and effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly to take all action provided herein to protect the rights of the Holder against dilution. 4. This Agreement (and the Option granted hereby) are exchangeable, without expense, at the option of the Holder, upon presentation and surrender of this Agreement at the principal office of Issuer, for other Agreements providing for Options of different denominations entitling the holder thereof to purchase, on the same terms and subject to the same conditions as are set forth herein, in the aggregate the same number of shares of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein include any Stock Option Agreements and related Options for which this Agreement (and the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Agreement, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like tenor and date. Any such new Agreement executed and delivered shall constitute an additional contractual obligation on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed or mutilated shall at any time be enforceable by anyone. 5. In addition to the adjustment in the number of shares of Common Stock that are purchasable upon exercise of the Option pursuant to Section 1 of this Agreement, the number of shares of Common Stock purchasable upon the exercise of the Option and the Option Price shall be subject to adjustment from time to time as provided in this Section 5. In the event of any change in, or distributions in respect of, the Common Stock by reason of stock dividends, split-ups, mergers, recapitalizations, combinations, subdivisions, conversions, exchanges of shares, distributions on or in respect of the Common Stock that would be prohibited under the terms of the Merger Agreement, or the like, the type and number of shares of Common Stock purchasable upon exercise hereof and the Option Price shall be appropriately adjusted in such manner as shall fully preserve the economic benefits provided hereunder and proper provision shall be made in any agreement governing any such transaction to provide for such proper adjustment and the full satisfaction of the Issuer's obligations hereunder. 6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to an Exercise Termination Event, Issuer shall, at the request of Grantee delivered within 90 days of such Subsequent Triggering Event (whether on its own behalf or on behalf of any subsequent holder of this Option (or part thereof) or any of the shares of Common Stock issued pursuant hereto), promptly prepare, file and keep current a shelf registration C-4 222 statement under the 1933 Act covering this Option and any shares issued and issuable pursuant to this Option and shall use its reasonable best efforts to cause such registration statement to become effective and remain current in order to permit the sale or other disposition of this Option and any shares of Common Stock issued upon total or partial exercise of this Option ("Option Shares") in accordance with any plan of disposition requested by Grantee. Issuer will use its reasonable best efforts to cause such registration statement first to become effective and then to remain effective for such period not in excess of 180 days from the day such registration statement first becomes effective or such shorter time as may be reasonably necessary to effect such sales or other dispositions. Grantee shall have the right to demand two such registrations. The foregoing notwithstanding, if, at the time of any request by Grantee for registration of the Option or Option Shares as provided above, Issuer is in registration with respect to an underwritten public offering of shares of Common Stock, and if in the good faith judgment of the managing underwriter or managing underwriters, or, if none, the sole underwriter or underwriters, of such offering the inclusion of the Holder's Option or Option Shares would interfere with the successful marketing of the shares of Common Stock offered by Issuer, the number of Option Shares otherwise to be covered in the registration statement contemplated hereby may be reduced; and provided, however, that after any such required reduction the number of Option Shares to be included in such offering for the account of the Holder shall constitute at least 25% of the total number of shares to be sold by the Holder and Issuer in the aggregate; and provided further, however, that if such reduction occurs, then the Issuer shall file a registration statement for the balance as promptly as practical and no reduction shall thereafter occur. Each such Holder shall provide all information reasonably requested by Issuer for inclusion in any registration statement to be filed hereunder. If requested by any such Holder in connection with such registration, Issuer shall become a party to any underwriting agreement relating to the sale of such shares, but only to the extent of obligating itself in respect of representations, warranties, indemnities and other agreements customarily included in such underwriting agreements for the Issuer. Upon receiving any request under this Section 6 from any Holder, Issuer agrees to send a copy thereof to any other person known to Issuer to be entitled to registration rights under this Section 6, in each case by promptly mailing the same, postage prepaid, to the address of record of the persons entitled to receive such copies. Notwithstanding anything to the contrary contained herein, in no event shall Issuer be obligated to effect more than two registrations pursuant to this Section 6 by reason of the fact that there shall be more than one Grantee as a result of any assignment or division of this Agreement. 7. (a) Immediately prior to the occurrence of a Repurchase Event (as defined below), (i) following a request of the Holder, delivered prior to an Exercise Termination Event, Issuer (or any successor thereto) shall repurchase the Option from the Holder at a price (the "Option Repurchase Price") equal to the amount by which (A) the market/offer price (as defined below) exceeds (B) the Option Price, multiplied by the number of shares for which this Option may then be exercised and (ii) at the request of the owner of Option Shares from time to time (the "Owner"), delivered within 90 days of such occurrence (or such later period as provided in Section 10), Issuer shall repurchase such number of the Option Shares from the Owner as the Owner shall designate at a price (the "Option Share Repurchase Price") equal to the market/offer price multiplied by the number of Option Shares so designated. The term "market/offer price" shall mean the highest of (i) the price per share of Common Stock at which a tender offer or exchange offer therefor has been made, (ii) the price per share of Common Stock to be paid by any third party pursuant to an agreement with Issuer, (iii) the highest closing price for shares of Common Stock within the six-month period immediately preceding the date the Holder gives notice of the required repurchase of this Option or the Owner gives notice of the required repurchase of Option Shares, as the case may be, or (iv) in the event of a sale of all or a substantial portion of Issuer's assets, the sum of the price paid in such sale for such assets and the current market value of the remaining assets of Issuer as determined by a nationally recognized investment banking firm selected by the Holder or the Owner, as the case may be, divided by the number of shares of Common Stock of Issuer outstanding at the time of such sale. In determining the market/offer price, the value of consideration other than cash shall be determined by a nationally recognized investment banking firm selected by the Holder or Owner, as the case may be, and reasonably acceptable to the Issuer. (b) The Holder and the Owner, as the case may be, may exercise its right to require Issuer to repurchase the Option and any Option Shares pursuant to this Section 7 by surrendering for such purpose to Issuer, at its principal office, a copy of this Agreement or certificates for Option Shares, as applicable, accompanied by a C-5 223 written notice or notices stating that the Holder or the Owner, as the case may be, elects to require Issuer to repurchase this Option and/or the Option Shares in accordance with the provisions of this Section 7. Within the latter to occur of (x) five business days after the surrender of the Option and/or certificates representing Option Shares and the receipt of such notice or notices relating thereto and (y) the time that is immediately prior to the occurrence of a Repurchase Event, Issuer shall deliver or cause to be delivered to the Holder the Option Repurchase Price and/or to the Owner the Option Share Repurchase Price therefor or the portion thereof that Issuer is not then prohibited under applicable law and regulation from so delivering. (c) To the extent that Issuer is prohibited under applicable law or regulation from repurchasing the Option and/or the Option Shares in full, Issuer shall immediately so notify the Holder and/or the Owner and thereafter deliver or cause to be delivered, from time to time, to the Holder and/or the Owner, as appropriate, the portion of the Option Repurchase Price and the Option Share Repurchase Price, respectively, that it is no longer prohibited from delivering, within five business days after the date on which Issuer is no longer so prohibited; provided, however, that if Issuer at any time after delivery of a notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited under applicable law or regulation from delivering to the Holder and/or the Owner, as appropriate, the Option Repurchase Price and the Option Share Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its best efforts to obtain all required regulatory and legal approvals and to file any required notices as promptly as practicable in order to accomplish such repurchase), the Holder or Owner may revoke its notice of repurchase of the Option or the Option Shares either in whole or to the extent of the prohibition, whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder and/or the Owner, as appropriate, that portion of the Option Repurchase Price or the Option Share Repurchase Price that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the Holder, a new Stock Option Agreement evidencing the right of the Holder to purchase that number of shares of Common Stock obtained by multiplying the number of shares of Common Stock for which the surrendered Stock Option Agreement was exercisable at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Option Repurchase Price less the portion thereof theretofore delivered to the Holder and the denominator of which is the Option Repurchase Price, or (B) to the Owner, a certificate for the Option Shares it is then so prohibited from repurchasing. (d) For purposes of this Section 7, a Repurchase Event shall be deemed to have occurred (i) upon the consummation of any merger, consolidation or similar transaction involving Issuer or any purchase, lease or other acquisition of all or a substantial portion of the assets of Issuer, other than any such transaction which would not constitute an Acquisition Transaction pursuant to the proviso to Section 2(b)(i) hereof or (ii) upon the acquisition by any person of beneficial ownership of 50% or more of the then outstanding shares of Common Stock, provided that no such event shall constitute a Repurchase Event unless a Subsequent Triggering Event shall have occurred prior to an Exercise Termination Event. The parties hereto agree that Issuer's obligations to repurchase the Option or Option Shares under this Section 7 shall not terminate upon the occurrence of an Exercise Termination Event unless no Subsequent Triggering Event shall have occurred prior to the occurrence of an Exercise Termination Event. 8. (a) In the event that prior to an Exercise Termination Event, Issuer shall enter into an agreement (i) to consolidate with or merge into any person, other than Grantee or one of its Subsidiaries, and shall not be the continuing or surviving corporation of such consolidation or merger, (ii) to permit any person, other than Grantee or one of its Subsidiaries, to merge into Issuer and Issuer shall be the continuing or surviving corporation, but, in connection with such merger, the then outstanding shares of Common Stock shall be changed into or exchanged for stock or other securities of any other person or cash or any other property or the then outstanding shares of Common Stock shall after such merger represent less than 50% of the outstanding voting shares and voting share equivalents of the merged company, or (iii) to sell or otherwise transfer all or substantially all of its assets to any person, other than Grantee or one of its Subsidiaries, then, and in each such case, the agreement governing such transaction shall make proper provision so that the Option shall, upon the consummation of any such transaction and upon the terms and conditions set forth herein, be converted into, or exchanged for, an option (the "Substitute Option"), at the election of the Holder, of either (x) the Acquiring Corporation (as hereinafter defined) or (y) any person that controls the Acquiring Corporation. C-6 224 (b) The following terms have the meanings indicated: (1) "Acquiring Corporation" shall mean (i) the continuing or surviving corporation of a consolidation or merger with Issuer (if other than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or surviving person, and (iii) the transferee of all or substantially all of Issuer's assets. (2) "Substitute Common Stock" shall mean the common stock issued by the issuer of the Substitute Option upon exercise of the Substitute Option. (3) "Assigned Value" shall mean the market/offer price, as defined in Section 7. (4) "Average Price" shall mean the average closing price of a share of the Substitute Common Stock for the one year immediately preceding the consolidation, merger or sale in question, but in no event higher than the closing price of the shares of Substitute Common Stock on the day preceding such consolidation, merger or sale; provided that if Issuer is the issuer of the Substitute Option, the Average Price shall be computed with respect to a share of common stock issued by the person merging into Issuer or by any company which controls or is controlled by such person, as the Holder may elect. (c) The Substitute Option shall have the same terms as the Option, provided, that if the terms of the Substitute Option cannot, for legal reasons, be the same as the Option, such terms shall be as similar as possible and in no event less advantageous to the Holder. The issuer of the Substitute Option shall also enter into an agreement with the then Holder or Holders of the Substitute Option in substantially the same form as this Agreement, which shall be applicable to the Substitute Option. (d) The Substitute Option shall be exercisable for such number of shares of Substitute Common Stock as is equal to the Assigned Value multiplied by the number of shares of Common Stock for which the Option is then exercisable, divided by the Average Price. The exercise price of the Substitute Option per share of Substitute Common Stock shall then be equal to the Option Price multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock for which the Option is then exercisable and the denominator of which shall be the number of shares of Substitute Common Stock for which the Substitute Option is exercisable. (e) In no event, pursuant to any of the foregoing paragraphs, shall the Substitute Option be exercisable for more than 19.9% of the shares of Substitute Common Stock outstanding prior to exercise of the Substitute Option. In the event that the Substitute Option would be exercisable for more than 19.9% of the shares of Substitute Common Stock outstanding prior to exercise but for this clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer") shall make a cash payment to Holder equal to the excess of (i) the value of the Substitute Option without giving effect to the limitation in this clause (e) over (ii) the value of the Substitute Option after giving effect to the limitation in this clause (e). This difference in value shall be determined by a nationally recognized investment banking firm selected by the Holder or the Owner, as the case may be, and reasonably acceptable to the Acquiring Corporation. (f) Issuer shall not enter into any transaction described in subsection (a) of this Section 8 unless the Acquiring Corporation and any person that controls the Acquiring Corporation assume in writing all the obligations of Issuer hereunder. 9. (a) At the request of the holder of the Substitute Option (the "Substitute Option Holder"), the issuer of the Substitute Option (the "Substitute Option Issuer") shall repurchase the Substitute Option from the Substitute Option Holder at a price (the "Substitute Option Repurchase Price") equal to (x) the amount by which (i) the Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by the number of shares of Substitute Common Stock for which the Substitute Option may then be exercised plus (y) Grantee's Out-of-Pocket Expenses (to the extent not previously reimbursed), and at the request of the owner (the "Substitute Share Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall repurchase the Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to (x) the Highest Closing Price multiplied by the number of Substitute Shares so designated plus (y) Grantee's Out-of-Pocket Expenses (to the extent not previously reimbursed). The term "Highest Closing Price" shall mean the highest closing price for shares of Substitute C-7 225 Common Stock within the six-month period immediately preceding the date the Substitute Option Holder gives notice of the required repurchase of the Substitute Option or the Substitute Share Owner gives notice of the required repurchase of the Substitute Shares, as applicable. (b) The Substitute Option Holder and the Substitute Share Owner, as the case may be, may exercise its respective right to require the Substitute Option Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to this Section 9 by surrendering for such purpose to the Substitute Option Issuer, at its principal office, the agreement for such Substitute Option (or, in the absence of such an agreement, a copy of this Agreement) and certificates for Substitute Shares accompanied by a written notice or notices stating that the Substitute Option Holder or the Substitute Share Owner, as the case may be, elects to require the Substitute Option Issuer to repurchase the Substitute Option and/or the Substitute Shares in accordance with the provisions of this Section 9. As promptly as practicable, and in any event within five business days after the surrender of the Substitute Option and/or certificates representing Substitute Shares and the receipt of such notice or notices relating thereto, the Substitute Option Issuer shall deliver or cause to be delivered to the Substitute Option Holder the Substitute Option Repurchase Price and/or to the Substitute Share Owner the Substitute Share Repurchase Price therefor or the portion thereof which the Substitute Option Issuer is not then prohibited under applicable law and regulation from so delivering. (c) To the extent that the Substitute Option Issuer is prohibited under applicable law or regulation from repurchasing the Substitute Option and/or the Substitute Shares in part or in full, the Substitute Option Issuer shall immediately so notify the Substitute Option Holder and/or the Substitute Share Owner and thereafter deliver or cause to be delivered, from time to time, to the Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the portion of the Substitute Share Repurchase Price, respectively, which it is no longer prohibited from delivering, within five business days after the date on which the Substitute Option Issuer is no longer so prohibited; provided, however, that if the Substitute Option Issuer is at any time after delivery of a notice of repurchase pursuant to subsection (b) of this Section 9 prohibited under applicable law or regulation from delivering to the Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option Repurchase Price and the Substitute Share Repurchase Price, respectively, in full (and the Substitute Option Issuer shall use its best efforts to receive all required regulatory and legal approvals as promptly as practicable in order to accomplish such repurchase), the Substitute Option Holder or Substitute Share Owner may revoke its notice of repurchase of the Substitute Option or the Substitute Shares either in whole or to the extent of the prohibition, whereupon, in the latter case, the Substitute Option Issuer shall promptly (i) deliver to the Substitute Option Holder or Substitute Share Owner, as appropriate, that portion of the Substitute Option Repurchase Price or the Substitute Share Repurchase Price that the Substitute Option Issuer is not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new Substitute Option evidencing the right of the Substitute Option Holder to purchase that number of shares of the Substitute Common Stock obtained by multiplying the number of shares of the Substitute Common Stock for which the surrendered Substitute Option was exercisable at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Substitute Option Repurchase Price less the portion thereof theretofore delivered to the Substitute Option Holder and the denominator of which is the Substitute Option Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the Substitute Option Shares it is then so prohibited from repurchasing. 10. The 90-day period for exercise of certain rights under Sections 2, 6, 7 and 13 shall be extended: (i) to the extent necessary to obtain all regulatory approvals for the exercise of such rights, and for the expiration of all statutory waiting periods; and (ii) to the extent necessary to avoid liability under Section 16(b) of the 1934 Act by reason of such exercise. 11. Issuer hereby represents and warrants to Grantee as follows: (a) Issuer has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Issuer and no other corporate proceedings on the part of Issuer are necessary to C-8 226 authorize this Agreement or to consummate the transactions so contemplated. This Agreement has been duly and validly executed and delivered by Issuer. (b) Issuer has taken all necessary corporate action to authorize and reserve and to permit it to issue, and at all times from the date hereof through the termination of this Agreement in accordance with its terms will have reserved for issuance upon the exercise of the Option, that number of shares of Common Stock equal to the maximum number of shares of Common Stock at any time and from time to time issuable hereunder, and all such shares, upon issuance pursuant hereto, will be duly authorized, validly issued, fully paid, nonassessable, and will be delivered free and clear of all claims, liens, encumbrance and security interests and not subject to any preemptive rights. (c) Issuer has taken all action (including if required redeeming all of the Rights or amending or terminating the Rights Agreement) so that the entering into of this Option Agreement, the acquisition of shares of Common Stock hereunder and the other transactions contemplated hereby do not and will not result in the grant of any rights to any person under the Rights Agreement or enable or require the Rights to be exercised, distributed or triggered. 12. Grantee hereby represents and warrants to Issuer that: (a) Grantee has all requisite corporate power and authority to enter into this Agreement and, subject to any approvals or consents referred to herein, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Grantee. This Agreement has been duly executed and delivered by Grantee. (b) The Option is not being, and any shares of Common Stock or other securities acquired by Grantee upon exercise of the Option will not be, acquired with a view to the public distribution thereof and will not be transferred or otherwise disposed of except in a transaction registered or exempt from registration under the Securities Act. 13. Neither of the parties hereto may assign any of its rights or obligations under this Option Agreement or the Option created hereunder to any other person, without the express written consent of the other party, except that in the event a Subsequent Triggering Event shall have occurred prior to an Exercise Termination Event, Grantee, subject to the express provisions hereof, may assign in whole or in part its rights and obligations hereunder within 90 days following such Subsequent Triggering Event (or such later period as provided in Section 10); provided, however, that until the date 15 days following the date on which the Federal Reserve Board approves an application by Grantee under the BHCA to acquire the shares of Common Stock subject to the Option, Grantee may not assign its rights under the Option except in (i) a widely dispersed public distribution, (ii) a private placement in which no one party acquires the right to purchase in excess of 2% of the voting shares of Issuer, (iii) an assignment to a single party (e.g., a broker or investment banker) for the purpose of conducting a widely dispersed public distribution on Grantee's behalf, or (iv) any other manner approved by the Federal Reserve Board. 14. Each of Grantee and Issuer will use its best efforts to make all filings with, and to obtain consents of, all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement, including without limitation making application to list the shares of Common Stock issuable hereunder on the New York Stock Exchange upon official notice of issuance and applying to the Federal Reserve Board under the BHCA for approval to acquire the shares issuable hereunder, but Grantee shall not be obligated to apply to state banking authorities for approval to acquire the shares of Common Stock issuable hereunder until such time, if ever, as it deems appropriate to do so. 15. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement by either party hereto and that the obligations of the parties hereto shall be enforceable by either party hereto through injunctive or other equitable relief. 16. If any term, provision, covenant or restriction contained in this Agreement is held by a court or a federal or state regulatory agency of competent jurisdiction to be invalid, void or unenforceable, the remainder C-9 227 of the terms, provisions and covenants and restrictions contained in this Agreement shall remain in full force and effect, and shall in no way be affected, impaired or invalidated. If for any reason such court or regulatory agency determines that the Holder is not permitted to acquire, or Issuer is not permitted to repurchase pursuant to Section 7, the full number of shares of Common Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5 hereof), it is the express intention of Issuer to allow the Holder to acquire or to require Issuer to repurchase such lesser number of shares as may be permissible, without any amendment or modification hereof. 17. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by cable, telegram, telecopy or telex, or by registered or certified mail (postage prepaid, return receipt requested) at the respective addresses of the parties set forth in the Merger Agreement. 18. This Agreement shall be governed by and construed in accordance with the laws of the State of Rhode Island, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 19. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 20. Except as otherwise expressly provided herein, each of the parties hereto shall bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants and counsel. 21. Except as otherwise expressly provided herein or in the Merger Agreement, this Agreement contains the entire agreement between the parties with respect to the transactions contemplated hereunder and supersedes all prior arrangements or understandings with respect thereof, written or oral. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, expressed or implied, is intended to confer upon any party, other than the parties hereto, and their respective successors except as assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein. 22. Capitalized terms used in this Agreement and not defined herein shall have the meanings assigned thereto in the Merger Agreement. IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the date first above written. SHAWMUT NATIONAL CORPORATION By: /s/ JOEL B. ALVORD ---------------------------------- FLEET FINANCIAL GROUP, INC. By: /s/ TERRENCE MURRAY ---------------------------------- C-10 228 SALOMON BROTHERS INC EXHIBIT D SEVEN WORLD TRADE CENTER NEW YORK, NEW YORK 10048 212-783-7000 - ------------------------- --------------------- SALOMON BROTHERS -------------------- May 8, 1995 Board of Directors Fleet Financial Group, Inc. 50 Kennedy Plaza Providence, Rhode Island 02903 Members of the Board: You have requested our opinion as investment bankers as to the fairness, from a financial point of view, to the holders of shares of common stock, par value $1.00 per share (the "Fleet Common Stock"), of Fleet Financial Group, Inc. (the "Company") of the exchange ratio (the "Exchange Ratio") in the proposed merger (the "Merger") of Shawmut National Corporation ("Shawmut") with and into the Company pursuant to the Agreement and Plan of Merger dated as of February 20, 1995 (the "Agreement") between the Company and Shawmut. Pursuant to the Agreement, each outstanding share of common stock, par value $.01 per share, of Shawmut (the "Shawmut Common Stock") will be converted into the right to receive 0.8922 shares of Fleet Common Stock. We understand that the Merger is conditioned upon, among other things, receipt of a letter from the Company's independent auditors to the effect that the Merger will qualify for pooling-of-interests accounting treatment and an opinion of counsel to the effect that the Merger constitutes a tax-free transaction under the Internal Revenue Code. Pursuant to the Agreement, the Company and Shawmut entered into separate Stock Option Agreements (the "Stock Option Agreements") under which Shawmut has granted to the Company an option to purchase up to 19.9% of the outstanding shares of Shawmut Common Stock at the time of exercise at an exercise price of $24.50 per share and the Company has granted to Shawmut an option to purchase up to 19.9% of the outstanding shares of Fleet Common Stock at an exercise price of $33.625 per share. The terms of the Merger are more fully set forth in the Agreement. As you are aware, Salomon Brothers Inc from time to time has provided investment banking and financial advisory services to the Company and its subsidiaries, including Fleet Mortgage Group, for which we have received customary compensation. Such services have included acting as a managing underwriter of debt and equity securities, as an agent for medium term notes and as a financial advisor in connection with various mergers and acquisitions. In addition, Salomon Brothers Inc from time to time has provided investment banking and financial advisory services to Shawmut and its subsidiaries for which we have received customary compensation. In addition, in the ordinary course of our business, we actively trade the debt and equity securities of the Company and Shawmut for our own account and the accounts of our customers, and accordingly at any time may hold a long or short position in such securities. In arriving at our opinion, we have reviewed and analyzed, among other things, the following: (i) the Agreement and the Stock Option Agreements; (ii) Annual Reports to Shareholders and Annual Reports on Form 10-K of the Company and Shawmut for each year in the three-year period ended December 31, 1994; (iii) Current Reports on Form 8-K filed by the Company on January 18, 1995, January 27, 1995, February 20, 1995 and February 21, 1995 and Current Reports on Form 8-K filed by Shawmut on January 6, 1995, January 11, 1995, January 17, 1995, January 26, 1995, February 7, 1995, February 20, 1995 and February 21, 1995; (iv) the Prospectus Supplement of the Company dated April 24, 1995 with respect to $250 million principal amount of 7 1/8% Series Notes Due May 1, 2000; (v) the Offering Circular Supplement of Shawmut Bank Connecticut, National Association dated February 7, 1995 with respect to a $250 million subordinated bank note issuance; (vi) the Prospectus Supplement of Shawmut National Corporation dated January 20, 1995 with respect to a 5,000,000 depositary share issuance (each representing a one-tenth interest in a share of D-1 229 cumulative preferred stock); (vii) the Joint Proxy Statement-Prospectus of the Company and Shawmut dated the date hereof; (viii) consolidated financial statements for the Company and for Shawmut as at and for the quarter ended March 31, 1995; (ix) certain other publicly available financial and other information concerning the Company and Shawmut and the trading markets for the publicly traded securities of the Company and Shawmut; (x) certain other internal information, including pro forma financial statements prepared by the management of each of the Company and Shawmut giving effect to recently completed and pending acquisitions, and projections relating to the Company and Shawmut prepared by the management of the Company, all furnished to us for purposes of our analysis; and (xi) certain other publicly available information concerning other banks and bank holding companies, the trading markets for their securities and the nature and terms of certain other merger and acquisition transactions we believe relevant to our inquiry. We have also met with certain officers and representatives of the Company and Shawmut to discuss the foregoing as well as other matters we believe relevant to our inquiry. In conducting our review and in arriving at our opinion, we have relied upon and assumed the accuracy and completeness of the financial and other information provided to us or publicly available and have not assumed any responsibility for independently verifying the same. We have relied upon the management of the Company and of Shawmut as to the reasonableness of the assumptions underlying the pro forma financial statements giving effect to recently completed and pending acquisitions provided to us, the appropriateness of the adjustments made to give effect to such assumptions in such pro forma financial statements and the proper allocation of such adjustments to the respective historical financial statements. We have relied upon the management of the Company as to the reasonableness and achievability of the projections (and the assumptions and bases therefor) for each of the Company and Shawmut provided to us by management of the Company, and we have assumed that such projections reflect the best currently available estimates and judgments of such management and that such projections will be realized in the amounts and in the time periods estimated by such management. We have also assumed, without independent verification, that the aggregate allowances for loan losses for the Company and Shawmut were adequate to cover such losses. We have not made or obtained any evaluations or appraisals of the property or assets of the Company, nor have we examined any individual loan credit files of the Company or Shawmut. It is understood that we were retained by the Board of Directors of the Company and that the Board of Directors has not looked to Salomon Brothers Inc to independently verify the accuracy and completeness of the financial and other information provided to us by the Company or Shawmut or publicly available, including the pro forma financial statements or the projections provided to us by the Company or Shawmut, or to obtain any evaluations or appraisals of the property or assets of the Company or Shawmut. Our opinion as expressed herein is limited to the fairness, from a financial point of view, to the holders of shares of Common Stock of the Exchange Ratio and does not address the Company's underlying business decision to proceed with the Merger. We have considered such financial and other factors as we have deemed appropriate under the circumstances, including among others the following: (i) the historical and current financial position and results of operations of the Company and Shawmut, including interest income, interest expense, net interest income, net interest margin, non-interest income, non-interest expense, earnings, dividends, internal capital generation, book value, intangible assets, return on assets, return on shareholders' equity, capitalization, the amount and type of non-performing assets, loan losses and the reserve for loan losses, all as set forth in the financial statements for the Company and Shawmut; (ii) the assets and liabilities of the Company and Shawmut, including the loan and investment portfolios, deposits, other liabilities, historical and current liability sources, costs and liquidity; (iii) certain pro forma combined financial information for the Company and Shawmut; (iv) historical and current market data for the Company and Shawmut; and (v) the nature and terms of certain other merger and acquisition transactions involving banks and bank holding companies. We have also taken into account our assessment of general economic, market and financial conditions and our experience in similar transactions, as well as our experience in securities valuation and our knowledge of the banking industry generally. Our opinion is necessarily based upon conditions as they exist and can be evaluated on the date hereof and the information made available to us through the date hereof. We understand that the Board of Directors D-2 230 has reached an independent business determination that the Merger is in the best interest of the Company. This letter does not constitute a recommendation to the Board of Directors or to any shareholder of the Company with respect to the Merger. Based upon and subject to the foregoing, it is our opinion as investment bankers that, as of the date hereof, the Exchange Ratio is fair, from a financial point of view, to the holders of shares of Common Stock. Very truly yours, D-3 231 EXHIBIT E MORGAN STANLEY MORGAN STANLEY & CO. INCORPORATED 1251 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10020 (212) 703-4000 May , 1995 Board of Directors Shawmut National Corporation 777 Main Street Hartford, CT 06115 Members of the Board: We understand that Shawmut National Corporation ("Shawmut" or the "Company") and Fleet Financial Group, Inc. ("Fleet") propose to enter into an Agreement and Plan of Merger, dated as of February 20, 1995 (the "Merger Agreement"), which provides, among other things, for the merger (the "Merger") of Shawmut with and into Fleet. Pursuant to the Merger, each outstanding share of common stock, par value $0.01 per share, of Shawmut, other than shares held directly or indirectly by Fleet will be converted into 0.8922 shares (the "Exchange Ratio") of common stock, par value $1.00 per share, of Fleet (and cash in lieu of fractional shares). The terms and conditions of the Merger are more fully set forth in the Merger Agreement. You have asked for our opinion as to whether the Exchange Ratio pursuant to the Merger Agreement is fair from a financial point of view to Shawmut's common stockholders (other than Fleet and its affiliates). For purposes of the opinion set forth herein, we have: (i) analyzed certain publicly available financial statements and other information of Shawmut and Fleet; (ii) analyzed certain internal financial statements and other financial and operating data concerning Shawmut and Fleet prepared by the managements of Shawmut and Fleet, respectively; (iii) analyzed certain financial projections prepared by the managements of Shawmut and Fleet; (iv) discussed the past and current operations and financial condition and the prospects of Shawmut and Fleet with senior executives of the two companies, respectively; (v) reviewed the reported prices and trading activity for the common stock of Shawmut and Fleet; (vi) compared the financial performance of Shawmut and Fleet and the prices and trading activity of the common stock of Shawmut and Fleet with that of certain other comparable bank holding companies and their securities; (vii) discussed the results of regulatory examinations of Shawmut and Fleet with senior management of the respective companies; (viii) reviewed and discussed with senior management of Shawmut and Fleet the strategic objectives of the Merger and the synergies and other benefits of the Merger for the combined company; (ix) analyzed certain pro forma financial projections for the combined company prepared by Shawmut and Fleet; (x) reviewed the amount and timing of the cost savings projected by Shawmut and Fleet for the combined company;
232 (xi) reviewed the financial terms, to the extent publicly available, of certain comparable bank holding company merger transactions; (xii) participated in discussions and negotiations among representatives of Shawmut and Fleet and their financial and legal advisors; (xiii) reviewed the Merger Agreement, the Stock Option Agreements between Shawmut and Fleet and certain related documents; and (xiv) performed such other analyses as we have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy and completeness of the information reviewed by us for purposes of this opinion. With respect to the financial projections, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the future financial performance of Shawmut and Fleet. We have not made any independent valuation or appraisal of the assets or liabilities of Shawmut and Fleet, nor have we been furnished with any such appraisals and we have not examined any loan files of Shawmut and Fleet. Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. In arriving at our opinion, we were not authorized to solicit, and did not solicit, interest from any party with respect to the acquisition of Shawmut or any of its assets. We have acted as financial advisor to the Board of Directors of Shawmut in connection with this transaction and will receive a fee for our services. In the past, Morgan Stanley & Co. Incorporated and its affiliates have provided financial advisory and financing services to Shawmut and have received fees for the rendering of these services. It is understood that this letter is for the information of the Board of Directors of Shawmut only and may not be used for any other purpose without our prior written consent. Based on and subject to the foregoing, we are of the opinion on the date hereof that the Exchange Ratio pursuant to the Merger Agreement is fair from financial point of view to Shawmut's common stockholders (other than Fleet and its affiliates). Very truly yours, MORGAN STANLEY & CO. INCORPORATED By:..................................... Donald A. Moore, Jr. Managing Director 2 233 EXHIBIT F DELAWARE GENERAL CORPORATION LAW SEC.262. APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to the provisions of subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with the provisions of subsection (d) of this Section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to sec.228 of this Chapter shall be entitled to an appraisal by the Court of Chancery of the fair value of his shares of stock under the circumstances described in subsections (b) and (c) of this Section. As used in this Section, the word "stockholder" means a holder of record of stock in a stock corporation and also a member of record of a non-stock corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a non-stock corporation; and the words "depository receipt" mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository. (b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to Sections 251, 252, 254, 257, 258, or 263 of this Chapter; (1) provided, however, that no appraisal rights under this Section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the holders of the surviving corporation as provided in subsection (f) of Section 251 of this Chapter. (2) Notwithstanding the provisions of subsection (b)(1) of this Section, appraisal rights under this Section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to Sections 251, 252, 254, 257, 258, 263 and 264 of this Chapter to accept for such stock anything except (i) shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof; (ii) shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or held of record by more than 2,000 holders; (iii) cash in lieu of fractional shares or fractional depository receipts described in the foregoing clauses (i) and (ii); or (iv) any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing clauses (i), (ii) and (iii) of this subsection. (3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under Section 253 of this Chapter is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation. (c) Any corporation may provide in its certificate of incorporation that appraisal rights under this Section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this Section, including those set forth in subsectiom (d) and (e), shall apply as nearly as is practicable. F-1 234 (d) Appraisal rights shall be perfected as follows: (1) If a proposed merger or consolidation for which appraisal rights are provided under this Section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsections (b) and (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this Section. Each stockholder electing to demand the appraisal of his shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of his shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of his shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with the provisions of this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or (2) If the merger or consolidation was approved pursuant to Section 228 or Section 253 of this Chapter, the surviving or resulting corporation, either before the effective date of the merger or consolidation or within 10 days thereafter, shall notify each of the stockholders entitled to appraisal rights of the effective date of the merger or consolidation and that appraisal rights are available for any or all of the shares of the constituent corporation, and shall include in such notice a copy of this Section. The notice shall be sent by certified or registered mail, return receipt requested, addressed to the stockholder at his address as it appears on the records of the corporation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of the notice, demand in writing from the surviving or resulting corporation the appraisal of his shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of his shares. (e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with the provisions of subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw his demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after his written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later. (f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by one or more publications at least one week before the day of the hearing, in a newspaper of general circulation published in the City of F-2 235 Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation. (g) At the hearing on such petition, the Court shall determine the stockholders who have complied with the provisions of this Section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. (h) After determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this Section and who has submitted his certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that he is not entitled to appraisal rights under this Section. (i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and in the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any other state. (j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys' fees and the fees and expenses of experts, to be charged pro rata against the value of all of the shares entitled to an appraisal. (k) From and after the effective date of the merger or consolidation, no stockholder who has demanded his appraisal rights as provided in subsection (d) of this Section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this Section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of his demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this Section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just. (l) The shares of the surviving or resulting corporation into which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation. F-3 236 [ALTERNATE SHAWMUT PAGE] EXHIBIT G CERTAIN COMPENSATION INFORMATION RELATING TO FLEET The following table shows, for the fiscal years ending December 31, 1994, 1993 and 1992, the compensation of the Chief Executive Officer and the four other most highly compensated executive officers of Fleet (the "Named Executive Officers"). Capitalized terms used but not defined herein shall have the meanings given such terms in the Joint Proxy Statement-Prospectus. SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------------------------------- LONG-TERM COMPENSATION ANNUAL COMPENSATION AWARDS -------------------------------------- -------------------------- OTHER RESTRICTED SECURITIES NAME AND ANNUAL STOCK UNDERLYING ALL OTHER PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS COMPENSATION POSITION YEAR ($) ($) ($)(2) ($)(3)(4)(5) (#)(5)(6) ($)(7) - -------------------------------------------------------------------------------------------------------------------------- Terrence Murray 1994 $993,936(1) $1,400,000 -- $1,160,156 100,000 $ 86,967 Chairman, President and 1993 902,000 990,000 -- -- 90,000 67,622 Chief Executive Officer 1992 917,461 750,000 -- -- 75,000 55,126 Robert J. Higgins 1994 524,999 600,000 $ 75,276 556,875 45,000 40,632 Vice Chairman 1993 505,769 350,000 -- -- 40,000 37,946 1992 441,346 200,000 -- 468,750 32,500 26,893 H. Jay Sarles 1994 524,999 550,000 -- 556,875 45,000 55,135 Vice Chairman 1993 512,692 350,000 -- -- 40,000 43,343 1992 478,731 225,000 124,532 625,000 32,500 33,485 Michael R. Zucchini 1994 524,999 600,000 -- 556,875 45,000 38,867 Vice Chairman 1993 510,769 350,000 -- -- 40,000 30,503 1992 458,731 250,000 -- -- 32,500 19,832 Eugene M. McQuade 1994 358,654 500,000 -- 556,875 45,000 23,585 Executive Vice President 1993 330,769 300,000 -- -- 35,000 20,451 and Chief Financial Officer 1992 254,808 125,000 159,123 -- 27,000 2,088 - --------------- (1) The discrepancy between Mr. Murray's approved base salary for 1994 ($992,200) and the amount paid in 1994 ($993,936) is the result of Fleet's payroll practice of paying employees on a bi-weekly basis. (2) Perquisites and other personal benefits paid to each of the Named Executive Officers (including tax preparation assistance) in each instance aggregated less than $50,000, other than Messrs. Higgins, Sarles and McQuade and, accordingly, are omitted from the table as permitted by Commission regulations. In 1994, Mr. Higgins' perquisites and other personal benefits included a relocation expense and moving allowance aggregating $60,157. In 1992, each of Messrs. Sarles and McQuade's perquisites and other personal benefits included a relocation expense and moving allowance aggregating $106,119 and $156,746, respectively. (3) In September 1994, Fleet awarded performance-based restricted stock to each of the Named Executive Officers under Fleet's Amended and Restated 1992 Stock Option and Restricted Stock Plan (the "1992 Stock Plan"). In accordance with the terms of the awards, the restrictions on transfer will lapse, if at all, only if cumulative earnings per share growth, measured over a three year period, exceeds a threshold target. To the extent cumulative earnings per share growth exceeds the threshold, each Named Executive Officer will vest in a percentage of the shares awarded, ranging from 40% to 100%. The amount and year-end value of the performance-based restricted stock awarded in 1994 under the 1992 Stock Plan, based on a December 30, 1994 closing market price of the Fleet Common Stock of $32.50, are: Mr. Murray, 31,250 and $1,015,625; and each of Messrs. Higgins, Sarles, Zucchini and McQuade, 15,000 and $487,500. Dividends will be paid on the shares of performance-based restricted stock if, and to the extent, paid on Fleet Common Stock generally. If a change of control were to occur, the performance-based restricted stock would immediately vest in full. (4) In December 1991, Fleet awarded shares of restricted stock to certain Named Executive Officers under Fleet's Amended and Restated 1988 Stock Option and Restricted Stock Plan (the "1988 Stock Plan"). In accordance with the terms of the awards, the restrictions on fifty percent of the stock lapsed as of January 1, 1995 as a result of the performance of Fleet Common Stock during 1994 when the Average
G-1 237 [ALTERNATE SHAWMUT PAGE] Closing Price of Fleet Common Stock was or exceeded $34 per share for four consecutive months. The Average Closing Price for each of the four consecutive months was deemed to be or exceed $34 per share when the average of the daily closing prices of Fleet Common Stock on the Stock Exchange for such month was or exceeded $34 per share. The number and year-end value of the remaining fifty percent of the restricted stock shares awarded to certain Named Executive Officers in 1991 under the 1988 Stock Plan, based on a December 30, 1994 closing market price of Fleet Common Stock of $32.50 per share, are: Mr. Murray, 25,000 and $812,500; and Mr. Zucchini, 12,500 and $406,250. Messrs. Higgins and Sarles were not awarded any restricted stock in 1991. In December 1992, Fleet awarded shares of restricted stock to Messrs. Higgins and Sarles under the 1992 Stock Plan. Mr. McQuade, who did not join Fleet until January 1992, was not awarded any restricted stock in 1992. The awards to Messrs. Higgins and Sarles provide that the restrictions will lapse on January 1, 1998 if the executive remains in the continuous employ of Fleet; however, the restrictions on fifty percent of the stock will lapse as of January 1, 1996 if, during 1995, the Average Closing Price of Fleet Common Stock is or exceeds $47 per share for four consecutive months. The Average Closing Price for a month shall be deemed to be or exceed $47 per share if the average of the daily closing prices of Fleet Common Stock on the Stock Exchange for such month is or exceeds $47 per share. The number and year-end value of the shares of restricted stock awarded to certain Named Executive Officers under the 1992 Stock Plan, based on a December 30, 1994 closing market price of Fleet Common Stock of $32.50 per share, are: Mr. Higgins, 15,000 and $487,500; and Mr. Sarles, 20,000 and $650,000. Dividends will be paid on the shares of restricted stock if, and to the extent, paid on Fleet Common Stock generally. If a change of control were to occur, the restricted stock would immediately vest in full. (5) The Merger will not constitute a change of control for purposes of any restricted stock awarded, or any stock options or stock appreciation rights ("SARs") granted, under the 1992 Stock Plan, or any predecessor plan. (6) All stock options include tandem SARs, except for the stock options granted in 1994. (7) Amounts of All Other Compensation include the following: (i) contributions by Fleet under Fleet's Savings Plan or amounts accrued under Fleet's Executive Supplemental Plan for the Named Executive Officers: Mr. Murray, $44,961; Mr. Higgins, $23,852; Mr. Sarles, $23,852; Mr. Zucchini, $23,852; and Mr. McQuade, $16,205; (ii) term life insurance premiums paid by Fleet on behalf of each of the Named Executive Officers in 1994 (the Named Executive Officers have the option of applying these payments to whole life policies): Mr. Murray, $21,040; Mr. Higgins, $4,957; Mr. Sarles, $5,908; Mr. Zucchini, $5,683; and Mr. McQuade, $2,268; (iii) an interest free loan in the amount of $100,000 provided to Mr. Sarles in 1992 which provided a benefit of $6,089 to Mr. Sarles in 1994 based on the applicable federal rate in effect on the date of issuance of such loan; and (iv) preferential earnings on deferred compensation: Mr. Murray, $20,966; Mr. Higgins, $11,823; Mr. Sarles, $19,286; Mr. Zucchini, $9,332; and Mr. McQuade, $5,112. Mr. Sarles repaid his loan on January 13, 1995; see "Indebtedness and Other Transactions". G-2 238 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Registrant's By-laws provide for indemnification to the extent permitted by Section 7-1.1-4.1 of the Rhode Island Business Corporation Law. Such section, as adopted by the By-laws, requires the Registrant to indemnify directors, officers, employees or agents against judgments, fines, reasonable costs, expenses and counsel fees paid or incurred in connection with any proceeding to which such director, officer, employee or agent or his legal representative may be a party (or for testifying when not a party) by reason of his being a director, officer, employee or agent, provided that such director, officer, employee or agent shall have acted in good faith and shall have reasonably believed (a) if he was acting in his official capacity that his conduct was in the Registrant's best interest, (b) in all other cases that his conduct was at least not opposed to its best interest, and (c) in the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful. The Registrant's By-laws provide that such rights to indemnification are contract rights and that the expenses incurred by an indemnified person shall be paid in advance of a final disposition of any proceeding; provided, however, that if required under applicable law, such person must deliver a written affirmation that he has met the standards of care required under such provisions to be entitled to indemnification and provides an undertaking by or on behalf of such person to repay all amounts advanced if it is ultimately determined that such person is not entitled to indemnification. With respect to possible indemnification of directors, officers and controlling persons of the Registrant for liabilities arising under the Securities Act of 1933 (the "Act") pursuant to such provisions, the Registrant is aware that the Securities and Exchange Commission has publicly taken the position that such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits. The following is a list of Exhibits to this Registration Statement: 2 -- Agreement and Plan of Merger dated as of February 20, 1995, between Fleet Financial Group, Inc. ("Fleet") and Shawmut National Corporation ("Shawmut") (included in Part I as Exhibit A to the Joint Proxy Statement-Prospectus included in this Registration Statement) 3 -- Form of Proposed Restated Articles of Incorporation of Fleet 4(a) -- Rights Agreement dated November 21, 1990 between Fleet and Fleet National Bank, as rights agent (incorporated by reference to Fleet's Registration Statement on Form 8-A dated November 29, 1990), as amended by a First Amendment to Rights Agreement dated March 28, 1991 and a Second Amendment to Rights Agreement dated July 12, 1991 (incorporated by reference to Fleet's Form 8 Amendment to Application or Report dated September 6, 1991) and as further amended by a Third Amendment to Rights Agreement dated February 20, 1995 (incorporated by reference to Fleet's Form 8-A/A dated March 17, 1995) 4(b) -- Instruments defining the rights of security holders, including indentures (Fleet has no instruments defining the rights of holders of equity or debt securities where the amount of securities authorized thereunder exceeds 10% of the total assets of Fleet and its subsidiaries on a consolidated basis. Fleet hereby agrees to furnish a copy of any such instrument to the Commission upon request) 4(c) -- Form of Rights Certificate for stock purchase rights issued to Whitehall Associates, L.P., and KKR Partners II, L.P. (incorporated by reference to Exhibit 4(c) of Fleet's Current Report on Form 8-K dated July 12, 1991) 4(d) -- Form of Warrant Agreement for Warrants to purchase Fleet Common Stock 4(e) -- Form of Warrant (included as Exhibit A to Exhibit 4(d)) 4(f) -- Form of Stock Certificate for Fleet Preferred Stock with Cumulative and Adjustable Dividends 4(g) -- Form of Stock Certificate for Fleet 9.30% Cumulative Preferred Stock 4(h) -- Form of Stock Certificate for Fleet 9.35% Cumulative Preferred Stock
II-1 239 4(i) -- Form of Deposit Agreement for Depositary Shares, each representing a 1/10 interest in a share of 9.30% Cumulative Preferred Stock 4(j) -- Form of Depositary Receipt evidencing the 9.30% Depositary Shares (included as Exhibit A to Exhibit 4(i)) 4(k) -- Form of Deposit Agreement for Depositary Shares, each representing a 1/10 interest in a share of 9.35% Cumulative Preferred Stock 4(l) -- Form of Depositary Receipt evidencing the 9.35% Depositary Shares (included as Exhibit A to Exhibit 4(k)) 5 -- Opinion of Edwards & Angell as to legality 8(a) -- Form of Opinion of Wachtell, Lipton, Rosen & Katz as to federal income tax matters 8(b) -- Form of Opinion of Skadden, Arps, Slate, Meagher & Flom as to federal income tax matters 12 -- Computation of Consolidated Ratios of Earnings to Fixed Charges and Earnings to Fixed Charges and Dividends on Preferred Stock 23(a) -- Consent of KPMG Peat Marwick LLP 23(b) -- Consent of Price Waterhouse LLP (as to Shawmut) 23(c) -- Consent of Price Waterhouse LLP (as to the Business Finance Division of Barclays Business Credit, Inc.) 23(d) -- Consent of Deloitte & Touche, LLP 23(e) -- Consent of Salomon Brothers Inc 23(f) -- Consent of Morgan Stanley & Co., Incorporated 23(g) -- Consent of Edwards & Angell (included in Exhibit 5) 24 -- Powers of Attorney (included on signature pages to this Registration Statement) 99(a)(i) -- Form of Proxy for Fleet 99(a)(ii) -- Form of Proxy for Shawmut 99(b) -- Stock Option Agreement dated February 20, 1995 between Fleet and Shawmut as to stock of Fleet (included in Part I as Exhibit B to the Joint Proxy Statement-Prospectus included in this Registration Statement) 99(c) -- Stock Option Agreement dated February 20, 1995 between Fleet and Shawmut as to stock of Shawmut (included in Part I as Exhibit C to the Joint Proxy Statement-Prospectus included in this Registration Statement)
(b) Financial Statement Schedules. Not Applicable. (c) Fairness Opinions. Included in Part I as Exhibits D and E to the Joint Proxy Statement-Prospectus included in this Registration Statement. ITEM 22. UNDERTAKINGS. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; II-2 240 (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's and Shawmut's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be initial bona fide offering thereof. The undersigned Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request. The undersigned Registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to Item 20 of this Registration Statement, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-3 241 SIGNATURES AND AMENDMENTS Each person whose signature appears below hereby constitutes and appoints the Chairman and President, the Executive Vice President and Chief Financial Officer or the Secretary of the Registrant, or any one of them, acting alone, as his true and lawful attorney-in-fact, with full power and authority to execute in the name, place and stead of each such person in any and all capacities and to file, an amendment or amendments to the Registration Statement (and all exhibits thereto) and any documents relating thereto, which amendments may make such changes in the Registration Statement as said officer or officers so acting deem(s) advisable. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all requirements for filing on Form S-4 and has duly caused this Form S-4 Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Providence, and State of Rhode Island, on April 28, 1995. FLEET FINANCIAL GROUP, INC. By: TERRENCE MURRAY --------------------------------- Terrence Murray Chairman and President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities on April 28, 1995.
SIGNATURES TITLE ---------- ----- TERRENCE MURRAY Chairman and President, Chief - ------------------------------------------ Executive Officer and Director Terrence Murray EUGENE M. MCQUADE Executive Vice President and - ------------------------------------------ Chief Financial Officer Eugene M. McQuade ROBERT C. LAMB, JR. Controller - ------------------------------------------ Robert C. Lamb, Jr. WILLIAM BARNET, III Director - ------------------------------------------ William Barnet, III BRADFORD R. BOSS Director - ------------------------------------------ Bradford R. Boss PAUL J. CHOQUETTE, JR. Director - ------------------------------------------ Paul J. Choquette, Jr. JAMES F. HARDYMON Director - ------------------------------------------ James F. Hardymon ROBERT M. KAVNER Director - ------------------------------------------ Robert M. Kavner
II-4 242
SIGNATURES TITLE ---------- ----- LAFAYETTE KEENEY Director - ------------------------------------------ Lafayette Keeney RAYMOND C. KENNEDY Director - ------------------------------------------ Raymond C. Kennedy RUTH R. MCMULLIN Director - ------------------------------------------ Ruth R. McMullin ARTHUR C. MILOT Director - ------------------------------------------ Arthur C. Milot THOMAS D. O,CONNOR Director - ------------------------------------------ Thomas D. O'Connor MICHAEL B. PICOTTE Director - ------------------------------------------ Michael B. Picotte JOHN A. REEVES Director - ------------------------------------------ John A. Reeves JOHN R. RIEDMAN Director - ------------------------------------------ John R. Riedman JOHN S. SCOTT Director - ------------------------------------------ John S. Scott
II-5 EX-3 2 FORM OF PROPOSED RESTATED ARTICLES OF INCORP. 1 EXHIBIT 3 STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS BUSINESS CORPORATION RESTATED ARTICLES OF INCORPORATION OF FLEET FINANCIAL GROUP, INC. (AS AMENDED) Pursuant to the provisions of Section 7-1.1-59 of the General Laws, 1956, as amended, the undersigned corporation adopts the following Restated Articles of Incorporation: FIRST: The name of the corporation (hereinafter called the Corporation) is FLEET FINANCIAL GROUP, INC. SECOND: The period of its duration is perpetual. THIRD: The nature of the business of the Corporation and the objects or purposes to be transacted, promoted or carried on by it are as follows: 1. To purchase or otherwise acquire and to hold, pledge, sell, exchange or otherwise dispose of securities (which term includes any shares of stock, bonds, debentures, notes, mortgages or other instruments representing rights to receive, purchase or subscribe for the same or representing any other rights or interest therein or in any property or assets) created or issued by any person, firm, association, corporation (including, to the extent permitted by the laws of the State of Rhode Island, the Corporation) or government or subdivision, agency or instrumentality thereof; to make payment therefor in any lawful manner; and to exercise, as owner or holder thereof, any and all rights, powers and privileges in respect thereof (to the extent aforesaid). 2. To make, manufacture, produce, prepare, process, purchase or otherwise acquire, and to hold, use, sell, import, export, or otherwise trade or deal in and with, goods, wares, products, merchandise, machines, machinery, appliances and apparatus, of every kind, nature and any manufacturing or other business of any kind or character whatsoever, including, but not by way of limitation, importing, exporting, mining, quarrying, producing, farming, agriculture, forestry, construction, management, advisory, mercantile, financial or investment business, any business engaged in rendering any manner of services and any business of buying, selling, leasing or dealing in properties of any and all kinds, whether any such business is located in the United States of America or any foreign country, and whether or not related to, conducive to, incidental to, or in any way connected with, the foregoing business. 3. To engage in research, exploration, laboratory and development work relating to any material, substance, compound or mixture now known or which may hereafter be known, discovered or developed and to perfect, develop, manufacture, use, apply and generally to deal in and with any such material, substance, compound or mixture. 4. To purchase, lease or otherwise acquire, to hold, own, use, develop, maintain, manage and operate, to sell, transfer, lease, assign, convey, exchange, or otherwise turn to account or dispose of, and, generally, to deal in and with, personal and real property, tangible or intangible, of every kind and description, wheresoever situated, and any and all rights, concessions, interests and privileges therein. 5. To adopt, apply for, obtain, register, purchase, lease or otherwise acquire, to maintain, protect, hold, use, own, exercise, develop, manufacture under, operate and introduce and to sell and grant licenses or other rights in respect of, assign or otherwise dispose of, turn to account, or in any manner deal with, and contract with reference to, any trademarks, trade names, patents, patent rights, concessions, franchises, designs, copyrights and distinctive marks and rights analogous thereto and inventions, devices, improvements, processes, recipes, formulae and the like, including, but not by way of limitation, such thereof as may be 2 covered by, used in connection with, or secured or received under, Letters Patent of the United States of America or elsewhere, and any licenses and rights in respect thereof, in connection therewith or appertaining thereto. 6. To make, enter into, perform and carry out contracts of every kind and description with any person, firm, association, corporation or government or subdivision, agency or instrumentality thereof; to endorse or guarantee the payment of principal, interest or dividends upon, and to guarantee the performance of sinking fund or other obligations of, any securities or the payment of a certain amount per share in liquidation of the capital stock of any other corporation; and to guarantee in any way permitted by law the performance of any of the contracts or other undertakings of any person, firm, association, corporation or government or subdivision, agency or instrumentality thereof. 7. To acquire by purchase, exchange or otherwise, all, or any part of, or any interest in, the properties, assets, business and good will of any one or more persons, firms, associations or corporations heretofore or hereafter engaged in any business whatsoever; to pay for the same in cash, property or its own or other securities; to hold, operate, lease, reorganize, liquidate, sell or in any manner dispose of the whole or any part thereof; to assume or guarantee, in connection therewith, the performance of any liabilities, obligations or contracts of such persons, firms, associations or corporations; and to conduct the whole or any part of any business thus acquired. 8. To lend its uninvested funds from time to time to such extent, to such persons, firms, associations, corporations or governments or subdivisions, agencies or instrumentalities thereof, and on such terms and on such security, if any, as the Board of Directors of the Corporation (hereinafter called the Board of Directors) may determine. 9. To borrow money for any of the purposes of the Corporation, from time to time, and without limits as to amount; to issue and sell from time to time its own securities in such amounts, on such terms and conditions, for such purposes and for such consideration, as may now be or hereafter shall be permitted by the laws of the State of Rhode Island; and to secure such securities by mortgage upon, or the pledge of, or the conveyance or assignment in trust of, the whole or any part of the properties, assets, business and good will of the Corporation then owned or thereafter acquired. 10. To promote, organize, manage, aid or assist, financially or otherwise, persons, firms, associations or corporations engaged in any business whatsoever; and to assume or underwrite the performance of all or any of their obligations. 11. To organize or cause to be organized under the laws of the State of Rhode Island, any other state or states of the United States of America, the District of Columbia, any territory, dependency, colony or possession of the United States of America, or of any foreign country, a corporation or corporations for the purpose of transacting, promoting or carrying on any or all objects or purposes for which the Corporation is organized; to dissolve, wind up, liquidate, merge or consolidate any such corporation or corporations or to cause the same to be dissolved, wound up, liquidated, merged or consolidated; and, subject to the laws of the State of Rhode Island, to consolidate or merge with or into one or more other corporations organized under the laws of the State of Rhode Island or under the laws of any other state or states in the United States of America, the District of Columbia, any territory, dependency, colony or possession of the United States of America or of any foreign country if the laws under which said other corporation or corporations are formed shall permit such consolidation or merger. 12. To conduct its business in any and all of its branches and maintain offices both within and without the State of Rhode Island in any and all states of the United States of America, in the District of Columbia, in any or all territories, dependencies, colonies or possessions of the United States of America and in foreign countries. 13. To such extent as a business corporation organized under the laws of the State of Rhode Island may now or hereafter lawfully do, to do, either as principal or agent and either alone or through subsidiaries or in connection with other persons, firms, associations or corporations, all and everything necessary, suitable, convenient or proper for, or in connection with, or incident to, the accomplishment of any of the purposes or 2 3 the attainment of any one or more of the objects herein enumerated or designed directly or indirectly to promote the interests of the Corporation or to enhance the value of its properties and in general to engage in any lawful act or activity for which corporations may be organized under the General Laws of Rhode Island; and to do any and all things and exercise all powers, rights and privileges which a business corporation may now or hereafter be organized or authorized to do or to exercise under the laws of the State of Rhode Island. 14. Whenever the context permits, the following provisions shall govern the construction of the paragraphs of these purposes: no specified enumeration shall be construed as restricting in any way any general language; any word, whether in the singular or plural shall be construed to mean both the singular and the plural; any phrase in the conjunctive or in the disjunctive shall include both the conjunctive and disjunctive; the mention of the whole shall include any part or parts; any one or more or all of the purposes set forth may be pursued from time to time and whenever deemed desirable; verbs in the present or future tense shall be construed to include both the present and future tenses or either of them. FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 617,763,700, of which 600,000,000 shares of the par value of $0.01 each are to be of a class designated "Common Stock ", 16,000,000 shares of the par value of $1 each are to be of a class designated "Preferred Stock", 688,700 shares of no par value each are to be of a class designated "Preferred Stock with Cumulative and Adjustable Dividends, no par value", 575,000 shares of no par value each are to be of a class designated "9.30% Cumulative Preferred Stock, no par value" and 500,000 shares of no par value each are to be of a class designated "9.35% Cumulative Preferred Stock, no par value". The terms and conditions of the Preferred Stock with Cumulative and Adjustable Dividends, no par value, 9.30% Cumulative Preferred Stock, no par value, and 9.35% Cumulative Preferred Stock, no par value, are attached as Exhibits E, F and G hereto, respectively, and incorporated by reference in this Article FOURTH as if set forth in full herein. The voting powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the classes of stock of the Corporation which are fixed by these Articles of Incorporation, and the authority vested in the Board of Directors to fix by vote or votes providing for the issue of Preferred Stock, the voting powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the shares of Preferred Stock which are not fixed by these Articles of Incorporation, are as follows: (a) The Preferred Stock may be issued from time to time in one or more series of any number of shares; provided that the aggregate number of shares issued and not canceled of any and all such series shall not exceed the total number of shares of Preferred Stock hereinabove authorized. Each series of Preferred Stock shall be distinctively designated by letter or descriptive words. All series of Preferred Stock shall rank equally and be identical in all respects except as permitted by the provisions of paragraph (b) of this Article FOURTH. (b) Authority is hereby vested in the Board of Directors from time to time to issue the Preferred Stock of any series and in connection with the creation of each such series to fix by vote or votes providing for the issue of shares thereof the voting powers, if any, the designation, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of such series to the full extent now or hereafter permitted by these Articles of Incorporation and the laws of the State of Rhode Island, in respect of the matters set forth in the following subparagraphs (1) to (8), inclusive: (1) The distinctive designation of such series and the number of shares which shall constitute such series, which number may be increased or decreased (but not below the number of shares thereof then outstanding) from time to time by action of the Board of Directors; (2) The dividend rate of such series, any preferences to or provisions in relation to the dividends payable on any other class or classes or of any other series of stock, and any limitations, restrictions or conditions on the payment of dividends; (3) The price or prices at which, and the terms and conditions on which, the shares of such series may be redeemed by the Corporation; 3 4 (4) The amount or amounts payable upon the shares of such series in the event of any liquidation, dissolution or winding up of the Corporation; (5) Whether or not the shares of such series shall be entitled to the benefit of a sinking fund to be applied to the purchase or redemption of shares of such series and, if so entitled, the amount of such fund and the manner of its application; (6) Whether or not the shares of such series shall be made convertible into, or exchangeable for, shares of any other class or classes of stock of the Corporation or shares of any other series of Preferred Stock, and, if made so convertible or exchangeable, the conversion price or prices, or the rate or rates of exchange, and the adjustments thereof, if any, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange; (7) Whether or not the shares of such series shall have any voting powers and, if voting powers are so granted, the extent of such voting powers; and (8) Whether or not the issue of any additional shares of such series or of any future series in addition to such series shall be subject to restrictions in addition to the restrictions, if any, on the issue of additional shares imposed in the vote or votes fixing the terms of any outstanding series of Preferred Stock theretofore issued pursuant to this Article FOURTH and, if subject to additional restrictions, the extent of such additional restrictions. (c) The holders of Preferred Stock of each series shall be entitled to receive, when and as declared by the Board of Directors, dividends in cash at the rate for such series fixed by the Board of Directors as provided in paragraph (b) of this Article FOURTH, and no more, payable quarterly on the first days of January, April, July and October or of such other months as may be designated by the Board of Directors (each of the quarterly periods ending on the first day of January, April, July and October in each year, or on the first days of such other months, respectively, being hereinafter called a dividend period), in each case from the date of cumulation (as defined in paragraph (h) of this Article FOURTH) of such series. Except as may otherwise be provided in the vote or votes providing for the issue of any given series of Preferred Stock, dividends on Preferred Stock shall be cumulative (whether or not there shall be net profits or net assets of the Corporation legally available for the payment of such dividends), so that, if at any time full cumulative dividends (as defined in paragraph (h) of this Article FOURTH) upon the Preferred Stock of all series to the end of the last completed dividend period shall not have been paid or declared and a sum sufficient for payment thereof set apart, the amount of the deficiency shall be fully paid, but without interest, or dividends in such amount shall have been declared on each such series and a sum sufficient for the payment thereof shall have been set apart for such payment, before any sum or sums shall be set aside for or applied to the purchase or redemption of Preferred Stock of any series (either pursuant to any applicable sinking fund provisions or any redemptions authorized pursuant to paragraph (g) of this Article FOURTH or otherwise) or set aside for or applied to the purchase of Common Stock and before any dividend shall be declared or paid or any other distribution ordered or made upon the Common Stock (other than a dividend payable in Common Stock); provided, however, that any moneys deposited in the sinking fund provided for any series of Preferred Stock in the vote or votes providing for the issue of shares of said series, in compliance with the provisions of such sinking fund and of this paragraph (c), may thereafter be applied to the purchase or redemption of Preferred Stock in accordance with the terms of such sinking fund, whether or not at the time of such application full cumulative dividends upon the outstanding Preferred Stock of all series to the end of the last completed dividend period shall have been paid or declared and set apart for payment. All dividends declared upon the Preferred Stock of the respective series outstanding shall be declared pro rata, so that the amounts of dividends declared per share on the Preferred Stock of different series shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of such respective series bear to each other. (d) Before any sum or sums shall be set aside for or applied to the purchase of Common Stock and before any dividends shall be declared or paid or any distribution ordered or made upon the Common Stock (other than a dividend payable in Common Stock), the Corporation shall comply with the sinking fund provisions, if any, of any vote or votes providing for the issue of any series of Preferred Stock any shares of which shall at the time be outstanding. 4 5 (e) Subject to the provisions of paragraphs (c) and (d) of this Article FOURTH, the holders of Common Stock shall be entitled, to the exclusion of the holders of Preferred Stock of any and all series, to receive such dividends as from time to time may be declared by the Board of Directors. (f) In the event of any liquidation, dissolution or winding up of the Corporation, the holders of Preferred Stock of each series then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, whether from capital, surplus or earnings, before any payment shall be made to the holders of Common Stock, an amount determined as provided in paragraph (b) of this Article FOURTH for every share of their holdings of Preferred Stock of such series. If upon any liquidation, dissolution or winding up of the Corporation the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of Preferred Stock of all series the full amounts to which they respectively shall be entitled, the holders of Preferred Stock of all series shall share ratably in any distribution of assets according to the respective amounts which would be payable in respect of the shares of Preferred Stock held by them upon such distribution if all amounts payable on or with respect to Preferred Stock of all series were paid in full. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after payment shall have been made to the holders of Preferred Stock of the full amount to which they shall be entitled as aforesaid, the holders of Common Stock shall be entitled, to the exclusion of the holders of Preferred Stock of any and all series, to share, ratably according to the number of shares of Common Stock held by them, in all remaining assets of the Corporation available for distribution to its stockholders. Neither the merger or consolidation of the Corporation into or with another corporation nor the merger or consolidation of any other corporation into or with the Corporation, nor the sale, transfer or lease of all or substantially all the assets of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation. (g) Subject to any requirements which may be applicable to the redemption of any given series of Preferred Stock as provided in any vote or votes providing for the issue of such series of Preferred Stock, the Preferred Stock of all series, or of any series thereof, or any part of any series thereof, at any time outstanding, may be redeemed by the Corporation, at its election expressed by vote of the Board of Directors, any time or from time to time, upon not less than 30 days previous notice to the holders of record of Preferred Stock to be redeemed, given by mail in such manner as may be prescribed by vote or votes of the Board of Directors, (1) If such redemption shall be otherwise than by the application of moneys in any sinking fund referred to in paragraph (d) of this Article FOURTH, at the redemption price, fixed as provided in paragraph (b) of this Article FOURTH, at which shares of Preferred Stock of the particular series may then be redeemed at the option of the Corporation and (2) If such redemption shall be by the application of moneys in any sinking fund referred to in paragraph (d) of this Article FOURTH, at the redemption price, fixed as provided in paragraph (b) of this Article FOURTH, at which shares of Preferred Stock of the particular series may then be redeemed for such sinking fund; provided, however, that, before any Preferred Stock of any series shall be redeemed at said redemption price thereof specified in clause (1) of this paragraph (g), all moneys at the time in the sinking fund, if any, for Preferred Stock of that series shall first be applied, as nearly as may be, to the purchase or redemption of Preferred Stock of that series as provided in the vote or votes of the Board of Directors providing for such sinking fund. If less than all the outstanding shares of Preferred Stock of any series are to be redeemed, the redemption may be made either by lot or pro rata in such manner as may be prescribed by vote of the Board of Directors. The Corporation may, if it shall so elect, provide moneys for the payment of the redemption price by depositing the amount thereof for the account of the holders of Preferred Stock entitled thereto with a bank or trust company doing business in the City of New York, in the State of New York, or in the City of Providence, in the State of Rhode Island, and having capital and surplus of at least $5,000,000. The date upon which such deposit may be made by the Corporation (hereinafter called the "date of deposit") shall be prior to the date fixed as the date of redemption. In any such case there shall be included in the notice of redemption a statement of the date of deposit and of the name and address of the bank or trust company with which the deposit has been or will be made. On and after the date fixed in any such notice of redemption as 5 6 the date of redemption (unless default shall be made by the Corporation in providing moneys for the payment of the redemption price pursuant to such notice) or, if the Corporation shall have made such deposit on or before the date specified therefor in the notice, then on and after the date of deposit all rights of the holders of the Preferred Stock to be redeemed as stockholders of the Corporation, except the right to receive the redemption price as hereinafter provided, and, in the case of such deposit, any conversion rights not theretofore expired, shall cease and terminate. Such conversion rights, however, in any event shall cease and terminate upon the date fixed for redemption or upon any earlier date fixed by the Board of Directors pursuant to paragraph (b) of this Article FOURTH for termination of such conversion rights. Anything herein contained to the contrary notwithstanding, said redemption price shall include an amount equal to accrued dividends on the Preferred Stock to be redeemed to the date fixed for the redemption thereof and the Corporation shall not be required to declare or pay on such Preferred Stock to be redeemed, and the holders thereof shall not be entitled to receive, any dividends in addition to those thus included in the redemption price, provided, however, that the Corporation may pay in regular course any dividends thus included in the redemption price either to the holders of record on the record date fixed for the determination of stockholders entitled to receive such dividends (in which event, anything herein to the contrary notwithstanding, the amount so deposited need not include any dividends so paid or to be paid) or as part of the redemption price upon surrender of the certificates for the shares redeemed. At any time on or after the date fixed as aforesaid for such redemption or, if the Corporation shall elect to deposit the money for such redemption as herein provided, then at any time on or after the date of deposit and without awaiting the date fixed as aforesaid for such redemption, the respective holders of record of the Preferred Stock to be redeemed shall be entitled to receive the redemption price upon actual delivery to the Corporation, or, in the event of such deposit, to the bank or trust company with which such deposit shall be made, of certificates for the shares to be redeemed, such certificates, if required, to be properly stamped for transfer and duly endorsed in blank or accompanied by proper instruments of assignment and transfer thereof duly executed in blank. Any moneys so deposited which shall remain unclaimed by the holders of such Preferred Stock at the end of five years after the redemption date shall be paid by such bank or trust company to the Corporation and any interest accrued on moneys so deposited shall belong to the Corporation and shall be paid to it from time to time. Preferred Stock redeemed pursuant to the provisions of this paragraph (g) shall be canceled and shall thereafter have the status of authorized and unissued shares of Preferred Stock. (h) The term "date of cumulation" as used with reference to any series of Preferred Stock shall be deemed to mean the date fixed by the Board of Directors as the date of cumulation of such series at the time of creation thereof or, if no date shall have been fixed, the date on which shares of such series are first issued. Whenever used with reference to any share of any series of Preferred Stock, the term "full cumulative dividends" shall be deemed to mean (whether or not in any dividend period, or any part thereof, in respect of which such term is used there shall have been net profits or net assets of the Corporation legally available for the payment of such dividends) that amount which shall be equal to dividends at the full rate fixed for such series as provided in paragraph (b) of this Article FOURTH for the period of time elapsed from the date of cumulation of such series to the date as of which full cumulative dividends are to be computed (including an amount equal to the dividend at such rate for any fraction of a dividend period included in such period of time); and the term "accrued dividends" shall be deemed to mean full cumulative dividends to the date as of which accrued dividends are to be computed, less the amount of all dividends paid, or deemed paid as hereinafter in this paragraph (h) provided, upon said share. In the event of the issue of additional shares of Preferred Stock of any series after the original issue of shares of Preferred Stock of such series, all dividends paid or accrued on Preferred Stock of such series prior to the date of issue of such additional Preferred Stock shall be deemed to have been paid on the additional Preferred Stock so issued. (i) No holder of stock of any class of the Corporation, whether now or hereafter authorized, shall have any preemptive, preferential or other rights to subscribe for or purchase or acquire any shares of any class or any other securities of the Corporation, whether now or hereafter authorized, and whether or not convertible into, or evidencing or carrying the right to purchase, shares of any class or any other securities now or hereafter authorized, and whether the same shall be issued for cash, services or property, or by way of dividend or otherwise. 6 7 (j) Subject to the provisions of these Articles of Incorporation and except as otherwise provided by law, the shares of stock of the Corporation, regardless of class, may be issued for such consideration and for such corporate purposes as the Board of Directors may from time to time determine. (k) Except as otherwise provided by law, or these Articles of Incorporation, or by the vote or votes providing for the issue of any series of Preferred Stock, the holders of shares of Preferred Stock as such holders, shall not have any right to vote, and are hereby specifically excluded from the right to vote, in the election of directors or for any other purpose. Except as aforesaid, the holders of Preferred Stock, as such holders, shall not be entitled to notice of any meeting of stockholders. (l) Subject to the provisions of any applicable law, or of the Bylaws of the Corporation as from time to time amended, with respect to the closing of the transfer books or the fixing of a record date for the determination of stockholders entitled to vote and except as otherwise provided by law or by these Articles of Incorporation, or by the vote or votes providing for the issue of any series of Preferred Stock, the holders of outstanding shares of Common Stock shall exclusively possess voting power for the election of directors and for all other purposes, each holder of record of shares of Common Stock being entitled to one vote for each share of Common Stock standing in his name on the books of the Corporation. (As of the date of these Restated Articles of Incorporation, the following series of Preferred Stock have been authorized by the Board of Directors of the Corporation: (i) Series III 10.12% Perpetual Preferred Stock, the terms and provisions of which are set forth in Exhibit A hereto, (ii) Series IV 9.375% Perpetual Preferred Stock, the terms and provisions of which are set forth in Exhibit B hereto, (iii) Dual Convertible Preferred Stock, the terms and provisions of which are set forth in Exhibit C hereto and (iv) Cumulative Participating Junior Preferred Stock, the terms and provisions of which are set forth in Exhibit D hereto, said Exhibits A through D being hereby incorporated by reference in this Article FOURTH as if set forth in full herein.) FIFTH: The private property of the stockholders of the Corporation shall not be subject to the payment of corporate debts to any extent whatsoever. SIXTH: Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, the meeting and vote of stockholders may be dispensed with and such action may be taken with the written consent of stockholders having not less than the minimum percentage of the total vote required by statute for the proposed corporate action, and provided that prompt notice of such action be given to all stockholders who would have been entitled to vote upon the action if such meeting were held. SEVENTH: (a) Directors of the Corporation need not be stockholders, but no person shall be elected a Director who has attained the age of 72 and no person shall continue to serve as Director after the date of the first meeting of the stockholders of the Corporation held on or after the date on which such person attained the age of 72. The powers and authorities herein conferred upon the Board of Directors are in furtherance and not in limitation of those conferred by the laws of the State of Rhode Island. In addition to the powers and authorities herein or by statute expressly conferred upon it, the Board of Directors may exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the laws of the State of Rhode Island, of these Articles of Incorporation and of the Bylaws of the Corporation. (b) The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The number of directors of the Corporation (exclusive of directors to be elected by the holders of any one or more series of the Preferred Stock voting separately as a class or classes) that shall constitute the Board of Directors shall be 13, unless otherwise determined from time to time by resolution adopted by the affirmative vote of: (1) At least 80% of the Board of Directors, and (2) A majority of the Continuing Directors. 7 8 (c) Subject to applicable law, the Directors shall be divided into three (3) classes, each class to be as nearly equal in number as possible. The term of office of Directors of the first class shall expire at the annual meeting of stockholders to be held in 1984 and until their respective successors are duly elected and qualified. The term of office of Directors of the second class shall expire at the annual meeting of stockholders to be held in 1985 and until their respective successors are duly elected and qualified. The term of office of Directors of the third class shall expire at the annual meeting of stockholders to be held in 1986 and until their respective successors are duly elected and qualified. Subject to the foregoing, at each annual meeting of stockholders, commencing at the annual meeting to be held in 1984, the successors to the class of directors whose term shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting and until their successors shall be duly elected and qualified. Any vacancies in the Board of Directors for any reason, and any newly created directorships resulting from any increase in the number of directors, may be filled only by the Board of Directors, acting by vote of 80% of the directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next election of the class for which such directors shall have been chosen and until their respective successors shall be duly elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director. Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, (i) the terms of the director or directors elected by such holders shall expire at the next succeeding annual meeting of stockholders and vacancies created with respect to any directorship of the directors so elected may be filled in the manner specified by such Preferred Stock, and (ii) this Article SEVENTH shall be deemed to be construed and/or modified so as to permit the full implementation of the terms and conditions relating to election of directors of any series of Preferred Stock that has been or will be designated by the Board of Directors. (d) Notwithstanding any other provisions of these Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Articles of Incorporation or the Bylaws of the Corporation), any one or more directors of the Corporation may be removed at any time, but only for cause and only by either (1) the affirmative vote of a majority of the Continuing Directors and a majority of the Board of Directors or (2) the affirmative vote, at a meeting of the stockholders called for that purpose, as to all stock held by the holders of 80% or more of the outstanding Voting Shares, voting separately as a class. Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the provisions of this Section (d) shall not apply with respect to the director or directors elected by such holders of Preferred Stock. (e) For purposes of this Article SEVENTH, the following definitions shall apply: (1) Affiliate. An "Affiliate" of, or a Person "affiliated with", a specified Person, means a Person that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. (2) Associate. The term "Associate" used to indicate a relationship with any Person means: (A) Any corporation or organization (other than the Corporation or a Subsidiary of the Corporation) of which such Person is an officer or partner or is, directly or indirectly, the beneficial owner of ten percent or more of any class of equity securities; (B) Any trust or other estate in which such Person has a ten percent or greater beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity; (C) Any relative or spouse of such Person, or any relative of such spouse, who has the same home as such Person; or (D) Any investment company registered under the Investment Company Act of 1940 for which such Person or any Affiliate or Associate of such Person serves as investment adviser. 8 9 (3) Beneficial Owner. A Person shall be considered the "Beneficial Owner" of any shares of stock (whether or not owned of record): (A) With respect to which such Person or any Affiliate or Associate of such Person directly or indirectly has or shares (i) voting power, including the power to vote or to direct the voting of such shares of stock, and/or (ii) investment power, including the power to dispose of or to direct the disposition of such shares of stock; (B) Which such Person or any Affiliate or Associate of such Person has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, and/or (ii) the right to vote pursuant to any agreement, arrangement or understanding (whether such right is exercisable immediately or only after the passage of time); or (C) Which are Beneficially Owned within the meaning of (A) or (B) of this Section (3) by any other Person with which such first mentioned Person or any of its Affiliates or Associates has any agreement, arrangement or understanding, written or oral, with respect to acquiring, holding, voting or disposing of any shares of stock of the Corporation or any Subsidiary of the Corporation or acquiring, holding or disposing of all or substantially all, or any Substantial Part, of the assets or business of the Corporation or a Subsidiary of the Corporation. For the purpose only of determining whether a Person is the Beneficial Owner of a percentage specified in this Article SEVENTH of the outstanding Voting Shares, such shares shall be deemed to include any Voting Shares which may be issuable pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants, options or otherwise and which are deemed to be beneficially owned by only such Person pursuant to the foregoing provisions of this Section (3). (4) Business Combination. A "Business Combination" means: (A) The sale, exchange, lease, transfer or other disposition to or with a Related Person or any Affiliate or Associate of such Related Person by the Corporation or any of its Subsidiaries (in a single transaction or a series of related transactions) of all or substantially all, or any Substantial Part, of its or their assets or businesses (including, without limitation, any securities issued by a Subsidiary); (B) The purchase, exchange, lease or other acquisition by the Corporation or any of its Subsidiaries (in a single transaction or a series of related transactions) of all or substantially all, or any Substantial Part, of the assets or business of a Related Person or any Affiliate or Associate of such Related Person; (C) Any merger or consolidation of the Corporation or any Subsidiary thereof into or with a Related Person or any Affiliate or Associate of such Related Person, irrespective of which Person is the surviving entity in such merger or consolidation; (D) Any reclassification of securities, recapitalization or other transaction (other than a redemption in accordance with the terms of the security redeemed) which has the effect, directly or indirectly, of increasing the proportionate amount of Voting Shares of the Corporation or any Subsidiary thereof which are Beneficially Owned by a Related Person, or any partial or complete liquidation, spinoff, split off or split up of the Corporation or any Subsidiary thereof; provided however, that this Section (4)(D) shall not relate to any transaction of the types specified herein that has been approved by (i) a majority of the Board of Directors, and (ii) 80% of the Continuing Directors; or (E) The acquisition upon the issuance thereof of Beneficial Ownership by a Related Person of Voting Shares or securities convertible into Voting Shares or any voting securities or securities convertible into voting securities of any Subsidiary of the Corporation, or the acquisition upon the issuance thereof of Beneficial Ownership by a Related Person of any rights, warrants or options to 9 10 acquire any of the foregoing or any combination of the foregoing Voting Shares or voting securities of a Subsidiary of the Corporation. As used in this definition, a "series of related transactions" shall be deemed to include not only a series of transactions with the same Related Person but also a series of separate transactions with a Related Person or any Affiliate or Associate of such Related Person. Anything in this definition to the contrary notwithstanding, this definition shall not be deemed to include any transaction of the type set forth in Sections (4)(A) through (4)(C) above between or among any two or more Subsidiaries of the Corporation or the Corporation and one or more Subsidiaries of the Corporation if such transaction has been approved by the affirmative vote of at least 80% of the Board of Directors and a majority of the Continuing Directors on or prior to the Date of Determination. (5) Continuing Director. A "Continuing Director" shall mean: (A) An individual who was a member of the Board of Directors of the Corporation first elected by the stockholders or by the Board of Directors prior to April 13, 1983 or prior to the time that a Related Person became the Beneficial Owner of in excess of 10% of the Voting Shares of the Corporation entitled to vote in the election of directors; or (B) An individual designated (before such individual's initial election as a director) as a Continuing Director by a majority of the then Continuing Directors. (6) Date of Determination. The term "Date of Determination" means: (A) The date on which a binding agreement (except for the fulfillment of conditions precedent, including, without limitation, votes of stockholders to approve such transaction) is entered into by the Corporation, as authorized by its Board of Directors, and another Person providing for any Business Combination; or (B) If such an agreement as referred to in Section (6)(A) above is amended so as to make it less favorable to the Corporation and its stockholders, the date on which such amendment is approved by the Board of Directors of the Corporation; or (C) In cases where neither Section (6)(A) or (6)(B) above shall be applicable, the record date for the determination of stockholders of the Corporation entitled to notice of and to vote upon the transaction in question. A majority of the Continuing Directors shall have the power and duty to determine the Date of Determination as to any transaction under this Article SEVENTH. Any such determination shall be conclusive and binding for all purposes of this Article. (7) Person. The term "Person" shall mean any individual, partnership, corporation, group or other entity (other than the Corporation, any Subsidiary of the Corporation for itself or as a fiduciary for customers in the ordinary course, or a trustee holding stock for the benefit of employees of the Corporation or its Subsidiaries, or any one of them, pursuant to one or more employee benefit plans or arrangements). When two or more Persons act as a partnership, limited partnership, syndicate, association or other group for the purpose of acquiring, holding or disposing of shares of stock, such partnership, syndicate, association or group shall be deemed a "Person". (8) Related Person. "Related Person" means any Person which is the Beneficial Owner, as of the Date of Determination or immediately prior to the consummation of a Business Combination, or both, of 10% or more of the Voting Shares, or any Person who is an Affiliate of the Corporation and at any time within five years preceding the Date of Determination was the Beneficial Owner of 10% or more of the then outstanding Voting Shares, but does not include any one group of more than one Continuing Director. (9) Substantial Part. The term "Substantial Part" as used with reference to the assets of the Corporation, of any Subsidiary or of any Related Person means assets having a value of more than five percent of the total consolidated assets of the Corporation and its Subsidiaries as of the end of the Corporation's most recent fiscal year ending prior to the time the determination is being made. 10 11 (10) Subsidiary. "Subsidiary" shall mean any corporation or entity of which the Person in question owns not less than 50% of any class of equity securities, directly or indirectly. (11) Voting Shares. "Voting Shares" shall mean shares of the Corporation's capital stock entitled to vote generally in the election of directors. (12) Certain Determinations With Respect to Article SEVENTH. (A) A majority of the Continuing Directors shall have the conclusive power and authority to determine, for the purposes of this Article SEVENTH, on the basis of information known to them: (i) the number of Voting Shares of which any Person is the Beneficial Owner, (ii) whether a Person is an Affiliate or Associate of another, (iii) whether a Person has an agreement, arrangement or understanding with another as to the matters referred to in the definition of "Beneficial Owner" as hereinabove defined, (iv) whether the assets subject to any Business Combination constitute a "Substantial Part" as hereinabove defined, (v) whether two or more transactions constitute a "series of related transactions" as hereinabove defined, (vi) any matters referred to in subsection (12)(B) below, and (vii) such other matters with respect to which a determination is required under this Article SEVENTH. Any such determination shall be final and binding for all purposes hereunder. (B) A Related Person shall be deemed to have acquired a Voting Share of the Corporation at the time when such Related Person became the Beneficial Owner thereof. With respect to Voting Shares owned by Affiliates, Associates or other Persons whose ownership is attributed to a Related Person under the foregoing definition of Beneficial Owner, if the price paid by such Related Person for such shares is not determinable, the price so paid shall be deemed to be the higher of (i) the price paid upon acquisition thereof by the Affiliate, Associate or other Person or (ii) the market price of the shares in question (as determined by a majority of the Continuing Directors) at the time when the Related Person became the Beneficial Owner thereof. (f) Notwithstanding any other provisions of these Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Articles of Incorporation or the Bylaws of the Corporation), and in addition to such additional vote of the Preferred Stock as may be required by the provisions of any series thereof or by applicable law, this Article SEVENTH shall not be amended, altered, changed or repealed without: (1) The affirmative vote of 80% of the Board of Directors and of a majority of Continuing Directors, and (2) The affirmative vote as to all stock held by the holders of 80% or more of the outstanding Voting Shares, voting separately as a class. EIGHTH: (a) The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in these Articles of Incorporation, and other provisions authorized by the laws of the State of Rhode Island at the time in force may be added or inserted in these Articles of Incorporation, in the manner (i) now or hereafter prescribed by law, and (ii) as has otherwise been provided in Articles SEVENTH and NINTH of these Articles of Incorporation; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to these Articles of Incorporation in their present form or as hereafter amended are granted subject to the right reserved in this Article EIGHTH. (b) Notwithstanding any other provisions of these Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Articles of Incorporation or the Bylaws of the Corporation), and in addition to such additional vote of the Preferred Stock as may be required by the provisions of any series thereof or by applicable law, this Article EIGHTH shall not be amended, altered, changed or repealed without the affirmative vote as to all stock held by the holders of 80% or more of the outstanding shares of the Corporation's capital stock entitled to vote generally in the election of directors, voting separately as class. NINTH: (a) Definitions and Related Matters as to Certain Business Combinations. 11 12 1.1 Affiliate. An "Affiliate" of, or a Person "affiliated with", a specified Person, means a Person that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. 1.2 Associate. The term "Associate" used to indicate a relationship with any Person means: (1) Any corporation or organization (other than the Corporation or a Subsidiary of the Corporation) of which such Person is an officer or partner or is, directly or indirectly, the beneficial owner of ten percent or more of any class of equity securities; (2) Any trust or other estate in which such Person has a ten percent or greater beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity; (3) Any relative or spouse of such Person, or any relative of such spouse, who has the same home as such Person; or (4) Any investment company registered under the Investment Company Act of 1940 for which such Person or any Affiliate or Associate of such Person serves as investment adviser. 1.3 Beneficial Owner. A Person shall be considered the "Beneficial Owner" of any shares of stock (whether or not owned of record): (1) With respect to which such Person or any Affiliate or Associate of such Person directly or indirectly has or shares (i) voting power, including the power to vote or to direct the voting of such shares of stock, and/or (ii) investment power, including the power to dispose of or to direct the disposition of such shares of stock; (2) Which such Person or any Affiliate or Associate of such Person has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, and/or (ii) the right to vote pursuant to any agreement, arrangement or understanding (whether such right is exercisable immediately or only after the passage of time); or (3) Which are Beneficially Owned within the meaning of (1) or (2) of this Section 1.3 by any other Person with which such first-mentioned Person or any of its Affiliates or Associates has any agreement, arrangement or understanding, written or oral, with respect to acquiring, holding, voting or disposing of any shares of stock of the Corporation or any Subsidiary of the Corporation or acquiring, holding or disposing of all or substantially all, or any Substantial Part, of the assets or business of the Corporation or a Subsidiary of the Corporation. For the purpose only of determining whether a Person is the Beneficial Owner of a percentage specified in this Article NINTH of the outstanding Voting Shares, such shares shall be deemed to include any Voting Shares which may be issuable pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants, options or otherwise and which are deemed to be beneficially owned by only such Person pursuant to the foregoing provisions of this Section 1.3. 1.4 Business Combination. A "Business Combination" means: (1) The sale, exchange, lease, transfer or other disposition to or with a Related Person or any Affiliate or Associate of such Related Person by the Corporation or any of its Subsidiaries (in a single transaction or a series of related transactions) of all or substantially all, or any Substantial Part, of its or their assets or business (including, without limitation, any securities issued by a Subsidiary); (2) The purchase, exchange, lease or other acquisition by the Corporation or any of its Subsidiaries (in a single transaction or a series of related transactions) of all, or any Substantial Part, of the assets or business of a Related Person or any Affiliate or Associate of such Related Person; (3) Any merger or consolidation of the Corporation or any Subsidiary thereof into or with a Related Person or any Affiliate or Associate of such Related Person, irrespective of which Person is the surviving entity in such merger or consolidation; 12 13 (4) Any reclassification of securities, recapitalization or other transaction (other than a redemption in accordance with the terms of the security redeemed) which has the effect, directly or indirectly, of increasing the proportionate amount of Voting Shares of the Corporation or any Subsidiary thereof which are Beneficially Owned by a Related Person, or any partial or complete liquidation, spin-off, split-off or split-up of the Corporation or any Subsidiary thereof; provided, however, that this Section 1.4(4) shall not relate to any transaction of the types specified herein that has been approved by (i) a majority of the Board of Directors and (ii) 80% of the Continuing Directors; or (5) The acquisition upon the issuance thereof of Beneficial Ownership by a Related Person of Voting Shares or securities convertible into Voting Shares or any voting securities or securities convertible into voting securities of any Subsidiary of the Corporation, or the acquisition upon the issuance thereof of Beneficial Ownership by a Related Person of any rights, warrants or options to acquire any of the foregoing or any combination of the foregoing Voting Shares or voting securities of a Subsidiary of the Corporation. As used in this definition, a "series of related transactions" shall be deemed to include not only a series of transactions with the same Related Person but also a series of separate transactions with a Related Person or any Affiliate or Associate of such Related Person. Anything in this definition to the contrary notwithstanding, this definition shall not be deemed to include any transaction of the type set forth in Section 1.4(1) through 1.4(3) above between or among any two or more Subsidiaries of the Corporation or the Corporation and one or more Subsidiaries of the Corporation if such transaction has been approved by the affirmative vote of at least 80% of the Board of Directors and a majority of the Continuing Directors on or prior to the Date of Determination. 1.5 Continuing Director. A "Continuing Director" shall mean: (1) An individual who was a member of the Board of Directors of the Corporation first elected by the stockholders or by the Board of Directors prior to April 13, 1983 or prior to the time that a Related Person became the Beneficial Owner of in excess of 10% of the Voting Shares of the Corporation entitled to vote in the election of directors; or (2) An individual designated (before such individual's initial election as a director) as a Continuing Director by a majority of the then Continuing Directors. 1.6 Date of Determination. The term "Date of Determination" means: (1) The date on which a binding agreement (except for the fulfillment of conditions precedent, including, without limitation, votes of stockholders to approve such transaction) is entered into by the Corporation, as authorized by its Board of Directors, and another Person providing for any Business Combination; or (2) If such an agreement as referred to in Section 1.6(1) above is amended so as to make it less favorable to the Corporation and its stockholders, the date on which such amendment is approved by the Board of Directors of the Corporation; or (3) In cases where neither Section 1.6(1) or (2) above shall be applicable, the record date for the determination of stockholders of the Corporation entitled to notice of and to vote upon the transaction in question. A majority of the Continuing Directors shall have the power and duty to determine the Date of Determination as to any transaction under this Article NINTH. Any such determination shall be conclusive and binding for all purposes of this Article. 1.7 Person. The term "Person" shall mean any individual, partnership, corporation, group or other entity (other than the Corporation, any Subsidiary of the Corporation for itself or as a fiduciary for customers in the ordinary course, or a trustee holding stock for the benefit of employees of the Corporation or its Subsidiaries, or any one of them, pursuant to one or more employee benefit plans or arrangements). When two or more Persons act as a partnership, limited partnership, syndicate, association or other group for the purpose of 13 14 acquiring, holding or disposing of shares of stock, such partnership, syndicate, association or group shall be deemed a "Person". 1.8 Related Person. "Related Person" means any Person which is the Beneficial Owner, as of the Date of Determination or immediately prior to the consummation of a Business Combination or both, of 10% or more of the Voting Shares, or any Person who is an Affiliate of the Corporation and at any time within five years preceding the Date of Determination was the Beneficial Owner of 10% or more of the then outstanding Voting Shares, but does not include any one or group of more than one Continuing Director. 1.9 Substantial Part. The term "Substantial Part" as used with reference to the assets of the Corporation, of any Subsidiary or of any Related Person means assets having a value of more than five percent of the total consolidated assets of the Corporation and its Subsidiaries as of the end of the Corporation's most recent fiscal year ending prior to the time the determination is being made. 1.10 Subsidiary. "Subsidiary" shall mean any corporation or entity of which the Person in question owns not less than 50% of any class of equity securities, directly or indirectly. 1.11 Voting Shares. "Voting Shares" shall mean shares of the Corporation's capital stock entitled to vote generally in the election of directors. 1.12 Certain Determinations With Respect to Article NINTH. (1) A majority of the Continuing Directors shall have the conclusive power and authority to determine, for the purposes of this Article NINTH, on the basis of information known to them: (i) the number of Voting Shares of which any Person is the Beneficial Owner, (ii) whether a Person is an Affiliate or Associate of another, (iii) whether a Person has an agreement, arrangement or understanding with another as to the matters referred to in the definition of "Beneficial Owner" as hereinabove defined, (iv) whether the assets subject to any Business Combination constitute a "Substantial Part" as hereinabove defined, (v) whether two or more transactions constitute a "series of related transactions" as hereinabove defined, (vi) any matters referred to in subsection 1.12(2) below, and (vii) such other matters with respect to which a determination is required under this Article NINTH. Any such determination shall be final and binding for all purposes hereunder. (2) A Related Person shall be deemed to have acquired a Voting Share of the Corporation at the time when such Related Person became the Beneficial Owner thereof. With respect to Voting Shares owned by Affiliates, Associates or other Persons whose ownership is attributed to a Related Person under the foregoing definition of Beneficial Owner, if the price paid by such Related Person for such shares is not determinable, the price so paid shall be deemed to be the higher of (i) the price paid upon acquisition thereof by the Affiliate, Associate or other Person or (ii) the market price of the shares in question (as determined by a majority of the Continuing Directors) at the time when the Related Person became the Beneficial Owner thereof. (b) Approval of Certain Business Combinations. Whether or not a vote of the stockholders is otherwise required in connection with the transaction, neither the Corporation nor any of its Subsidiaries shall become a party to any Business Combination without prior compliance with the provisions of Section 1.1 or 1.2 or 1.3 hereinbelow, in addition to such additional vote of the Preferred Stock as may be required by the provisions of any series thereof or by applicable law. 1.1 Prior Approval by the Board of Directors. Such Business Combination was approved by the Board of Directors of the Corporation by the affirmative vote of at least 80% of the Board of Directors of the Corporation either (a) at a time prior to the acquisition of 10% or more of the outstanding Voting Shares of the Corporation by the Related Person, or (b) after such acquisition, but only so long as such Related Person sought and obtained the approval, by the affirmative vote of at least 80% of the Board of Directors of the Corporation, of the acquisition of 10% or more of the outstanding Voting Shares prior to such acquisition being consummated. 14 15 1.2 Approval by Continuing Directors and Additional Requirements. Such Business Combination (a) shall be approved at a meeting of the Board of Directors by the affirmative vote of 80% of the Continuing Directors and a majority of the Board of Directors, and (b) all of the conditions hereinafter set forth in subsections (1) through (5) shall be satisfied: (1) The ratio of (i) the aggregate amount of the cash and the fair market value of other consideration to be received per share of Common Stock in such Business Combination by holders of Common Stock other than the Related Person involved in such Business Combination, to (ii) the market price per share of the Common Stock immediately prior to the announcement of the proposed Business Combination, is at least as great as the ratio of (x) the highest per share price (including brokerage commissions, transfer taxes and soliciting dealers' fees) which such Related Person has theretofore paid in acquiring any Common Stock prior to such Business Combination, to (y) the market price per share of Common Stock immediately prior to the initial acquisition by such Related Person of any shares of Common Stock; and (2) The aggregate amount of the cash and the fair market value of other consideration to be received per share of Common Stock in such Business Combination by holders of Common Stock, other than the Related Person involved in such Business Combination, (i) is not less than the highest per share price (including brokerage commissions, transfer taxes and soliciting dealers' fees) paid by such Related Person in acquiring any of its holdings of Common Stock, (ii) is not less than the earnings per share of Common Stock for the four consecutive fiscal quarters of the Corporation immediately preceding the Date of Determination of such Business Combination multiplied by the then price/earnings multiple (if any) of such Related Person as customarily computed and reported in the financial community; provided, that for the purposes of this clause (ii), if more than one Person constitutes the Related Person involved in the Business Combination, the price/earnings multiple (if any) of the Person having the highest price/earnings multiple shall be used for the computation in this clause (ii), and (iii) is not less than the book value of a share of the Common Stock, as reflected in the balance sheet of the Corporation as of the last day of the last fiscal quarter of the Corporation preceding the Date of Determination; and (3) The consideration (if any) to be received in such Business Combination by holders of Common Stock other than the Related Person involved shall, except to the extent that a stockholder agrees otherwise as to all or part of the shares which he or she owns, be in the same form and of the same kind as the consideration paid by the Related Person in acquiring Common Stock already owned by it; and (4) After such Related Person became a Related Person and prior to the consummation of such Business Combination: (i) such Related Person shall have taken steps to ensure that the Board of Directors of the Corporation included at all times representation by Continuing Directors proportionate to the ratio that the number of Voting Shares of the Corporation from time to time owned by stockholders who are not Related Persons bears to all Voting Shares of the Corporation outstanding at the time in question (with a Continuing Director to occupy any resulting fractional position among the directors); (ii) such Related Person shall not have acquired from the Corporation, directly or indirectly, any shares of the Corporation (except (x) upon conversion of convertible securities acquired by it prior to becoming a Related Person or (y) as a result of a pro rata stock dividend, stock split or division of shares or (z) in a transaction consummated after this Article NINTH was added to these Articles of Incorporation and which satisfied all applicable requirements of this Article NINTH); (iii) such Related Person shall not have acquired any additional Voting Shares of the Corporation or securities convertible into or exchangeable for Voting Shares except as a part of the transaction which resulted in such Related Person's becoming a Related Person; and (iv) such Related Person shall not have (x) received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance or tax credits provided by the Corporation or any Subsidiary, or (y) made any major change in the Corporation's business or equity capital structure or entered into any contract, arrangement or understanding with the Corporation except any such change, contract, arrangement or understanding as may have been approved by the favorable vote of not less than 80% of the Continuing Directors and a majority of the Board of Directors of the Corporation; and 15 16 (5) A proxy statement complying with the requirements of the Securities Exchange Act of 1934 shall have been mailed to all holders of Voting Shares for the purpose of soliciting stockholder approval of such Business Combination. Such proxy statement shall contain at the front thereof, in a prominent place, any recommendations as to the advisability (or inadvisability) of the Business Combination which the Continuing Directors, or any of them, may have furnished in writing and, if deemed advisable by two thirds of the Continuing Directors, an opinion of a reputable investment banking firm as to the fairness (or lack of fairness) of the terms of such Business Combination from the point of view of the holders of Voting Shares other than any Related Person (such investment banking firm to be selected by two thirds of the Continuing Directors, to be furnished with all information it reasonably requests, and to be paid by the Corporation a reasonable fee for its services upon receipt by the Corporation of such opinion). For purposes of Sections 1.1 (1) and (2) hereof, in the event of a Business Combination upon consummation of which the Corporation would be the surviving corporation or company or would continue to exist (unless it is provided, contemplated or intended that as part of such Business Combination or within one year after consummation thereof a plan of liquidation or dissolution of the Corporation will be effected), the term "other consideration to be received" shall include (without limitation) Common Stock retained by stockholders of the Corporation other than Related Persons who are parties to such Business Combination. 1.3 Approval by Stockholders. If there is not full compliance with the provisions of Section 1.1 or 1.2 of paragraph (b) of this Article, such Business Combination shall be approved by the affirmative vote of 80% of the Voting Shares, voting as a single class; provided that a proxy statement complying with the requirements of the Securities Exchange Act of 1934 shall have been mailed to all holders of Voting Shares for the purpose of soliciting stockholder approval of such Business Combination. Such proxy statement shall contain at the front thereof, in a prominent place, any recommendations as to the advisability (or inadvisability) of the Business Combination which the Continuing Directors, or any of them, may have furnished in writing and, if deemed advisable by two thirds of the Continuing Directors, an opinion of a reputable investment banking firm as to the fairness (or lack of fairness) of the terms of such Business Combination from the point of view of the holders of Voting Shares other than any Related Person (such investment banking firm to be selected by two thirds of the Continuing Directors, to be furnished with all information it reasonably requests, and to be paid a reasonable fee by the Corporation for its services upon receipt by the Corporation of such opinion). (c) Amendments to this Article NINTH. Notwithstanding any other provisions of these Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Articles of Incorporation or the Bylaws of the Corporation), and in addition to such additional vote of the Preferred Stock as may be required by the provisions of any series thereof or by applicable law, this Article NINTH shall not be amended, altered, changed or repealed without: (1) The affirmative vote of 80% of the Board of Directors and a majority of the Continuing Directors, and (2) The affirmative vote as to all stock held by the holders of 80% or more of the outstanding Voting Shares, voting separately as a class. (d) Amendments Recommended by Directors. The provisions of paragraph (c) of this Article NINTH shall not apply to, and the vote referred to therein shall not be required for, any amendment, addition, alteration or repeal of any provision of this Article NINTH that is recommended to the stockholders by the favorable vote of (1) a majority of the Board of Directors, and (2) not less than 80% of the Continuing Directors, and any such amendment, addition, alteration or repeal so recommended shall require only the vote, if any, required under the applicable provisions of the Rhode Island Business Corporation Law. 16 17 TENTH: (a) No director of the Corporation shall be liable to the Corporation or to its stockholders for monetary damages for breach of the director's duty as a director; provided, however, that this Article TENTH shall not eliminate or limit the liability of a director: (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) the liability imposed pursuant to the provisions of R.I.G.L. Section 7-1.1-43 (as in effect or as hereafter amended); or (iv) for any transaction from which the director derived an improper personal benefit unless said transaction is permitted by R.I.G.L. Section 7-1.1-37.1 (as in effect or as hereafter amended). If the Rhode Island General Laws are amended after the adoption of this Article TENTH to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of each director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Rhode Island General Laws, as so amended. Neither the amendment nor repeal of this Article TENTH nor the adoption of any provision of these Articles of Incorporation inconsistent with this Article TENTH shall eliminate or reduce the effect of this Article TENTH in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article TENTH, would occur or arise, prior to such amendment, repeal or adoption of an inconsistent provision. (b) Notwithstanding any other provision of these Articles of Incorporation, including Section EIGHTH (a), or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Articles of Incorporation or the Bylaws of the Corporation), and in addition to such additional vote of the Preferred Stock as may be required by the provisions of any series thereof or by applicable law, this Article TENTH shall not be amended, altered, changed or repealed without: (1) the affirmative vote of 80% of the Board of Directors and a majority of Continuing Directors (as defined in Article SEVENTH of these Articles of Incorporation), and (2) the affirmative vote as to all stock held by the holders of 80% or more of the outstanding Voting Shares (as defined in Article SEVENTH of these Articles of Incorporation), voting separately as a class. ELEVENTH: The Restated Articles of Incorporation correctly set forth without change the corresponding provisions of the Articles of Incorporation as heretofore amended, and supersede the original Articles of Incorporation and all amendments thereto. FLEET FINANCIAL GROUP, INC. Date: June , 1995 By ........................ Its President and........................ Its Secretary STATE OF RHODE ISLAND Sc. COUNTY OF PROVIDENCE At Providence in said county on this day of June, 1995, personally appeared before me Terrence Murray, who being by me first duly sworn, declared that he is the President of Fleet Financial Group, Inc., that he signed the foregoing document as President of the Corporation, and that the statements therein contained are true. ------------------------------------ [Notarial Seal] 17 18 STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS OFFICE OF THE SECRETARY OF STATE RESTATED ARTICLES OF INCORPORATION OF FLEET FINANCIAL GROUP, INC. I, , Acting Deputy Secretary of State, hereby certify that duplicate originals of Restated Articles of Incorporation of Fleet Financial Group, Inc., duly signed and verified pursuant to the provisions of Chapter 7-1.1 of the General Laws, 1956, as amended, have been received in this office and are found to conform to law, and that the foregoing is a duplicate original of the Restated Articles of Incorporation. Witness my hand and the seal of the State of Rhode Island this day of June, 1995. ------------------------------------ Acting Deputy Secretary of State [State Seal] - ------------------------------ DEPARTMENT OF STATE OFFICE OF SECRETARY OF STATE PROVIDENCE, R.I. - ------------------------------ RECEIVED & FILED JUNE , 1995. 18 19 EXHIBIT A FLEET FINANCIAL GROUP, INC. SERIES III 10.12% PERPETUAL PREFERRED STOCK (a) DESIGNATION. The designation of the series of Preferred Stock shall be "Series III 10.12% Perpetual Preferred Stock" (hereinafter called this "Series") and the number of shares constituting this Series is One Million One Hundred Thousand (1,100,000). (b) DIVIDEND RATE. (1) The holders of shares of this Series shall be entitled to receive dividends thereon at a rate of 10.12% per annum computed on the basis of an issue price thereof of $100 per share, and no more, payable quarterly out of the funds of the Corporation legally available for the payment of dividends. Such dividends shall be cumulative from the date of original issue of such shares and shall be payable, when, as and if declared by the Board, on March 1, June 1, September 1 and December 1 of each year, commencing September 1, 1991. Each such dividend shall be paid to the holders of record of shares of this Series as they appear on the stock register of the Corporation on such record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board. Dividends on account of arrears for any past quarters may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board. (2) No full dividends shall be declared or paid or set apart for payment on the Preferred Stock of any series ranking, as to dividends, on a parity with or junior to this Series for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on this Series for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of this Series and any other preferred stock ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any other class or series of preferred stock of the Corporation ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other preferred stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other preferred stock bear to each other. Holders of shares of this Series shall not be entitled to any dividend, whether payable in cash, property or stocks, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (3) So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation and other than as provided in paragraph (2) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a parity with this Series as to dividends or upon liquidation, nor shall any Common Stock nor any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of this Series shall have been paid for all past dividend payment periods. (4) Dividends payable on this Series for any period, including the period from the original issue of such shares until September 1, 1991, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. A-1 20 (c) REDEMPTION. (1) The shares of this Series shall not be redeemable prior to June 1, 1996. On and after June 1, 1996, the Corporation, at its option, may redeem shares of this Series, as a whole or in part, at any time or from time to time, at a redemption price per share as follows: If redeemed during the twelve-month period beginning June 1, 1996 -- $105.060 per share If redeemed during the twelve-month period beginning June 1, 1997 -- $104.048 per share If redeemed during the twelve-month period beginning June 1, 1998 -- $103.036 per share If redeemed during the twelve-month period beginning June 1, 1999 -- $102.024 per share If redeemed during the twelve-month period beginning June 1, 2000 -- $101.012 per share If redeemed at any time from and after June 1, 2001 -- $100.000 per share plus, in each case, accrued and unpaid dividends thereon to the date fixed for redemption. (2) In the event that fewer than all the outstanding shares of this Series are to be redeemed, the number of shares to be redeemed shall be determined by the Board and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board or by any other method as may be determined by the Board in its sole discretion to be equitable. (3) In the event the Corporation shall redeem shares of this Series, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (4) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the shares of this Series so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the aforesaid redemption price. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (5) Notwithstanding the foregoing provisions of this Section (c), if any dividends on this Series are in arrears, no shares of this Series shall be redeemed unless all outstanding shares of this Series are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Series; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of this Series pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of this Series. (d) LIQUIDATION RIGHTS. (1) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the shares of this Series shall be entitled to receive and be paid out of the assets of the Corporation available for distribution to its stockholders, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the shares of this Series upon liquidation, the amount of $100 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. A-2 21 (2) Neither the sale of all or substantially all the property or business of the Corporation nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section (d). (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (d), the holders of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (d), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (e) CONVERSION OR EXCHANGE. The holders of shares of this Series shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. (f) VOTING. The shares of this Series shall not have any voting powers, either general or special, except that: (1) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Articles of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of the Voting Powers, Designations, Preferences and Relative, Participating, Optional or Other Special Rights, and the Qualifications, Limitations or Restrictions thereof, or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of this Series; (2) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series and all other series of Preferred Stock ranking on a parity with shares of this Series, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting, increasing or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the shares of this Series as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares. (3) If, at the time of any annual meeting of stockholders for the election of directors, a default in preference dividends on any series of the Preferred Stock or any other class or series of preferred stock of the Corporation (other than the Corporation's Series II 6 1/2% Cumulative Convertible Preferred Stock (the "Series II Preferred") and any other class or series of the Corporation's preferred stock expressly entitled to elect additional directors to the Board by a vote separate and distinct from the vote provided for in this paragraph (3) ("Voting Preferred")) shall exist, the number of directors constituting the Board shall be increased by two (without duplication of any increase made pursuant to the terms of any other class or series of the Corporation's preferred stock other than the Series II Preferred and any Voting Preferred) and the holders of the Corporation's preferred stock of all classes and series (other than the A-3 22 Series II Preferred and any such Voting Preferred) shall have the right at such meeting, voting together as a single class without regard to class or series, to the exclusion of the holders of Common Stock, the Series II Preferred and the Voting Preferred, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon shares of any class or series of the Corporation's preferred stock ranking prior to or on a parity with shares of this Series as to dividends (other than the Series II Preferred and any Voting Preferred). Each director elected by the holders of shares of any series of the Preferred Stock or any other class or series of the Corporation's preferred stock in an election provided for by this paragraph (3) (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of the Corporation's preferred stock entitled to have originally voted for such director's election, voting together as a single class without regard to class or series, at a meeting of the stockholders, or of the holders of shares of the Corporation's preferred stock, called for that purpose. So long as a default in any preference dividends on any series of the Preferred Stock or any other class or series of preferred stock of the Corporation shall exist (other then the Series II Preferred and any Voting Preferred) (A) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (B)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (B) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of the Corporation's preferred stock entitled to have originally voted for the removed director's election, voting together as a single class without regard to class or series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid shall be deemed for all purposes hereto to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board shall be reduced by two. For purposes hereof, a "default in preference dividends" on any series of the Preferred Stock or any other class or series of preferred stock of the Corporation shall be deemed to have occurred whenever the amount of accrued dividends upon such class or series of the Corporation's preferred stock shall be equivalent to six full quarterly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all such shares of the Corporation's preferred stock of each and every series then outstanding (other than the Series II Preferred, any Voting Preferred or shares of any class or series ranking junior to shares of this Series as to dividends) shall have been paid to the end of the last preceding quarterly dividend period. (g) REACQUIRED SHARES. Shares of this Series which have been issued and reacquired through redemption or purchase shall, upon compliance with an applicable provision of the Rhode Island Business Corporation Act, have the status of authorized and unissued shares of Preferred Stock and may be reissued, but only as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board. (h) RELATION TO EXISTING PREFERRED CLASSES OF STOCK. Shares of this Series are equal in rank and preference with all other series of the Preferred Stock outstanding on the date of original issue of the shares of this Series and the Preferred Stock with Cumulative and Adjustable Dividends, $20.00 par value, and are senior in rank and preference to the Common Stock and the Cumulative Participating Junior Preferred Stock of the Corporation. (i) RELATION TO OTHER PREFERRED CLASSES OF STOCK. For purposes of this resolution, any stock of any class or classes of the Corporation shall be deemed to rank: (1) prior to the shares of this Series, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of this Series; (2) on a parity with shares of this Series, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund A-4 23 provisions, if any, be different from those of this Series, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (3) junior to the shares of this Series, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes. A-5 24 EXHIBIT B FLEET FINANCIAL GROUP, INC. SERIES IV 9.375% PERPETUAL PREFERRED STOCK (a) DESIGNATION. The designation of the series of Preferred Stock shall be "Series IV 9.375% Perpetual Preferred Stock" (hereinafter called this "Series") and the number of shares constituting this Series is One Million (1,000,000). (b) DIVIDEND RATE. (1) The holders of shares of this Series shall be entitled to receive dividends thereon at a rate of 9.375% per annum computed on the basis of an issue price thereof of $100 per share, and no more, payable quarterly out of the funds of the Corporation legally available for the payment of dividends. Such dividends shall be cumulative from the date of original issue of such shares and shall be payable, when, as and if declared by the Board, on March 1, June 1, September 1 and December 1 of each year, commencing March 1, 1992. Each such dividend shall be paid to the holders of record of shares of this Series as they appear on the stock register of the Corporation on such record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board. Dividends on account of arrears for any past quarters may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board. (2) No full dividends shall be declared or paid or set apart for payment on the Preferred Stock of any series ranking, as to dividends, on a parity with or junior to this Series for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on this Series for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of this Series and any other preferred stock ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any other class or series of preferred stock of the Corporation ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other preferred stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other preferred stock bear to each other. Holders of shares of this Series shall not be entitled to any dividend, whether payable in cash, property or stocks, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (3) So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation and other than as provided in paragraph (2) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a parity with this Series as to dividends or upon liquidation, nor shall any Common Stock nor any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of this Series shall have been paid for all past dividend payment periods. (4) Dividends payable on this Series for any period, including the period from the original issue of such shares until March 1, 1992, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. B-1 25 (c) REDEMPTION. (1) The shares of this Series shall not be redeemable prior to December 1, 1996. On and after December 1, 1996, the Corporation, at its option, may redeem shares of this Series, in whole or in part, at any time or from time to time, at a redemption price of $100 per share, plus accrued and unpaid dividends thereon to the date fixed for redemption. (2) In the event that fewer than all the outstanding shares of this Series are to be redeemed, the number of shares to be redeemed shall be determined by the Board and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board or by any other method as may be determined by the Board in its sole discretion to be equitable. (3) In the event the Corporation shall redeem shares of this Series, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (4) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the shares of this Series so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the aforesaid redemption price. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (5) Notwithstanding the foregoing provisions of this Section (c), if any dividends on this Series are in arrears, no shares of this Series shall be redeemed unless all outstanding shares of this Series are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Series; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of this Series pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of this Series. (d) LIQUIDATION RIGHTS. (1) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the shares of this Series shall be entitled to receive and be paid out of the assets of the Corporation available for distribution to its stockholders, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the shares of this Series upon liquidation, the amount of $100 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) Neither the sale of all or substantially all the property or business of the Corporation nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section (d). (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (d), the holders of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. B-2 26 (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (d), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (e) CONVERSION OR EXCHANGE. The holders of shares of this Series shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. (f) VOTING. The shares of this Series shall not have any voting powers, either general or special, except that: (1) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Articles of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of the Voting Powers, Designations, Preferences and Relative, Participating, Optional or Other Special Rights, and the Qualifications, Limitations or Restrictions thereof, or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of this Series; (2) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series and all other series of Preferred Stock ranking on a parity with shares of this Series, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting, increasing or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the shares of this Series as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares. (3) If, at the time of any annual meeting of stockholders for the election of directors, a default in preference dividends on any series of the Preferred Stock or any other class or series of preferred stock of the Corporation (other than the Corporation's Series II 6 1/2% Cumulative Convertible Preferred Stock (the "Series II Preferred") and any other class or series of the Corporation's preferred stock expressly entitled to elect additional directors to the Board by a vote separate and distinct from the vote provided for in this paragraph (3) ("Voting Preferred")) shall exist, the number of directors constituting the Board shall be increased by two (without duplication of any increase made pursuant to the terms of any other class or series of the Corporation's preferred stock other than the Series II Preferred and any Voting Preferred) and the holders of the Corporation's preferred stock of all classes and series (other than the Series II Preferred and any such Voting Preferred) shall have the right at such meeting, voting together as a single class without regard to class or series, to the exclusion of the holders of Common Stock, the Series II Preferred and the Voting Preferred, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon shares of any class or series of the Corporation's preferred stock ranking prior to or on a parity with shares of this Series as to dividends (other than the Series II Preferred and any Voting Preferred). Each director elected by the holders of shares of any series of the Preferred Stock or any other class or series of the Corporation's preferred stock in an election provided for by this paragraph (3) (herein called a "Preferred Director") B-3 27 shall continue to serve as such director for the full term for which he shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of the Corporation's preferred stock entitled to have originally voted for such director's election, voting together as a single class without regard to class or series, at a meeting of the stockholders, or of the holders of shares of the Corporation's preferred stock, called for that purpose. So long as a default in any preference dividends on any series of the Preferred Stock or any other class or series of preferred stock of the Corporation shall exist (other than the Series II Preferred and any Voting Preferred) (A) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (B)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (B) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of the Corporation's preferred stock entitled to have originally voted for the removed director's election, voting together as a single class without regard to class or series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid shall be deemed for all purposes hereto to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board shall be reduced by two. For purposes hereof, a "default in preference dividends" on any series of the Preferred Stock or any other class or series of preferred stock of the Corporation shall be deemed to have occurred whenever the amount of accrued dividends upon such class or series of the Corporation's preferred stock shall be equivalent to six full quarterly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all such shares of the Corporation's preferred stock of each and every series then outstanding (other than the Series II Preferred, any Voting Preferred or shares of any class or series ranking junior to shares of this Series as to dividends) shall have been paid to the end of the last preceding quarterly dividend period. (g) REACQUIRED SHARES. Shares of this Series which have been issued and reacquired through redemption or purchase shall, upon compliance with an applicable provision of the Rhode Island Business Corporation Act, have the status of authorized and unissued shares of Preferred Stock and may be reissued but only as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board. (h) RELATION TO EXISTING PREFERRED CLASSES OF STOCK. Shares of this Series are equal in rank and preference with all other series of the Preferred Stock outstanding on the date of original issue of the shares of this Series and the Preferred Stock with Cumulative and Adjustable Dividends, $20.00 par value, and are senior in rank and preference to the Common Stock and the Cumulative Participating Junior Preferred Stock of the Corporation. (i) RELATION TO OTHER PREFERRED CLASSES OF STOCK. For purposes of this resolution, any stock of any class or classes of the Corporation shall be deemed to rank: (1) prior to the shares of this Series, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of this Series; (2) on a parity with shares of this Series, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be different from those of this Series, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (3) junior to the shares of this Series, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes. B-4 28 EXHIBIT C FLEET FINANCIAL GROUP, INC. DUAL CONVERTIBLE PREFERRED STOCK (a) DESIGNATION. The designation of this series of Preferred Stock shall be "Dual Convertible Preferred Stock" (the "Dual Convertible Preferred Stock") consisting of 1,415,000 shares. The stated value of the Dual Convertible Preferred Stock shall be $200 per share. (b) RANK. The Dual Convertible Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank prior to the Common Stock, par value $1.00 per share (the "Common Stock"), of the Corporation. (All equity securities of the Corporation to which the Dual Convertible Preferred Stock ranks prior with respect to dividend rights and rights on liquidation, winding up and dissolution, including the Common Stock, are collectively referred to herein as the "Junior Securities", all equity securities of the Corporation with which the Dual Convertible Preferred Stock ranks on a parity with respect to dividend rights and rights on liquidation, winding up and dissolution are collectively referred to herein as the "Parity Securities" and all equity securities of the Corporation to which the Dual Convertible Preferred Stock ranks junior, whether with respect to dividends or upon liquidation, dissolution, winding-up or otherwise, are collectively referred to herein as the "Senior Securities.") The Dual Convertible Preferred Stock shall be subject to the creation of Junior Securities, Parity Securities and Senior Securities, subject, in the case of Senior Securities, to obtaining the approval of the holders of the shares of the Dual Convertible Preferred Stock in accordance with paragraph (h). (c) DIVIDENDS. (i) The holders of the shares of Dual Convertible Preferred Stock shall be entitled to receive, out of funds legally available for the payment of dividends, cumulative dividends in an amount equal to 50% of the dividends declared on the common stock, par value $.01 per share ("Holding Common Stock"), of Fleet/Norstar Holding Company, Inc., a Rhode Island corporation ("Holding"), and its successor or assign; provided, however, that dividends shall not become payable on the shares of the Dual Convertible Preferred Stock until an aggregate of $15 million of dividends have been declared by Holding and shall only become payable to the extent of dividends declared by Holding in excess of such amount; and, provided further, that the amount of such dividends shall be subject to reduction in accordance with paragraph (f) (iv); and, provided further, that dividends shall not become payable on the shares of the Dual Convertible Preferred Stock as a result of the declaration of the Dividend Note (as hereinafter defined) or other amounts payable as dividends by Holding to the Corporation pursuant to the Tax Allocation Agreement (as hereinafter defined). Such dividends shall be payable from time to time as declared by the Board (each of such dates being a "dividend payment date"), in preference to dividends on the Junior Securities. Such dividends shall be paid to the holders of record at the close of business on the tenth business day immediately preceding each dividend payment date (each of such dates being a "dividend payment record date"). Each of such dividends shall be fully cumulative and shall accrue without interest, until paid. (ii) All dividends paid with respect to shares of the Dual Convertible Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to the holders entitled thereto. (iii) No full dividends shall be declared by the Board of Directors or paid or set apart for payment by the Corporation on any Parity Securities for any period unless full cumulative accrued dividends have been or contemporaneously are declared and paid or declared and a sum set apart sufficient for such payment on the Dual Convertible Preferred Stock. If any dividends are not paid in full upon the shares of the Dual Convertible Preferred Stock and any other Parity Securities, all dividends declared upon shares of the Dual Convertible Preferred Stock and any other Parity Securities shall be declared pro rata so that the amount of dividends declared per share of the Dual Convertible Preferred Stock and such Parity Securities shall in all cases bear to each other the same ratio that accrued dividends per share on the Dual Convertible Preferred Stock and such Parity Securities bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Dual Convertible Preferred Stock or any other Parity Securities which may be in arrears. Any dividend not paid pursuant to paragraph (c)(i) hereof or this C-1 29 paragraph (c)(iii) shall be fully cumulative and shall accrue (whether or not declared), without interest, as set forth in paragraph (c)(i) hereof. (iv) (A) Holders of shares of the Dual Convertible Preferred Stock shall be entitled to receive the dividends provided for in paragraph (c)(i) hereof in preference to and in priority over any dividends upon any of the Junior Securities. (B) So long as any shares of the Dual Convertible Preferred Stock are outstanding, the Board of Directors shall not declare, and the Corporation shall not pay or set apart for payment, any dividend on any of the Junior Securities or make any payment on account of, or set apart for payment money for a sinking or other similar fund for, the repurchase, redemption or other retirement of, any of the Junior Securities or Parity Securities or any warrants, rights or options exercisable for or convertible into any of the Junior Securities or Parity Securities, or make any distribution in respect of the Junior Securities, either directly or indirectly, and whether in cash, obligations or shares of the Corporation or other property (other than distributions or dividends in Junior Securities to the holders of Junior Securities), and shall not permit any corporation or other entity directly or indirectly controlled by the Corporation to purchase or redeem any of the Junior Securities or Parity Securities or any warrants, rights, calls or options exercisable for or convertible into any of the Junior Securities or Parity Securities unless prior to or concurrently with such declaration, payment, setting apart for payment, repurchase, redemption or other retirement or distribution, as the case may be, all accrued and unpaid dividends on shares of the Dual Convertible Preferred Stock not paid on the dates provided for in paragraph (c) (i) hereof shall have been or be paid; provided, however, that the foregoing restriction shall not prohibit the Corporation from redeeming the rights outstanding under that certain Rights Agreement dated as of November 21, 1990, as amended, between the Corporation and Fleet National Bank, for a redemption price not in excess of $.01 per right. (d) PAYMENT IN LIQUIDATION. (i) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of shares of Dual Convertible Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its shareholders an amount in cash equal to $200 for each share outstanding, plus an amount in cash equal to all accrued but unpaid dividends thereon to the date of liquidation, dissolution or winding up, before any payment shall be made or any assets distributed to the holders of any of the Junior Securities. If the assets of the Corporation are not sufficient to pay in full the liquidation payments payable to the holders of outstanding shares of the Dual Convertible Preferred Stock and any Parity Securities, then the holders of all such shares shall share ratably in such distribution of assets in accordance with the amount which would be payable on such distribution if the amounts to which the holders of outstanding shares of Dual Convertible Preferred Stock and the holders of outstanding shares of such Parity Securities are entitled were paid in full. (ii) For the purposes of this paragraph (d), neither the voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with or into one or more other corporations nor the consolidation or merger of one or more corporations with or into the Corporation shall be deemed to be a voluntary or involuntary liquidation, dissolution or winding up. (e) COMMON STOCK CONVERSION. (i) Upon the terms and in the manner set forth in this paragraph (e) and subject to the provisions for adjustment contained in paragraph (e) (vii), (A) the shares of the Dual Convertible Preferred Stock shall be convertible, in whole, but not in part, at the option of the holders thereof, at any time after the date that is one year after the Issue Date (as hereinafter defined) and (B) each share of the Dual Convertible Preferred Stock shall be convertible, from time to time in part, after the date that is ten years after the Issue Date, or such earlier date as provided in paragraph (e)(ii), in either case, upon surrender to the Corporation of the certificates for the shares to be converted, into a number of fully paid and nonassessable shares of Common Stock equal to the aggregate stated value of the Dual Convertible Preferred Stock to be converted divided by a conversion price (the "Conversion Price") of $17.65. As used herein, the term "Issue Date" shall mean the date of initial issuance of the Dual Convertible Preferred Stock. (ii) If, prior to the date that is one year after the Issue Date, there occurs a sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property C-2 30 or assets of the Corporation or a consolidation or merger of the Corporation with or into another corporation in which the shares of Common Stock are converted into cash, assets or securities (other than shares of Common Stock where the Corporation is the surviving corporation), the time when the conversion rights of holders of shares of Dual Convertible Preferred Stock into Common Stock become effective shall be accelerated and such conversion rights shall be effective at and after a time at least 20 business days prior to the consummation of such transaction. (iii) In order to convert shares of the Dual Convertible Preferred Stock into Common Stock, (x) if such shares are converted in whole, but not in part, pursuant to paragraph (e)(i)(A) above, there shall be delivered to the Corporation written evidence reasonably satisfactory to it that the holders of a majority of the shares of Dual Convertible Preferred Stock have elected to convert the Dual Convertible Preferred Stock into Common Stock (the "Common Stock Conversion Election"), and (y) if such shares are converted in part, the holder thereof shall deliver a properly completed and duly executed written notice of election to convert specifying the number (in whole shares) of the shares of the Dual Convertible Preferred Stock to be converted. In either case, each holder of shares of the Dual Convertible Preferred Stock shall (A) deliver a written notice to the Corporation at its principal office or at the office of the agency which may be maintained for such purpose (the "Common Stock Conversion Agent") specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued, (B) surrender the certificate for such shares of Dual Convertible Preferred Stock to the Corporation or the Common Stock Conversion Agent, accompanied, if so required by the Corporation or the Common Stock Conversion Agent, by a written instrument or instruments of transfer in form reasonably satisfactory to the Corporation or the Common Stock Conversion Agent duly executed by the holder or his attorney duly authorized in writing, and (C) pay any transfer or similar tax required by paragraph (e)(ix). (iv) (A) A "Common Stock Conversion" shall be deemed to have been effected at the close of business on the date (the "Common Stock Conversion Date") on which the Corporation or the Common Stock Conversion Agent shall have received (x) the written notice of Common Stock Conversion Election or (y) a notice of election to convert, a surrendered certificate, any required payments contemplated by paragraph (e) (ix) below, and all other required documents. Immediately upon conversion, the rights of the holders of converted shares of Dual Convertible Preferred Stock shall cease and the persons entitled to receive the shares of Common Stock upon the conversion of such shares of Dual Convertible Preferred Stock shall be treated for all purposes as having become the beneficial owners of such shares of Common Stock; provided, however, that such persons shall be entitled to receive when paid dividends accrued on such shares of Dual Convertible Preferred Stock to the last preceding dividend payment date and unpaid as of the date of such conversion. A Common Stock Conversion shall be at the Conversion Price in effect on such date, unless the stock transfer books of the Corporation shall be closed on that date, in which event such person or persons shall be deemed to have become such holder or holders of record of the Common Stock at the close of business on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Conversion Price in effect on the Common Stock Conversion Date. (B) As promptly as practicable after the Common Stock Conversion Date, the Corporation shall deliver or cause to be delivered at the office or agency of the Common Stock Conversion Agent, to or upon the written order of the holders of the surrendered shares of Dual Convertible Preferred Stock, a certificate or certificates representing the number of fully paid and nonassessable shares of Common Stock, with no personal liability attaching to the ownership thereof, free of all taxes with respect to the issuance thereof, liens, charges and security interests and not subject to any preemptive rights, into which such shares of Dual Convertible Preferred Stock have been converted in accordance with the provisions of this paragraph (e), and any cash payable in respect of fractional shares as provided in paragraph (e)(v). (C) Upon the surrender of a certificate representing shares of Dual Convertible Preferred Stock that is converted in part, the Corporation shall issue or cause to be issued for the holder a new certificate representing shares of Dual Convertible Preferred Stock equal in number to the unconverted portion of the shares of Dual Convertible Preferred Stock represented by the certificate so surrendered. C-3 31 (v) No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon the conversion or redemption of any shares of Dual Convertible Preferred Stock. Instead of any fractional interest in a share of Common Stock which would otherwise be deliverable upon the conversion or redemption of a share of Dual Convertible Preferred Stock, the Corporation shall pay to the holder of such share (a "Fractional Shareholder") an amount in cash (computed to the nearest cent) equal to the current market price (as defined in paragraph (e)(vii)(E) below) thereof on the business day next preceding the day of conversion or redemption. If more than one share shall be surrendered for conversion or redemption at one time by the same holder, the number of full shares of Common Stock issuable upon conversion or redemption thereof shall be computed on the basis of the aggregate stated value of the shares of Dual Convertible Preferred Stock so surrendered. (vi) The holders of shares of Dual Convertible Preferred Stock at the close of business on a dividend payment record date shall be entitled to receive the dividend payable on such shares on the corresponding dividend payment date notwithstanding the conversion thereof or the Corporation's default in payment of the dividend due on such dividend payment date. (vii) The Conversion Price shall be subject to adjustment as follows: (A) If the Corporation shall (1) declare or pay a dividend on its outstanding Common Stock in shares of Common Stock or make a distribution to holders of its Common Stock in shares of Common Stock, (2) subdivide its outstanding shares of Common Stock into a greater number of shares of Common Stock, (3) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (4) issue by reclassification of its shares of Common Stock other securities of the Corporation, then the Conversion Price in effect immediately prior thereto shall be adjusted so that the holder of any shares of Dual Convertible Preferred Stock thereafter converted shall be entitled to receive the number and kind of shares of Common Stock or other securities that the holder would have owned or have been entitled to receive after the happening of any of the events described above had such shares of Dual Convertible Preferred Stock been converted immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this paragraph (e)(vii)(A) shall become effective on the date of the dividend payment, subdivision, combination or issuance retroactive to the record date with respect thereto, if any, for such event. Such adjustment shall be made successively. (B) If the Corporation shall issue to all holders of its Common Stock rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase shares of Common Stock at a price per share that is lower than the then current market price per share of Common Stock (as defined in paragraph (e)(vii)(E) below), then the Conversion Price shall be adjusted in accordance with the following formula: (N x P) ------- AC = C x 0 + (M) -------------- 0 + N where AC = the adjusted Conversion Price. C = the current Conversion Price. 0 = the number of shares of Common Stock outstanding on the record date. N = the number of additional shares of Common Stock offered. P = the offering price per share of the additional shares. M = the current market price per share of Common Stock on the record date.
The adjustment shall be made successively whenever any such rights, options, warrants or convertible or exchangeable securities are issued, and shall become effective immediately after the record date for the determination of shareholders entitled to receive the rights, options, warrants or convertible or exchangeable securities. (C) Upon the expiration of any rights, options, warrants or convertible or exchangeable securities issued by the Corporation to all holders of its Common Stock which caused an adjustment to the C-4 32 Conversion Price pursuant to paragraph (e) (vii) (B), if any thereof shall not have been exercised, then the Conversion Price shall be increased by the amount of the initial adjustment of the Conversion Price pursuant to paragraph (e) (vii) (B) in respect of such expired rights, options, warrants or convertible or exchangeable securities. (D) If the Corporation shall distribute to all holders of its outstanding Common Stock any shares of capital stock of the Corporation (other than Common Stock) or evidences of indebtedness or assets (excluding ordinary cash dividends and dividends or distributions referred to in paragraphs (e) (vii) (A) and (B) above) or rights or warrants to subscribe for or purchase any of its securities (excluding those referred to in paragraph (e) (vii) (B) above), (any of the foregoing being hereinafter in this paragraph (e) (vii) (D) called the "Securities or Assets"), then in each such case, unless the Corporation elects to reserve shares or other units of such Securities or Assets for distribution to the holders of the Dual Convertible Preferred Stock upon the conversion of the shares of Dual Convertible Preferred Stock so that any such holder converting shares of Dual Convertible Preferred Stock will receive upon such conversion, in addition to the shares of the Common Stock to which such holder is entitled, the amount and kind of such Securities or Assets which such holder would have received if such holder had, immediately prior to the record date for the distribution of the Securities or Assets, converted its shares of Dual Convertible Preferred Stock into Common Stock, the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the date of such distribution by a fraction of which the numerator shall be the current market price per share (as defined in paragraph (e) (vii) (E) below) of the Common Stock on the record date mentioned below less the then fair market value (as determined by the Board in good faith) of the portion of the capital stock or assets or evidences of indebtedness so distributed or of such rights or warrants applicable to one share of Common Stock, and of which the denominator shall be the current market price per share of the Common Stock on such record date; provided, however, that if the then fair market value (as so determined) of the portion of the Securities or Assets so distributed applicable to one share of Common Stock is equal to or greater than the current market price per share of the Common Stock on the record date mentioned above, in lieu of the foregoing adjustment, adequate provision shall be made so that each holder of shares of the Dual Convertible Preferred Stock shall have the right to receive the amount and kind of Securities and Assets such holder would have received had such holder converted each such share of the Dual Convertible Preferred Stock immediately prior to the record date for the distribution of the Securities or Assets. Such adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution. (E) For the purposes of any computation under paragraph (e) (vii), and for the purposes of paragraphs (e) (v) and (g)(ii), the current market price per share of Common Stock at any date shall be deemed to be the average of the daily closing prices for the 20 consecutive trading days commencing on the 30th trading day prior to the date in question. The closing price for each day shall be (i) if the Common Stock is listed or admitted to trading on a national securities exchange, the closing price on the New York Stock Exchange Consolidated Tape (or any successor composite tape reporting transactions on national securities exchanges) or, if such a composite tape shall not be in use or shall not report transactions in the Common Stock, the last reported sales price regular way on the principal national securities exchange on which the Common Stock is listed or admitted to trading (which shall be the national securities exchange on which the greatest number of shares of Common Stock has been traded during such 20 consecutive trading days), or, if there is no transaction on any such day in any such situation, the mean of the bid and asked prices on such day or, (ii) if the Common Stock is not listed or admitted to trading on any such exchange, the closing price, if reported, or, if the closing price is not reported, the average of the closing bid and asked prices as reported by the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or, (iii) if bid and asked prices for the Common Stock on each such day shall not have been reported through NASDAQ, the average of the bid and asked prices for such date as furnished by any three New York Stock Exchange member firms regularly making a market in the Common Stock and not affiliated with the Corporation selected for such purpose by the Board or, (iv) if no such quotations are available, the fair market value of the Common C-5 33 Stock as determined by a New York Stock Exchange member firm regularly making a market in the Common Stock selected for such purpose by the Board. (F) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% of such price; provided, however, that any adjustments which by reason of this paragraph (e) (vii) (F) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this paragraph (e) (vii) shall be made to the nearest one hundredth of a cent or to the nearest one-hundredth of a share, as the case may be. (G) If the Corporation shall be a party to any transaction, including without limitation a merger, consolidation, sale of all or substantially all of the Corporation's assets, liquidation or recapitalization of the Common Stock (each of the foregoing being referred to as a "Transaction"), in each case (except in the case of a Common Stock Fundamental Change (as hereinafter defined)) as a result of which shares of Common Stock shall be converted into the right to receive stock, securities or other property (including cash or any combination thereof), in addition to the right to exchange the Dual Convertible Preferred Stock for Holding Common Stock, which shall survive the consummation of any such Transaction, each share of Dual Convertible Preferred Stock shall thereafter be convertible into the kind and amount of shares of stock and other securities and property receivable (including cash) upon the consummation of such Transaction by a holder of that number of shares of Common Stock into which one share of Dual Convertible Preferred Stock was convertible immediately prior to such Transaction. The Corporation shall not be a party to any Transaction unless the terms of such Transaction are consistent with the provisions of this paragraph (e) (vii) (G) and it shall not consent or agree to the occurrence of any Transaction until the corporation has entered into an agreement with the successor or purchasing entity, as the case may be, for the benefit of the holders of the Dual Convertible Preferred Stock, which shall contain provisions (i) enabling the holders of the Dual Convertible Preferred Stock to convert into the consideration received by holders of Common Stock at the Conversion Price immediately after such Transaction and (ii) acknowledging the right of the Dual Convertible Preferred Stock to be exchanged for Holding Common Stock and assuming any obligations with respect thereto. The provisions of this paragraph (e) (vii) (G) shall similarly apply to successive Transactions. (H) In the event of a Common Stock Fundamental Change, in addition to the right to exchange the Dual Convertible Preferred Stock for Holding Common Stock, which shall survive the consummation of any such Common Stock Fundamental Change, each share of Dual Convertible Preferred Stock shall be convertible into common stock of the kind received by holders of Common Stock as the result of such Common Stock Fundamental Change. The Conversion Price immediately following such Common Stock Fundamental Change shall be the Conversion Price in effect immediately prior to such Common Stock Fundamental Change multiplied by a fraction, the numerator of which is the Purchaser Stock Price (as hereinafter defined) and the denominator of which is the Applicable Price (as hereinafter defined). The Corporation shall not consent or agree to the occurrence of any Common Stock Fundamental Change until the Corporation has entered into an agreement with the successor or purchasing entity, as the case may be, for the benefit of the holders of the Dual Convertible Preferred Stock, which shall contain provisions (i) enabling the holders of the Dual Convertible Preferred Stock to convert into the consideration received by holders of Common Stock at the Conversion Price immediately after such Fundamental Change and (ii) acknowledging the right of the Dual Convertible Preferred Stock to be exchanged for Holding Common Stock and assuming any obligations with respect thereto. The provisions of this paragraph (e)(vii)(H) shall similarly apply to successive Common Stock Fundamental Changes. (I) As used herein: (1) The term "Applicable Price" means the current market price for one share of the Common Stock (determined in accordance with paragraph (e)(vii)(E)) on the record date for the determination of the holders of Common Stock entitled to receive common stock in connection with such Common Stock Fundamental Change, or, if there is no such record date, on the date upon which the holders of Common Stock shall have the right to receive such common stock. C-6 34 (2) The term "Common Stock Fundamental Change" shall mean the occurrence of any transaction or event in connection with which all or substantially all the Common Stock shall be exchanged for, converted into, acquired for or shall constitute solely the right to receive common stock that, for the ten consecutive trading days immediately prior to such Common Stock Fundamental Change, has been admitted for listing on a national securities exchange or quoted on the National Market System of NASDAQ (whether by means of an exchange order, liquidation, tender offer, consolidation, merger, combination, reclassification, recapitalization or otherwise). (3) The term "Purchaser Stock Price" shall mean, with respect to any Common Stock Fundamental Change, the current market price for one share of the common stock received by holders of Common Stock in such Common Stock Fundamental Change (determined in accordance with paragraph (e)(vii)(E) as if such paragraph were applicable to such common stock) on the record date for the determination of the holders of Common Stock entitled to receive such common stock or, if there is no such record date, on the date upon which the holders of Common Stock shall have the right to receive such common stock. (J) For the purposes of this paragraph (e)(vii) and paragraph (e)(x), the term "shares of Common Stock" shall mean (i) the class of stock designated as the Common Stock of the Corporation at the date hereof or (ii) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of changes in par value, or from no par value to par value. If at any time, as a result of an adjustment made pursuant to paragraphs (e) (vii) (A), (D), (G) or (H) above, the holders of Dual Convertible Preferred Stock shall become entitled to receive any securities other than shares of Common Stock, thereafter the number of such other securities so issuable upon conversion of the shares of Dual Convertible Preferred Stock shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Dual Convertible Preferred Stock contained in this paragraph (e) (vii). (K) Notwithstanding the foregoing, in any case which this paragraph (e) (vii) provides that an adjustment shall become effective immediately after a record date for an event, the Corporation may defer until the occurrence of such event (i) issuing to the holder of any share of Dual Convertible Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion before giving effect to such adjustment and (ii) paying to such holder any amount in cash in lieu of any fraction pursuant to paragraph (e)(v). (L) If the Corporation shall take any action affecting the Common Stock, other than action described in this paragraph (e) (vii), which in the opinion of the Board would materially adversely affect the conversion rights of the holders of the shares of Dual Convertible Preferred Stock, the Conversion Price for the Dual Convertible Preferred Stock may be adjusted, to the extent permitted by law, in such manner, if any, and at such time, as the Board may determine in good faith to be equitable in the circumstances. Failure of the Board to provide for any such adjustment prior to the effective date of any such action by the Corporation affecting the Common Stock shall be evidence that such Board has determined that it is equitable to make no adjustments in the circumstances. (viii) Whenever the Conversion Price is adjusted as herein provided, the Chief Financial Officer of the Corporation shall compute the adjusted Conversion Price in accordance with the foregoing provisions and shall prepare a certificate setting forth such adjusted Conversion Price and showing in reasonable detail the facts upon which such adjustment is based. A copy of such certificate shall be filed promptly with the Common Stock Conversion Agent. Promptly after delivery of such certificate, the Corporation shall prepare a notice of such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the date on which such adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Price to the holder of each share of Dual Convertible Preferred Stock at his last address as shown on the stock books of the Corporation. (ix) The Corporation will pay any and all documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on the conversion of shares of Dual Convertible Preferred Stock pursuant to this paragraph (e); provided, however, that the Corporation shall C-7 35 not be required to pay any tax which may be payable in respect of any registration or transfer involved in the issue or delivery of shares of Common Stock in a name other than that of the registered holder of Dual Convertible Preferred Stock converted or to be converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. (x) (A) The Corporation shall at all times reserve and keep available, free from all liens, charges and security interests and not subject to any preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its issued Common Stock held in its treasury, or both, for the purpose of effecting the conversion of the Dual Convertible Preferred Stock, the full number of shares of Common Stock then deliverable upon the conversion of all outstanding shares of the Dual Convertible Preferred Stock. (B) Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value (if any) of the Common Stock issuable upon conversion of the Dual Convertible Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of such Common Stock at such adjusted Conversion Price. (xi) If (A) the Corporation shall declare a dividend on its outstanding Common Stock (excluding ordinary cash dividends) or make a distribution to holders of its Common Stock; (B) the Corporation shall authorize the granting to the holders of the Common Stock of rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase any shares of Common Stock or any of its securities; (C) there shall be any reclassification of the Common Stock or any consolidation or merger to which the Corporation is a party and for which approval of any shareholders of the Corporation is required, or the sale or transfer of all or substantially all of the assets of the Corporation; or (D) there shall be any Common Stock Fundamental Change; then the Corporation shall cause to be mailed to the holders of shares of the Dual Convertible Preferred Stock at their addresses as shown on the stock books of the Corporation, as promptly as possible, but at least 15 days, prior to the applicable date hereinafter specified, a notice stating (l) the date on which a record is to be taken for the purpose of such dividend or distribution, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend or distribution are to be determined or (2) the date on which such reclassification, consolidation, merger, sale, transfer or Common Stock Fundamental Change is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or Common Stock Fundamental Change. (f) HOLDING EXCHANGE. (i) Upon the terms and in the manner set forth in this paragraph (f), the shares of Dual Convertible Preferred Stock shall be exchangeable, in whole, but not in part, at the option of the holders thereof, upon surrender to the Corporation of the certificates representing such shares of Dual Convertible Preferred Stock, for a number of fully paid and nonassessable shares of Holding Common Stock equal to 50% of the shares of Holding Common Stock on a fully diluted basis on the Holding Exchange Date (as hereinafter defined). (ii) On the Issue Date, all of the shares of Dual Convertible Preferred Stock will be issued to one or more limited partnerships (the "Partnerships"), for which Kohlberg Kravis Roberts & Co. or one of its affiliates acts as sole general partner. The Partnerships shall distribute all shares of Dual Convertible Preferred Stock then owned by the Partnerships to the partners thereof (the "Distribution") upon the earlier to occur of (A) the date of the Automatic Early Distribution (as hereinafter defined) or (B) the date that is six years after the Issue Date, unless the Partnerships shall have received the consent of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") to an alternative date on which to effect the Distribution (which shall not be earlier than the date that is four years after the Issue Date). The Partnerships shall promptly notify the Corporation of the Distribution. C-8 36 (iii) The shares of Dual Convertible Preferred Stock shall be exchangeable for Holding Common Stock, in whole, but not in part, in accordance with this paragraph (f), (A) at any time after the Automatic Early Distribution shall have been effected and before the date that is ten years after the Issue Date, or (B) from time to time after the date that is (x) four years after the Issue Date or at any time after such date, if the Partnerships do not own any shares of Dual Convertible Preferred Stock on any such date and before the date that is ten years after the Issue Date, or (y) the date that the Distribution shall have been effected, which shall be six years after the Issue Date unless the Partnerships shall have received the consent of the Federal Reserve Board to an alternative date on which to effect the Distribution (which shall not be earlier than the date that is four years after the Issue Date) and before the date that is ten years after the Issue Date (the period of time set forth in either clause (x) or (y) of this paragraph (f)(iii)(B) is referred to herein as the "Exchange Period"). (iv) At any time and from time to time during the Exchange Period, the holders of a majority of the shares of the Dual Convertible Preferred Stock shall have the right to have an independent nationally recognized investment banking firm render an opinion (an "Appraisal") of the fair price for all the outstanding shares of Holding Common Stock as if all such shares were to be sold to a third party in their entirety reflecting a full control premium (the "Appraised Price"). The fees and expenses of such investment banking firm shall be paid by the Corporation. The Corporation shall be entitled to reduce the amount of dividends that would otherwise be payable on the Dual Convertible Preferred Stock pursuant to paragraph (c) (i) by the amount of such fees and expenses paid by the Corporation. The investment banking firm that performs each Appraisal shall be selected by the Corporation but shall be reasonably acceptable to the holders of a majority of the shares of the Dual Convertible Preferred Stock. The holders of a majority of the shares of the Dual Convertible Preferred Stock shall have 30 days to accept or reject the Appraised Price set by any Appraisal. The Dual Convertible Preferred Stock will become exchangeable for Holding Common Stock for a period of 90 days commencing on the date that is six months after the written acceptance by the holders of a majority of the shares of the Dual Convertible Preferred Stock of the Appraised Price set by an Appraisal. If the holders of the Dual Convertible Preferred Stock do not elect to exchange their shares of the Dual Convertible Preferred Stock for Holding Common Stock during any such 90-day period, in addition to their other rights hereunder, the holders shall be entitled to have additional Appraisals rendered and to otherwise comply with the requirements hereof to have the Dual Convertible Preferred Stock again become exchangeable for Holding Common Stock. (v) The right to exchange the Dual Convertible Preferred Stock for Holding Common Stock may also be exercised at any time on or after the 60th day after the Corporation shall have given notice to the holders of the shares of the Dual Convertible Preferred Stock that the Corporation's consolidated Tier 1 capital leverage ratio, based on the rules and regulations of the Federal Reserve Board as currently in effect (using year end 1992 standards) as disclosed in any report of condition filed by the Corporation with any bank regulatory authority, adjusted to include the Corporation's goodwill existing at the Issue Date, shall be less than 3%. The Corporation shall give the holders of the shares of the Dual Convertible Preferred Stock immediate notice if its consolidated Tier 1 capital leverage ratio as reported in any such regulatory filing, adjusted to include its goodwill existing at the Issue Date, falls below 3%. Prior to the fifth day after the Partnerships shall have received such notice, unless the Partnerships shall have received the consent of the Federal Reserve Board to an extension of such date, the Partnerships shall effect the Distribution with respect to all shares of Dual Convertible Preferred Stock then owned by the Partnerships (the "Automatic Early Distribution"). The Corporation shall cause an Appraisal to be prepared at the Corporation's expense and delivered to the holders of the shares of the Dual Convertible Preferred Stock within 20 days after the Corporation's notice of capital deficiency. The holders of a majority of the shares of the Dual Convertible Preferred Stock shall have 20 days to accept or reject such Appraisal. If such Appraisal is accepted, the Corporation may redeem at its option, with the prior approval of the Federal Reserve Board, the Dual Convertible Preferred Stock in whole, but not in part, for the Gross Redemption Price, determined and payable in accordance with paragraph (g) below. (vi) In order to exchange shares of the Dual Convertible Preferred Stock into Holding Common Stock, there shall be delivered to the Corporation written evidence reasonably satisfactory to it that the holders of a majority of the shares of Dual Convertible Preferred Stock have elected to exchange the Dual Convertible C-9 37 Preferred Stock into Holding Common Stock (the "Holding Exchange Election"), which election shall be binding on all the holders of the shares of the Dual Convertible Preferred Stock. Each holder of shares of the Dual Convertible Preferred Stock shall (A) deliver a written notice of the name or names in which such holder wishes the certificate or certificates for shares of Holding Common Stock to be issued to the Corporation at its principal office or at the office of the agency which may be maintained for such purpose (the "Holding Exchange Agent"), (B) surrender the certificate for such shares of Dual Convertible Preferred Stock to the Corporation or the Holding Exchange Agent, accompanied, if so required by the Corporation or the Holding Exchange Agent, by a written instrument or instruments of transfer in form reasonably satisfactory to the Corporation or the Holding Exchange Agent duly executed by the holder or his attorney duly authorized in writing, and (C) pay any transfer or similar tax required by paragraph (f)(x)(A). (vii) (A) The "Holding Exchange" shall be deemed to have been effected at the close of business on the fifth business day after the date (the "Holding Exchange Date") on which the Corporation shall have received the written notice of the Holding Exchange Election. Immediately upon exchange, the rights of all the holders of Dual Convertible Preferred Stock shall cease and the persons entitled to receive the shares of Holding Common Stock upon the exchange of Dual Convertible Preferred Stock shall be treated for all purposes as having become the beneficial owners of such shares of Holding Common Stock; provided, however, that such persons shall be entitled to receive when paid dividends accrued on such shares of Dual Convertible Preferred Stock to the last preceding dividend payment date and unpaid as of the date of such exchange. (B) As promptly as practicable after the Holding Exchange Date subject to the provisions of paragraph (f) (x), the Corporation shall deliver or cause to be delivered at the office or agency of the Holding Exchange Agent, to or upon the written order of the holders of the surrendered shares of Dual Convertible Preferred Stock, a certificate or certificates representing the number of fully paid and nonassessable shares of Holding Common Stock into which such shares of Dual Convertible Preferred Stock have been exchanged in accordance with the provisions of this paragraph (f). (viii) No fractional shares or scrip representing fractional shares of Holding Common Stock shall be issued upon the exchange of the Dual Convertible Preferred Stock for Holding Common stock. The Corporation shall cause Holding to effect a stock split or reverse stock split so that no fractional shares become deliverable pursuant to the Holding Exchange. (ix) The holders of shares of Dual Convertible Preferred Stock at the close of business on a dividend payment record date shall be entitled to receive the dividend payable on such shares on the corresponding dividend payment date notwithstanding the exchange thereof or the Corporation's default in payment of the dividend due on such dividend payment date. (x) (A) The Corporation will pay any and all documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Holding Common Stock on the exchange of shares of Dual Convertible Preferred Stock pursuant to this paragraph (f); provided, however, that the Corporation shall not be required to pay any tax which may be payable in respect of any registration or transfer involved in the issue or delivery of shares of Holding Common Stock in a name other than that of the registered holder or Dual Convertible Preferred Stock exchanged or to be exchanged, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. (B) If the Board of Directors of Holding determines in good faith that (i) the declaration and payment of the dividend note (the "Dividend Note") described in Section 3 of the Supplemental Tax Allocation Agreement between the Corporation and Holding, dated the Issue Date (the "Tax Allocation Agreement"), would cause Holding to be unable to comply with regulatory capital maintenance requirements and policies then in effect or with safe and sound banking practices or (ii) Holding will have insufficient cash to pay the Dividend Note, then the Corporation may condition the issuance of Holding Common Stock to any holder of the Dual Convertible Preferred Stock upon the receipt of a cash capital contribution (a "Capital Contribution") from such holder to Holding concurrently with such issuance equal to the product of a fraction, the numerator of which equals the number of shares of Holding Common Stock for which such holder's Dual C-10 38 Convertible Preferred Stock may be exchanged and the denominator of which equals the total number of shares of Holding Common Stock that will be outstanding (on a fully diluted basis) after all of the shares of Dual Convertible Preferred Stock have been exchanged, multiplied by the amount of the Dividend Note and, in such event, the declaration and payment of the Dividend Note to the Corporation will be conditioned upon Holding's receipt of a Capital Contribution from the Corporation equal to 50% of the amount of the Dividend Note. Except as provided in this paragraph (f) (x), the holders of the Dual Convertible Preferred Stock shall have no obligation to make any capital contribution, including, without limitation, with respect to the obligations of Holding to the Corporation under the Tax Allocation Agreement. (C) The Board of Directors of Holding shall give written notice of its determination to require a Capital Contribution to each holder of record of the shares of the Dual Convertible Preferred Stock, which notice shall state the amount of such holder's required Capital Contribution and the consequences of failing to make such Capital Contribution. If any holder of the Dual Convertible Preferred Stock fails to make such holder's Capital Contribution within 90 days of such notice, the shares of Holding Common Stock for which such holder's shares of the Dual Convertible Preferred Stock may be exchanged (the "Escrowed Shares") shall be deposited by the Corporation in escrow with an independent trustee (the "Trustee") that is not affiliated with the Corporation. The Trustee shall be empowered and directed to sell such of the Escrowed Shares as will be sufficient to realize net proceeds (after the payment of the fees and expenses of the Trustee) equal to such holder's required Capital Contribution, together with interest on such amount at the prime rate then in effect at the Corporation's banking subsidiaries commencing on the 90th day after the notice of such Capital Contribution ("Interest"). The holder of the shares of the Dual Convertible Preferred Stock to which such Escrowed Shares relate may obtain the release of such Escrowed Shares from the Trustee at any time prior to the Trustee's disposition thereof by paying the amount of the Capital Contribution, together with Interest thereon, to the Trustee. The Trustee shall have the right to sell such of the Escrowed Shares in a public offering or in one or more private sales as will result in the receipt of sufficient proceeds, after the payment of the fees and expenses of the Trustee therefrom, to pay the required Capital Contribution, together with Interest thereon, with respect to such Escrowed Shares. The Trustee shall use its best efforts to obtain the highest price for the Escrowed Shares to be sold. The Trustee shall not be prohibited from selling, and shall be specifically authorized to sell, any of the Escrowed Shares to the Corporation provided that the Corporation purchases such shares for a consideration at least equal to the book value thereof. Upon the receipt of sufficient proceeds to pay the required Capital Contribution, together with Interest thereon, the balance of such Escrowed Shares will be released to the holder of the Dual Convertible Preferred Stock to which such Escrowed Shares relate in exchange for the Dual Convertible Preferred Stock held by such holder. (g) OPTIONAL REDEMPTION. (i) The Corporation may redeem at its option, with the prior approval of the Federal Reserve Board, the Dual Convertible Preferred Stock, in whole, but not in part, at any time during the period after the acceptance of any Appraisal by the holders of a majority of the shares of Dual Convertible Preferred Stock but before the 90-day period following the acceptance of any Appraisal during which the Dual Convertible Preferred Stock becomes exchangeable for Holding Common Stock in accordance with paragraph (f) (iv) or before the Dual Convertible Preferred Stock becomes exchangeable for Holding Common Stock in accordance with paragraph (f)(v) above (the "Optional Redemption Period"), at a redemption price equal to 50% of the Appraised Price (the "Gross Redemption Price"), together with accrued and unpaid dividends thereon to the date of redemption. The Appraised Price that is applicable to any Optional Redemption Period shall be the Appraised Price set forth in the Appraisal, the acceptance of which gave rise to such Optional Redemption Period. (ii) The Gross Redemption Price shall be reduced by the aggregate of (A) the aggregate current market price of the shares of Common Stock into which the Dual Convertible Preferred Stock would then be convertible, regardless of whether such shares are actually convertible at such time (which current market price shall be determined in accordance with paragraph (e) (vii) (E) and the date in question for purposes thereof shall be the date that the Optional Redemption Notice (as hereinafter defined) is mailed in accordance with paragraph (g)(iii) below) or, if any Transaction has been effected in which shares of Common Stock were converted into the right to receive stock, securities or other property (including cash or any combination thereof) (the "Transaction Consideration") and the Common Stock is no longer outstand- C-11 39 ing, the value of the Transaction Consideration into which the Dual Convertible Preferred Stock would then be convertible, and (B) the value of the rights to purchase Common Stock (the "Rights") issued to the Partnerships on the Issue Date. The value of the Rights shall be determined as follows: (1) with respect to any portion of the Rights that has been exercised and the holder of such Rights received Common Stock upon the exorcise thereof, the value of such Rights shall be equal to the aggregate current market price of the Common Stock received upon the exercise of the Rights on the date of exercise less the aggregate exercise price paid for such Common Stock (which current market price shall be determined in accordance with paragraph (e) (vii) (E) and the date in question for purposes thereof shall be the date of exercise); (2) with respect to any portion of the Rights that has not been exercised, the value of such Rights shall be equal to the aggregate current market price of the Common Stock that the holders of such Rights would then be entitled to receive upon the exercise thereof in their entirety less the aggregate exercise price that would then be payable upon such exercise (which current market price shall be determined in accordance with paragraph (e) (vii) (E) and the date in question for purposes thereof shall be the date that the Optional Redemption Notice is mailed); and (3) with respect to any portion of the Rights that has been exercised and the Corporation exercised its option to purchase such Rights rather than issue Common Stock upon the exercise thereof, the value of such Rights shall be equal to the aggregate purchase price received by the holders thereof upon the Corporation's purchase of such Rights. The value of the Transaction Consideration shall be determined as follows: (1) with respect to any portion of the Transaction Consideration that consists of stock or securities, the value of such stock or securities shall be equal to the aggregate current market price of such stock or securities (determined in accordance with paragraph (e) (vii) (E) as if such paragraph were applicable to such stock or securities and the date in question for purposes thereof shall be the date that the Optional Redemption Notice is mailed); and (2) with respect to any portion of the Transaction Consideration that consists of other property, the value of such other property shall be equal to its then aggregate fair market value as determined by the Board in good faith. If the Corporation certifies in the Optional Redemption Notice that it must report gain, and that it will do so on its tax return for the taxable year of the redemption, that will result in an actual income tax liability or an actual reduction in income tax refund (or combination thereof) on the income tax return of the Corporation for the taxable year of the redemption as a direct result of the actual redemption of the Dual Convertible Preferred Stock for cash and/or the issuance of Common Stock or debt securities of the Corporation pursuant to paragraph (g) (i), the Gross Redemption Price shall be reduced by one-half of the amount of the total income tax liability actually to be incurred as a result of, and/or the actual reduction in income tax refund to occur caused by, such redemption, as will be reported on the income tax return of the Corporation to be filed for the taxable year of the redemption, including any income tax for which the Corporation is liable as a result of such reduction. If the Corporation does not expect to incur an actual tax liability or reduction in refund (or combination thereof) in the year of the redemption, the Gross Redemption Price shall be reduced by one-half of the amount determined by the Board of Directors of the Corporation in good faith, equal to the projected tax liability to be incurred by the Corporation in future years as a result of the redemption appropriately discounted to take into account the period of time before such tax liability will actually be paid by the Corporation. The Corporation will not provide the certification in the Optional Redemption Notice unless there is substantial authority that requires gain to be recognized by the Corporation on the redemption and no substantial authority supporting the position that gain is not recognized by the Corporation on the redemption. If the Corporation subsequently receives a refund of all or any portion of the taxes paid or has a reduction in the tax liability that resulted in a reduction of the Gross Redemption Price, the Corporation shall promptly pay the former holders of the Dual Convertible Preferred Stock their respective proportionate C-12 40 share of 50% of such refund or reduction in tax liability, together with any interest at the underpayment rate set forth in Section 6621(a) (2) of the Internal Revenue Code of 1986, as amended. The Gross Redemption Price reduced by the value of the Rights in accordance with clause (B) above and any reduction pursuant to the three preceding sentences shall be referred to herein as the "Net Redemption Price", and further reduced by the aggregate current market price of the Common Stock or the aggregate value of the Transaction Consideration in accordance with clause (A) above shall be referred to herein as the "Balance". (iii) The Net Redemption Price shall be payable to the holders of the shares of Dual Convertible Preferred Stock as follows: (A) certificates representing the number of shares of Common Stock or, if any Transaction has been effected, certificates representing the number of shares of stock or securities together with any other property, into which the Dual Convertible Preferred Stock would then be convertible, regardless of whether such shares are actually convertible at such time, and any cash payable in respect of fractional shares as provided in paragraph (e)(v), shall be delivered to the holders of the Dual Convertible Preferred Stock in accordance with the procedures for effecting a Common Stock Conversion; and (B) the Balance shall be payable, at the Corporation's option, in any combination of cash or the Corporation's capital and other securities having a realizable market value (as determined by an independent nationally recognized investment banking firm selected and paid for by the Corporation and reasonably acceptable to the holders of at least a majority of the shares of the Dual Convertible Preferred Stock) equal to the Balance. (iv) The Corporation shall have the obligation to redeem, with the prior approval of the Federal Reserve Board, the Dual Convertible Preferred Stock, in whole, but not in part, if (A) the Corporation offers to redeem (the "Redemption Offer") the Dual Convertible Preferred Stock at a redemption price other than the Gross Redemption Price, which offer, if made after the Distribution shall have been effected, may only be made during an Optional Redemption Period or during the period after an Appraisal has been received and prior to the acceptance or rejection thereof by the holders of the shares of the Dual Convertible Preferred Stock, and (B) the holders of a majority of the outstanding shares of the Dual Convertible Preferred Stock shall have elected to accept the Redemption Offer, which election shall be binding on all the holders of the shares of the Dual Convertible Preferred Stock. Written notice of every Redemption Offer shall be given by first class mail, postage prepaid, to each holder of record of the shares of the Dual Convertible Preferred Stock at such holder's address as the same appears on the stock register of the Corporation. Each Redemption Offer shall state: (A) the consideration offered by the Corporation for all the shares of the Dual Convertible Preferred Stock (the "Alternative Redemption Price"); (B) the proposed date on and the manner in which the Alternative Redemption Price would be payable; and (C) the Gross Redemption Price, the Net Redemption Price and the Balance, together with a certificate of the Chief Financial Officer of the Corporation setting forth in reasonable detail the facts upon and the manner in which each was determined. (v) If the Corporation shall redeem shares of Dual Convertible Preferred Stock pursuant to this paragraph (g), written notice of such redemption (the "Optional Redemption Notice") shall be given by first class mail, postage prepaid, mailed not less than 10 days nor more than 30 days prior to the redemption date, to each holder of record of the shares of the Dual Convertible Preferred Stock at such holder's address as the same appears on the stock register of the Corporation. The Optional Redemption Notice shall state: (A) the redemption date; (B) the Gross Redemption Price, the Net Redemption Price and the Balance, together with a certificate of the Chief Financial Officer of the Corporation setting forth in reasonable detail the facts upon and the manner in which each was determined or the Alternative Redemption Price, as the case may be; (C) that shares of Dual Convertible Preferred Stock called for redemption may be converted in accordance with, and subject to the terms of, paragraph (e) hereof at any time prior to the date fixed for redemption (unless the Corporation shall default in payment of the Net Redemption Price or the Alternative Redemption Price, in which case such right shall not terminate at such date); (D) the place or places where certificates for such shares are to be surrendered for payment of the Net Redemption Price or the Alternative Redemption Price; C-13 41 (E) the amount of any accrued and unpaid dividends; and (F) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (vi) The Optional Redemption Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the Net Redemption Price or the Alternative Redemption Price) dividends on the shares of Dual Convertible Preferred Stock shall cease to accrue and said shares shall no longer be deemed to be outstanding and shall have the status of authorized but unissued shares of Preferred Stock, undesignated as to series, and all rights of the holders thereof as shareholders of the Corporation (except the right to receive from the Corporation the Net Redemption Price or the Alternative Redemption Price and any accrued and unpaid dividends) shall cease. Upon surrender in accordance with the Optional Redemption Notice of any certificates for the shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the Optional Redemption Notice shall so state), such shares shall be redeemed by the Corporation at the Net Redemption Price or the Alternative Redemption Price, as the case may be, plus any accrued and unpaid dividends thereon. (h) VOTING RIGHTS. (i) The holders of record of shares of Dual Convertible Preferred Stock shall not be entitled to any voting rights except as hereinafter provided in this paragraph (h) or as otherwise provided by law. (ii) (A) Whenever any matter is required to be acted upon herein by the holders of a majority of the Dual Convertible Preferred Stock, the affirmative vote of the holders of a majority of the outstanding Dual Convertible Preferred Stock, whether at a special meeting of such holders called as hereinafter provided, or by the written consent of such holders pursuant to Section 7-1.1-30.3 of the Rhode Island Business Corporation Act, shall be required to adopt such matter, which adoption shall be binding on all the holders of the shares of Dual Convertible Preferred Stock. (B) Upon the written request of the holders of at least 10% of the shares of the Dual Convertible Preferred Stock, addressed to the Secretary of the Corporation, a proper officer of the Corporation shall call a special meeting of holders of Dual Convertible Preferred Stock. Such meeting shall be held at the earliest practicable date upon the notice required for special meetings of shareholders at a place designated by the holders of at least 10% of the shares of the Dual Convertible Preferred Stock. If such meeting shall not be called by the proper officers of the Corporation within 5 days after the personal service of such written request upon the Secretary of the Corporation, or within 10 days after mailing the same within the United States, by registered mail, addressed to the Secretary of the Corporation at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the holders of at least 10% of the shares of Dual Convertible Preferred Stock may designate in writing a holder of Dual Convertible Preferred Stock to call such meeting at the expense of the Corporation, and such meeting may be called by such person designated upon the notice required for special meetings of shareholders and shall be held at the same place as is elsewhere provided in this paragraph (h)(ii)(B). Any holder of Dual Convertible Preferred Stock that would be entitled to vote at such meeting shall have access to the stock books of the Corporation relating to the Dual Convertible Preferred Stock and the right to examine and to make extracts therefrom, in person or by agent or attorney, at any reasonable time or times, for the purpose of causing a meeting of shareholders to be called pursuant to the provisions of this paragraph or otherwise communicating with the holders of the Dual Convertible Preferred Stock or for any other proper purpose. (C) At any meeting of the holders of the Dual Convertible Preferred Stock, the presence in person or by proxy of the holders of a majority of the then outstanding shares of Dual Convertible Preferred Stock shall be required and be sufficient to constitute a quorum of such holders for the action to be taken by such class. At any such meeting or adjournment thereof in the absence of a quorum of the holders of shares of Dual Convertible Preferred Stock, the holders of a majority of such shares present in person or by proxy shall have the power to adjourn the meeting from time to time, without notice (except as required by law) other than announcement at the meeting, until a quorum shall be present. (D) At any meeting of the holders of the Dual Convertible Preferred Stock, the holders of a majority of the outstanding shares of the Dual Convertible Preferred Stock shall be entitled to designate a committee (the C-14 42 "Committee") consisting of as many holders of the Dual Convertible Preferred Stock as the holders of a majority of such shares may determine to be appropriate. The Committee may be empowered to act on behalf of all holders of the Dual Convertible Preferred Stock with respect to certain matters affecting the exchangeability of the Dual Convertible Preferred Stock specified in paragraphs (f) (iv) and (f) (v) and the acceptability of the Corporation's selection of an investment banking firm hereunder if so designated by the holders of the Dual Convertible Preferred Stock pursuant to this paragraph (h)(ii)(D); provided, however, that in no event may the Committee be empowered to elect to convert the Dual Convertible Preferred Stock into Common Stock, to accept any Redemption Offer or to exchange the Dual Convertible Preferred Stock for Holding Common Stock on behalf of the holders thereof. (iii) So long as any shares of the Dual Convertible Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote or consent of the holders of at least 66 2/3% of the outstanding shares of Dual Convertible Preferred Stock, voting as a class, given in person or by proxy, either in writing or by resolution adopted at a special meeting called for the purpose, authorize any new class of Senior Securities. (iv) So long as any shares of the Dual Convertible Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote or consent of the holders of at least 66 2/3% of the outstanding shares of Dual Convertible Preferred Stock, voting as a class, given in person or by proxy, either in writing or by resolution adopted at a special meeting called for the purpose, amend the Certificate of Incorporation or this Certificate of Designation so as to affect materially and adversely the specified rights, preferences, privileges or voting rights of shares of Dual Convertible Preferred Stock. (i) OTHER REDEMPTION RIGHTS. (i) If less than 10% of the shares of the Dual Convertible Preferred Stock originally issued is then outstanding, the Corporation may redeem at its option, with the prior approval of the Federal Reserve Board, the Dual Convertible Preferred Stock, in whole, but not in part, at any time on or after the date that is ten years after the Issue Date, at a redemption price of $200 per share (the "Stated Value Redemption Price"), together with accrued and unpaid dividends thereon to the date of redemption, without interest. (ii) The Corporation may redeem at its option, with the prior approval of the Federal Reserve Board, the Dual Convertible Preferred Stock, in whole, but not in part, at any time on or after the date that is 12 years after the Issue Date, at a redemption price in cash equal to the Fair Market Value (as hereinafter defined) of such shares. The Corporation shall have the right to have an independent nationally recognized investment banking firm render an opinion of the fair market value for all the outstanding shares of the Dual Convertible Preferred Stock as if all such shares were to be sold to a third party (the "Fair Market Value"). The investment banking firm that renders such opinion shall be selected by the Corporation but shall be reasonably acceptable to the holders of a majority of the outstanding shares of the Dual Convertible Preferred Stock. Such determination of Fair Market Value shall be binding and conclusive on the Corporation and the holders of the Dual Convertible Preferred Stock. The fees and expenses of such investment banking firm shall be paid by the Corporation. (iii) If the Corporation shall redeem shares of Dual Convertible Preferred Stock pursuant to this paragraph (i), written notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 90 days nor more than 120 days prior to the redemption date, to each holder of record of the shares of the Dual Convertible Preferred Stock at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (A) the redemption date; (B) the number of shares of Dual Convertible Preferred Stock to be redeemed; (C) the Stated Value Redemption Price or the Fair Market Value of such holder's shares, as the case may be; (D) that shares of Dual Convertible Preferred Stock called for redemption may be converted in accordance with, and subject to the terms of, paragraph (e) hereof at any time prior to the date fixed for redemption (unless the Corporation shall default in payment of the Stated Value Redemption Price or the Fair Market Value of such shares, in which case such right shall not terminate at such date); (E) the place or places where certificates for such shares are to be surrendered for payment of the Stated Value Redemption Price or the Fair Market Value of such shares; and (F) that dividends on the shares to be redeemed will cease to accrue on such redemption date. C-15 43 (iv) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the Stated Value Redemption Price or the Fair Market Value of such shares) dividends on the shares of Dual Convertible Preferred Stock shall cease to accrue and said shares shall no longer be deemed to be outstanding and shall have the status of authorized but unissued shares of Preferred Stock, undesignated as to series, and all rights of the holders thereof as shareholders of the Corporation (except the right to receive from the Corporation the Stated Value Redemption Price and any accrued and unpaid dividends or the Fair Market Value of such shares) shall cease. Upon surrender in accordance with said notice of any certificates for the shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the Stated Value Redemption Price plus any accrued and unpaid dividends thereon or the Fair Market Value of such shares, as the case may be. C-16 44 EXHIBIT D FLEET FINANCIAL GROUP, INC. CUMULATIVE PARTICIPATING JUNIOR PREFERRED STOCK Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be designated as "Cumulative Participating Junior Preferred Stock" (the "Junior Preferred Stock") and the number of shares constituting the Junior Preferred Stock shall be 1,500,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Junior Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Junior Preferred Stock. Section 2. DIVIDENDS AND DISTRIBUTIONS. (A) The holders of shares of Junior Preferred Stock, in preference to the holders of Common Stock, par value $1.00 per share (the "Common Stock"), of the Corporation, and of any other junior stock, but subject to the rights of holders of any senior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first days of January, April, July and October in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Junior Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Junior Preferred Stock. In the event the Corporation shall at any time after November 21, 1990 declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock), then in each such case the amount to which holders of shares of Junior Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Junior Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Junior Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Junior Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the Record Date for the determination of holders of shares of Junior Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on D-1 45 the shares of Junior Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Junior Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 50 days prior to the date fixed for the payment thereof. Section 3. VOTING RIGHTS. The holders of shares of Junior Preferred Stock shall have the following voting rights: (A) Each share of Junior Preferred Stock shall entitle the holder thereof to one hundred votes (subject to adjustment as set forth below) on all matters submitted to a vote of the stockholders of the Corporation (including, without limitation, the election of directors). In the event the Corporation shall at any time after November 21, 1990, declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock), then in each such case the number of votes to which holders of shares of Junior Preferred Stock were entitled to immediately prior to such event shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in the Restated Articles of Incorporation, or by law, the holders of shares of Junior Preferred Stock, the holders of shares of Common Stock and the holders of any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) (i) If at any time dividends on any Junior Preferred Stock shall be in arrears in an amount equal to the full accrued dividends for six (6) or more quarterly dividend periods, whether or not consecutive, shall not have been paid or declared and a sum sufficient for the payment thereof irrevocably set aside in trust for the holders of all of such shares, the Board of Directors of the Corporation shall promptly take all necessary actions to increase the authorized number of directors of the Corporation by one (1) and the holders of the shares of the Junior Preferred Stock then outstanding shall be entitled (by series, voting as a single class) to elect one (1) person director to the Board of Directors of the Corporation (such right to elect one (1) director being hereinafter sometimes referred to as the "special voting rights"), each outstanding share having such right being entitled for such purpose to one vote; PROVIDED, HOWEVER, that at such time as the arrearage in payment of dividends which gave rise to the exercise of the special voting rights has been cured with regard to the Junior Preferred Stock by waiver or payment of all accrued dividends, the right of the holders of such shares so to vote as provided in this paragraph (C)(i) of this Section 3 shall cease (subject to renewal from time to time upon the same terms and conditions) and the term of office of the person who is at that time a director elected by such holders shall terminate and the number of directors of the Corporation shall be automatically reduced by one (1). (ii) At any time after the special voting rights shall have become vested in the holders of the shares of the Junior Preferred Stock as provided in paragraph (C)(i) of this Section 3, the Secretary of the Corporation, as promptly as possible but in any event within twenty (20) days after receipt of the written request of the holders of 10% of the shares of the Junior Preferred Stock then outstanding, addressed to the Corporation at its principal office, shall call a special meeting of the holders of the shares of the Junior Preferred Stock for the purpose of electing such additional director, such meeting to be held at any place as provided by the Bylaws of the Corporation for meetings of the Corporation's stockholders, and upon not less than ten (10) nor more than twenty (20) days notice. If such meeting shall not be so called within twenty (20) days after receipt of the request by the Secretary of the Corporation, then the holders of 10% of the shares of the Junior Preferred Stock then outstanding may, by written notice to the Secretary of the Corporation, designate any person to call such meeting, and the person so designated may call such meeting, at any such place as provided above and upon not less than ten (10) nor more D-2 46 than twenty (20) days notice and for that purpose shall have access to the stockholder record books of the Corporation. No such special meeting of the holders of the shares of the Junior Preferred Stock and no adjournment thereof shall be held on a date later than thirty (30) days before the annual meeting of stockholders of the Corporation. At any meeting so called or at any annual meeting held at any time when the special voting rights are in effect, the holders of a majority of the shares of the Junior Preferred Stock then outstanding, present in person or by proxy, shall be sufficient to constitute a quorum for the election of such additional director, and such additional director, together with any and all other directors who are then members of the Board of Directors, shall constitute the duly elected directors of the Corporation. (iii) With respect to a vacancy arising in the directorship referred to in paragraph (C)(i) of this Section 3 at any time when the special voting rights are in effect pursuant to paragraph (C)(i) of this Section 3, upon the written request of the holders of 10% of the shares of the Junior Preferred Stock then outstanding, addressed to the Corporation at its principal office, the Secretary of the Corporation shall give notice of a special meeting of holders of the shares of the Junior Preferred Stock of the election of a director to fill such vacancy caused by the death, resignation or other inability to serve as a director elected by such holders, to be held not less than ten (10) nor more than twenty (20) days following receipt by the Secretary of the Corporation of such written request. So long as special voting rights are in effect pursuant to paragraph (i) of this Section 3(c), any director who shall have been so elected by the holders of the Junior Preferred Stock may be removed at any time, either with or without cause, only by the affirmative vote of the holders of the shares at the time entitled to cast a majority of the votes entitled to be cast for the election of such director at a special meeting of such holders called for that purpose, and any vacancy thereby created may be filled by the vote of such holders. (D) Except as set forth herein, or as otherwise provided by the Restated Articles of Incorporation or by law, holders of Junior Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. (E) Holders of Junior Preferred Stock shall be entitled to such notice of each meeting of stockholders as is furnished to the holders of Common Stock with respect to such meeting. Section 4. CERTAIN RESTRICTIONS. (A) Subject to the provisions of the Restated Articles of Incorporation, whenever quarterly dividends or other dividends or distributions payable on the Junior Preferred Stock as provided in Section 2 are in arrears as of any Quarterly Dividend Payment Date, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Junior Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Junior Preferred Stock, except dividends paid ratably on the Junior Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends and upon dissolution, liquidation or winding up) to the Junior Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Junior Preferred Stock, or any shares of stock ranking on a parity with the Junior Preferred Stock, except in D-3 47 accordance with the terms of the Restated Articles of Incorporation and with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. REACQUIRED SHARES. Any shares of Junior Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Restated Articles of Incorporation, or as otherwise required by law. Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock unless, prior thereto, the holders of shares of Junior Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Junior Preferred Liquidation Preference"). Following the payment of the full amount of the Junior Preferred Liquidation Preference, no additional distributions shall be made to the holders of shares of Junior Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Junior Preferred Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph (C) below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii) immediately above being referred to as the "Adjustment Number"). Following the payment of the full amount of the Junior Preferred Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Junior Preferred Stock and Common Stock, respectively, holders of Junior Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to one (1) with respect to such Junior Preferred Stock and Common Stock, on a per share basis, respectively. (B) In the event, however, that there are not sufficient assets available to permit payment in full of the Junior Preferred Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Junior Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. (C) In the event the Corporation shall at any time after November 21, 1990, (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation should enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Junior Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, D-4 48 cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after November 21, 1990 declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange of change of shares of Junior Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. RANKING. The Junior Preferred Stock shall rank junior, as to dividends and upon liquidation, dissolution or winding up, to (a) the Common Stock, (b) the Preferred Stock with Cumulative and Adjustable Dividends, $20 par value, (c) any other class of capital stock of the Corporation unless the terms of such class shall expressly provide otherwise, and (d), to the extent permitted by the Restated Articles of Incorporation, all other series of Preferred Stock issued by the Corporation. Section 9. NO REDEMPTION. The shares of Junior Preferred Stock shall not be redeemable. Section 10. FRACTIONAL SHARES. The Junior Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of shares of Junior Preferred Stock. D-5 49 EXHIBIT E FLEET FINANCIAL GROUP, INC. ADJUSTABLE RATE PREFERRED STOCK (a) DESIGNATION. The designation of this class of Preferred Stock shall be "Preferred Stock with Cumulative and Adjustable Dividends" (hereinafter called this "Class") and the number of shares constituting this Class is 688,700. Shares of this Class shall have a stated value of $50 per share. (b) DIVIDEND RATE. (1) The dividend rate on the shares of this Class shall be $.8875 per share for the period (the "Initial Dividend Period") from the date of their original issue to and including March 31, 1988. Dividend rates on the shares of this Class shall be for each quarterly dividend period (hereinafter referred to as a "Quarterly Dividend Period"; and the Initial Dividend Period or any Quarterly Dividend Period being hereinafter individually referred to as a "Dividend Period" and collectively referred to as "Dividend Periods") thereafter, which Quarterly Dividend Periods shall commence on January 1, April 1, July 1, and October 1, in each year and shall end on and include the day next preceding the first day of the next Quarterly Dividend Period, at a rate per annum of the stated value thereof of 2.25% below the Applicable Rate (as defined in paragraph (2) of this Section (b)) in respect of such Quarterly Dividend Period. Anything to the contrary herein notwithstanding, the dividend rate for any Quarterly Dividend Period shall in no event be less than 6% or greater than 12% per annum. Such dividends shall be cumulative from the date of original issue of such shares and shall be payable, when and as declared by the Board of Directors, on January 1, April 1, July 1, and October 1, of each year, commencing on April 1, 1988. Each such dividend shall be paid to the holders of record of shares of this Class as they appear on the stock register of the Corporation on such record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board of Directors. Dividends on account of arrears for any past Dividend Periods may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board of Directors. (2) Except as provided below in this paragraph, the "Applicable Rate" for any Quarterly Dividend Period shall be the highest of the Treasury Bill Rate, then Ten Year Constant Maturity Rate or the Twenty Year Constant Maturity Rate (each as hereinafter defined) for such Dividend Period. In the event that the Corporation determines in good faith that for any reason one or more of such rates cannot be determined for any Quarterly Dividend Period, then the Applicable Rate for such Quarterly Dividend Period shall be the higher of whichever of such rates can be so determined. In the event that the Corporation determines in good faith that none of such rates can be determined for any Quarterly Dividend Period, then the Applicable Rate in effect for the preceding Dividend Period shall be continued for such Dividend Period. (3) Except as provided below in this paragraph, the "Treasury Bill Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calendar Period as provided below) for three-month U.S. Treasury bills, as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the last ten calendar days of the March, June, September or December, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on this Class is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum market discount rate during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calendar Period as provided below) for three-month U.S. Treasury bills, as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum market discount rate for three-month U.S. Treasury bills shall not be published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calendar Period as provided below) for all of the U.S. Treasury bills then having maturities of not E-1 50 less than 80 nor more than 100 days, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such rates, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason no such U.S. Treasury Bill Rates are published as provided above during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the per annum market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable noninterest-bearing U.S. Treasury securities with a maturity of not less than 80 nor more than 100 days from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Treasury Bill Rate for any Quarterly Dividend Period as provided above in this paragraph, the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the per annum market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable interest-bearing U.S. Treasury securities with a maturity of not less than 80 nor more than 100 days from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. (4) Except as provided in this paragraph, the "Ten Year Constant Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the last ten calendar days of the March, June, September or December, as the case may be prior to the Quarterly Dividend Period for which the dividend rate on this Series is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Ten Year Average Yield during such Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum Ten Year Average Yield shall not be published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly average yield to maturity, if only one such yield shall be published during the relevant Calendar Period as provided below) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) then having maturities of not less than eight nor more than twelve years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Ten Year Constant Maturity Rate for any Quarterly Dividend Period as provided above in this paragraph, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eight nor more than twelve years from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. (5) Except as provided below in the paragraph, the "Twenty Year Constant Maturity Rate" for each Quarterly dividend Period shall be the arithmetic average of the two most recent weekly per annum Twenty Year Average Yields (or the one weekly per annum Twenty Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly by the Federal E-2 51 Reserve Board during the Calendar Period immediately prior to the last ten calendar days of the March, June, September or December, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on this Series is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Twenty Year Average Yield during such Calendar Period, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum Twenty Year Average Yields (or the one weekly per annum Twenty Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum Twenty Year Average Yield shall not be published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly average yield to maturity, if only one such yield shall be published during the relevant Calendar Period as provided below) for all of the actively trade marketable U.S. Treasury fixed interest securities (other than Special Securities) then having maturities of not less than eighteen nor more than twenty-two years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Twenty Year Constant Maturity Rate for any Quarterly Dividend Period as provided above in this paragraph, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eighteen nor more than twenty-two years from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. (6) The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Twenty Year Constant Maturity Rate shall each be rounded to the nearest five hundredths of a percentage point. (7) The dividend rate with respect to each Quarterly Dividend Period will be calculated as promptly as practicable by the Corporation according to the appropriate method described herein. The mathematical accuracy of each such calculation will be confirmed in writing by independent accountants of recognized standing. The Corporation will cause each dividend rate to be published in a newspaper of general circulation in New York City prior to the commencement of the new Quarterly Dividend Period to which it applies and will cause notice of such dividend rate to be enclosed with the dividend payment checks next mailed to the holders of shares of this Series. (8) For purposes of this Section (b), the term (i) "Calendar Period" shall mean 14 calendar days; (ii) "Special Securities" shall mean securities which can, at the option of the holder, be surrendered at face value in payment of any Federal estate tax or which provide tax benefits to the holder and are priced to reflect such tax benefits or which were originally issued at a deep or substantial discount. (iii) "Ten Year Average Yield" shall mean the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of ten years); and (iv) "Twenty Year Average Yield" shall mean the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of 20 years). (9) No full dividends shall be declared or paid or set apart for payment on Preferred Stock of any series ranking, as to dividends, on a parity with or junior to this Class for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on this Class for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of this Class and any other Preferred Stock ranking on a parity as to dividends with this Class, all dividends declared upon shares of this Class and any other Preferred Stock ranking on a parity as to dividends E-3 52 with this Class shall be declared pro rata so that the amount of dividends declared per share on this Class and such other Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Class and such other Preferred Stock bear to each other. Holders of shares of this Class shall not be entitled to any dividend, whether payable in cash, property or stocks, in excess of full cumulative dividends, as herein provided, on this Class. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Class which may be in arrears. (10) So long as any shares of this Class are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Class as to dividends and upon liquidation and other than as provided in paragraph (9) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a parity with this Class as to dividends or upon liquidation, nor shall any Common Stock nor any other stock of the Corporation ranking junior to or on a parity with this Class as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Class as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of this Class shall have been paid for all past dividend payment periods. (11) Dividends payable on each share of this Class for each full Quarterly Dividend Period shall be computed by dividing the dividend rate for such Quarterly Dividend Period by four and applying such rate against the stated value, per share of this Class. Dividends payable on this Class for any period less than a full Quarterly Dividend Period shall be computed on the basis of a 360-day year consisting of 30-day months. (c) REDEMPTION. (1) The shares of this Class shall not be redeemable prior to April 1, 1988. On and after April 1, 1988, the Corporation, at its option, may redeem shares of this Class, as a whole or in part, at any time or from time to time, at a redemption price (i) in the case of any redemption on a redemption date occurring on or after April 1, 1988, and prior to April 1, 1993, of $51.50 per share, and (ii) in the case of any redemption on a redemption date occurring on or after April 1, 1993, of $50.00 per share, plus, in each case, accrued and unpaid dividends thereon to the date fixed for redemption. (2) In the event that fewer than all the outstanding shares of this Class are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board of Directors or by any other method as may be determined by the Board of Directors in its sole discretion to be equitable. (3) In the event the Corporation shall redeem shares of this Class, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of this Class to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (4) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the shares of this Class so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. E-4 53 (5) Any shares of this Class which shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. (6) Notwithstanding the foregoing provisions of this Section (c), if any dividends on this Class are in arrears, no shares of this Class shall be redeemed unless all outstanding shares of this Class are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Class; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of this Class pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of this Class. (d) CONVERSION OR EXCHANGE. The holders of shares of this Class shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. (e) VOTING. The shares of this Class shall not have any voting powers either general or special, except that (1) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66% of all of the shares of this Class at the time outstanding, given in person or by proxy, either in writing by a vote at a meeting called for the purpose at which the holders of shares of this Class shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of this Restated Certificate of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of Designation, Preferences and Rights or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of this Class; (2) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66% of all of the shares of this Class and all other series of Preferred Stock ranking on a parity with shares of this Class, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Class and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the shares of this Class as to dividends or upon liquidation, or the reclassification or any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares; (3) If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends on the Preferred Stock shall exist, the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the holders of the Preferred Stock of all series shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of Common Stock, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Preferred Stock. Each director elected by the holders of shares of Preferred Stock (herein called a "Preferred Director")shall continue to serve as such director for the full term for which he shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at a meeting of the stockholders, or of the holders of shares of Preferred Stock, called for that purpose. So long as a default in any preference dividends on the Preferred Stock, called for that purpose. So long as a default in any preference dividends on the Preferred Stock shall exist, (A) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (B)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (B) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a E-5 54 Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board of Directors of the Corporation shall be reduced by two. For the purposes hereof, a "default in preference dividends" on the Preferred Stock shall be deemed to exist whenever the amount of accrued dividends upon any series of the Preferred Stock shall be equivalent to six full quarter-yearly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Preferred Stock of each and every series then outstanding shall have been paid to the end of the last preceding quarterly dividend period. (f) LIQUIDATION RIGHTS. (1) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the shares of this Class shall be entitled to receive out of the assets of the Corporation, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the Preferred Stock upon liquidation, the amount of $50.00 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) Neither the sale of all or substantially all the property or business of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purpose of this Section (f). (3) After the payment to the holders of the shares of this Class of the full preferential amounts provided for in this Section (f), the holders of this Class as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Class upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph 1 of this Section (f), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Class upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Class, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (5) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the shares of this Class then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (f) before any payment shall be made to the holders of any class of capital stock of the Corporation ranking junior upon liquidation of this Class. (g) RANKING OF CLASSES OF STOCK. Any stock of any class or classes of the Corporation shall be deemed to rank: (1) prior to the shares of this Class, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of this Class; (2) on a parity with shares of this Class, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be different from those of this Class, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Class; and (3) junior to shares of this Class, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of shares of this Class shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes. E-6 55 EXHIBIT F FLEET FINANCIAL GROUP, INC. 9.30% CUMULATIVE PREFERRED STOCK (a) DESIGNATION. The designation of this class of Preferred Stock shall be "9.30% Cumulative Preferred Stock" (hereinafter called the "Preferred Shares") and the number of shares constituting this class shall be 575,000. Such Preferred Shares shall have a stated value of $250 per share. (b) DIVIDENDS. (1) Dividend periods ("Dividend Periods") shall commence on January 16, April 16, July 16 and October 16 in each year and shall end on and include the day next preceding the first day of the next Dividend Period. The dividend rate on the Preferred Shares from November 3, 1992 to and including January 15, 1993 (the "Initial Dividend Period") and for each Dividend Period thereafter will be 9.30% per annum of the stated value thereof. Such dividends shall be cumulative from November 3, 1992 and shall be payable when and as declared by the Board of Directors, on January 15th, April 15th, July 15th and October 15th of each year, commencing January 15, 1993. Each such dividend shall be paid to the holders of record of Preferred Shares as they appear on the stock register of the Corporation on such record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board of Directors. Dividends on account of arrears for any past Dividend Periods may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board of Directors. (2) No full dividends shall be declared or paid or set apart for payment on Preferred Stock of any series ranking, as to dividends, on a parity with or junior to the Preferred Shares for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Preferred Shares for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the Preferred Shares and any other Preferred Stock ranking on a parity as to dividends with the Preferred Shares, all dividends declared upon shares of the Preferred Shares and any other Preferred Stock ranking on a parity as to dividends with the Preferred Shares shall be declared pro rata so that the amount of dividends declared per share on the Preferred Shares and such other Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the Preferred Shares and such other Preferred Stock bear to each other. Holders of the Preferred Shares shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Preferred Shares. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Preferred Shares which may be in arrears. (3) So long as any of the Preferred Shares are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to the Preferred Shares as to dividends and upon liquidation and other than as provided in paragraph (2) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a parity with the Preferred Shares as to dividends or upon liquidation, nor shall any Common Stock nor any other stock of the Corporation ranking junior to or on a parity with the Preferred Shares as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to the Preferred Shares as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding Preferred Shares shall have been paid for all past dividend payment periods. (4) Dividends payable on each Preferred Share for each Dividend Period shall be computed by annualizing the applicable dividend rate and dividing by four. Dividends payable on the Preferred Shares F-1 56 for any period less than a full Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. (c) REDEMPTION. (1) The Preferred Shares shall not be redeemable prior to October 15, 1997. On and after October 15, 1997, the Corporation, at its option, may redeem the Preferred Shares, as a whole or in part, at any time or from time to time at a redemption price equal to $250 per share plus accrued and unpaid dividends thereon to the date fixed for redemption. (2) In the event that fewer than all the outstanding Preferred Shares are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board of Directors of the Corporation or by any duly authorized committee thereof or by any other method as may be determined by the Board of Directors of the Corporation or by any duly authorized committee thereof in its sole discretion to be equitable, provided that such method satisfies any applicable requirements of any securities exchange on which the Preferred Shares are listed. (3) In the event the Corporation shall redeem Preferred Shares, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less that 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of Preferred Shares to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (4) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the Preferred Shares so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation or any duly authorized committee thereof shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (5) Any of the Preferred Shares which shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors of the Corporation or any duly authorized committee thereof. (6) Notwithstanding the foregoing provisions of this Section (c), if any dividends on the Preferred Shares are in arrears, no Preferred Shares shall be redeemed unless all outstanding Preferred Shares of this class are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any Preferred Shares; provided, however, that the foregoing shall not prevent the purchase or acquisition of Preferred Shares pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Preferred Shares. (d) CONVERSION OR EXCHANGE. The holders of the Preferred Shares shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. F-2 57 (e) VOTING. The Preferred Shares shall not have any voting powers, either general or special, except that (i) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the Preferred Shares at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of Preferred Shares shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Restated Certificate of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of Designation, Preferences and Rights or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of the Preferred Shares; (ii) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the Preferred Shares and all other series of Preferred Stock ranking on a party with the Preferred Shares, either as to a parity with the Preferred Shares, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of Preferred Shares and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the Preferred Shares as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares; (iii) If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends (as defined below) on the Preferred Stock shall exist, the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the holders of the Preferred Stock of all series shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of common stock, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Preferred Stock. Each director elected by the holders of shares of Preferred Stock (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he or she shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at a meeting of the stockholders, or of the holders of shares of Preferred Stock, called for the purpose. So long as a default in any preference dividends on the Preferred Stock shall exist, (a) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (b)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (b) in case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board of Directors of the Corporation shall be reduced by two. For the purposes hereof, a "default in preference dividends" on the Preferred Stock shall be deemed to exist whenever the amount of accrued dividends upon any series of Preferred Stock shall be equivalent to six full quarter-yearly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Preferred Stock of each and every series then outstanding shall have been paid to the end of the last preceding quarterly dividend period. F-3 58 (f) LIQUIDATION RIGHTS. (1) Upon the voluntary or involuntary dissolution, liquidation or winding up of the Corporation, the holders of the Preferred Shares shall be entitled to receive, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the Preferred Shares upon liquidation, the amount of $250 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) Neither the sale of all or substantially all of the property or business of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation, nor the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purpose of this Section (f). (3) After the payment to the holders of the Preferred Shares of the full preferential amounts provided for in this Section (f), the holders of the Preferred Shares as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of the Preferred Shares upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (l) of this Section (f), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the Preferred Shares upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the Preferred Shares, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (5) Upon the voluntary or involuntary dissolution, liquidation or winding up of the Corporation, the holders of the Preferred Shares then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (f) before any payment shall be made to the holders of any class of capital stock of the Corporation ranking junior upon liquidation to the Preferred Shares. (g) RANKING OF CLASSES OF STOCK. For purposes of this resolution, any stock of any class or classes of the Corporation shall be deemed to rank: (1) prior to the Preferred Shares, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon voluntary or involuntary dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of the Preferred Shares; (2) on a parity with the Preferred Shares, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be different from those of the Preferred Shares, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon voluntary or involuntary dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of the Preferred Shares; and (3) junior to the Preferred Shares, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of the Preferred Shares shall be entitled to receipt of dividends or of amounts distributable upon voluntary or involuntary dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes. F-4 59 EXHIBIT G FLEET FINANCIAL GROUP, INC. 9.35% CUMULATIVE PREFERRED STOCK (a) DESIGNATION. The designation of this class of Preferred Stock shall be "9.35% Cumulative Preferred Stock" (hereinafter called the "Preferred Shares") and the number of shares constituting this class shall be 500,000. Such Preferred Shares shall have a stated value of $250 per share. (b) DIVIDENDS. (1) Dividend periods ("Dividend Periods") shall commence on January 15, April 15, July 15 and October 15 in each year and shall end on and include the day next preceding the first day of the next Dividend Period. The dividend rate on the Preferred Shares from January 26, 1995 to and including April 14, 1995 (the "Initial Dividend Period") and for each Dividend Period thereafter will be 9.35% per annum of the stated value thereof. Such dividends shall be cumulative from January 26, 1995 and shall be payable when and as declared by the Board of Directors, on January 15, April 15, July 15 and October 15 of each year, commencing April 15, 1995. Each such dividend shall be paid to the holders of record of Preferred Shares as they appear on the stock register of the Corporation on such record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board of Directors. Dividends on account of arrears for any past Dividend Periods may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board of Directors. (2) No full dividends shall be declared or paid or set apart for payment on Preferred Stock of any series ranking, as to dividends, on a parity with or junior to the Preferred Shares for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Preferred Shares for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the Preferred Shares and any other Preferred Stock ranking on a parity as to dividends with the Preferred Shares, all dividends declared upon shares of the Preferred Shares and any other Preferred Stock ranking on a parity as to dividends with the Preferred Shares shall be declared pro rata so that the amount of dividends declared per share on the Preferred Shares and such other Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the Preferred Shares and such other Preferred Stock bear to each other. Holders of the Preferred Shares shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Preferred Shares. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Preferred Shares which may be in arrears. (3) So long as any of the Preferred Shares are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to the Preferred Shares as to dividends and upon liquidation and other than as provided in paragraph (2) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a parity with the Preferred Shares as to dividends or upon liquidation, nor shall any Common Stock nor any other stock of the Corporation ranking junior to or on a parity with the Preferred Shares as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to the Preferred Shares as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding Preferred Shares shall have been paid for all past dividend payment periods. (4) Dividends payable on each Preferred Share for each Dividend Period shall be computed by annualizing the applicable dividend rate and dividing by four. Dividends payable on the Preferred Shares G-1 60 for any period less than a full Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. (c) REDEMPTION. (1) The Preferred Shares shall not be redeemable prior to January 15, 2000. On and after January 15, 2000, the Corporation, at its option, may redeem the Preferred Shares, as a whole or in part, at any time or from time to time at a redemption price equal to $250 per share plus accrued and unpaid dividends thereon to the date fixed for redemption. Notwithstanding the foregoing, to the extent applicable law requires, the Preferred Shares may not be redeemed by the Corporation without the prior approval of the Board of Governors of the Federal Reserve System. (2) In the event that fewer than all the outstanding Preferred Shares are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board of Directors of the Corporation or by any duly authorized committee thereof or by any other method as may be determined by the Board of Directors of the Corporation or by any duly authorized committee thereof in its sole discretion to be equitable, provided that such method satisfies any applicable requirements of any securities exchange on which the Preferred Shares are listed. (3) In the event the Corporation shall redeem Preferred Shares, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of Preferred Shares to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (4) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the Preferred Shares so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation or any duly authorized committee thereof shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (5) Any of the Preferred Shares which shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors of the Corporation or any duly authorized committee thereof. (6) Notwithstanding the foregoing provisions of this Section (c), if any dividends on the Preferred Shares are in arrears, no Preferred Shares shall be redeemed unless all outstanding Preferred Shares of this class are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any Preferred Shares; provided, however, that the foregoing shall not prevent the purchase or acquisition of Preferred Shares pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Preferred Shares. (d) CONVERSION OR EXCHANGE. The holders of the Preferred Shares shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. G-2 61 (e) VOTING. The Preferred Shares shall not have any voting powers, either general or special, except that (i) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the Preferred Shares at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of Preferred Shares shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Restated Certificate of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of Designation, Preferences and Rights or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of the Preferred Shares; (ii) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the Preferred Shares and all other series of Preferred Stock ranking on a parity with the Preferred Shares, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of Preferred Shares and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the Preferred Shares as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares; (iii) If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends (as defined below) on the Preferred Stock shall exist, the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the holders of the Preferred Stock of all series shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of common stock, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Preferred Stock. Each director elected by the holders of shares of Preferred Stock (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he or she shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at a meeting of the stockholders, or of the holders of shares of Preferred Stock, called for the purpose. So long as a default in any preference dividends on the Preferred Stock shall exist, (a) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (b)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (b) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board of Directors of the Corporation shall be reduced by two. For the purposes hereof, a "default in preference dividends" on the Preferred Stock shall be deemed to exist whenever the amount of accrued dividends upon any series of Preferred Stock shall be equivalent to six full quarter-yearly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Preferred Stock of each and every series then outstanding shall have been paid to the end of the last preceding quarterly dividend period. G-3 62 (f) LIQUIDATION RIGHTS. (1) Upon the voluntary or involuntary dissolution, liquidation or winding up of the Corporation, the holders of the Preferred Shares shall be entitled to receive, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the Preferred Shares upon liquidation, the amount of $250 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) Neither the sale of all or substantially all of the property or business of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation, nor the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purpose of this Section (f). (3) After the payment to the holders of the Preferred Shares of the full preferential amounts provided for in this Section (f), the holders of the Preferred Shares as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of the Preferred Shares upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (f), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the Preferred Shares upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the Preferred Shares, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (5) Upon the voluntary or involuntary dissolution, liquidation or winding up of the Corporation, the holders of the Preferred Shares then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (f) before any payment shall be made to the holders of any class of capital stock of the Corporation ranking junior upon liquidation to the Preferred Shares. (g) RANKING OF CLASSES OF STOCK. For purposes of this resolution, any stock of any class or classes of the Corporation shall be deemed to rank: (1) prior to the Preferred Shares, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon voluntary or involuntary dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of the Preferred Shares; (2) on a parity with the Preferred Shares, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be different from those of the Preferred Shares, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon voluntary or involuntary dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of the Preferred Shares; and (3) junior to the Preferred Shares, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of the Preferred Shares shall be entitled to receipt of dividends or of amounts distributable upon voluntary or involuntary dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes." G-4 EX-4.(D) 3 FORM OF WARRANT AGREEMENT 1 EXHIBIT 4(d) WARRANT AGREEMENT Warrant Agreement, dated as of , 1995 between FLEET FINANCIAL GROUP, INC., A Rhode Island corporation (the "Company"), and Fleet National Bank (the "Warrant Agent"). WHEREAS, as of the date hereof, Shawmut National Corporation ("Shawmut") has outstanding warrants (the "Shawmut Warrants") to purchase up to an aggregate of 1,329,115 shares of its Common Stock, par value $.01 per share ("Shawmut Common Stock"), each Shawmut Warrant entitling the holder thereof to purchase one share of Shawmut Common Stock at an exercise price of $22.11; and WHEREAS, as of the effective time (the "Effective Time") of the merger (the "Merger") of Shawmut into the Company, each Shawmut Warrant automatically converted into a Common Stock Subscription Warrants, as hereinafter described (the "Warrants"), to purchase up to an aggregate of 1,185,836 fully paid and nonassessable shares of the Common Stock, par value $1.00 per share of the Company ("Common Stock", and the shares of Common Stock issuable upon exercise of the Warrants being referred to herein as the "Warrant Shares"), each Warrant entitling the holder thereof to purchase one share of Common Stock at an Exercise Price (defined in Section 9 hereof) of $24.78 per Warrant, subject to adjustment as hereinafter provided; and WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act, in connection with the issuance of the Warrants and the other matters as provided herein. NOW, THEREFORE, in consideration of the foregoing and for the purpose of defining the terms and provisions of the Warrants and the respective rights and obligations thereunder of the Company and the registered holders of the Warrants (the "Holders"), the Company and the Warrant Agent hereby agree as follows: SECTION 1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the provisions hereinafter set forth in this Agreement, and the Warrant Agent hereby accepts such appointment. As used herein, the term "Warrant Agent" shall mean the Warrant Agent and any successor appointed hereunder. SECTION 2. Form and Countersignature of Warrants. 2.1 Form of Warrant. The text of the Warrant, the subscription form (the "Subscription Form"), and form of assignment shall be substantially as set forth in Exhibit A attached hereto. The Warrants shall be executed on behalf of the Company by one or more authorized officers. The signature of any such officers on the Warrants may be made manually or by facsimile. 2.2 Countersignature of Warrants. The Warrants shall be countersigned manually or by facsimile by the Warrant Agent and shall not be valid for any purpose unless so countersigned. Warrants may be countersigned by the Warrant Agent and may be issued or delivered by the Warrant Agent, notwithstanding that the persons whose manual or facsimile signatures appear thereon as proper officers of the Company shall have ceased to be such officers at the time of such countersignature, issuance or delivery. Warrants shall be dated as of the date of issuance or countersignature thereof by the Warrant Agent either upon initial issuance or upon exchange, substitution or transfer. SECTION 3. Issuance and Registration of Warrants. 3.1 Initial Issuance of Warrants. The Warrant Agent shall issue the Warrants upon receipt of, and in accordance with, a statement from an authorized representative of the Company as contemplated by Section 15.10 hereof specifying the identity of, and number of Warrants to be issued to, each person or entity to be issued Warrants. 2 3.2 Registration. The Warrants shall be numbered and shall be registered in a warrant register maintained by the Warrant Agent as they are issued. The Company and the Warrant Agent may deem and treat the registered holder of a Warrant Certificate as the absolute owner thereof (notwithstanding any notation of ownership or other writing thereon made by anyone), for the purpose of any exercise or conversion thereof and any distribution to the holder thereof and for all other purposes and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. The Company shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person. SECTION 4. Transfer and Exchange of Warrants. Transfer of Warrants. The Warrants shall be transferable only on the books of the Warrant Agent maintained at the principal office of the Warrant Agent upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment or authority to transfer, which endorsement shall be guaranteed by an eligible guarantor institution which is a member of a signature guarantee program satisfactory to the Warrant Agent (an "Eligible Institution"). Warrants may be transferred only in whole, so as to allow the Holder of each Warrant to purchase one full share of Common Stock. In all cases of transfer by an attorney-in-fact, the original power of attorney, duly approved, or a copy thereof, duly certified, in such form and with such other evidence of authority as the Warrant Agent shall request, shall be deposited and remain with the Warrant Agent. In case of transfer by executors, administrators, guardians or other legal representatives, duly authenticated evidence of their authority shall be produced, in such form and with such other evidence of authority as the Warrant Agent shall request, and may be required to be deposited and remain with the Warrant Agent in its discretion. Upon any such registration of transfer, the Warrant Agent shall countersign and deliver a new Warrant or Warrants to the person entitled thereto. 4.2 Exchange of Warrant Certificates. Each Warrant certificate may be exchanged upon surrender at the principal office of the Warrant Agent for another certificate or certificates entitling the Holder thereof to purchase a like aggregate number of Warrant Shares as the certificate or certificates surrendered then entitle such Holder to purchase. Any Holder desiring to exchange a Warrant certificate or certificates shall make such request in writing delivered to the Warrant Agent, and shall surrender, properly endorsed, the certificate or certificates to be so exchanged. Thereupon, the Warrant Agent shall countersign and deliver to the Holder a new Warrant certificate or certificates, as the case may be, as so requested, in the name of such Holder. No fractional Warrant certificates shall be issued and no new Warrant certificate entitling the Holder thereof to purchase fractional shares will be issued. SECTION 5. Term of Warrants; Exercise of Warrants. 5.1 Term of Warrants. Subject to the terms of this Agreement, each Holder shall have the right, which may be exercised commencing at the opening of business on January 18, 1995 until 5:00 p.m., New York time, on January 18, 1996 (the "Expiration Date"), to purchase from the Company the number of fully paid and nonassessable Warrant Shares which the Holder may at the time be entitled to purchase on exercise of such Warrants. 5.2 Exercise of Warrants. A Warrant may be exercised upon surrender to the Warrant Agent at its principal office of the certificate or certificates evidencing the Warrants to be exercised, together with the Subscription Form duly completed and signed, which signature shall be guaranteed by an Eligible Institution, and upon payment to the Warrant Agent for the account of the Company of the Exercise Price (as defined in Section 9 hereof and subject to adjustment in accordance with the provisions of Section 10 hereof) for the number of Warrant Shares in respect of which such Warrants are then exercised. Payment of the aggregate Exercise Price shall be made by certified or official bank check. Subject to Section 6 hereof, upon the surrender of Warrants and payment of the Exercise Price as aforesaid, the Warrant Agent shall cause to be issued and delivered as soon as practicable to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate or certificates for the number of full Warrant Shares so purchased upon the exercise of such Warrants. No certificate for fractional Warrant Shares, or cash in lieu thereof, will be issued. If permitted by applicable law, 3 such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the receipt by the Warrant Agent of such Warrants and payment of the Exercise Price, as aforesaid; provided, however, that if at the date of surrender of such Warrants and payment of such Exercise Price, the transfer books for the shares of Common Stock purchasable upon the exercise of such Warrants shall be closed, the certificates for the shares in respect of which such Warrants are then exercised shall be issuable as of the date on which such books shall be opened, and until such date the Company shall be under no duty to deliver any certificate for such shares and the holder of the Warrant shall not be deemed to be the holder of shares of Common Stock issuable upon exercise of such Warrant until such time as such books shall be opened; provided, further, however, that such transfer books, unless other wise required by law or by applicable rule of any national securities exchange, shall not be closed at any one time for a period longer than twenty (20) days. The rights of purchase represented by the Warrants shall be exercisable, at the election of the Holders thereof, either in full or from time to time in part, and in the event that a certificate evidencing Warrants is exercised in respect of less than all of the Warrant Shares purchasable on such exercise at any time prior to the date of expiration of the Warrants, a new certificate evidencing the remaining Warrant or Warrants will be issued to the Holder thereof, and the Warrant Agent is hereby authorized to countersign and deliver the required new Warrant certificate or certificates pursuant to the provisions of this Section and Section 2 hereof. 5.3 Compliance with Government Regulations. The Company covenants that if any shares of Common Stock required to be reserved for purposes of exercise of Warrants require, under any federal securities law or applicable governing rule or regulation of any national securities exchange, registration with or approval of any governmental authority, or listing on any such national securities exchange before such shares may be issued upon exercise, the Company will in good faith prior to the issuance of such shares endeavor to cause such shares to be duly registered, approved or listed on the relevant national securities exchange, as the case may be; provided, however, that in no event shall such shares of Common Stock be issued, and the Company is hereby authorized to suspend the exercise of all Warrants, for the period during which such registration, approval or listing is required but not in effect. The Company covenants that it will use reasonable efforts to obtain any required approvals or registration under state "blue sky" securities laws for the issuance of the Warrant Shares; provided, however, that Warrants may not be exercised by, or Warrant Shares issued to, any Holder in any state where such exercise or issuance would be unlawful. SECTION 6. Payment of Taxes. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue or delivery of any Warrants or certificates for Warrant Shares in a name other than that of the Holder of such Warrants, and the Company shall not be required to issue or deliver such Warrants or certificates for Warrant Shares or proceeds unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. SECTION 7. Mutilated or Missing Warrants. In case any of the certificates evidencing the Warrants shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and the Warrant Agent shall countersign and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in substitution for the Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company and the Warrant Agent of such loss, theft or destruction of such Warrant and an indemnity or bond, if requested, also satisfactory to them. An applicant for such a substitute Warrant certificate shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company or the Warrant Agent may prescribe. SECTION 8. Reservation of Warrant Shares; Purchase and Cancellation of Warrants. Reservation of Warrant Shares. There have been reserved, and the Company shall at all times keep reserved, out of its authorized Common Stock, a number of shares of Common Stock sufficient to provide for the exercise of the rights of purchase represented by the outstanding Warrants. The transfer agent for the 4 Common Stock (the "Transfer Agent") and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of any of the rights of purchase aforesaid will be authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrants. The Warrant Agent is hereby authorized to requisition from time to time from the Transfer Agent the stock certificates required to honor outstanding Warrants upon exercise thereof in accordance with the terms of this Agreement. The Company will supply the Transfer Agent and any such subsequent transfer agent with duly executed stock certificates for such purposes. The Company will furnish the Transfer Agent and any such subsequent transfer agent a copy of all notices of adjustments delivered by the Company to the Warrant Agent hereunder. 8.2 Purchase of Warrants by the Company. The Company shall have the right, except as limited by law, other agreements or herein, to purchase or otherwise acquire Warrants at such times, in such manner and for such consideration as it may deem appropriate. 8.3 Cancellation of Warrants. In the event the Company shall purchase or otherwise acquire Warrants, the same shall thereupon be delivered to the Warrant Agent and be cancelled by it and retired. The Warrant Agent shall cancel any Warrant surrendered for exchange, substitution, transfer or exercise in whole or in part and such cancelled Warrant Certificate shall be disposed of by the Warrant Agent in a manner satisfactory to the Company. SECTION 9. Exercise Price. The price per share at which a Warrant Share shall be purchasable upon exercise of a Warrant (the "Exercise Price") shall be $24.78, subject to adjustment as provided in Section 10 hereof. SECTION 10. Adjustments. The Exercise Price and the number and kind of securities subject to purchase upon the exercise of each Warrant shall be subject to adjustment form time to time upon the happening of certain events, as hereinafter set forth. 10.1 Adjustments. (a) In the event that, on or after the Distribution Date and prior to the Expiration Date, the Company shall (i) declare a dividend or make a distribution on its shares of Common Stock payable in shares of Common Stock, (ii) subdivide or reclassify the outstanding Common Stock into a greater number of shares of Common Stock, or (iii) combine or reclassify the outstanding Common Stock into a smaller number of shares of Common Stock, the Exercise Price in effect and number of Warrant Shares which are to be issued upon exercise of a Warrant at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, shall be proportionately adjusted so that the holder of any Warrant exercised after such time shall be entitled to receive the aggregate number of shares of Common Stock which, if such Warrant had been exercised immediately prior to such date, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur. (b) In the event, on or after the Distribution Date and prior to the Expiration Date, of any merger or consolidation of the Company with or into, or all of the outstanding Common Stock is acquired by, any other person or company, the Holder of Warrants shall receive upon such exercise of the Warrants and payment of the Exercise Price the kind and amount of shares of stock and other securities and property (including cash) receivable upon such merger or consolidation, by a Holder of the number of shares of Common Stock of the Company into which such Warrants so exercised might have been exercised immediately prior to such merger or consolidation, subject to adjustments which, for events subsequent to the effective date of such merger or consolidation, shall be on terms as nearly equivalent as practicable to the adjustments provided above. The above provisions shall similarly apply to successive mergers and consolidations. (c) The Company may make such reduction in the Exercise Price, in addition to those required by clauses (a) or (b) of this Section 10.1, as it considers to be advisable in order that any event treated for federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. 5 (d) Notwithstanding anything to the contrary contained in this Section 10.1, no adjustment in the Exercise Price shall be required unless such adjustments would require an increase or decrease of at least one percent in such price; provided, however, that any adjustments which by reason of this Section 10.1 (d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 10.1 shall be made to the nearest cent. (e) In any case in which this Section 10 shall require that any adjustment in the Exercise Price be made effective as of immediately after a record date for a specified event, the Company may elect to defer until the occurrence of the event the issuing to the Holder of any Warrant exercised after that record date of the shares of Common Stock and other capital stock of the Company, if any, issuable upon the exercise over and above the shares of Common Stock and other capital stock of the Company, if any, issuable upon the exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that the Company shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment. (f) Notwithstanding anything to the contrary contained in this Section 10.1, no adjustment to the Exercise Price or other terms of the Warrants need be made if Holders are to participate in any transaction on a basis, and with notice, that the Board of Directors of the Company determines to be fair and appropriate in light of the basis and notice on which holders of Common Stock participate in the transaction. 10.2 Notice of Adjustment. Whenever the Exercise Price is adjusted, as herein provided, the Company shall cause the Warrant Agent promptly to give notice to the Holders as provided in Section 18 hereof of such adjustment or adjustments and shall deliver to the Warrant Agent a certificate setting forth the Exercise Price after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. The Warrant Agent shall be entitled to rely on such certificate and shall be under no duty or responsibility with respect to any such certificate, except to exhibit the same, from time to time, to any Holder desiring an inspection thereof during reasonable business hours. The Warrant Agent shall not at any time be under any duty or responsibility to any Holders to determine whether any facts exist which may require any adjustment of the Exercise Price or other stock or property purchasable on the exercise thereof, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed in making such adjustment. 10.3 Statement on Warrants. Irrespective of any adjustments in the Exercise Price or the number or kind of shares or other property purchasable upon the exercise of the Warrants or other amendments to or corrections of this Agreement, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrants initially issuable pursuant to this Agreement. SECTION 11. No Fractional Interests. No Warrant entitling the Holder to purchase fractional interests in Warrant Shares and no fractional Warrant Shares, or cash or other consideration in lieu thereof, will be issued. SECTION 12. No Rights as Stockholders; Notice to Holders. Nothing contained in this Agreement or in any of the Warrants shall be construed as conferring upon the Holders or their transferees the right to vote or to receive dividends or to consent or to receive notice as stockholders in respect of any meeting of stockholders for the election of directors of the Company or any other matter, or any rights whatsoever as stockholders of the Company. If, however, at any time during which the Warrants are exercisable and prior to their exercise, any of the following events shall occur: (a) the Company shall declare any dividend or distribution payable in any securities upon all its shares of Common Stock (other than any dividend or distribution of securities pursuant to the Rights Agreement dated as of November 21, 1990, as thereafter amended, between the Company and Fleet National Bank, as Rights Agent, or pursuant to any similar agreement) to all holders of its shares of Common Stock; or (b) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, sale or transfer of all or substantially all of its assets) shall be proposed; 6 (c) then in any one or more of said events, the Company shall give notice in writing of such event to the Warrant Agent and the Warrant Agent shall give notice to the Holders as provided in Section 18 hereof, such giving of notice to the Warrant Agent to be completed at least 10 days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the stockholders entitled to such dividend or distribution or for the determination of stockholders entitled to vote on such proposed action. Such notice shall specify such record date or the date of closing the transfer books, as the case may be. Failure to mail or receive such notice or any defect therein or in the mailing thereof shall not affect the validity of any action taken in connection with such dividend or distribution or action. SECTION 13. Disposition of Proceeds on Exercise of Warrants; Inspection of Warrant Agreement. The Warrant Agent shall account promptly to the Company with respect to Warrants exercised and concurrently pay to the Company all monies received by the Warrant Agent for the purchase of the Warrant Shares through the exercise of such Warrants. The Warrant Agent shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the Holders during normal business hours at its principal office. The Company shall supply the Warrant Agent from time to time with such number of copies of this Agreement as the Warrant Agent may request. SECTION 14. Merger or Consolidation or Change of Name of Warrant Agent. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party, or any corporation succeeding to substantially all of the business of the Warrant Agent, shall be the successor to the Warrant Agent hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Warrant Agent under the provisions of Section 16 hereof. In case at the time such successor to the Warrant Agent shall succeed to the agency created by this Agreement any of the Warrants shall have been countersigned but not delivered, any such successor to the Warrant Agent may adopt the countersignature of the original Warrant Agent and deliver such Warrants so countersigned; and in case at that time any of the Warrants shall not have been countersigned, any successor to the Warrant Agent may countersign such Warrants either in the name of the predecessor Warrant Agent or in the name of the successor Warrant Agent; and in any such cases such Warrants shall have the full force provided in the Warrants and in this Agreement. In case at any time the name of the Warrant Agent shall be changed and at such time any of the Warrants shall have been countersigned but not delivered, the Warrant Agent may adopt the countersignatures under its prior name and deliver such Warrants so countersigned; and in case at that time any of the Warrants shall not have been countersigned, the Warrant Agent may countersign such Warrants either in its prior name or in its changed name; and in all such cases such Warrants shall have the full force provided in the Warrants and in this Agreement. SECTION 15. Concerning the Warrant Agent. The Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the Holders, by their acceptance of Warrants, shall be bound. 15.1 Correctness of Statements. The statements contained herein and in the Warrants shall be taken as statements of the Company and the Warrant Agent assumes no responsibility for the correctness of any of the same except such as describe the Warrant Agent or action taken by it. The Warrant Agent assumes no responsibility with respect to the distribution of the Warrants except as otherwise provided herein. 15.2 Breach of Covenants. The Warrant Agent shall not be responsible for any failure of the Company to comply with any of the covenants of the Company contained in this Agreement or in the Warrant. 15.3 Reliance on Counsel. The Warrant Agent may consult at any time with legal counsel satisfactory to it (who may be counsel for the Company) and the Warrant Agent shall incur no liability or responsibility to the Company or to any Holder in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or the advice of such counsel. 7 15.4 Proof of Actions Taken. Whenever in the performance of its duties under this Agreement the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed conclusively to be proved and established by a certificate signed by an officer of the Company and delivered to the Warrant Agent; and such certificate shall be full authorization to the Warrant Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. 15.5 Compensation and Indemnification. The Company agrees to pay the Warrant Agent reasonable compensation for all services rendered by the Warrant Agent in the performance of its duties under this Agreement, to reimburse the Warrant Agent for all expenses, taxes and governmental charges and other charges of any kind and nature reasonably incurred by the Warrant Agent in the performance of its duties under this Agreement, and to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the performance of its duties under this Agreement except as a result of the Warrant Agent's gross negligence or bad faith. In connection with such indemnification, the Company shall be entitled to conduct any litigation and shall only be required to pay the reasonable costs and fees of one counsel selected by the Company. The Warrant Agent will cooperate in the defense of any such action and will not settle such action without the consent of the Company. 15.6 Other Transactions in Securities of Company. The Warrant Agent and any stockholder, director, officer or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested or contract with or lend money to the Company or otherwise act as fully and freely as though the Warrant Agent was not Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any legal entity including, without limitation, acting as a lender to the Company or an affiliate thereof. 15.7 Liability of Warrant Agent. The Warrant Agent shall act hereunder solely as the agent of the Company and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not be liable for anything which it may do or refrain from doing in connection with this Agreement except for its own gross negligence or bad faith. Anything in this Agreement to the contrary notwithstanding, in no event shall the Warrant Agent be liable for special, indirect or consequential loss or damage whatsoever (including, but not limited to, lost profits) even if the Warrant Agent has been advised of the likelihood of such loss or damage and regardless of the form of action. 15.8 Reliance on Documents. The Warrant Agent will not incur any liability or responsibility to the Company or to any Holder for any action taken in reliance on any notice, resolution, waiver, consent, order, certificate, or other paper, document or instrument reasonably believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. 15.9 Validity of Agreement. The Warrant Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Warrant Agent) or in respect of the validity and execution of any Warrant (except its countersignature thereof); nor shall the Warrant Agent by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Warrant Shares (or other stock) to be issued pursuant to this Agreement or any Warrant, or as to whether any Warrant Shares (or other stock) will, when issued, be validly issued, fully paid and nonassessable, or as to the Exercise Price or the number or amount of Warrant Shares or other securities or other property issuable upon exercise of any Warrant. 15.10 Instructions from Company. The Warrant Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the President, any Vice Chairman of the Board, or any Executive, Senior or other Vice President of the Company or any other employee of the Company expressly authorized in writing by any of such persons as having the authority to deliver instructions hereunder, and to apply to such officers or employees for advice or instructions 8 in connection with its duties, and shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officers or employees. SECTION 16. Change of Warrant Agent. The Warrant Agent may resign and be discharged from its duties under this Agreement by giving to the Company 30 days' notice in writing. The Warrant Agent may be removed by like notice to the Warrant Agent from the Company. If the Warrant Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Warrant Agent or by any Holder (who shall with such notice submit his Warrant for inspection by the Company), then any Holder may apply to any court of competent jurisdiction located in Boston, Massachusetts for the appointment of a successor to the Warrant Agent. Pending appointment of a successor to the Warrant Agent, either by the Company or by such a court, the duties of the Warrant Agent shall be carried out by the Company. Any successor Warrant Agent, whether appointed by the Company or such a court, shall be a bank or trust company, in good standing, incorporated under the laws of the United States of America or any state thereof and having at the time of its appointment as Warrant Agent a combined capital and surplus of at least $5,000,000. After appointment, the successor Warrant Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Warrant Agent without further act or deed; but the former warrant agent shall deliver and transfer to the successor warrant agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Failure to file any notice provided for in this Section 16, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the warrant agent or the appointment of the successor warrant agent, as the case may be. In the event of such resignation or removal, the successor warrant agent shall mail, by first class mail, postage prepaid, to each Holder, written notice of such removal or resignation and the name and address of such successor warrant agent. SECTION 17. Identity of Transfer Agent. Forthwith upon the appointment of any subsequent transfer agent for the Common Stock, or any other shares of the Company's capital stock issuable upon exercise of the Warrant, the Company will file with the Warrant Agent a statement setting forth the name and address of such subsequent transfer agent. SECTION 18. Notices. Any notice pursuant to this Agreement by the Company or by any Holder to the Warrant Agent, or by the Warrant Agent or by any Holder to the Company, shall be in writing and shall be delivered in person, by overnight courier, or by facsimile transmission (with hard copy to follow promptly by first class mail or overnight courier), or mailed first class, postage prepaid (a) to the Company at its offices at 50 Kennedy Plaza, Providence, Rhode Island 02903, Attention: Secretary; or (b) to the Warrant Agent at Fleet National Bank, 111 Westminster Street, Providence, Rhode Island 02903, Attn: Shareholder Services. Each party hereto may from time to time change the address or facsimile numbers to which notices to it are to be delivered or mailed hereunder by notice to the other party. Any notice required to be mailed pursuant to this Agreement by the Company or the Warrant Agent to the Holders shall be in writing and shall be mailed first class, postage prepaid, or otherwise delivered, to such Holders at their respective addresses on the books of the Warrant Agent. Any other notices which the Company or the Warrant Agent may wish to provide to the Holder may be made in such manner (including by publication in a newspaper of national circulation) as the Company or the Warrant Agent, as the case may be, shall elect. Any notice requested by any other person may be dispatched in the discretion of the Warrant Agent, but at no expense to the Warrant Agent or the Company. SECTION 19. Supplements and Amendments. The Company and the Warrant Agent may from time to time supplement or amend this Agreement without the approval of any Holder in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Warrant Agent may deem necessary or desirable, which shall not adversely affect in any material manner the interest of the Holders. The Company and the Warrant Agent may from time to time supplement or amend this Agreement in any other respect with the written consent of 9 the Holders of not less than a majority of the Warrants then outstanding; provided, however, that no change in the number or nature of the securities purchasable upon the exercise of any Warrant, or increase in the Exercise Price of any Warrant, or acceleration of the Expiration Date of any Warrant, shall be made without the written consent of the Holder of such Warrant, other than such changes as are specifically prescribed by this Agreement as originally executed or are made in compliance with applicable law. SECTION 20. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 21. Applicable Law. This Agreement and each Warrant issued hereunder shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within such State, without giving effect to principles of conflicts of laws. The parties consent to the exclusive jurisdiction of the state and federal courts located in Boston, Massachusetts, Providence, Rhode Island or New York, New York, in all cases arising out of this Agreement or the subject matter thereof, and to the service of process of such courts (and will not initiate or maintain an action in any other venue without the consent of both parties hereto). Any action brought by any person (other than the Company and the Warrant Agent) arising under or relating to this Agreement and the Warrants shall be brought only in the state and federal courts located in Boston, Massachusetts except that any such action brought solely against the Warrant Agent shall be brought only in the state and federal courts located in Providence, Rhode Island. SECTION 22. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Warrant Agent, and the Holders any legal or equitable right, remedy or claim under this Agreement; this Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the Holders of the Warrants. SECTION 23. Counterparts. This Agreement may be executed in counterparts and by facsimile and each of such counterparts and facsimile copies shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. SECTION 24. Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. SECTION 25. Captions. The captions of the Sections and subsections of this Agreement have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the day and year first above written. FLEET FINANCIAL GROUP, INC. By: ------------------------------------ Name: Title: FLEET NATIONAL BANK By: ------------------------------------ Name: Title: 10 EXHIBIT A FORM OF WARRANT CERTIFICATE (OBVERSE) EXERCISABLE ONLY ON OR AFTER JANUARY 18, 1995 AND ON OR BEFORE 5:00 P.M. NEW YORK CITY TIME ON JANUARY 18, 1996 NUMBER NYW: ________________ WARRANTS: ___________________ SEE REVERSE SIDE FOR DEFINITIONS COMMON STOCK SUBSCRIPTION WARRANTS CUSIP Incorporated Under the Laws of The State of Rhode Island FLEET FINANCIAL GROUP, INC. This certifies that FOR VALUE RECEIVED or registered assigns (the "Registered Holder") is the owner of the number of Common Stock Subscription Warrants (the "Warrants") specified above. Each Warrant initially entitles the Registered Holder to purchase, subject to the terms and conditions set forth in this Warrant Certificate and the Warrant Agreement (as hereinafter defined), one fully paid and nonassessable share of Common Stock, $1.00 par value (the "Common Stock"), of Fleet Financial Group, Inc., a Rhode Island corporation (the "Company"), at any time between January 18, 1995 and 5:00 p.m. (New York City time) on January 18, 1996 (the "Expiration Date"), upon surrender of this Warrant Certificate with the Subscription Form on the reverse hereof duly executed, at the principal office of Fleet National Bank, as Warrant Agent, or its successor (the "Warrant Agent"), accompanied by payment of $24.78 per Warrant (the "Exercise Price") by certified or official bank check made payable to the Warrant Agent for the account of the Company. This Warrant Certificate and each Warrant represented hereby are issued pursuant to and are subject in all respects to the terms and conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated as of , 1995, by and between the Company and the Warrant Agent. A copy of the Warrant Agreement may be obtained by the Registered Holder upon written request to the Company. Upon the occurrence of certain events provided for in the Warrant Agreement, the Exercise Price and the number and kind of securities subject to purchase upon the exercise of each Warrant represented hereby are subject to adjustment. Each Warrant represented hereby is exercisable at the option of the Registered Holder, but no fractional shares of Common Stock, or cash or other consideration in lieu thereof, will be issued. In the case of the exercise of less than all of the Warrants represented hereby, the Company shall execute a new Warrant Certificate, which the Warrant Agent shall countersign and deliver, for the balance of such Warrants. This Warrant Certificate is exchangeable, upon the surrender hereof by the Registered Holder at the principal office of the Warrant Agent, for a new Warrant Certificate or Warrant Certificates entitling such Registered Holder to purchase a like aggregate number of shares of Common Stock as this Warrant Certificate entitles such Registered Holder to purchase. A Registered Holder desiring to exchange this Warrant Certificate shall make such request in writing delivered to the Warrant Agent, and shall surrender, 11 properly endorsed, this Warrant Certificate to be so exchanged. Thereupon, the Warrant Agent shall countersign and deliver to the Registered Holder a new Warrant Certificate or Warrant Certificates as so requested, in the name of such Registered Holder, subject to the limitations provided in the Warrant Agreement. No fractional Warrant Certificate shall be issued and no new Warrant Certificate entitling the Registered Holder thereof to purchase fractional shares will be issued. Prior to the exercise of any Warrant represented hereby, the Registered Holder shall not be entitled to any rights of a stockholder of the Company, including, without limitation, the right to vote or to receive dividends, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided in the Warrant Agreement. The Company and the Warrant Agent may deem and treat the Registered Holder as the absolute owner hereof (notwithstanding any notation of ownership or other writing hereon made by anyone) for all purposes and shall not be affected by any notice to the contrary. This Warrant Certificate is not valid unless countersigned by the Warrant Agent. IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed, manually or in facsimile, by two of its officers thereunto duly authorized and a facsimile of its corporate seal to be imprinted thereon. FLEET FINANCIAL GROUP, INC. By: ------------------------------------ Secretary By: ------------------------------------ Chief Executive Officer and President COUNTERSIGNED: FLEET NATIONAL BANK, as Warrant Agent By: ------------------------------------ Authorized Officer 2 12 (REVERSE) The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT -- as tenants by the entireties JT TEN -- as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT -- ______________________ Custodian ____________________ (Cust) (Minor) Act ___________ (State) Additional abbreviations may also be used though not in the above list. 3 13 SUBSCRIPTION FORM (To be executed only upon exercise of Warrant) The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant Certificate for, and to purchase thereunder, shares of Common Stock, as provided for therein, and tenders herewith payment of the purchase price in full in the form of a certified or official bank check in the amount of $ Please issue a certificate or certificates for such shares of Common Stock in the name of: Name ---------------------------------- (Please Print Name, Address and Social Security or Taxpayer Identification Number) Name -------------------------------------- Name -------------------------------------- Name -------------------------------------- Name -------------------------------------- And, if said number of shares shall not be all the shares purchasable under the within Warrant Certificate, a new Warrant Certificate is to be issued in the name of said undersigned for the balance remaining of the shares purchasable thereunder. -------------------------------------- Signature: Note: The above signature must correspond exactly with the name on the face of this Warrant Certificate or with the name of assignee appearing in the assignment form below. - ---------------------------------------- Signature Guarantee Signatures should be guaranteed by an eligible guarantor institution which is a member of a signature guarantee program satisfactory to the Warrant Agent. 4 14 ASSIGNMENT (TO BE EXECUTED ONLY UPON ASSIGNMENT OF WARRANT) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE [ ] - -------------------------------------------------------------------------------- (Name and Address of Assignee Must Be Printed or Typewritten) the within Warrant Certificate, hereby irrevocably constituting and appointing , Attorney to transfer said Warrant Certificate on the books of the Company, with full power of substitution in the premises. Dated: - ------------------------------------------------------ Signature of Registered Holder Note: The above signature must correspond exactly with the name on the face of this Warrant Certificate. - ----------------------------------------------- Signature Guarantee Signatures should be guaranteed by an eligible guarantor institution which is a member of a signature guarantee program satisfactory to the Warrant Agent.
Upon the exercise of the Warrants represented by this Warrant Certificate, the holder will receive shares of Common Stock which will, to the extent provided by the provisions of the Rights Agreement between the Company and Fleet National Bank (the "Rights Agent"), dated as of November 21, 1990 (the "Rights Agreement"), entitle the holder to certain Rights. The terms of the Rights Agreement are hereby incorporated herein by reference and a copy of the Rights Agreement is on file at the principal offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by the certificate representing shares of Common Stock. The Company or the Rights Agent will mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge promptly after receipt of a written request therefor. Except as may be otherwise provided in the Rights Agreement, any shares of Common Stock issued prior to the Distribution Date (as defined in the Rights Agreement) will be issued with Rights. Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person, an Adverse Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void. 5 EX-4.(F) 4 FORM OF STOCK CERTIFICATE FOR PREFERRED STOCK 1 EXHIBIT 4(F) INCORPORATED UNDER THE LAWS OF THE STATE OF RHODE ISLAND FLEET FINANCIAL GROUP, INC. PREFERRED STOCK WITH CUMULATIVE AND ADJUSTABLE DIVIDENDS This is to certify that is the owner of fully paid and non-assessable shares of the Preferred Stock with Cumulative and Adjustable Dividends of Fleet Financial Group, Inc., transferable on the books of the Corporation in person or by attorney upon surrender of this Certificate duly endorsed or assigned. This Certificate and the Shares represented thereby are subject to the laws of the State of Rhode Island and to the provisions of the Restated Articles of Incorporation and the Bylaws of the Corporation as from time to time amended. This Certificate is not valid unless countersigned by the Transfer Agent. Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. DATED: - --------------------------------------------- --------------------------------------------- Chief Executive Officer and President Secretary
COUNTERSIGNED: FLEET NATIONAL BANK By ------------------------------------------------------ Authorized Officer - -------------------------------------------------------------------------------- 2 [REVERSE] FLEET FINANCIAL GROUP, INC. The Corporation is authorized to issue Preferred Stock and Common Stock. The Preferred Stock may be divided into and issued in one or more series, having such preferences, voting powers, qualifications and special and relative rights as may be established by the Board of Directors from time to time. The Corporation will furnish to the holder hereof upon written request and without charge a copy of the full text, as set forth in the Corporation's Restated Articles of Incorporation, of the preferences, voting powers, qualifications and special and relative rights of the shares of each class (and each series of a class, if any) of its capital stock authorized to be issued as of the date of such request. Requests for such copies should be directed to the office of the Secretary of the Corporation or to the Transfer Agent named on the face of this Certificate. The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT -- as tenants by the entireties JT TEN -- as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT -- _________________________ Custodian _____________________ (Cust) (Minor) under Uniform Gift to Minors Act ________________ (State)
Additional abbreviations may also be used though not in the above list For value received, __________________________________ hereby sell, assign and transfer unto _____________________ (please insert social security or other identifying number of assignee) ________________________________________________________________________________ _______________________________________________________________________________ (Please print or typewrite name and address including postal zip code of assignee) _________ Shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________________________________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated ___________________________ _______________________________________________________ Notice: The signature to this Assignment must correspond with the name as written upon the face of the certificate in every particular, without alteration or enlargement, or any change whatever. EX-4.(G) 5 FORM OF STOCK CERTIFICATE 9.30% CUMULATIVE 1 EXHIBIT 4(g) CUSIP Number ___________ Shares _______ INCORPORATED UNDER THE LAWS OF THE STATE OF RHODE ISLAND FLEET FINANCIAL GROUP, INC. 9.30% CUMULATIVE PREFERRED STOCK NO PAR VALUE This Certifies that Fleet National Bank, as Depository and Registrar is the registered holder of _______ Shares of the Capital Stock of FLEET FINANCIAL GROUP, INC. Fully Paid and Non-Assessable, transferable only on the books of the Corporation by the holder hereof in person or by Attorney upon surrender of this Certificate properly endorsed. In Witness Whereof, the said Corporation has caused this Certificate to be signed by its duly authorized officers and its Corporate Seal to be hereunto affixed this _______ day of , . _____________________________________ ________________________________ Chief Executive Officer and President Secretary
[SEAL] ________________________________________________________________________________ [REVERSE] FLEET FINANCIAL GROUP, INC. The Corporation is authorized to issue Preferred Stock and Common Stock. The Preferred Stock may be divided into and issued in one or more series, having such preferences, voting powers, qualifications and special and relative rights as may be established by the Board of Directors from time to time. The Corporation will furnish to the holder hereof upon written request and without charge a copy of the full text, as set forth in the Corporation's Restated Articles of Incorporation, of the preferences, voting powers, qualifications and special and relative rights of the shares of each class (and each series of a class, if any) of its capital stock authorized to be issued as of the date of such request. Requests for such copies should be directed to the office of the Secretary of the Corporation or to the Transfer Agent named on the face of this Certificate. The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT -- as tenants by the entireties JT TEN -- as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT -- _____________________________ Custodian _____________ (Cust) (Minor) under Uniform Gift to Minors Act_____________________ (State)
Additional abbreviations may also be used though not in the above list For value received, _____________________ hereby sell, assign and transfer unto ______________________ (please insert social security or other identifying number of assignee) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name and address including postal zip code of assignee) 2 ___________________ Shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated _______________________________ ------------------------------------------------------ Notice: The signature to this Assignment must correspond with the name as written upon the face of the certificate in every particular, without alteration or enlargement, or any change whatever. EX-4.(H) 6 FORM OF STOCK CERTIFICATE 9.35% CUMULATIVE 1 EXHIBIT 4(h) CUSIP Number __________ Shares _______ INCORPORATED UNDER THE LAWS OF THE STATE OF RHODE ISLAND FLEET FINANCIAL GROUP, INC. 9.35% CUMULATIVE PREFERRED STOCK NO PAR VALUE This Certifies that Fleet National Bank, as Depository and Registrar is the registered holder of Shares of the Capital Stock of FLEET FINANCIAL GROUP, INC. Fully Paid and Non-Assessable transferable only on the books of the Corporation by the holder hereof in person or by Attorney upon surrender of this Certificate properly endorsed. In Witness Whereof, the said Corporation has caused this Certificate to be signed by its duly authorized officers and its Corporate Seal to be hereunto affixed this day of , 19 . - ------------------------------------- -------------------------------------- Chief Executive Officer and President Secretary [SEAL] - -------------------------------------------------------------------------------- 2 [REVERSE] FLEET FINANCIAL GROUP, INC. The Corporation is authorized to issue Preferred Stock and Common Stock. The Preferred Stock may be divided into and issued in one or more series, having such preferences, voting powers, qualifications and special and relative rights as may be established by the Board of Directors from time to time. The Corporation will furnish to the holder hereof upon written request and without charge a copy of the full text, as set forth in the Corporation's Restated Articles of Incorporation, of the preferences, voting powers, qualifications and special and relative rights of the shares of each class (and each series of a class, if any) of its capital stock authorized to be issued as of the date of such request. Requests for such copies should be directed to the office of the Secretary of the Corporation or to the Transfer Agent named on the face of this Certificate. The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT -- as tenants by the entireties JT TEN -- as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT -- _______________________ Custodian ________________________ (Cust) (Minor) under Uniform Gift to Minors Act _________________________ (State)
Additional abbreviations may also be used though not in the above list For value received,__________________ hereby sell, assign and transfer unto __________ (please insert social security or other identifying number of assignee) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Please print or typewrite name and address including postal zip code of assignee) ____________ Shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint _____________________________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated ________________________ ------------------------------------------------------ Notice: The signature to this Assignment must correspond with the name as written upon the face of the certificate in every particular, without alteration or enlargement, or any change whatever. EX-4.(I) 7 FORM OF DEPOSIT AGREEMENT FOR DEPOSITARY SHARES 1 EXHIBIT 4(I) FLEET FINANCIAL GROUP, INC. FLEET NATIONAL BANK, AS DEPOSITARY AND THE HOLDERS FROM TIME TO TIME OF THE DEPOSITARY RECEIPTS DESCRIBED HEREIN DEPOSIT AGREEMENT DATED AS OF , 1995 2 TABLE OF CONTENTS
PAGE ----- ARTICLE I Definitions........................................................................... ARTICLE II FORM OF RECEIPTS, DEPOSIT OF STOCK, EXECUTION AND DELIVERY, TRANSFER, SURRENDER AND REDEMPTION OF RECEIPTS SECTION 2.1. Form and Transfer of Receipts......................................... SECTION 2.2. Deposit of Stock; Execution and Delivery of Receipts in Respect Thereof............................................................... SECTION 2.3. Registration of Transfer of Receipts.................................. SECTION 2.4. Split-ups and Combinations of Receipts; Surrender of Receipts and Withdrawal of Stock................................................... SECTION 2.5. Limitations on Execution and Delivery, Transfer, Surrender and Exchange of Receipts.................................................. SECTION 2.6. Lost Receipts, etc.................................................... SECTION 2.7. Cancellation and Destruction of Surrendered Receipts.................. SECTION 2.8. Redemption of Stock................................................... ARTICLE III CERTAIN OBLIGATIONS OF HOLDERS OF RECEIPTS AND THE COMPANY SECTION 3.1. Filing Proofs, Certificates and Other Information..................... SECTION 3.2. Payment of Taxes or Other Governmental Charges........................ SECTION 3.3. Warranty as to Stock.................................................. SECTION 3.4. Warranty as to Receipts............................................... ARTICLE IV THE DEPOSITED SECURITIES; NOTICES SECTION 4.1. Cash Distributions.................................................... SECTION 4.2. Distributions Other than Cash, Rights, Preferences or Privileges...... SECTION 4.3. Subscription Rights, Preferences or Privileges........................ SECTION 4.4. Notice of Dividends, etc.; Fixing Record Date for Holders of Receipts.............................................................. SECTION 4.5. Voting Rights......................................................... SECTION 4.6. Changes Affecting Deposited Securities and Reclassifications, Recapitalizations, etc................................................ SECTION 4.7. Delivery of Reports................................................... SECTION 4.8. List of Receipt Holders............................................... ARTICLE V THE DEPOSITARY, THE DEPOSITARY'S AGENTS, THE REGISTRAR AND THE COMPANY SECTION 5.1. Maintenance of Offices, Agencies and Transfer Books by the Depositary; Registrar............................................................. SECTION 5.2. Prevention of or Delay in Performance by the Depositary, the Depositary's Agents, the Registrar or the Company..................... SECTION 5.3. Obligation of the Depositary, the Depositary's Agents, the Registrar and the Company...........................................................
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PAGE ----- SECTION 5.4. Resignation and Removal of the & Depositary; Appointment of Successor Depositary............................................................ SECTION 5.5. Corporate Notices and Reports......................................... SECTION 5.6. Indemnification by the Company........................................ SECTION 5.7. Charges and Expenses.................................................. ARTICLE VI AMENDMENT AND TERMINATION SECTION 6.1. Amendment............................................................. SECTION 6.2. Termination........................................................... ARTICLE VII MISCELLANEOUS SECTION 7.1. Counterparts.......................................................... SECTION 7.2. Exclusive Benefit of Parties.......................................... SECTION 7.3. Invalidity of Provisions.............................................. SECTION 7.4. Notices............................................................... SECTION 7.5. Depositary's Agents................................................... SECTION 7.6. Holders of Receipts Are Parties....................................... SECTION 7.7. GOVERNING LAW......................................................... SECTION 7.8. Inspection of Deposit Agreement....................................... SECTION 7.9. Headings.............................................................. FORM OF DEPOSITARY SHARES Form of Face of Receipt............................................................... Form of Reverse of Receipt............................................................
4 DEPOSIT AGREEMENT DEPOSIT AGREEMENT, dated as of , 1995, among FLEET FINANCIAL GROUP, INC., a Rhode Island corporation, (the "Company"), FLEET NATIONAL BANK, a national banking association (the "Depositary"), and the holders from time to time of the Receipts described herein. WHEREAS, it is desired to provide, as hereinafter set forth in this Deposit Agreement, for the deposit of shares of the Company's 9.30% Cumulative Preferred Stock with the Depositary for the purposes set forth in this Deposit Agreement and for the issuance hereunder of Receipts evidencing Depositary Shares in respect of the Stock so deposited; and WHEREAS, the Receipts are to be substantially in the form of Exhibit A annexed hereto, with appropriate insertions, modifications and omissions, as hereinafter provided in this Deposit Agreement; NOW, THEREFORE, in consideration of the promises contained herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS The following definitions shall, for all purposes, unless otherwise indicated, apply to the respective terms used in this Deposit Agreement: "Company" shall mean Fleet Financial Group, Inc., a Rhode Island corporation, and its successors. "Deposit Agreement" shall mean this Deposit Agreement, as amended or supplemented from time to time. "Depositary" shall mean Fleet National Bank, and any successor as Depositary hereunder. "Depositary Shares" shall mean Depositary Shares, each representing one-tenth of a share of Stock and evidenced by a Receipt. "Depositary's Agent" shall mean an agent appointed by the Depositary pursuant to Section 7.5. "Depositary's Office" shall mean the principal office of the Depositary, at which at any particular time its depositary receipt business shall be administered. "Preferred Stock" means any stock of any class or series of the Company which has a preference over Common Stock in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which is not mandatorily redeemable or repayable by the Company or redeemable or repayable at the option of the holder of such stock. "Receipt" shall mean one of the Depositary Receipts, substantially in the form set forth as Exhibit A hereto, issued hereunder, whether in definitive or temporary form and evidencing the number of Depositary Shares held of record by the record holder of such Depositary Shares. "record holder" or "holder" as applied to a Receipt shall mean the person in whose name a Receipt is registered on the books of the Depositary maintained for such purpose. "Registrar" shall mean the Depositary or such other bank or trust company which shall be appointed to register ownership and transfers of Receipts as herein provided. "Restated Articles" shall mean the Company's Restated Articles of Incorporation, as amended. "Securities Act" shall mean the Securities Act of 1933, as amended. "Stock" shall mean shares of the Company's 9.30% Cumulative Preferred Stock, $250 stated value per share. 5 ARTICLE II FORM OF RECEIPTS, DEPOSIT OF STOCK, EXECUTION AND DELIVERY, TRANSFER, SURRENDER AND REDEMPTION OF RECEIPTS SECTION 2.1. Form and Transfer of Receipts. Definitive Receipts shall be engraved or printed or lithographed on steel-engraved borders, with appropriate insertions, modifications and omissions, as hereinafter provided. Pending the preparation of definitive Receipts, the Depositary, upon the written order of the Company or any holder of Stock, as the case may be, delivered in compliance with Section 2.2, shall execute and deliver temporary Receipts which are printed, lithographed, typewritten, mimeographed or otherwise substantially of the tenor of the definitive Receipts in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the persons executing such Receipts may determine, as evidenced by their execution of such Receipts. If temporary Receipts are issued, the Company and the Depositary will cause definitive Receipts to be prepared without unreasonable delay. After the preparation of definitive Receipts, the temporary Receipts shall be exchangeable for definitive Receipts upon surrender of the temporary Receipts at an office described in the penultimate paragraph of Section 2.2, without charge to the holder. Upon surrender for cancellation of any one or more temporary Receipts, the Depositary shall execute and deliver in exchange therefor definitive Receipts representing the same number of Depositary Shares as represented by the surrendered temporary Receipt or Receipts. Such exchange shall be made at the Company's expense and without any charge therefor. Until so exchanged, the temporary Receipts shall in all respects be entitled to the same benefits under this Agreement, and with respect to the Stock, as definitive Receipts. Receipts shall be executed by the Depositary by the manual signature of a duly authorized officer of the Depositary; provided, that such signature may be a facsimile if a Registrar for the Receipts (other than the Depositary) shall have been appointed and such Receipts are countersigned by a duly authorized officer of the Registrar. No Receipt shall be entitled to any benefits under this Deposit Agreement or be valid or obligatory for any purpose unless it shall have been executed manually by a duly authorized officer of the Depositary or, if a Registrar for the Receipts (other than the Depositary) shall have been appointed, by manual or facsimile signature of a duly authorized officer of the Depositary and countersigned by a duly authorized officer of such Registrar. The Depositary shall record on its books each Receipt so signed and delivered as hereinafter provided. Receipts shall be in denominations of any number of whole Depositary Shares. Receipts may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Deposit Agreement as may be required by the Depositary or required to comply with any applicable law or any regulation thereunder or with the rules and regulations of any securities exchange upon which the Stock, the Depositary Shares or the Receipts may be listed or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Receipts are subject. Title to Depositary Shares evidenced by a Receipt, which is properly endorsed or accompanied by a properly executed instrument of transfer, shall be transferable by delivery with the same effect as in the case of a negotiable instrument; provided, however, that until transfer of a Receipt shall be registered on the books of the Depositary as provided in Section 2.3, the Depositary may, notwithstanding any notice to the contrary, treat the record holder thereof at such time as the absolute owner thereof for the purpose of determining the person entitled to distributions of dividends or other distributions or to any notice provided for in this Deposit Agreement and for all other purposes. SECTION 2.2. Deposit of Stock; Execution and Delivery of Receipts in Respect Thereof. Subject to the terms and conditions of this Deposit Agreement, the Company or any holder of Stock may from time to time deposit shares of the Stock under this Deposit Agreement by delivery to the Depositary of a certificate or certificates for the Stock to be deposited, properly endorsed or accompanied, if required by the Depositary, by a duly executed instrument of transfer or endorsement, in form satisfactory to the Depositary, together with all 2 6 such certifications as may be required by the Depositary in accordance with the provisions of this Deposit Agreement, and together with a written order of the Company or such holder, as the case may be, directing the Depositary to execute and deliver to, or upon the written order of, the person or persons stated in such order a Receipt or Receipts for the number of Depositary Shares representing such deposited Stock. Deposited Stock shall be held by the Depositary at the Depositary's Office or at such other place or places as the Depositary shall determine. Upon receipt by the Depositary of a certificate or certificates for Stock deposited in accordance with the provisions of this Section, together with the other documents required as above specified, and upon recordation of the Stock on the books of the Company in the name of the Depositary or its nominee, the Depositary, subject to the terms and conditions of this Deposit Agreement, shall execute and deliver, to or upon the order of the person or persons named in the written order delivered to the Depositary referred to in the first paragraph of this Section, a Receipt or Receipts for the number of Depositary Shares representing the Stock so deposited and registered in such name or names as may be requested by such person or persons. The Depositary shall execute and deliver such Receipt or Receipts at the Depositary's Office or such other offices, if any, as the Depositary may designate. Delivery at other offices shall be at the risk and expense of the person requesting such delivery. SECTION 2.3. Registration of Transfer of Receipts. Subject to the terms and conditions of this Deposit Agreement, the Depositary shall register on its books from time to time transfers of Receipts upon any surrender thereof by the holder in person or by duly authorized attorney, properly endorsed or accompanied by a properly executed instrument of transfer. Thereupon, the Depositary shall execute a new Receipt or Receipts evidencing the same aggregate number of Depositary Shares as those evidenced by the Receipt or Receipts surrendered and deliver such new Receipt or Receipts to or upon the order of the person entitled thereto. SECTION 2.4. Split-ups and Combinations of Receipts; Surrender of Receipts and Withdrawal of Stock. Upon surrender of a Receipt or Receipts at the Depositary's Office or at such other offices as it may designate for the purpose of effecting a split-up or combination of such Receipt or Receipts, and subject to the terms and conditions of this Deposit Agreement, the Depositary shall execute and deliver a new Receipt or Receipts in the authorized denomination or denominations requested, evidencing the aggregate number of Depositary Shares evidenced by the Receipt or Receipts surrendered. Any holder of a Receipt or Receipts representing any number of whole shares of Stock may withdraw the Stock and all money and other property, if any, represented thereby by surrendering such Receipt or Receipts, at the Depositary's Office or at such other offices as the Depositary may designate for such withdrawals. Thereafter, without unreasonable delay, the Depositary shall deliver to such holder or to the person or persons designated by such holder as hereinafter provided, the number of whole shares of Stock and all money and other property, if any, represented by the Receipt or Receipts so surrendered for withdrawal, but holders of such whole shares of Stock will not thereafter be entitled to deposit such Stock hereunder or to receive Depositary Shares therefor. If a Receipt delivered by the holder to the Depositary in connection with such withdrawal shall evidence a number of Depositary Shares in excess of the number of Depositary Shares representing the number of whole shares of Stock to be so withdrawn, the Depositary shall at the same time, in addition to such number of whole shares of Stock and such money and other property, if any, to be so withdrawn, deliver to such holder, or upon his order, a new Receipt evidencing such excess number of Depositary Shares. Delivery of the Stock and money and other property being withdrawn may be made by the delivery of such certificates, documents of title and other instruments as the Depositary may deem appropriate. If the Stock and the money and other property being withdrawn are to be delivered to a person or persons other than the record holder of the Receipt or Receipts being surrendered for withdrawal of Stock, such holders shall execute and deliver to the Depositary a written order so directing the Depositary and the Depositary may require that the Receipt or Receipts surrendered by such holder for withdrawal of such shares of Stock be properly endorsed in blank or accompanied by a properly executed instrument of transfer in blank. 3 7 Delivery of the Stock and the money and other property, if any, represented by Receipts surrendered for withdrawal shall be made by the Depositary at the Depositary's Office, except that, at the request, risk and expense of the holder surrendering such Receipt or Receipts and for the account of the holder thereof, such delivery may be made at such other place as may be designated by such holder. SECTION 2.5. Limitations on Execution and Delivery, Transfer, Surrender and Exchange of Receipts. As a condition precedent to the execution and delivery, registration of transfer, split-up, combination, surrender or exchange of any Receipt, the Depositary, any of the Depositary's Agents or the Company may require payment to it of a sum sufficient for the payment (or, in the event that the Depositary or the Company shall have made such payment, the reimbursement to it) of any charges or expenses payable by the holder of a Receipt pursuant to Section 5.7, may require the production of evidence satisfactory to it as to the identity and genuineness of any signature and may also require compliance with such regulations, if any, as the Depositary or the Company may establish consistent with the provisions of this Deposit Agreement. The deposit of Stock may be refused, the delivery of Receipts against Stock may be suspended, the registration of transfer of Receipts may be refused and the registration of transfer, surrender or exchange of outstanding Receipts may be suspended (i) during any period when the register of stockholders of the Company is closed or (ii) if any such action is deemed necessary or advisable by the Depositary, any of the Depositary's Agents or the Company at any time or from time to time because of any requirement of law or of any government or governmental body or commission or under any provision of this Deposit Agreement. SECTION 2.6. Lost Receipts, etc. In case any receipt shall be mutilated, destroyed, lost or stolen, the Depositary in its discretion may execute and deliver a Receipt of like form and tenor in exchange and substitution for such mutilated Receipt, or in lieu of and in substitution for such destroyed, lost or stolen Receipt, upon (i) the filing by the holder thereof with the Depositary of evidence satisfactory to the Depositary of such destruction or loss or theft of such Receipt, of the authenticity thereof and of his or her ownership thereof and (ii) the furnishing to the Depositary of indemnification (which may include posting an indemnification bond) satisfactory to it. SECTION 2.7. Cancellation and Destruction of Surrendered Receipts. All Receipts surrendered to the Depositary or any Depositary's Agent shall be cancelled by the Depositary. Except as prohibited by applicable law or regulation, the Depositary is authorized to destroy all Receipts so cancelled. SECTION 2.8. Redemption of Stock. Whenever the Company shall be permitted and shall elect to redeem shares of Stock in accordance with the provisions of the Restated Articles, it shall (unless otherwise agreed to in writing with the Depositary) give or cause to be given to the Depositary not less than 30 days' and not more than 60 days' notice of the date of such proposed redemption or exchange of Stock and of the number of such shares held by the Depositary to be so redeemed and the applicable redemption price, as set forth in the Restated Articles, which notice shall be accompanied by a certificate from the Company stating that such redemption of Stock is in accordance with the provisions of the Restated Articles. On the date of such redemption, provided that the Company shall then have paid or caused to be paid in full to the Depositary the redemption price of the Stock to be redeemed, plus an amount equal to any accrued and unpaid dividends thereon to the date fixed for redemption, in accordance with the provisions of the Restated Articles, the Depositary shall redeem the number of Depositary Shares representing such Stock. The Depositary shall mail notice of the Company's redemption of Stock and the proposed simultaneous redemption of the number of Depositary Shares representing the Stock to be redeemed by first-class mail, postage prepaid, not less than 10 and not more than 60 days prior to the date fixed for redemption of such Stock and Depositary Shares (the "Redemption Date") to the record holders of the Receipts evidencing the Depositary Shares to be so redeemed, at the address of such holders as they appear on the records of the Depositary; but neither failure to mail any such notice of redemption of Depositary Shares to one or more such holders nor any defect in any notice of redemption of Depositary Shares to one or more such holders shall affect the sufficiency of the proceedings for redemption as to the other holders. Each such notice shall state: (i) the Redemption Date; (ii) the number of Depositary Shares to be redeemed and, if less than all the Depositary Shares held by any such holder are to be redeemed, the number of such Depositary Shares held by such holder to be so redeemed; (iii) the redemption price; (iv) the place or places where Receipts evidencing 4 8 Depositary Shares are to be surrendered for payment of the redemption price; and (v) that dividends in respect of the Stock represented by the Depositary Shares to be redeemed will cease to accrue on such Redemption Date. In case less than all the outstanding Depositary Shares are to be redeemed, the Depositary Shares to be so redeemed shall be selected by the Depositary by lot or pro rata (as nearly as may be) or by any other method, in each case, as determined by the Depositary in its sole discretion to be equitable. Notice having been mailed by the Depositary as aforesaid, from and after the Redemption Date (unless the Company shall have failed to provide the funds necessary to redeem the Stock evidenced by the Depositary Shares called for redemption) (i) dividends on the shares of Stock so called for redemption shall cease to accrue from and after such date, (ii) the Depositary Shares being redeemed from such proceeds shall be deemed no longer to be outstanding, (iii) all rights of the holders of Receipts evidencing such Depositary Shares (except the right to receive the redemption price) shall, to the extent of such Depositary Shares, cease and terminate, and (iv) upon surrender in accordance with such redemption notice of the Receipts evidencing any such Depositary Shares called for redemption (properly endorsed or assigned for transfer, if the Depositary or applicable law shall so require), such Depositary Shares shall be redeemed by the Depositary at a redemption price per Depositary Share equal to one-tenth of the redemption price per share plus all money and other property, if any, represented by such Depositary Shares, including all amounts paid by the Company in respect of dividends which on the Redemption Date have accumulated on the shares of Stock to be so redeemed and have not theretofore been paid. If fewer than all of the Depositary Shares evidenced by a Receipt are called for redemption, the Depositary will deliver to the holder of such Receipt upon its surrender to the Depositary, together with the redemption payment, a new Receipt evidencing the Depositary Shares evidenced by such prior Receipt and not called for redemption. ARTICLE III CERTAIN OBLIGATIONS OF HOLDERS OF RECEIPTS AND THE COMPANY SECTION 3.1. Filing Proofs, Certificates and Other Information. Any holder of a Receipt may be required from time to time to file such proof of residence, or other matters or other information, to execute such certificates and to make such representations and warranties as the Depositary or the Company may reasonably deem necessary or proper. The Depositary or the Company may withhold the delivery, or delay the registration of transfer, redemption or exchange, of any Receipt or the withdrawal or conversion of the Stock represented by the Depositary Shares evidenced by any Receipt or the distribution of any dividend or other distribution or the sale of any rights or of the proceeds thereof until such proof or other information is filed or such certificates are executed or such representations and warranties are made. SECTION 3.2. Payment of Taxes or Other Governmental Charges. Holders of Receipts shall be obligated to make payments to the Depositary of certain charges and expenses, as provided in Section 5.7. Registration of transfer of any Receipt or any withdrawal of Stock and all money or other property, if any, represented by the Depositary Shares evidenced by such Receipt may be refused until any such payment due is made, and any dividends, interest payments or other distributions may be withheld or any part of or all the Stock or other property represented by the Depositary Shares evidenced by such Receipt and not theretofore sold may be sold for the account of the holder thereof (after attempting by reasonable means to notify such holder prior to such sale), and such dividends, interest payments or other distributions or the proceeds of any such sale may be applied to any payment of such charges or expenses, the holder of such Receipt remaining liable for any deficiency. SECTION 3.3. Warranty as to Stock. The Company hereby represents and warrants that the Stock, when issued, will be duly authorized, validly issued, fully paid and nonassessable, subject to the Rhode Island Business Corporation Act. Such representation and warranty shall survive the deposit of the Stock and the issuance of Receipts. 5 9 SECTION 3.4. Warranty as to Receipts. The Company hereby represents and warrants that the Receipts, when issued, will represent legal and valid interests in the Stock. Such representation and warranty shall survive the deposit of the Stock and the issuance of Receipts. ARTICLE IV THE DEPOSITED SECURITIES; NOTICES SECTION 4.1. Cash Distributions. Whenever the Depositary shall receive any cash dividend or other cash distribution on Stock, the Depositary shall, subject to Section 3.1 and 3.2, distribute to record holders of Receipts on the record date fixed pursuant to Section 4.4 such amounts of such dividend or distribution as are, as nearly as practicable, in proportion to the respective numbers of Depositary Shares evidenced by the Receipts held by such holders; provided, however, that in case the Company or the Depositary shall be required to withhold and shall withhold from any cash dividend or other cash distribution in respect of the Stock an amount on account of taxes, the amount made available for distribution or distributed in respect of Depositary Shares shall be reduced accordingly. The Depositary shall distribute or make available for distribution, as the case may be, only such amount, however, as can be distributed without attributing to any holder of Depositary Shares a fraction of one cent. Any balance not so distributable shall be returned by the Depositary to the Company and shall be added to and be treated as part of the next sum received by the Depositary for distribution to record holders of Receipts then outstanding. SECTION 4.2. Distributions Other than Cash, Rights, Preferences or Privileges. Whenever the Depositary shall receive any distribution other than cash, rights, preferences or privileges upon Stock, the Depositary shall, subject to Sections 3.1 and 3.2, distribute to record holders of Receipts on the record date fixed pursuant to Section 4.4 such amounts of the securities or property received by it as are, as nearly as practicable, in proportion to the respective numbers of Depositary Shares evidenced by the Receipts held by such holders, in any manner that the Depositary may deem equitable and practicable for accomplishing such distribution. If in the opinion of the Depositary such distribution cannot be made proportionately among such record holders, or if for any other reason (including any requirement that the Company or the Depositary withhold an amount on account of taxes) the Depositary deems, after consultation with the Company, such distribution not to be feasible, the Depositary may, with the approval of the Company, adopt such method as it deems equitable and practicable for the purpose of effecting such distribution, including the sale (at public or private sale) of the securities or property thus received, or any part thereof, at such place or places and upon such terms as it may deem proper. The net proceeds of any such sale shall, subject to Sections 3.1 and 3.2, be distributed or made available for distribution, as the case may be, by the Depositary to record holders of Receipts as provided by Section 4.1 in the case of a distribution received in cash. The Company shall not make any distribution of such securities or property to the Depositary and the Depositary shall not make any distribution of such securities or property to the holders of Receipts unless the Company shall have provided an opinion of counsel stating that such securities or property have been registered under the Securities Act or do not need to be registered in connection with such distributions. SECTION 4.3. Subscription Rights, Preferences or Privileges. If the Company shall at any time offer or cause to be offered to the persons in whose names Stock is recorded on the books of the Company any rights, preferences or privileges to subscribe for or to purchase any securities or any rights, preferences or privileges of any other nature, such rights, preferences or privileges shall in each such instance be made available by the Depositary to the record holders of Receipts in such manner as the Depositary may determine, either by the issue to such record holders of warrants representing such rights, preferences or privileges or by such other method as may be approved by the Depositary in its discretion with the approval of the Company; provided, however, that (i) if at the time of issue or offer of any such rights, preferences or privileges the Depositary determines that it is not lawful or (after consultation with the Company) not feasible to make such rights, preferences or privileges available to holders of Receipts by the issue of warrants or otherwise, or (ii) if and to the extent so instructed by holders of Receipts who do not desire to exercise such rights, preferences or privileges, then the Depositary, in its discretion (with approval of the Company, in any case where the Depositary has determined that it is not feasible to make such rights, preferences or privileges 6 10 available), may, if applicable laws or the terms of such rights, preferences or privileges permit such transfer, sell such rights, preferences or privileges at public or private sale, at such place or places and upon such terms as it may deem proper. The net proceeds of any such sale shall, subject to Sections 3.1 and 3.2, be distributed by the Depositary to the record holders of Receipts entitled thereto as provided by Section 4.1 in the case of a distribution received in cash. If registration under the Securities Act of the securities to which any rights, preferences or privileges relate is required in order for holders of Receipts to be offered or sold the securities to which such rights, preferences or privileges relate, the Company agrees with the Depositary that it will file promptly a registration statement pursuant to such Act with respect to such rights, preferences or privileges and securities and use its best efforts and take all steps available to it to cause such registration statement to become effective sufficiently in advance of the expiration of such rights, preferences or privileges to enable such holders to exercise such rights, preferences or privileges. In no event shall the Depositary make available to the holders of Receipts any right, preference or privilege to subscribe for or to purchase any securities unless and until such registration statement shall have become effective, or unless the offering and sale of such securities to such holders are exempt from registration under the provisions of the Securities Act, and the Company shall have provided to the Depositary an opinion of counsel to such effect. If any other action under the laws of any jurisdiction or any governmental or administrative authorization, consent or permit is required in order for such rights, preferences or privileges to be made available to holders of Receipts, the Company agrees with the Depositary that the Company will use its reasonable best efforts to take such action or obtain such authorization, consent or permit sufficiently in advance of the expiration of such rights, preferences or privileges to enable such holders to exercise such rights, preferences or privileges. SECTION 4.4. Notice of Dividends, etc.; Fixing Record Date for Holders of Receipts. Whenever any cash dividend or other cash distribution shall become payable or any distribution other than cash shall be made, or if rights, preferences or privileges shall at any time be offered, with respect to Stock, or whenever the Depositary shall receive notice of any meeting at which holders of Stock are entitled to vote or of which holders of Stock are entitled to notice, or whenever the Depositary and the Company shall decide it is appropriate, the Company shall in each such instance fix a record date for the determination of the holders of Receipts who shall be entitled to receive such dividend, distribution, rights, preferences or privileges or the net proceeds of the sale thereof, or to give instructions for the exercise of voting rights at any such meeting, or who shall be entitled to notice of such meeting or for any other appropriate reasons. SECTION 4.5. Voting Rights. Upon receipt of notice of any meeting at which the holders of Stock are entitled to vote, the Depositary shall, as soon as practicable thereafter, mail to the record holders of Receipts a notice which shall contain (i) such information as is contained in such notice of meeting and (ii) a statement that the holders may, subject to any applicable restrictions, instruct the Depositary as to the exercise of the voting rights pertaining to the amount of Stock represented by their respective Depositary Shares (including an express indication that instructions may be given to the Depositary to give a discretionary proxy to a person designated by the Company) and a brief statement as to the manner in which such instructions may be given. Upon the written request of the holders of Receipts on the relevant record date, the Depositary shall endeavor insofar as practicable to vote or cause to be voted, in accordance with the instructions set forth in such requests, the maximum number of whole shares of Stock represented by the Depositary Shares evidenced by all Receipts as to which any particular voting instructions are received. The Company hereby agrees to take all reasonable action which may be deemed necessary by the Depositary in order to enable the Depositary to vote such Stock or cause such Stock to be voted. In the absence of specific instructions from the holder of a Receipt, the Depositary will not vote (but, at its discretion, may appear at any meeting with respect to such Stock unless directed to the contrary by the holders of all the Receipts) to the extent of the Stock represented by the Depositary Shares evidence by such Receipt. SECTION 4.6. Changes Affecting Deposited Securities and Reclassifications, Recapitalizations, etc. Upon any change in par or stated value, split-up, combination or any other reclassification of the Stock, or upon any recapitalization, reorganization, merger or consolidation affecting the Company or to which it is party, the Depositary may in its discretion with the approval of, and shall upon the instructions of, the 7 11 Company, and (in either case) in such manner as the Depositary may deem equitable, (i) make such adjustments as are certified by the Company in the fraction of an interest represented by one Depositary Share in one share of Stock as may be necessary fully to reflect the effects of such change in par or stated value, split-up, combination or other reclassification of Stock, or of such recapitalization, reorganization, merger or consolidation and (ii) treat any securities which shall be received by the Depositary in exchange for or upon conversion of or in respect of the Stock as new deposited securities so received in exchange for or upon conversion or in respect of such Stock. In any such case the Depositary may in its discretion, with the approval of the Company, execute and deliver additional Receipts or may call for the surrender of all outstanding Receipts to be exchanged for new Receipts specifically describing such new deposited securities. Anything to the contrary herein notwithstanding, holders of Receipts shall have the right from and after the effective date of any such change in par or stated value, split-up, combination or other reclassification of the Stock or any such recapitalization, reorganization, merger or consolidation to surrender such Receipts to the Depositary with instructions to convert, exchange or surrender the Stock represented thereby only into or for, as the case may be, the kind and amount of shares of stock and other securities and property and cash into which the Stock represented by such Receipts might have been converted or for which such Stock might have been exchanged or surrendered immediately prior to the effective date of such transaction. SECTION 4.7. Delivery of Reports. The Depositary shall furnish to holders of Receipts any reports and communications received from the Company which are received by the Depositary as the holder of Stock. SECTION 4.8. List of Receipt Holders. Promptly upon request from time to time by the Company, the Depositary shall furnish to it a list, as of the most recent practicable date, of the names, addresses and holdings of Depositary Shares of all record holders of Receipts. ARTICLE V THE DEPOSITARY, THE DEPOSITARY'S AGENTS, THE REGISTRAR AND THE COMPANY SECTION 5.1. Maintenance of Offices, Agencies and Transfer Books by the Depositary; Registrar. Upon execution of this Deposit Agreement, the Depositary shall maintain at the Depositary's office, facilities for the execution and delivery, registration and registration of transfer, surrender and exchange of Receipts, and at the offices of the Depositary's Agents, if any, facilities for the delivery, registration of transfer, surrender and exchange of Receipts, all in accordance with the provisions of this Deposit Agreement. The Depositary shall keep books at the Depositary's Office for the registration and registration of transfer of Receipts, which books at all reasonable times shall be open for inspection by the record holders of Receipts; provided that any such holder requesting to exercise such right shall certify to the Depositary that such inspection shall be for a proper purpose reasonably related to such person's interest as an owner of Depositary Shares evidenced by the Receipts. The Depositary may close such books, at any time or from time to time, when deemed expedient by it in connection with the performance of its duties hereunder. The Depositary may, with the approval of the Company, appoint a Registrar for registration of the Receipts or the Depositary Shares evidenced thereby. If the Receipts or the Depositary Shares evidenced thereby or the Stock represented by such Depositary Shares shall be listed on one or more national stock exchanges, the Depositary will appoint a Registrar (acceptable to the Company) for registration of such Receipts or Depositary Shares in accordance with any requirements of such exchange. Such Registrar may be the Depositary if so permitted by the requirements of any such exchange. Such Registrar may be removed and a substitute registrar appointed by the Depositary upon the request or with the approval of the Company. If the Receipts, such Depositary Shares or such stock are listed on one or more other stock exchanges, the Depositary will, at the request of the Company, arrange such facilities for the delivery, registration, registration of transfer, surrender and exchange of such Receipts, such Depositary Shares or such stock as may be required by law or applicable stock exchange regulation. 8 12 SECTION 5.2. Prevention of or Delay in Performance by the Depositary, the Depositary's Agents, the Registrar or the Company. Neither the Depositary nor any Depositary's Agent nor any Registrar nor the Company shall incur any liability to any holder of any Receipt if by reason of any provision of any present or future law, or regulation thereunder, of the United States of America or of any other governmental authority or, in the case of the Depositary, the Depositary's Agent or the Registrar, by reason of any provision, present or future, of the Restated Articles or by reason of any act of God or war or other circumstance beyond the control of the relevant party, the Depositary, the Depositary's Agent, the Registrar or the Company shall be prevented, delayed or forbidden from, or subjected to any penalty on account of, doing or performing any act or thing which the terms of this Deposit Agreement provide shall be done or performed; nor shall the Depositary, any Depositary's Agent, any Registrar or the Company incur liability to any holder of a Receipt (i) by reason of any nonperformance or delay, caused as aforesaid, in the performance of any act or thing which the terms of this Deposit Agreement shall provide shall or may be done or performed, or (ii) by reason of any exercise of, or failure to exercise, any discretion provided for in this Deposit Agreement except, in the case of any such exercise or failure to exercise discretion not caused as aforesaid, if caused by the negligence or willful misconduct of the party charged with such exercise or failure to exercise. SECTION 5.3. Obligation of the Depositary, the Depositary's Agents, the Registrar and the Company. Neither the Depositary nor any Depositary's Agent nor any Registrar nor the Company assumes any obligation or shall be subject to any liability under this Deposit Agreement to holders of Receipts other than for its negligence, willful misconduct or bad faith. The Company shall indemnify the Depositary for, and hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part arising out of or in connection with its agency under this Deposit Agreement, including the costs and expenses of defending itself against any claim or liability in connection with its exercise or performance of any of its duties under this Deposit Agreement. Anything in this Deposit Agreement to the contrary notwithstanding, in no event shall the Depositary be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Depositary has been advised of the likelihood of such loss or damage and regardless of the form of the action. Neither the Depositary nor any Depositary's Agent nor any Registrar nor the Company shall be under any obligation to appear in, prosecute or defend any action, suit or other preceding in respect of the Stock, the Depositary Shares or the Receipts which in its opinion may involve it in expense or liability unless indemnity satisfactory to it against all expense and liability be furnished as often as may be required. Neither the Depositary nor any Depositary's Agent nor any Registrar nor the Company shall be liable for any action or any failure to act by it in reliance upon the written advice of legal counsel or accountants, or information from any person presenting Stock for deposit, any holder of a Receipt or any other person believed by it in good faith to be competent to give such information. The Depositary, any Depositary's Agent, any Registrar and the Company may each rely and shall each be protected in acting upon any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Depositary shall not be responsible for any failure to carry out any instruction to vote and of the shares of stock or for the manner or effect of any such vote made, as long as any such action or non-action is in good faith. The Depositary undertakes, and any Registrar shall be required to undertake, to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Depositary or any Registrar. This Section 5.3 shall survive any termination of this Agreement and any succession of any Depositary. The Depositary, the Depositary's Agents, and any Registrar may own and deal in any class of securities of the Company and its affiliates and in Receipts. The Depositary may also act as transfer agent or registrar of any of the securities of the Company and its affiliates. SECTION 5.4. Resignation and Removal of the Depositary; Appointment of Successor Depositary. The Depositary may at any time resign as Depositary hereunder by delivering notice of its election to do so to the Company, such resignation to take effect upon the appointment of a successor Depositary and its acceptance of such appointment as hereinafter provided. 9 13 The Depositary may at any time be removed by the Company by notice of such removal delivered to the Depositary, such removal to take effect upon the appointment of a successor Depositary and its acceptance of such appointment as hereinafter provided. In case at any time the Depositary acting hereunder shall resign or be removed, the Company shall, within 60 days after the delivery of the notice of resignation or removal, as the case may be, appoint a successor Depositary, which shall be a bank or trust company having its principal office in the United States of America and having a combined capital and surplus of at least $50,000,000. If no successor Depositary shall have been so appointed and have accepted appointment within 60 days after delivery of such notice, the resigning or removed Depositary may petition any court of competent jurisdiction for the appointment of a successor Depositary. Every successor Depositary shall execute and deliver to its predecessor and to the Company an instrument in writing accepting its appointment hereunder, and thereupon such successor Depositary, without any further act or deed, shall become fully vested with all the rights, powers, duties and obligations of its predecessor and for all purposes shall be the Depositary under this Deposit Agreement, and such predecessor, upon payment of all sums due it and on the written request of the Company, shall execute and deliver an instrument transferring to such successor all rights and powers of such predecessor hereunder, shall duly assign, transfer and deliver all right, title and interest in the Stock and any moneys or property held hereunder to such successor, and shall deliver to such successor a list of the record holders of all outstanding Receipts and such records, books and other information in its possession relating thereto. Any successor Depositary shall promptly mail notice of its appointment to the record holders of Receipts. Any corporation into or with which the Depositary may be merged, consolidated or converted shall be the successor of such Depositary without the execution or filing of any document or any further act, and notice thereof shall not be required hereunder. Such successor Depositary may authenticate the Receipts in the name of the predecessor Depositary or in the name of the successor Depositary. SECTION 5.5. Corporate Notices and Reports. The Company agrees that it will transmit to the record holders of Receipts, in each case at the addresses furnished to it pursuant to Section 4.8, all notices and reports (including without limitation financial statements) required by law or by the rules of any national securities exchange upon which the Stock, the Depositary Shares or the Receipts are listed, to be furnished to the record holders of Receipts or otherwise determine to furnish. Such transmission will be at the Company's expense. SECTION 5.6. Indemnification by the Company. The Company shall indemnify the Depositary, any Depositary's Agent and any Registrar against, and hold each of them harmless from, any loss, liability or expense (including the reasonable costs and expenses of defending itself) which may arise out of acts performed or omitted in connection with this Agreement and the Receipts by the Depositary, any Registrar or any of their respective agents (including any Depositary's Agent), except for any liability arising out of negligence, willful misconduct or bad faith on the respective parts of any such person or persons. The obligations of the Company set forth in this Section 5.6 shall survive any succession of any Depositary, Registrar or Depositary's Agent. SECTION 5.7. Charges and Expenses. The Company shall pay all transfer and other taxes and governmental charges arising solely from the existence of the depositary arrangements. The Company shall pay all charges of the Depositary in connection with the initial deposit of the Stock and the initial issuance of the Depositary Shares, all withdrawals of shares of the Stock by owners of Depositary Shares, and any redemption or exchange of the Stock at the option of the Company. All other transfer and other taxes and governmental charges shall be at the expense of holders of Depositary Shares. If, at the request of a holder of Receipts, the Depositary incurs charges or expenses for which it is not otherwise liable hereunder, such holder will be liable for such charges and expenses. All other charges and expenses of the Depositary and any Depositary's Agent hereunder and of any Registrar (including, in each case, reasonable fees and expenses of counsel) incident to the performance of their respective obligations hereunder will be paid upon consultation and agreement between the Depositary and the Company as to the amount and nature of such charges and expenses. The Depositary shall present its statement for charges and expenses to the Company at such intervals as the Company and the Depositary may agree. 10 14 ARTICLE VI AMENDMENT AND TERMINATION SECTION 6.1. Amendment. The form of the Receipts and any provisions of this Deposit Agreement may at any time and from time to time be amended by agreement between the Company and the Depositary in any respect which they may deem necessary or desirable; provided, however, that no such amendment (other than any change in the fees of any Depositary or Registrar, which shall go into effect not sooner than three months after notice thereof to the holders of the Receipts) which shall materially and adversely alter the rights of the holders of Receipts shall be effective unless such amendment shall have been approved by the holders of at least a majority of the Depositary Shares then outstanding. Every holder of an outstanding Receipt at the time any such amendment becomes effective shall be deemed, by continuing to hold such Receipt, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. SECTION 6.2. This Agreement may be terminated by the Company or the Depositary only after (i) all outstanding Depositary Shares have been redeemed pursuant to Section 2.8 or (ii) there shall have been made a final distribution in respect of the Stock in connection with any liquidation, dissolution or winding up of the Company and such distribution shall have been distributed to the holders of Depositary Shares pursuant to Section 4.1 or 4.2, as applicable. Upon the termination of this Deposit Agreement, the Company shall be discharged from all obligations under this Deposit Agreement except for its obligations to the Depositary, any Depositary's Agent and any Registrar under Sections 5.6 and 5.7. ARTICLE VII MISCELLANEOUS SECTION 7.1. Counterparts. This Deposit Agreement may be executed in any number of counterparts, and by each of the parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed an original, but all such counterparts taken together shall constitute one and the same instrument. SECTION 7.2. Exclusive Benefit of Parties. This Deposit Agreement is for the exclusive benefit of the parties hereto, and their respective successors hereunder, and shall not be deemed to give any legal or equitable right, remedy or claim to any other person whatsoever. SECTION 7.3. Invalidity of Provisions. In case any one or more of the provisions contained in this Deposit Agreement or in the Receipts should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby. SECTION 7.4. Notices. Any and all notices to be given to the Company hereunder or under the Receipts shall be in writing and shall be deemed to have been duly given if personally delivered or sent by mail, or by telegram or facsimile transmission confirmed by letter, addressed to the Company at: Fleet Financial Group, Inc. 50 Kennedy Plaza Providence, RI 02903 Attention: Secretary Facsimile No.: (401) 278-5801 or at any other address of which the Company shall have notified the Depositary in writing. 11 15 Any and all notices to be given to the Depositary hereunder or under the Receipts shall be in writing and shall be deemed to have been duly given if personally delivered or sent by mail, or by telegram or facsimile transmission confirmed by letter, addressed to the Depositary at the Depositary's Office, at: Fleet National Bank 111 Westminster Street Providence, RI 02903 Attention: Shareholder Services Facsimile No.: 401-751-9706 or at any other address of which the Depositary shall have notified the Company in writing. Any and all notices to be given to any record holder of a Receipt hereunder or under the Receipts shall be in writing and shall be deemed to have been duly given if personally delivered or sent by mail, or by telegram or facsimile transmission confirmed by letter, addressed to such record holder at the address of such record holder as it appears on the books of the Depositary, or if such holder shall have filed with the Depositary a written request that notices intended for such holder be mailed some other address, at the address designated in such request. Delivery of a notice sent by mail or by telegram or facsimile transmission shall be deemed to be effected at the time when a duly addressed letter containing the same (or a confirmation thereof in the case of a telegram or facsimile transmission) is deposited, postage prepaid, in a post office letter box. The Depositary or the Company may, however, act upon any telegram or facsimile transmission received by it from the other or from any holder of a Receipt, notwithstanding that such telegram or facsimile transmission shall not subsequently be confirmed by letter or as aforesaid. SECTION 7.5. Depositary's Agents. The Depositary may from time to time appoint Depositary's Agents to act in any respect for the Depositary for the purposes of this Deposit Agreement and may at any time appoint additional Depositary's Agents and vary or terminate the appointment of such Depositary's Agents. The Depositary will notify the Company of any such action. The Company hereby also appoints the Depositary as Registrar in respect of the Receipts and the Depositary hereby accepts such appointments. SECTION 7.6. Holders of Receipts Are Parties. The holders of Receipts from time to time shall be parties to this Deposit Agreement and shall be bound by all of the terms and conditions hereof and of the Receipts by acceptance of delivery thereof. SECTION 7.7. GOVERNING LAW. THIS DEPOSIT AGREEMENT AND THE RECEIPTS AND ALL RIGHTS HEREUNDER AND THEREUNDER AND PROVISIONS HEREOF AND THEREOF SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 7.8. Inspection of Deposit Agreement. Copies of this Deposit Agreement shall be filed with the Depositary and the Depositary's Agent and shall be open to inspection during business hours at the Depositary's office and respective offices of the Depositary's Agent, if any, by any holder of a Receipt. SECTION 7.9. Headings. The headings of articles and sections in this Deposit Agreement and in the form of the Receipt set forth in Exhibit A hereto have been inserted for convenience only and are not to be regarded as a part of this Deposit Agreement or the Receipts or to have any bearing upon the meaning or interpretation of any provision contained herein or in the Receipts. 12 16 IN WITNESS WHEREOF, the Company and the Depositary have duly executed this Agreement as of the day and year first above set forth, and all holders of Receipts shall become parties hereto by and upon acceptance by them of delivery of Receipts issued in accordance with the terms hereof. Attested by - ------------------------------------------------------ [SEAL] FLEET FINANICAL GROUP, INC. By: Attested by - ------------------------------------------------------ [SEAL] FLEET NATIONAL BANK By: 13 17 EXHIBIT A TO DEPOSIT AGREEMENT SEE REVERSE FOR CERTAIN DEFINITIONS
CERTIFICATE FOR DEPOSITARY RECEIPT FOR DEPOSITARY SHARES, EACH DEPOSITARY SHARE ____________________ REPRESENTING A ONE-TENTH INTEREST IN ONE SHARE OF 9.30% CUMULATIVE ____________________ PREFERRED STOCK
FLEET FINANCIAL GROUP, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF RHODE ISLAND DEPOSITARY SHARES FLEET NATIONAL BANK, as Depositary (the "Depositary) hereby certifies that Transferable Depositary Receipt This Certificate is transferable in Providence, Rhode Island and New York, New York CUSIP Is the registered owner of DEPOSITARY SHARES ("Depositary Shares"), each Depositary Share representing a one-tenth interest in one share of 9.30% Cumulative Preferred Stock, $1 par value, $250 stated value per preferred share (the "Stock"), of Fleet Financial Group, Inc., a Rhode Island corporation (the "Corporation") on deposit with the Depositary, subject to the terms and entitled to the benefits of the Deposit Agreement dated as of [ ], 1995 (the "Deposit Agreement"), between the Corporation and the Depositary. By accepting this Depositary Receipt, the holder hereof becomes a party to and agrees to be bound by all the terms and conditions of the Deposit Agreement. This Depositary Receipt shall not be valid or obligatory for any purpose or be entitled to any benefits under the Deposit Agreement unless it shall have been executed by the Depositary by the manual signature of a duly authorized officer or, if executed in facsimile by the Depositary, countersigned by a Registrar in respect of the Depositary Receipts by a duly authorized officer thereof. Dated Countersigned FLEET NATIONAL BANK Depositary and Registrar By ___________________________________ Authorized Officer FLEET FINANCIAL GROUP, INC. FLEET FINANCIAL GROUP INC. WILL FURNISH WITHOUT CHARGE TO EACH RECEIPTHOLDER WHO SO REQUESTS A COPY OF THE DEPOSIT AGREEMENT AND A STATEMENT OR SUMMARY OF THE TERMS OF THE 9.30% CUMULATIVE PREFERRED STOCK AND EACH OTHER CLASS OF PREFERRED STOCK OR SERIES THEREOF WHICH THE CORPORATION IS AUTHORIZED TO ISSUE AND OF THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCE AND/OR RIGHTS. ANY SUCH REQUEST SHOULD BE ADDRESSED TO FLEET FINANCIAL GROUP, INC., 50 KENNEDY PLAZA, PROVIDENCE, RI 02903, ATTN: SECRETARY. 18 ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this Depositary Receipt, shall be construed as though they are written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT -- as tenants by the entireties JT TEN -- as joint tenant with right of survivorship and not as tenants in common UNIF GIFT MIN ACT -- ______________________ Custodian ______________________ (Cust) (Minor) under Uniform Gifts to Minors Act _____________________ (State) UNIF TRAN MIN ACT -- ______________________ Custodian (until age _______________ (Cust) (Minor) under Uniform Transfers Minors Act ___________________ Additional abbreviations may also be used though not in the above list. For value received, hereby sell(s), assigns(s) and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE - -------------------------------------------------------------------------------- Depositary Shares represented by the within Depositary Receipt, and do(es) hereby irrevocably constitute and appoint Attorney to transfer the said Depositary Shares on the books of the within named Depositary with full power of substitution in the premises. Dated Signature: -------------------------------------- NOTICE The signature to this assignment must correspond with the name as written upon the face of this Depositary Receipt in every particular, without alteration or enlargement or any change whatsoever SIGNATURE GUARANTEED EX-4.(K) 8 FORM OF DEPOSIT AGREEMENT FOR DEPOSITARY SHARES 1 EXHIBIT 4(k) FLEET FINANCIAL GROUP, INC. FLEET NATIONAL BANK, AS DEPOSITARY AND THE HOLDERS FROM TIME TO TIME OF THE DEPOSITARY RECEIPTS DESCRIBED HEREIN DEPOSIT AGREEMENT DATED AS OF , 1995 2 TABLE OF CONTENTS
PAGE ----- ARTICLE I Definitions........................................................................... ARTICLE II FORM OF RECEIPTS, DEPOSIT OF STOCK, EXECUTION AND DELIVERY, TRANSFER, SURRENDER AND REDEMPTION OF RECEIPTS SECTION 2.1. Form and Transfer of Receipts......................................... SECTION 2.2. Deposit of Stock; Execution and Delivery of Receipts in Respect Thereof............................................................... SECTION 2.3. Registration of Transfer of Receipts.................................. SECTION 2.4. Split-ups and Combinations of Receipts; Surrender of Receipts and Withdrawal of Stock................................................... SECTION 2.5. Limitations on Execution and Delivery, Transfer, Surrender and Exchange of Receipts.................................................. SECTION 2.6. Lost Receipts, etc.................................................... SECTION 2.7. Cancellation and Destruction of Surrendered Receipts.................. SECTION 2.8. Redemption of Stock................................................... ARTICLE III CERTAIN OBLIGATIONS OF HOLDERS OF RECEIPTS AND THE COMPANY SECTION 3.1. Filing Proofs, Certificates and Other Information..................... SECTION 3.2. Payment of Taxes or Other Governmental Charges........................ SECTION 3.3. Warranty as to Stock.................................................. SECTION 3.4. Warranty as to Receipts............................................... ARTICLE IV THE DEPOSITED SECURITIES; NOTICES SECTION 4.1. Cash Distributions.................................................... SECTION 4.2. Distributions Other than Cash, Rights, Preferences or Privileges...... SECTION 4.3. Subscription Rights, Preferences or Privileges........................ SECTION 4.4. Notice of Dividends, etc.; Fixing Record Date for Holders of Receipts.............................................................. SECTION 4.5. Voting Rights......................................................... SECTION 4.6. Changes Affecting Deposited Securities and Reclassifications, Recapitalizations, etc................................................ SECTION 4.7. Delivery of Reports................................................... SECTION 4.8. List of Receipt Holders............................................... ARTICLE V THE DEPOSITARY, THE DEPOSITARY'S AGENTS, THE REGISTRAR AND THE COMPANY SECTION 5.1. Maintenance of Offices, Agencies and Transfer Books by the Depositary; Registrar............................................................. SECTION 5.2. Prevention of or Delay in Performance by the Depositary, the Depositary's Agents, the Registrar or the Company..................... SECTION 5.3. Obligation of the Depositary, the Depositary's Agents, the Registrar and the Company.......................................................
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PAGE ----- SECTION 5.4. Resignation and Removal of the & Depositary; Appointment of Successor Depositary............................................................ SECTION 5.5. Corporate Notices and Reports......................................... SECTION 5.6. Indemnification by the Company........................................ SECTION 5.7. Charges and Expenses.................................................. ARTICLE VI AMENDMENT AND TERMINATION SECTION 6.1. Amendment............................................................. SECTION 6.2. Termination........................................................... ARTICLE VII MISCELLANEOUS SECTION 7.1. Counterparts.......................................................... SECTION 7.2. Exclusive Benefit of Parties.......................................... SECTION 7.3. Invalidity of Provisions.............................................. SECTION 7.4. Notices............................................................... SECTION 7.5. Depositary's Agents................................................... SECTION 7.6. Holders of Receipts Are Parties....................................... SECTION 7.7. GOVERNING LAW......................................................... SECTION 7.8. Inspection of Deposit Agreement....................................... SECTION 7.9. Headings.............................................................. FORM OF DEPOSITARY SHARES Form of Face of Receipt............................................................... Form of Reverse of Receipt............................................................
4 DEPOSIT AGREEMENT DEPOSIT AGREEMENT, dated as of , 1995, among FLEET FINANCIAL GROUP, INC., a Rhode Island corporation, (the "Company"), FLEET NATIONAL BANK, a national banking association (the "Depositary"), and the holders from time to time of the Receipts described herein. WHEREAS, it is desired to provide, as hereinafter set forth in this Deposit Agreement, for the deposit of shares of the Company's 9.35% Cumulative Preferred Stock with the Depositary for the purposes set forth in this Deposit Agreement and for the issuance hereunder of Receipts evidencing Depositary Shares in respect of the Stock so deposited; and WHEREAS, the Receipts are to be substantially in the form of Exhibit A annexed hereto, with appropriate insertions, modifications and omissions, as hereinafter provided in this Deposit Agreement; NOW, THEREFORE, in consideration of the promises contained herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS The following definitions shall, for all purposes, unless otherwise indicated, apply to the respective terms used in this Deposit Agreement: "Company" shall mean Fleet Financial Group, Inc., a Rhode Island corporation, and its successors. "Deposit Agreement" shall mean this Deposit Agreement, as amended or supplemented from time to time. "Depositary" shall mean Fleet National Bank, and any successor as Depositary hereunder. "Depositary Shares" shall mean Depositary Shares, each representing one-tenth of a share of Stock and evidenced by a Receipt. "Depositary's Agent" shall mean an agent appointed by the Depositary pursuant to Section 7.5. "Depositary's Office" shall mean the principal office of the Depositary, at which at any particular time its depositary receipt business shall be administered. "Preferred Stock" means any stock of any class or series of the Company which has a preference over Common Stock in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which is not mandatorily redeemable or repayable by the Company or redeemable or repayable at the option of the holder of such stock. "Receipt" shall mean one of the Depositary Receipts, substantially in the form set forth as Exhibit A hereto, issued hereunder, whether in definitive or temporary form and evidencing the number of Depositary Shares held of record by the record holder of such Depositary Shares. "record holder" or "holder" as applied to a Receipt shall mean the person in whose name a Receipt is registered on the books of the Depositary maintained for such purpose. "Registrar" shall mean the Depositary or such other bank or trust company which shall be appointed to register ownership and transfers of Receipts as herein provided. "Restated Articles" shall mean the Company's Restated Articles of Incorporation, as amended. "Securities Act" shall mean the Securities Act of 1933, as amended. "Stock" shall mean shares of the Company's 9.35% Cumulative Preferred Stock, $250 stated value per share. 5 ARTICLE II FORM OF RECEIPTS, DEPOSIT OF STOCK, EXECUTION AND DELIVERY, TRANSFER, SURRENDER AND REDEMPTION OF RECEIPTS SECTION 2.1. Form and Transfer of Receipts. Definitive Receipts shall be engraved or printed or lithographed on steel-engraved borders, with appropriate insertions, modifications and omissions, as hereinafter provided. Pending the preparation of definitive Receipts, the Depositary, upon the written order of the Company or any holder of Stock, as the case may be, delivered in compliance with Section 2.2, shall execute and deliver temporary Receipts which are printed, lithographed, typewritten, mimeographed or otherwise substantially of the tenor of the definitive Receipts in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the persons executing such Receipts may determine, as evidenced by their execution of such Receipts. If temporary Receipts are issued, the Company and the Depositary will cause definitive Receipts to be prepared without unreasonable delay. After the preparation of definitive Receipts, the temporary Receipts shall be exchangeable for definitive Receipts upon surrender of the temporary Receipts at an office described in the penultimate paragraph of Section 2.2, without charge to the holder. Upon surrender for cancellation of any one or more temporary Receipts, the Depositary shall execute and deliver in exchange therefor definitive Receipts representing the same number of Depositary Shares as represented by the surrendered temporary Receipt or Receipts. Such exchange shall be made at the Company's expense and without any charge therefor. Until so exchanged, the temporary Receipts shall in all respects be entitled to the same benefits under this Agreement, and with respect to the Stock, as definitive Receipts. Receipts shall be executed by the Depositary by the manual signature of a duly authorized officer of the Depositary; provided, that such signature may be a facsimile if a Registrar for the Receipts (other than the Depositary) shall have been appointed and such Receipts are countersigned by a duly authorized officer of the Registrar. No Receipt shall be entitled to any benefits under this Deposit Agreement or be valid or obligatory for any purpose unless it shall have been executed manually by a duly authorized officer of the Depositary or, if a Registrar for the Receipts (other than the Depositary) shall have been appointed, by manual or facsimile signature of a duly authorized officer of the Depositary and countersigned by a duly authorized officer of such Registrar. The Depositary shall record on its books each Receipt so signed and delivered as hereinafter provided. Receipts shall be in denominations of any number of whole Depositary Shares. Receipts may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Deposit Agreement as may be required by the Depositary or required to comply with any applicable law or any regulation thereunder or with the rules and regulations of any securities exchange upon which the Stock, the Depositary Shares or the Receipts may be listed or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Receipts are subject. Title to Depositary Shares evidenced by a Receipt, which is properly endorsed or accompanied by a properly executed instrument of transfer, shall be transferable by delivery with the same effect as in the case of a negotiable instrument; provided, however, that until transfer of a Receipt shall be registered on the books of the Depositary as provided in Section 2.3, the Depositary may, notwithstanding any notice to the contrary, treat the record holder thereof at such time as the absolute owner thereof for the purpose of determining the person entitled to distributions of dividends or other distributions or to any notice provided for in this Deposit Agreement and for all other purposes. SECTION 2.2. Deposit of Stock; Execution and Delivery of Receipts in Respect Thereof. Subject to the terms and conditions of this Deposit Agreement, the Company or any holder of Stock may from time to time deposit shares of the Stock under this Deposit Agreement by delivery to the Depositary of a certificate or certificates for the Stock to be deposited, properly endorsed or accompanied, if required by the Depositary, by a duly executed instrument of transfer or endorsement, in form satisfactory to the Depositary, together with all 2 6 such certifications as may be required by the Depositary in accordance with the provisions of this Deposit Agreement, and together with a written order of the Company or such holder, as the case may be, directing the Depositary to execute and deliver to, or upon the written order of, the person or persons stated in such order a Receipt or Receipts for the number of Depositary Shares representing such deposited Stock. Deposited Stock shall be held by the Depositary at the Depositary's Office or at such other place or places as the Depositary shall determine. Upon receipt by the Depositary of a certificate or certificates for Stock deposited in accordance with the provisions of this Section, together with the other documents required as above specified, and upon recordation of the Stock on the books of the Company in the name of the Depositary or its nominee, the Depositary, subject to the terms and conditions of this Deposit Agreement, shall execute and deliver, to or upon the order of the person or persons named in the written order delivered to the Depositary referred to in the first paragraph of this Section, a Receipt or Receipts for the number of Depositary Shares representing the Stock so deposited and registered in such name or names as may be requested by such person or persons. The Depositary shall execute and deliver such Receipt or Receipts at the Depositary's Office or such other offices, if any, as the Depositary may designate. Delivery at other offices shall be at the risk and expense of the person requesting such delivery. SECTION 2.3. Registration of Transfer of Receipts. Subject to the terms and conditions of this Deposit Agreement, the Depositary shall register on its books from time to time transfers of Receipts upon any surrender thereof by the holder in person or by duly authorized attorney, properly endorsed or accompanied by a properly executed instrument of transfer. Thereupon, the Depositary shall execute a new Receipt or Receipts evidencing the same aggregate number of Depositary Shares as those evidenced by the Receipt or Receipts surrendered and deliver such new Receipt or Receipts to or upon the order of the person entitled thereto. SECTION 2.4. Split-ups and Combinations of Receipts; Surrender of Receipts and Withdrawal of Stock. Upon surrender of a Receipt or Receipts at the Depositary's Office or at such other offices as it may designate for the purpose of effecting a split-up or combination of such Receipt or Receipts, and subject to the terms and conditions of this Deposit Agreement, the Depositary shall execute and deliver a new Receipt or Receipts in the authorized denomination or denominations requested, evidencing the aggregate number of Depositary Shares evidenced by the Receipt or Receipts surrendered. Any holder of a Receipt or Receipts representing any number of whole shares of Stock may withdraw the Stock and all money and other property, if any, represented thereby by surrendering such Receipt or Receipts, at the Depositary's Office or at such other offices as the Depositary may designate for such withdrawals. Thereafter, without unreasonable delay, the Depositary shall deliver to such holder or to the person or persons designated by such holder as hereinafter provided, the number of whole shares of Stock and all money and other property, if any, represented by the Receipt or Receipts so surrendered for withdrawal, but holders of such whole shares of Stock will not thereafter be entitled to deposit such Stock hereunder or to receive Depositary Shares therefor. If a Receipt delivered by the holder to the Depositary in connection with such withdrawal shall evidence a number of Depositary Shares in excess of the number of Depositary Shares representing the number of whole shares of Stock to be so withdrawn, the Depositary shall at the same time, in addition to such number of whole shares of Stock and such money and other property, if any, to be so withdrawn, deliver to such holder, or upon his order, a new Receipt evidencing such excess number of Depositary Shares. Delivery of the Stock and money and other property being withdrawn may be made by the delivery of such certificates, documents of title and other instruments as the Depositary may deem appropriate. If the Stock and the money and other property being withdrawn are to be delivered to a person or persons other than the record holder of the Receipt or Receipts being surrendered for withdrawal of Stock, such holders shall execute and deliver to the Depositary a written order so directing the Depositary and the Depositary may require that the Receipt or Receipts surrendered by such holder for withdrawal of such shares of Stock be properly endorsed in blank or accompanied by a properly executed instrument of transfer in blank. 3 7 Delivery of the Stock and the money and other property, if any, represented by Receipts surrendered for withdrawal shall be made by the Depositary at the Depositary's Office, except that, at the request, risk and expense of the holder surrendering such Receipt or Receipts and for the account of the holder thereof, such delivery may be made at such other place as may be designated by such holder. SECTION 2.5. Limitations on Execution and Delivery, Transfer, Surrender and Exchange of Receipts. As a condition precedent to the execution and delivery, registration of transfer, split-up, combination, surrender or exchange of any Receipt, the Depositary, any of the Depositary's Agents or the Company may require payment to it of a sum sufficient for the payment (or, in the event that the Depositary or the Company shall have made such payment, the reimbursement to it) of any charges or expenses payable by the holder of a Receipt pursuant to Section 5.7, may require the production of evidence satisfactory to it as to the identity and genuineness of any signature and may also require compliance with such regulations, if any, as the Depositary or the Company may establish consistent with the provisions of this Deposit Agreement. The deposit of Stock may be refused, the delivery of Receipts against Stock may be suspended, the registration of transfer of Receipts may be refused and the registration of transfer, surrender or exchange of outstanding Receipts may be suspended (i) during any period when the register of stockholders of the Company is closed or (ii) if any such action is deemed necessary or advisable by the Depositary, any of the Depositary's Agents or the Company at any time or from time to time because of any requirement of law or of any government or governmental body or commission or under any provision of this Deposit Agreement. SECTION 2.6. Lost Receipts, etc. In case any receipt shall be mutilated, destroyed, lost or stolen, the Depositary in its discretion may execute and deliver a Receipt of like form and tenor in exchange and substitution for such mutilated Receipt, or in lieu of and in substitution for such destroyed, lost or stolen Receipt, upon (i) the filing by the holder thereof with the Depositary of evidence satisfactory to the Depositary of such destruction or loss or theft of such Receipt, of the authenticity thereof and of his or her ownership thereof and (ii) the furnishing to the Depositary of indemnification (which may include posting an indemnification bond) satisfactory to it. SECTION 2.7. Cancellation and Destruction of Surrendered Receipts. All Receipts surrendered to the Depositary or any Depositary's Agent shall be cancelled by the Depositary. Except as prohibited by applicable law or regulation, the Depositary is authorized to destroy all Receipts so cancelled. SECTION 2.8. Redemption of Stock. Whenever the Company shall be permitted and shall elect to redeem shares of Stock in accordance with the provisions of the Restated Articles, it shall (unless otherwise agreed to in writing with the Depositary) give or cause to be given to the Depositary not less than 30 days' and not more than 60 days' notice of the date of such proposed redemption or exchange of Stock and of the number of such shares held by the Depositary to be so redeemed and the applicable redemption price, as set forth in the Restated Articles, which notice shall be accompanied by a certificate from the Company stating that such redemption of Stock is in accordance with the provisions of the Restated Articles. On the date of such redemption, provided that the Company shall then have paid or caused to be paid in full to the Depositary the redemption price of the Stock to be redeemed, plus an amount equal to any accrued and unpaid dividends thereon to the date fixed for redemption, in accordance with the provisions of the Restated Articles, the Depositary shall redeem the number of Depositary Shares representing such Stock. The Depositary shall mail notice of the Company's redemption of Stock and the proposed simultaneous redemption of the number of Depositary Shares representing the Stock to be redeemed by first-class mail, postage prepaid, not less than 10 and not more than 60 days prior to the date fixed for redemption of such Stock and Depositary Shares (the "Redemption Date") to the record holders of the Receipts evidencing the Depositary Shares to be so redeemed, at the address of such holders as they appear on the records of the Depositary; but neither failure to mail any such notice of redemption of Depositary Shares to one or more such holders nor any defect in any notice of redemption of Depositary Shares to one or more such holders shall affect the sufficiency of the proceedings for redemption as to the other holders. Each such notice shall state: (i) the Redemption Date; (ii) the number of Depositary Shares to be redeemed and, if less than all the Depositary Shares held by any such holder are to be redeemed, the number of such Depositary Shares held by such holder to be so redeemed; (iii) the redemption price; (iv) the place or places where Receipts evidencing 4 8 Depositary Shares are to be surrendered for payment of the redemption price; and (v) that dividends in respect of the Stock represented by the Depositary Shares to be redeemed will cease to accrue on such Redemption Date. In case less than all the outstanding Depositary Shares are to be redeemed, the Depositary Shares to be so redeemed shall be selected by the Depositary by lot or pro rata (as nearly as may be) or by any other method, in each case, as determined by the Depositary in its sole discretion to be equitable. Notice having been mailed by the Depositary as aforesaid, from and after the Redemption Date (unless the Company shall have failed to provide the funds necessary to redeem the Stock evidenced by the Depositary Shares called for redemption) (i) dividends on the shares of Stock so called for redemption shall cease to accrue from and after such date, (ii) the Depositary Shares being redeemed from such proceeds shall be deemed no longer to be outstanding, (iii) all rights of the holders of Receipts evidencing such Depositary Shares (except the right to receive the redemption price) shall, to the extent of such Depositary Shares, cease and terminate, and (iv) upon surrender in accordance with such redemption notice of the Receipts evidencing any such Depositary Shares called for redemption (properly endorsed or assigned for transfer, if the Depositary or applicable law shall so require), such Depositary Shares shall be redeemed by the Depositary at a redemption price per Depositary Share equal to one-tenth of the redemption price per share plus all money and other property, if any, represented by such Depositary Shares, including all amounts paid by the Company in respect of dividends which on the Redemption Date have accumulated on the shares of Stock to be so redeemed and have not theretofore been paid. If fewer than all of the Depositary Shares evidenced by a Receipt are called for redemption, the Depositary will deliver to the holder of such Receipt upon its surrender to the Depositary, together with the redemption payment, a new Receipt evidencing the Depositary Shares evidenced by such prior Receipt and not called for redemption. ARTICLE III CERTAIN OBLIGATIONS OF HOLDERS OF RECEIPTS AND THE COMPANY SECTION 3.1. Filing Proofs, Certificates and Other Information. Any holder of a Receipt may be required from time to time to file such proof of residence, or other matters or other information, to execute such certificates and to make such representations and warranties as the Depositary or the Company may reasonably deem necessary or proper. The Depositary or the Company may withhold the delivery, or delay the registration of transfer, redemption or exchange, of any Receipt or the withdrawal or conversion of the Stock represented by the Depositary Shares evidenced by any Receipt or the distribution of any dividend or other distribution or the sale of any rights or of the proceeds thereof until such proof or other information is filed or such certificates are executed or such representations and warranties are made. SECTION 3.2. Payment of Taxes or Other Governmental Charges. Holders of Receipts shall be obligated to make payments to the Depositary of certain charges and expenses, as provided in Section 5.7. Registration of transfer of any Receipt or any withdrawal of Stock and all money or other property, if any, represented by the Depositary Shares evidenced by such Receipt may be refused until any such payment due is made, and any dividends, interest payments or other distributions may be withheld or any part of or all the Stock or other property represented by the Depositary Shares evidenced by such Receipt and not theretofore sold may be sold for the account of the holder thereof (after attempting by reasonable means to notify such holder prior to such sale), and such dividends, interest payments or other distributions or the proceeds of any such sale may be applied to any payment of such charges or expenses, the holder of such Receipt remaining liable for any deficiency. SECTION 3.3. Warranty as to Stock. The Company hereby represents and warrants that the Stock, when issued, will be duly authorized, validly issued, fully paid and nonassessable, subject to the Rhode Island Business Corporation Act. Such representation and warranty shall survive the deposit of the Stock and the issuance of Receipts. 5 9 SECTION 3.4. Warranty as to Receipts. The Company hereby represents and warrants that the Receipts, when issued, will represent legal and valid interests in the Stock. Such representation and warranty shall survive the deposit of the Stock and the issuance of Receipts. ARTICLE IV THE DEPOSITED SECURITIES; NOTICES SECTION 4.1. Cash Distributions. Whenever the Depositary shall receive any cash dividend or other cash distribution on Stock, the Depositary shall, subject to Section 3.1 and 3.2, distribute to record holders of Receipts on the record date fixed pursuant to Section 4.4 such amounts of such dividend or distribution as are, as nearly as practicable, in proportion to the respective numbers of Depositary Shares evidenced by the Receipts held by such holders; provided, however, that in case the Company or the Depositary shall be required to withhold and shall withhold from any cash dividend or other cash distribution in respect of the Stock an amount on account of taxes, the amount made available for distribution or distributed in respect of Depositary Shares shall be reduced accordingly. The Depositary shall distribute or make available for distribution, as the case may be, only such amount, however, as can be distributed without attributing to any holder of Depositary Shares a fraction of one cent. Any balance not so distributable shall be returned by the Depositary to the Company and shall be added to and be treated as part of the next sum received by the Depositary for distribution to record holders of Receipts then outstanding. SECTION 4.2. Distributions Other than Cash, Rights, Preferences or Privileges. Whenever the Depositary shall receive any distribution other than cash, rights, preferences or privileges upon Stock, the Depositary shall, subject to Sections 3.1 and 3.2, distribute to record holders of Receipts on the record date fixed pursuant to Section 4.4 such amounts of the securities or property received by it as are, as nearly as practicable, in proportion to the respective numbers of Depositary Shares evidenced by the Receipts held by such holders, in any manner that the Depositary may deem equitable and practicable for accomplishing such distribution. If in the opinion of the Depositary such distribution cannot be made proportionately among such record holders, or if for any other reason (including any requirement that the Company or the Depositary withhold an amount on account of taxes) the Depositary deems, after consultation with the Company, such distribution not to be feasible, the Depositary may, with the approval of the Company, adopt such method as it deems equitable and practicable for the purpose of effecting such distribution, including the sale (at public or private sale) of the securities or property thus received, or any part thereof, at such place or places and upon such terms as it may deem proper. The net proceeds of any such sale shall, subject to Sections 3.1 and 3.2, be distributed or made available for distribution, as the case may be, by the Depositary to record holders of Receipts as provided by Section 4.1 in the case of a distribution received in cash. The Company shall not make any distribution of such securities or property to the Depositary and the Depositary shall not make any distribution of such securities or property to the holders of Receipts unless the Company shall have provided an opinion of counsel stating that such securities or property have been registered under the Securities Act or do not need to be registered in connection with such distributions. SECTION 4.3. Subscription Rights, Preferences or Privileges. If the Company shall at any time offer or cause to be offered to the persons in whose names Stock is recorded on the books of the Company any rights, preferences or privileges to subscribe for or to purchase any securities or any rights, preferences or privileges of any other nature, such rights, preferences or privileges shall in each such instance be made available by the Depositary to the record holders of Receipts in such manner as the Depositary may determine, either by the issue to such record holders of warrants representing such rights, preferences or privileges or by such other method as may be approved by the Depositary in its discretion with the approval of the Company; provided, however, that (i) if at the time of issue or offer of any such rights, preferences or privileges the Depositary determines that it is not lawful or (after consultation with the Company) not feasible to make such rights, preferences or privileges available to holders of Receipts by the issue of warrants or otherwise, or (ii) if and to the extent so instructed by holders of Receipts who do not desire to exercise such rights, preferences or privileges, then the Depositary, in its discretion (with approval of the Company, in any case where the Depositary has determined that it is not feasible to make such rights, preferences or privileges 6 10 available), may, if applicable laws or the terms of such rights, preferences or privileges permit such transfer, sell such rights, preferences or privileges at public or private sale, at such place or places and upon such terms as it may deem proper. The net proceeds of any such sale shall, subject to Sections 3.1 and 3.2, be distributed by the Depositary to the record holders of Receipts entitled thereto as provided by Section 4.1 in the case of a distribution received in cash. If registration under the Securities Act of the securities to which any rights, preferences or privileges relate is required in order for holders of Receipts to be offered or sold the securities to which such rights, preferences or privileges relate, the Company agrees with the Depositary that it will file promptly a registration statement pursuant to such Act with respect to such rights, preferences or privileges and securities and use its best efforts and take all steps available to it to cause such registration statement to become effective sufficiently in advance of the expiration of such rights, preferences or privileges to enable such holders to exercise such rights, preferences or privileges. In no event shall the Depositary make available to the holders of Receipts any right, preference or privilege to subscribe for or to purchase any securities unless and until such registration statement shall have become effective, or unless the offering and sale of such securities to such holders are exempt from registration under the provisions of the Securities Act, and the Company shall have provided to the Depositary an opinion of counsel to such effect. If any other action under the laws of any jurisdiction or any governmental or administrative authorization, consent or permit is required in order for such rights, preferences or privileges to be made available to holders of Receipts, the Company agrees with the Depositary that the Company will use its reasonable best efforts to take such action or obtain such authorization, consent or permit sufficiently in advance of the expiration of such rights, preferences or privileges to enable such holders to exercise such rights, preferences or privileges. SECTION 4.4. Notice of Dividends, etc.; Fixing Record Date for Holders of Receipts. Whenever any cash dividend or other cash distribution shall become payable or any distribution other than cash shall be made, or if rights, preferences or privileges shall at any time be offered, with respect to Stock, or whenever the Depositary shall receive notice of any meeting at which holders of Stock are entitled to vote or of which holders of Stock are entitled to notice, or whenever the Depositary and the Company shall decide it is appropriate, the Company shall in each such instance fix a record date for the determination of the holders of Receipts who shall be entitled to receive such dividend, distribution, rights, preferences or privileges or the net proceeds of the sale thereof, or to give instructions for the exercise of voting rights at any such meeting, or who shall be entitled to notice of such meeting or for any other appropriate reasons. SECTION 4.5. Voting Rights. Upon receipt of notice of any meeting at which the holders of Stock are entitled to vote, the Depositary shall, as soon as practicable thereafter, mail to the record holders of Receipts a notice which shall contain (i) such information as is contained in such notice of meeting and (ii) a statement that the holders may, subject to any applicable restrictions, instruct the Depositary as to the exercise of the voting rights pertaining to the amount of Stock represented by their respective Depositary Shares (including an express indication that instructions may be given to the Depositary to give a discretionary proxy to a person designated by the Company) and a brief statement as to the manner in which such instructions may be given. Upon the written request of the holders of Receipts on the relevant record date, the Depositary shall endeavor insofar as practicable to vote or cause to be voted, in accordance with the instructions set forth in such requests, the maximum number of whole shares of Stock represented by the Depositary Shares evidenced by all Receipts as to which any particular voting instructions are received. The Company hereby agrees to take all reasonable action which may be deemed necessary by the Depositary in order to enable the Depositary to vote such Stock or cause such Stock to be voted. In the absence of specific instructions from the holder of a Receipt, the Depositary will not vote (but, at its discretion, may appear at any meeting with respect to such Stock unless directed to the contrary by the holders of all the Receipts) to the extent of the Stock represented by the Depositary Shares evidence by such Receipt. SECTION 4.6. Changes Affecting Deposited Securities and Reclassifications, Recapitalizations, etc. Upon any change in par or stated value, split-up, combination or any other reclassification of the Stock, or upon any recapitalization, reorganization, merger or consolidation affecting the Company or to which it is party, the Depositary may in its discretion with the approval of, and shall upon the instructions of, the 7 11 Company, and (in either case) in such manner as the Depositary may deem equitable, (i) make such adjustments as are certified by the Company in the fraction of an interest represented by one Depositary Share in one share of Stock as may be necessary fully to reflect the effects of such change in par or stated value, split-up, combination or other reclassification of Stock, or of such recapitalization, reorganization, merger or consolidation and (ii) treat any securities which shall be received by the Depositary in exchange for or upon conversion of or in respect of the Stock as new deposited securities so received in exchange for or upon conversion or in respect of such Stock. In any such case the Depositary may in its discretion, with the approval of the Company, execute and deliver additional Receipts or may call for the surrender of all outstanding Receipts to be exchanged for new Receipts specifically describing such new deposited securities. Anything to the contrary herein notwithstanding, holders of Receipts shall have the right from and after the effective date of any such change in par or stated value, split-up, combination or other reclassification of the Stock or any such recapitalization, reorganization, merger or consolidation to surrender such Receipts to the Depositary with instructions to convert, exchange or surrender the Stock represented thereby only into or for, as the case may be, the kind and amount of shares of stock and other securities and property and cash into which the Stock represented by such Receipts might have been converted or for which such Stock might have been exchanged or surrendered immediately prior to the effective date of such transaction. SECTION 4.7. Delivery of Reports. The Depositary shall furnish to holders of Receipts any reports and communications received from the Company which are received by the Depositary as the holder of Stock. SECTION 4.8. List of Receipt Holders. Promptly upon request from time to time by the Company, the Depositary shall furnish to it a list, as of the most recent practicable date, of the names, addresses and holdings of Depositary Shares of all record holders of Receipts. ARTICLE V THE DEPOSITARY, THE DEPOSITARY'S AGENTS, THE REGISTRAR AND THE COMPANY SECTION 5.1. Maintenance of Offices, Agencies and Transfer Books by the Depositary; Registrar. Upon execution of this Deposit Agreement, the Depositary shall maintain at the Depositary's office, facilities for the execution and delivery, registration and registration of transfer, surrender and exchange of Receipts, and at the offices of the Depositary's Agents, if any, facilities for the delivery, registration of transfer, surrender and exchange of Receipts, all in accordance with the provisions of this Deposit Agreement. The Depositary shall keep books at the Depositary's Office for the registration and registration of transfer of Receipts, which books at all reasonable times shall be open for inspection by the record holders of Receipts; provided that any such holder requesting to exercise such right shall certify to the Depositary that such inspection shall be for a proper purpose reasonably related to such person's interest as an owner of Depositary Shares evidenced by the Receipts. The Depositary may close such books, at any time or from time to time, when deemed expedient by it in connection with the performance of its duties hereunder. The Depositary may, with the approval of the Company, appoint a Registrar for registration of the Receipts or the Depositary Shares evidenced thereby. If the Receipts or the Depositary Shares evidenced thereby or the Stock represented by such Depositary Shares shall be listed on one or more national stock exchanges, the Depositary will appoint a Registrar (acceptable to the Company) for registration of such Receipts or Depositary Shares in accordance with any requirements of such exchange. Such Registrar may be the Depositary if so permitted by the requirements of any such exchange. Such Registrar may be removed and a substitute registrar appointed by the Depositary upon the request or with the approval of the Company. If the Receipts, such Depositary Shares or such stock are listed on one or more other stock exchanges, the Depositary will, at the request of the Company, arrange such facilities for the delivery, registration, registration of transfer, surrender and exchange of such Receipts, such Depositary Shares or such stock as may be required by law or applicable stock exchange regulation. 8 12 SECTION 5.2. Prevention of or Delay in Performance by the Depositary, the Depositary's Agents, the Registrar or the Company. Neither the Depositary nor any Depositary's Agent nor any Registrar nor the Company shall incur any liability to any holder of any Receipt if by reason of any provision of any present or future law, or regulation thereunder, of the United States of America or of any other governmental authority or, in the case of the Depositary, the Depositary's Agent or the Registrar, by reason of any provision, present or future, of the Restated Articles or by reason of any act of God or war or other circumstance beyond the control of the relevant party, the Depositary, the Depositary's Agent, the Registrar or the Company shall be prevented, delayed or forbidden from, or subjected to any penalty on account of, doing or performing any act or thing which the terms of this Deposit Agreement provide shall be done or performed; nor shall the Depositary, any Depositary's Agent, any Registrar or the Company incur liability to any holder of a Receipt (i) by reason of any nonperformance or delay, caused as aforesaid, in the performance of any act or thing which the terms of this Deposit Agreement shall provide shall or may be done or performed, or (ii) by reason of any exercise of, or failure to exercise, any discretion provided for in this Deposit Agreement except, in the case of any such exercise or failure to exercise discretion not caused as aforesaid, if caused by the negligence or willful misconduct of the party charged with such exercise or failure to exercise. SECTION 5.3. Obligation of the Depositary, the Depositary's Agents, the Registrar and the Company. Neither the Depositary nor any Depositary's Agent nor any Registrar nor the Company assumes any obligation or shall be subject to any liability under this Deposit Agreement to holders of Receipts other than for its negligence, willful misconduct or bad faith. The Company shall indemnify the Depositary for, and hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part arising out of or in connection with its agency under this Deposit Agreement, including the costs and expenses of defending itself against any claim or liability in connection with its exercise or performance of any of its duties under this Deposit Agreement. Anything in this Deposit Agreement to the contrary notwithstanding, in no event shall the Depositary be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Depositary has been advised of the likelihood of such loss or damage and regardless of the form of the action. Neither the Depositary nor any Depositary's Agent nor any Registrar nor the Company shall be under any obligation to appear in, prosecute or defend any action, suit or other preceding in respect of the Stock, the Depositary Shares or the Receipts which in its opinion may involve it in expense or liability unless indemnity satisfactory to it against all expense and liability be furnished as often as may be required. Neither the Depositary nor any Depositary's Agent nor any Registrar nor the Company shall be liable for any action or any failure to act by it in reliance upon the written advice of legal counsel or accountants, or information from any person presenting Stock for deposit, any holder of a Receipt or any other person believed by it in good faith to be competent to give such information. The Depositary, any Depositary's Agent, any Registrar and the Company may each rely and shall each be protected in acting upon any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Depositary shall not be responsible for any failure to carry out any instruction to vote and of the shares of stock or for the manner or effect of any such vote made, as long as any such action or non-action is in good faith. The Depositary undertakes, and any Registrar shall be required to undertake, to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Depositary or any Registrar. This Section 5.3 shall survive any termination of this Agreement and any succession of any Depositary. The Depositary, the Depositary's Agents, and any Registrar may own and deal in any class of securities of the Company and its affiliates and in Receipts. The Depositary may also act as transfer agent or registrar of any of the securities of the Company and its affiliates. SECTION 5.4. Resignation and Removal of the Depositary; Appointment of Successor Depositary. The Depositary may at any time resign as Depositary hereunder by delivering notice of its election to do so to the Company, such resignation to take effect upon the appointment of a successor Depositary and its acceptance of such appointment as hereinafter provided. 9 13 The Depositary may at any time be removed by the Company by notice of such removal delivered to the Depositary, such removal to take effect upon the appointment of a successor Depositary and its acceptance of such appointment as hereinafter provided. In case at any time the Depositary acting hereunder shall resign or be removed, the Company shall, within 60 days after the delivery of the notice of resignation or removal, as the case may be, appoint a successor Depositary, which shall be a bank or trust company having its principal office in the United States of America and having a combined capital and surplus of at least $50,000,000. If no successor Depositary shall have been so appointed and have accepted appointment within 60 days after delivery of such notice, the resigning or removed Depositary may petition any court of competent jurisdiction for the appointment of a successor Depositary. Every successor Depositary shall execute and deliver to its predecessor and to the Company an instrument in writing accepting its appointment hereunder, and thereupon such successor Depositary, without any further act or deed, shall become fully vested with all the rights, powers, duties and obligations of its predecessor and for all purposes shall be the Depositary under this Deposit Agreement, and such predecessor, upon payment of all sums due it and on the written request of the Company, shall execute and deliver an instrument transferring to such successor all rights and powers of such predecessor hereunder, shall duly assign, transfer and deliver all right, title and interest in the Stock and any moneys or property held hereunder to such successor, and shall deliver to such successor a list of the record holders of all outstanding Receipts and such records, books and other information in its possession relating thereto. Any successor Depositary shall promptly mail notice of its appointment to the record holders of Receipts. Any corporation into or with which the Depositary may be merged, consolidated or converted shall be the successor of such Depositary without the execution or filing of any document or any further act, and notice thereof shall not be required hereunder. Such successor Depositary may authenticate the Receipts in the name of the predecessor Depositary or in the name of the successor Depositary. SECTION 5.5. Corporate Notices and Reports. The Company agrees that it will transmit to the record holders of Receipts, in each case at the addresses furnished to it pursuant to Section 4.8, all notices and reports (including without limitation financial statements) required by law or by the rules of any national securities exchange upon which the Stock, the Depositary Shares or the Receipts are listed, to be furnished to the record holders of Receipts or otherwise determine to furnish. Such transmission will be at the Company's expense. SECTION 5.6. Indemnification by the Company. The Company shall indemnify the Depositary, any Depositary's Agent and any Registrar against, and hold each of them harmless from, any loss, liability or expense (including the reasonable costs and expenses of defending itself) which may arise out of acts performed or omitted in connection with this Agreement and the Receipts by the Depositary, any Registrar or any of their respective agents (including any Depositary's Agent), except for any liability arising out of negligence, willful misconduct or bad faith on the respective parts of any such person or persons. The obligations of the Company set forth in this Section 5.6 shall survive any succession of any Depositary, Registrar or Depositary's Agent. SECTION 5.7. Charges and Expenses. The Company shall pay all transfer and other taxes and governmental charges arising solely from the existence of the depositary arrangements. The Company shall pay all charges of the Depositary in connection with the initial deposit of the Stock and the initial issuance of the Depositary Shares, all withdrawals of shares of the Stock by owners of Depositary Shares, and any redemption or exchange of the Stock at the option of the Company. All other transfer and other taxes and governmental charges shall be at the expense of holders of Depositary Shares. If, at the request of a holder of Receipts, the Depositary incurs charges or expenses for which it is not otherwise liable hereunder, such holder will be liable for such charges and expenses. All other charges and expenses of the Depositary and any Depositary's Agent hereunder and of any Registrar (including, in each case, reasonable fees and expenses of counsel) incident to the performance of their respective obligations hereunder will be paid upon consultation and agreement between the Depositary and the Company as to the amount and nature of such charges and expenses. The Depositary shall present its statement for charges and expenses to the Company at such intervals as the Company and the Depositary may agree. 10 14 ARTICLE VI AMENDMENT AND TERMINATION SECTION 6.1. Amendment. The form of the Receipts and any provisions of this Deposit Agreement may at any time and from time to time be amended by agreement between the Company and the Depositary in any respect which they may deem necessary or desirable; provided, however, that no such amendment (other than any change in the fees of any Depositary or Registrar, which shall go into effect not sooner than three months after notice thereof to the holders of the Receipts) which shall materially and adversely alter the rights of the holders of Receipts shall be effective unless such amendment shall have been approved by the holders of at least a majority of the Depositary Shares then outstanding. Every holder of an outstanding Receipt at the time any such amendment becomes effective shall be deemed, by continuing to hold such Receipt, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. SECTION 6.2. This Agreement may be terminated by the Company or the Depositary only after (i) all outstanding Depositary Shares have been redeemed pursuant to Section 2.8 or (ii) there shall have been made a final distribution in respect of the Stock in connection with any liquidation, dissolution or winding up of the Company and such distribution shall have been distributed to the holders of Depositary Shares pursuant to Section 4.1 or 4.2, as applicable. Upon the termination of this Deposit Agreement, the Company shall be discharged from all obligations under this Deposit Agreement except for its obligations to the Depositary, any Depositary's Agent and any Registrar under Sections 5.6 and 5.7. ARTICLE VII MISCELLANEOUS SECTION 7.1. Counterparts. This Deposit Agreement may be executed in any number of counterparts, and by each of the parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed an original, but all such counterparts taken together shall constitute one and the same instrument. SECTION 7.2. Exclusive Benefit of Parties. This Deposit Agreement is for the exclusive benefit of the parties hereto, and their respective successors hereunder, and shall not be deemed to give any legal or equitable right, remedy or claim to any other person whatsoever. SECTION 7.3. Invalidity of Provisions. In case any one or more of the provisions contained in this Deposit Agreement or in the Receipts should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby. SECTION 7.4. Notices. Any and all notices to be given to the Company hereunder or under the Receipts shall be in writing and shall be deemed to have been duly given if personally delivered or sent by mail, or by telegram or facsimile transmission confirmed by letter, addressed to the Company at: Fleet Financial Group, Inc. 50 Kennedy Plaza Providence, RI 02903 Attention: Secretary Facsimile No.: (401) 278-5801 or at any other address of which the Company shall have notified the Depositary in writing. 11 15 Any and all notices to be given to the Depositary hereunder or under the Receipts shall be in writing and shall be deemed to have been duly given if personally delivered or sent by mail, or by telegram or facsimile transmission confirmed by letter, addressed to the Depositary at the Depositary's Office, at: Fleet National Bank 111 Westminster Street Providence, RI 02903 Attention: Shareholder Services Facsimile No.: 401-751-9706 or at any other address of which the Depositary shall have notified the Company in writing. Any and all notices to be given to any record holder of a Receipt hereunder or under the Receipts shall be in writing and shall be deemed to have been duly given if personally delivered or sent by mail, or by telegram or facsimile transmission confirmed by letter, addressed to such record holder at the address of such record holder as it appears on the books of the Depositary, or if such holder shall have filed with the Depositary a written request that notices intended for such holder be mailed some other address, at the address designated in such request. Delivery of a notice sent by mail or by telegram or facsimile transmission shall be deemed to be effected at the time when a duly addressed letter containing the same (or a confirmation thereof in the case of a telegram or facsimile transmission) is deposited, postage prepaid, in a post office letter box. The Depositary or the Company may, however, act upon any telegram or facsimile transmission received by it from the other or from any holder of a Receipt, notwithstanding that such telegram or facsimile transmission shall not subsequently be confirmed by letter or as aforesaid. SECTION 7.5. Depositary's Agents. The Depositary may from time to time appoint Depositary's Agents to act in any respect for the Depositary for the purposes of this Deposit Agreement and may at any time appoint additional Depositary's Agents and vary or terminate the appointment of such Depositary's Agents. The Depositary will notify the Company of any such action. The Company hereby also appoints the Depositary as Registrar in respect of the Receipts and the Depositary hereby accepts such appointments. SECTION 7.6. Holders of Receipts Are Parties. The holders of Receipts from time to time shall be parties to this Deposit Agreement and shall be bound by all of the terms and conditions hereof and of the Receipts by acceptance of delivery thereof. SECTION 7.7. GOVERNING LAW. THIS DEPOSIT AGREEMENT AND THE RECEIPTS AND ALL RIGHTS HEREUNDER AND THEREUNDER AND PROVISIONS HEREOF AND THEREOF SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 7.8. Inspection of Deposit Agreement. Copies of this Deposit Agreement shall be filed with the Depositary and the Depositary's Agent and shall be open to inspection during business hours at the Depositary's office and respective offices of the Depositary's Agent, if any, by any holder of a Receipt. SECTION 7.9. Headings. The headings of articles and sections in this Deposit Agreement and in the form of the Receipt set forth in Exhibit A hereto have been inserted for convenience only and are not to be regarded as a part of this Deposit Agreement or the Receipts or to have any bearing upon the meaning or interpretation of any provision contained herein or in the Receipts. 12 16 IN WITNESS WHEREOF, the Company and the Depositary have duly executed this Agreement as of the day and year first above set forth, and all holders of Receipts shall become parties hereto by and upon acceptance by them of delivery of Receipts issued in accordance with the terms hereof. Attested by FLEET FINANCIAL GROUP, INC. By: - ---------------------------- ---------------------------- [SEAL] Attested by FLEET NATIONAL BANK By: - ---------------------------- ---------------------------- [SEAL] By: 13 17 EXHIBIT A TO DEPOSIT AGREEMENT SEE REVERSE FOR CERTAIN DEFINITIONS
CERTIFICATE FOR DEPOSITARY RECEIPT FOR DEPOSITARY SHARES, EACH DEPOSITARY SHARE ____________________ REPRESENTING A ONE-TENTH INTEREST IN ONE SHARE OF 9.35% CUMULATIVE PREFERRED STOCK ____________________
FLEET FINANCIAL GROUP, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF RHODE ISLAND DEPOSITARY SHARES FLEET NATIONAL BANK, as Depositary (the "Depositary) hereby certifies that Transferable Depositary Receipt This Certificate is transferable in Providence, Rhode Island and New York, New York CUSIP Is the registered owner of DEPOSITARY SHARES ("Depositary Shares"), each Depositary Share representing a one-tenth interest in one share of 9.35% Cumulative Preferred Stock, $1 par value, $250 stated value per preferred share (the "Stock"), of Fleet Financial Group, Inc., a Rhode Island corporation (the "Corporation") on deposit with the Depositary, subject to the terms and entitled to the benefits of the Deposit Agreement dated as of [ ], 1995 (the "Deposit Agreement"), between the Corporation and the Depositary. By accepting this Depositary Receipt, the holder hereof becomes a party to and agrees to be bound by all the terms and conditions of the Deposit Agreement. This Depositary Receipt shall not be valid or obligatory for any purpose or be entitled to any benefits under the Deposit Agreement unless it shall have been executed by the Depositary by the manual signature of a duly authorized officer or, if executed in facsimile by the Depositary, countersigned by a Registrar in respect of the Depositary Receipts by a duly authorized officer thereof. Dated Countersigned FLEET NATIONAL BANK Depositary and Registrar By ___________________________________ Authorized Officer FLEET FINANCIAL GROUP, INC. FLEET FINANCIAL GROUP INC. WILL FURNISH WITHOUT CHARGE TO EACH RECEIPTHOLDER WHO SO REQUESTS A COPY OF THE DEPOSIT AGREEMENT AND A STATEMENT OR SUMMARY OF THE TERMS OF THE 9.35% CUMULATIVE PREFERRED STOCK AND EACH OTHER CLASS OF PREFERRED STOCK OR SERIES THEREOF WHICH THE CORPORATION IS AUTHORIZED TO ISSUE AND OF THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCE AND/OR RIGHTS. ANY SUCH REQUEST SHOULD BE ADDRESSED TO FLEET FINANCIAL GROUP, INC., 50 KENNEDY PLAZA, PROVIDENCE, RI 02903, ATTN: SECRETARY. 18 ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this Depositary Receipt, shall be construed as though they are written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT -- as tenants by the entireties JT TEN -- as joint tenant with right of survivorship and not as tenants in common UNIF GIFT MIN ACT -- ______________________ Custodian ______________________ (Cust) (Minor) under Uniform Gifts to Minors Act _____________________ (State) UNIF TRAN MIN ACT -- ______________________ Custodian (until age _______________ (Cust) (Minor) under Uniform Transfers Minors Act ___________________ Additional abbreviations may also be used though not in the above list. For value received, hereby sell(s), assigns(s) and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE - -------------------------------------------------------------------------------- Depositary Shares represented by the within Depositary Receipt, and do(es) hereby irrevocably constitute and appoint Attorney to transfer the said Depositary Shares on the books of the within named Depositary with full power of substitution in the premises. Dated Signature: -------------------------------------- NOTICE The signature to this assignment must correspond with the name as written upon the face of this Depositary Receipt in every particular, without alteration or enlargement or any change whatsoever SIGNATURE GUARANTEED EX-5 9 OPINION OF EDWARDS & ANGELL AS TO LEGALITY 1 EXHIBIT 5 April 28, 1995 Fleet Financial Group, Inc. 50 Kennedy Plaza Providence, Rhode Island 02903 Ladies and Gentlemen: We have examined the Registration Statement on Form S-4 (the "Registration Statement") to be filed by Fleet Financial Group, Inc. (the "Company") with the Securities and Exchange Commission on April 28, 1995 in connection with the registration under the Securities Act of 1933, as amended, of up to 116,139,576 shares of common stock, $1 par value (the "Common Stock"), 116,139,576 preferred share purchase rights (the "Rights"), 688,700 shares of preferred stock with cumulative and adjustable dividends, no par value (the "Adjustable Preferred"), 5,750,000 depositary shares (the "9.30% Depositary Shares"), each representing 1/10 of a share of 9.30% preferred stock, no par value (the "9.30% Preferred"), 5,000,000 depositary shares (the "9.35 % Depositary Shares", and together with the 9.30% Depositary Shares, collectively, the "Depositary Shares"), each representing 1/10 of a share of 9.35% preferred stock, no par value (the "9.35% Preferred Stock" and together with the Adjustable Preferred and the 9.30% Preferred, collectively the "Preferred Stock"), and warrants to purchase Common Stock (the "Warrants"). We have served as counsel for the Company and, as such, assisted in the organization thereof under the laws of the State of Rhode Island and are familiar with all corporate proceedings since its organization. We have examined the following documents and records: 1. The Restated Articles of Incorporation of the Company as they currently exist and as proposed to be amended and restated; 2. The By-Laws of the Company; 3. The Agreement and Plan of Merger dated as of February 20, 1995 (the "Merger Agreement"); 4. Specimen certificates of the Common Stock and proposed forms of the Preferred Stock certificates and proposed forms of the depositary receipts for the Depositary Shares; 5. The proposed form of the Warrant Agreement to be entered into between the Company and Fleet National Bank, as Warrant Agent; 6. The proposed form of the Warrants to be issued by the Company; and 7. All corporate minutes and proceedings of the Company relating to the issuance of the Common Stock, the Rights, the Preferred Stock, the Depositary Shares and the Warrants being registered under the Registration Statement. We have also examined such further documents, records and proceedings as we have deemed pertinent in connection with the issuance of said Common Stock, Rights, Preferred Stock, the Depositary Shares and Warrants. In our examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the completeness and authenticity of all documents submitted to us as originals, and the conformity to the originals of all documents submitted to us as certified, photostatic or conformed copies, and the validity of all laws and regulations. We also are familiar with the additional proceedings proposed to be taken by the Company in connection with the authorization, registration, issuance and sale of the Common Stock, the Rights, the Preferred Stock, the Depositary Shares and the Warrants, and have assumed that the Warrant Agreement and the Warrants are duly executed and delivered in substantially the terms reviewed by us. 2 We are qualified to practice law in the State of Rhode Island and we do not purport to express any opinion herein concerning any law other than the laws of the State of Rhode Island and the federal law of the United States. Based upon such examination, it is our opinion that subject to the proposed additional proceedings being duly taken and completed as now contemplated by the Company prior to the issuance of the Common Stock, the Rights, the Preferred Stock, the Depositary Shares and the Warrants, (a) the Common Stock and the Rights being registered by the Registration Statement, when issued pursuant to the Merger Agreement upon consummation of the Merger, will be validly issued, fully paid and nonassessable; (b) the Preferred Stock and the Depositary Shares being registered by the Registration Statement, when issued pursuant to the Merger Agreement upon consummation of the Merger, will be validly issued, fully paid and nonassessable; and (c) the warrants, when issued pursuant to the Merger Agreement upon consummation of the Merger, will be legally issued and binding obligations of the Company except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws, or equitable principles relating to or limiting creditors' rights generally. We express no opinion as to the availability of equitable remedies. Subject to the proposed additional proceedings being duly taken and completed as now contemplated by the Company prior to the issuance of the Warrant Shares, and compliance by the holder of a Warrant with the terms of the Warrant Agreement in connection with the exercise thereof (including payment therefor), the Warrant Shares, when issued and so paid for, will be validly issued, fully paid and nonassessable. V. Duncan Johnson, a partner of Edwards & Angell, is a director of Fleet National Bank, Fleet Bank, National Association and Fleet Bank of Massachusetts, National Association, subsidiaries of the Company and beneficially owns 4,052 shares of Common Stock of the Company. We consent to the use of this opinion as an exhibit to the Registration Statement and the reference to our firm in the Joint Proxy Statement-Prospectus which is part of the Registration Statement. Very truly yours, /S/ EDWARDS & ANGELL -------------------- EDWARDS & ANGELL EX-8.(A) 10 FORM OF OPINION OF WACHTELL,LIPTON,ROSEN & KATZ 1 EXHIBIT 8(a) April 28, 1995 Fleet Financial Group, Inc. 50 Kennedy Plaza Providence, RI 07903 Ladies and Gentlemen: You have requested our opinion regarding the discussions of the material U.S. federal income tax consequences under the captions "SUMMARY OF JOINT PROXY STATEMENT-PROSPECTUS -- Certain Federal Income Tax Consequences" and "THE MERGER -- Certain Federal Income Tax Consequences" in the Joint Proxy Statement-Prospectus which will be included in the Registration Statement on Form S-4 filed on the date hereof with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"). The Registration Statement relates to the proposed merger of Shawmut National Corporation with and into Fleet Financial Group, Inc. This opinion is delivered in accordance with the requirements of Item 601(b)(8) of Regulation S-K under the Securities Act. In rendering our opinion, we have reviewed the Registration Statement and such other materials as we have deemed necessary or appropriate as a basis for our opinion. In addition, we have considered the applicable provisions of the Internal Revenue Code of 1986, as amended, Treasury Regulations, pertinent judicial authorities, rulings of the Internal Revenue Service, and such other authorities as we have considered relevant. Based upon the foregoing, it is our opinion that the statements made under the captions "SUMMARY OF JOINT PROXY STATEMENT-PROSPECTUS -- Certain Federal Income Tax Consequences" and "THE MERGER -- Certain Federal Income Tax Consequences" in the Joint Proxy Statement-Prospectus, to the extent that they constitute matters of law or legal conclusions, are correct in all material respects. There can be no assurance that contrary positions may not be asserted by the Internal Revenue Service. This opinion is being furnished in connection with the Registration Statement. You may rely upon and refer to the foregoing opinion in the Registration Statement. Any variation or difference in the facts from those set forth or assumed either herein or in the Registration Statement may affect the conclusions stated herein. We hereby consent to the use of our name under the captions "SUMMARY OF JOINT PROXY STATEMENT-PROSPECTUS -- Certain Federal Income Tax Consequences" and "THE MERGER -- Certain Federal Income Tax Consequences" in the Joint Proxy Statement-Prospectus and to the filing of this opinion as an Exhibit to the Registration Statement. In giving this consent, we do not admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission thereunder. Very truly yours, /S/ WACHTELL, LIPTON, ROSEN & KATZ ---------------------------------- EX-8.(B) 11 FORM OF OPINION OF SKADDEN,APRS,SLATE,MEAGHER&FLOM 1 EXHIBIT 8(b) April 28, 1995 Shawmut National Corporation 777 Main Street Hartford, CT 06115 Ladies and Gentlemen: You have requested our opinion regarding the discussions of the material U.S. federal income tax consequences under the captions "SUMMARY OF JOINT PROXY STATEMENT-PROSPECTUS -- Certain Federal Income Tax Consequences" and "THE MERGER -- Certain Federal Income Tax Consequences" in the Joint Proxy Statement-Prospectus which will be included in the Registration Statement on Form S-4 filed on the date hereof with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"). The Registration Statement relates to the proposed merger of Shawmut National Corporation with and into Fleet Financial Group, Inc. This opinion is delivered in accordance with the requirements of Item 601(b)(8) of Regulation S-K under the Securities Act. In rendering our opinion, we have reviewed the Registration Statement and such other materials as we have deemed necessary or appropriate as a basis for our opinion. In addition, we have considered the applicable provisions of the Internal Revenue Code of 1986, as amended, Treasury Regulations, pertinent judicial authorities, rulings of the Internal Revenue Service, and such other authorities as we have considered relevant. Based upon the foregoing, it is our opinion that the statements made under the captions "SUMMARY OF JOINT PROXY STATEMENT-PROSPECTUS -- Certain Federal Income Tax Consequences" and "THE MERGER -- Certain Federal Income Tax Consequences" in the Joint Proxy Statement-Prospectus, to the extent that they constitute matters of law or legal conclusions, are correct in all material respects. There can be no assurance that contrary positions may not be asserted by the Internal Revenue Service. This opinion is being furnished in connection with the Registration Statement. You may rely upon and refer to the foregoing opinion in the Registration Statement. Any variation or difference in the facts from those set forth or assumed either herein or in the Registration Statement may affect the conclusions stated herein. We hereby consent to the use of our name under the captions "SUMMARY OF JOINT PROXY STATEMENT-PROSPECTUS -- Certain Federal Income Tax Consequences" and "THE MERGER -- Certain Federal Income Tax Consequences" in the Joint Proxy Statement-Prospectus and to the filing of this opinion as an Exhibit to the Registration Statement. In giving this consent, we do not admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission thereunder. Very truly yours, /S/ SKADDEN, ARPS, SLATE, MEAGHER & FLOM ---------------------------------------- EX-12 12 COMPUTATION OF CONSOLIDATED RATIOS OF EARNINGS 1 EXHIBIT 12 FLEET FINANCIAL GROUP, INC. COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS EXCLUDING INTEREST ON DEPOSITS (THOUSANDS)
YEAR ENDED DECEMBER 31 ------------------------------------------------------------------ 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- Earnings: Net income (loss)............ $ 612,931 $ 488,049 $ 279,843 $ 97,672 $ (73,687) Adjustments: (a) Applicable income taxes (benefits)................... 397,708 327,407 228,526 55,176 (89,636) (b) Fixed charges: (1) Interest on borrowed funds...................... 526,397 417,301 386,275 449,544 782,814 (2) 1/3 of rent............. 33,706 34,217 29,672 23,033 19,121 (c) Preferred dividends......... 24,742 36,927 49,706 21,958 12,990 ---------- ---------- ---------- ---------- ---------- (d) Adjusted earnings........... $1,595,484 $1,303,901 $ 974,022 $ 647,383 $ 651,602 ========= ========= ========= ========= ========= Fixed charges [b(1) + b(2) + c]............... $ 584,845 $ 488,445 $ 465,653 $ 494,535 $ 814,925 ========= ========= ========= ========= ========= Adjusted earnings/fixed charges... 2.73x 2.67x 2.09x 1.31x 0.80x* ========= ========= ========= ========= =========
INCLUDING INTEREST ON DEPOSITS
YEAR ENDED DECEMBER 31 ------------------------------------------------------------------ 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- Earnings: Net income (loss)............... $ 612,931 $ 488,049 $ 279,843 $ 97,672 $ (73,687) Adjustments: (a) Applicable income taxes (benefits)................... 397,708 327,407 228,526 55,176 (89,636) (b) Fixed charges: (1) Interest on borrowed funds...................... 526,397 417,301 386,275 449,544 782,814 (2) 1/3 of rent............. 33,706 34,217 29,672 23,033 19,121 (3) Interest on deposits..... 764,186 744,080 1,076,368 1,480,395 1,343,417 (c) Preferred dividends 24,742 36,927 49,706 21,958 12,990 ---------- ---------- ---------- ---------- ---------- (d) Adjusted earnings........... $2,359,670 $2,047,981 $2,050,390 $2,127,778 $1,995,019 ========= ========= ========= ========= ========= Fixed charges [b(1) + b(2) + b(3) + c]........ $1,349,031 $1,232,525 $1,542,021 $1,974,930 $2,158,342 ========= ========= ========= ========= ========= Adjusted earnings/fixed charges... 1.75x 1.66x 1.33x 1.08x 0.92x* ========= ========= ========= ========= ========= - --------------- * Note that earnings are inadequate to cover fixed charges, the deficiency being $163,323 for both the ratio excluding and including interest on deposits
2 EXHIBIT 12 -- (CONTINUED) FLEET FINANCIAL GROUP, INC. COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES EXCLUDING INTEREST ON DEPOSITS (THOUSANDS)
YEAR ENDED DECEMBER 31 ------------------------------------------------------------------ 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- Earnings: Net income (loss)............ $ 612,931 $ 488,049 $ 279,843 $ 97,672 $ (73,687) Adjustments: (a) Applicable income taxes (benefits)................... 397,708 327,407 228,526 55,176 (89,636) (b) Fixed charges: (1) Interest on borrowed funds...................... 526,397 417,301 386,275 449,544 782,814 (2) 1/3 of rent............. 33,706 34,217 29,672 23,033 19,121 ---------- ---------- ---------- ---------- ---------- (c) Adjusted earnings........... $1,570,742 $1,266,974 $ 924,316 $ 625,425 $ 638,612 ========= ========= ========= ========= ========= Fixed charges [b(1) + b(2)]....... $ 560,103 $ 451,518 $ 415,947 $ 472,577 $ 801,935 ========= ========= ========= ========= ========= Adjusted earnings/fixed charges... 2.80x 2.81x 2.22x 1.32x 0.80x* ========= ========= ========= ========= =========
INCLUDING INTEREST ON DEPOSITS
YEAR ENDED DECEMBER 31 ------------------------------------------------------------------ 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- Earnings: Net income (loss)............ $ 612,931 $ 488,049 $ 279,843 $ 97,672 $ (73,687) Adjustments: (a) Applicable income taxes (benefits)................... 397,708 327,407 228,526 55,176 (89,636) (b) Fixed charges: (1) Interest on borrowed funds...................... 526,397 417,301 386,275 449,544 782,814 (2) 1/3 of rent............. 33,706 34,217 29,672 23,033 19,121 (3) Interest on deposits..... 764,186 744,080 1,076,368 1,480,395 1,343,417 ---------- ---------- ---------- ---------- ---------- (c) Adjusted earnings........... $2,334,928 $2,011,054 $2,000,684 $2,105,820 $1,982,029 ========= ========= ========= ========= ========= Fixed charges [b(1) + b(2) + b(3)]............ $1,324,289 $1,195,598 $1,492,315 $1,952,972 $2,145,352 ========= ========= ========= ========= ========= Adjusted earnings/fixed charges... 1.76x 1.68x 1.34x 1.08x 0.92x* ========= ========= ========= ========= ========= - --------------- * Note that earnings are inadequate to cover fixed charges, the deficiency being $163,323 for both the ratio excluding and including interest on deposits
EX-23.(A) 13 CONSENT OF KPMG PEAT MARWICK LLP 1 EXHIBIT 23(A) CONSENT OF INDEPENDENT AUDITORS The Board of Directors Fleet Financial Group, Inc.: We consent to the use of our report incorporated by reference in the Fleet Financial Group, Inc. Annual Report on Form 10-K for the year ended December 31, 1994 which is incorporated by reference herein and to the reference to our Firm under the heading "Experts" in the joint proxy statement-prospectus. Our report refers to a change in the method of accounting for investments. KPMG PEAT MARWICK LLP Providence, Rhode Island April 28, 1995 EX-23.(B) 14 CONSENT OF PRICE WATERHOUSE LLP (SHAWMUT) 1 EXHIBIT 23(b) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Joint Proxy Statement-Prospectus constituting part of the Registration Statement on Form S-4 of Fleet Financial Group, Inc. of our report dated February 20, 1995 appearing on page 83 of Shawmut National Corporation's Annual Report on Form 10-K for the year ended December 31, 1994. We also consent to the reference to us under the heading "Experts" in such Prospectus. /S/ PRICE WATERHOUSE LLP Hartford, Connecticut April 28, 1995 EX-23.(C) 15 CONSENT OF PRICE WATERHOUSE LLP 1 EXHIBIT 23(c) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Joint Proxy Statement-Prospectus constituting part of the Registration Statement on Form S-4 of Fleet Financial Group, Inc. of our report dated April 7, 1995 relating to the financial statements of the Business Finance Division of Barclays Business Credit, Inc., which appears in the Current Report on Form 8-K of Shawmut National Corporation dated April 13, 1995. We also consent to the reference to us under the heading "Experts" in such Prospectus. /S/ PRICE WATERHOUSE LLP Hartford, Connecticut April 28, 1995 EX-23.(D) 16 CONSENT OF DELOITTE & TOUCHE, LLP 1 EXHIBIT 23(D) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-4 of Fleet Financial Group, Inc. of our report dated January 20, 1995 appearing in the Current Report on Form 8-K dated April 13, 1995 of Shawmut National Corporation, and to the reference to us under the heading "Experts" which appears in this Joint Proxy Statement-Prospectus which is part of this Registration Statement. /S/ DELOITTE & TOUCHE LLP Hartford, Connecticut April 28, 1995 EX-23.(E) 17 CONSENT OF SALOMON BROTHERS INC 1 EXHIBIT 23(e) We hereby consent to the use of our opinion letter dated May 8, 1995 to the Board of Directors of Fleet Financial Group, Inc. included as Exhibit D to the Joint Proxy Statement-Prospectus which forms a part of the Registration Statement on Form S-4 relating to the proposed merger of Shawmut National Corporation with and into Fleet Financial Group, Inc., and to the reference to such opinion in such Joint Proxy Statement-Prospectus. In giving such consent, we do not admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder, nor do we thereby admit that we are experts with respect to any part of such Registration Statement within the meaning of the term "experts" as used in the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. SALOMON BROTHERS INC /s/ David W. Levy BY:______________________________ Dated: April 28, 1995 EX-23.(F) 18 CONSENT OF MORGAN STANLEY & CO. INCORPORATED 1 EXHIBIT 23(F) CONSENT OF MORGAN STANLEY & CO. INCORPORATED April 28, 1995 Shawmut National Corporation 777 Main Street Hartford, Connecticut 06115 Dear Sirs: We hereby consent to the inclusion of the Registration Statement on Form S-4, relating to the proposed merger of Shawmut National Corporation with Fleet Financial Group, Inc., of our opinion letter appearing as Exhibit E to the Joint Proxy Statement-Prospectus which is a part of the Registration Statement, and to the references of our firm name under the captions "SUMMARY OF JOINT PROXY STATEMENT-PROSPECTUS -- Fairness Opinions of Financial Advisors", "THE MERGER -- Reasons for the Merger -- Recommendation of the Shawmut Board and Reasons for the Merger" and "THE MERGER -- Fairness Opinions of Financial Advisors -- Shawmut." In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933 or the rules and regulations adopted by the Securities and Exchange Commission thereunder nor do we admit that we are experts with respect to any part of such Registration Statement within the meaning of the term "experts" as used in the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Very truly yours, MORGAN STANLEY & CO. INCORPORATED /S/ STEPHEN CRAWFORD By: .................................... Stephen Crawford Vice President EX-99.(A)(I) 19 FORM OF PROXY FOR FLEET 1 EXHIBIT 99(A)(I) PROXY FLEET FINANCIAL GROUP, INC. PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Paul J. Choquette, Jr., Michael B. Picotte and John S. Scott, or any one or more of them, attorneys with full power of substitution to each for and in the name of the undersigned, with all powers the undersigned would possess if personally present to vote the Common Stock of the undersigned in Fleet Financial Group, Inc. ("Fleet") at the Annual Meeting of its stockholders to be held June 21, 1995 or any adjournment thereof. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU INSTRUCT THE PROXIES TO VOTE FOR EACH OF THE PROPOSALS LISTED BELOW. 1. ELECTION OF DIRECTORS: FOR all nominees listed below (except marked to AGAINST all nominees listed below / / the contrary below) / /
NOMINEES: Bradford R. Boss, James F. Hardymon, Arthur C. Milot, John A. Reeves and John R. Riedman. - -------------------------------------------------------------------------------- (INSTRUCTION: TO VOTE AGAINST ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.) - -------------------------------------------------------------------------------- 2. To approve and adopt the Agreement and Plan of Merger, dated as of February 20, 1995, between Fleet and Shawmut National Corporation, and the consummation of the transactions contemplated thereby, including the Merger. / / FOR / / AGAINST / / ABSTAIN 3. To approve the amendment and restatement of the Restated Articles of Incorporation of Fleet, as described in the accompanying Joint Proxy Statement-Prospectus. / / FOR / / AGAINST / / ABSTAIN 4. To ratify the selection of KPMG Peat Marwick LLP as independent auditors of Fleet for the fiscal year ending December 31, 1995. / / FOR / / AGAINST / / ABSTAIN 5. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment thereof. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL NOS. 1, 2, 3 AND 4. Please sign exactly as name appears below. When shares are held in more than one name, including joint tenants, each party should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. Dated: .............................., 1995 ........................................... Signature ........................................... Signature if held jointly PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. EX-99.(A)(II) 20 FORM OF PROXY FOR SHAWMUT 1 EXHIBIT 99(a)(ii) PLEASE MARK /X/ YOUR VOTES AS IN THE EXAMPLE --------- ---------------- COMMON D.R.S THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING: FOR AGAINST ABSTAIN 1. Proposal to approve and adopt the Agreement and Plan of Merger, by and between / / / / / / Shawmut National Corporation and Fleet Financial Group, Inc., and the consummation of the transactions contemplated thereby. - ---------------------------------------------------------------------------------------------------------------------------------- 2. Election of Directors. FOR listed nominees: FOR AGAINST ABSTAIN Alvord, Brown, Collins, Colloredo-Mansfeld, 3. Appointment of / / / / / / Fox, Matura, Overstrom, Rice, Segall, Thier, FOR WITHHELD independent Tregurtha and Wilde. / / / / accountants For all nominees listed except: WITHHELD for listed nominees - ----------------------------------- ------------------------------------ - ---------------------------------------------------------------------------------------------------------------------------------- UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS 1,2 AND 3 in the discretion of the named proxies, and upon such other matters as may properly come before the meeting or any adjournments or postponements thereof. By executing this proxy, the undersigned hereby revokes all prior proxies. Signature(s) ___________________________________________________________________________________ Date ___________________ Please sign your name as it appears on this proxy. All joint owners should sign. Persons signing as executors, administrators, trustees, etc. should so indicate. THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED.
2 SHAWMUT NATIONAL CORPORATION PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS 600 Atlantic Avenue, Boston, Massachusetts 02106 June 21, 1995 at 10 A.M. The undersigned hereby appoints Lois D. Rice and Wilson Wilde proxies, with full power of substitution to each, to represent and vote all stock that the undersigned is entitled to vote at the 1995 Annual Meeting of Stockholders of Shawmut National Corporation, or any adjournments or postponements thereof, upon any and all matters which may properly be brought before such meeting. TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS, JUST SIGN AND DATE ON THE REVERSE SIDE; NO BOXES NEED BE CHECKED. PLEASE SIGN, DATE AND RETURN TO CHEMICAL BANK P.O. BOX 24036, NEW YORK, N.Y. 10242-4036. 3 THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING: UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS 1,2 and 3 in the discretion of the named proxies, and upon such other matters as may properly come before the meeting or any adjournment thereof. By executing this proxy, the undersigned hereby revokes all prior proxies. 1. Proposal to approve and adopt the Agreement and Plan of Merger, by and between Shawmut National Corporation and Fleet Financial Group, Inc., and the consummation of the transactions contemplated thereby. FOR AGAINST ABSTAIN / / / / / / 2. Election of directors. For listed nominees except: WITHHELD for listed nominees FOR listed nominees: Alvord, Brown, Collins, Colloredo-Mansfeld, Fox, Matura, Overstrom, Rice, Segall, Thier, Tregurtha and Wilde. / / _________________ / / 3. Appointment of independent accountants. FOR AGAINST ABSTAIN / / / / / / _______________________________________ Signature _______________________________________ Date Please sign your name as it appears on this proxy. All joint owners should sign. Persons signing as executors, administrators, trustees, etc. should so indicate. THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED.
4 SHAWMUT NATIONAL CORPORATION PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS 600 Atlantic Avenue, Boston, Massachusetts 02106 June 21, 1995 at 10 A.M. The undersigned hereby appoints Lois D. Rice and Wilson Wilde proxies, with full power of substitution to each, to represent and vote all stock that the undersigned is entitled to vote at the 1995 Annual Meeting of Stockholders of Shawmut National Corporation, or any adjournments or postponements thereof, upon any and all matters which may properly be brought before such meeting. TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS, JUST SIGN AND DATE ON THE REVERSE SIDE; NO BOXES NEED BE CHECKED. PLEASE SIGN, DATE AND RETURN IN THE ENCLOSED POSTAGE PAID ENVELOPE. 5 PLEASE MARK /X/ YOUR VOTES AS IN THE EXAMPLE ---------- THRIFT THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING: FOR AGAINST ABSTAIN 1. Proposal to approve and adopt the Agreement and Plan of Merger, by and between / / / / / / Shawmut National Corporation and Fleet Financial Group, Inc., and the consummation of the transactions contemplated thereby. - ---------------------------------------------------------------------------------------------------------------------------------- 2. Election of Directors. FOR listed nominees: FOR AGAINST ABSTAIN Alvord, Brown, Collins, Colloredo-Mansfeld, 3. Appointment of / / / / / / Fox, Matura, Overstrom, Rice, Segall, Thier, FOR WITHHELD independent Tregurtha and Wilde. / / / / accountants For all nominees listed except: WITHHELD for listed nominees - ----------------------------------- ------------------------------------ - ---------------------------------------------------------------------------------------------------------------------------------- UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS 1,2 AND 3 Signature(s) ___________________________________________________________________________________ Date ___________________ Please sign your name as it appears on your account
6 SHAWMUT NATIONAL CORPORATION EMPLOYEES' THRIFT PLAN The undersigned hereby instructs Chemical Bank, the proxy tally agent, to vote, in person or by proxy, all stock in the undersigned's account in the Plan at the Annual Meeting of Stockholders of Shawmut National Corporation to be held on June 21, 1995, or any adjournments or postponements thereof. TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS, JUST SIGN AND DATE ON THE REVERSE SIDE; NO BOXES NEED BE CHECKED. PLEASE SIGN, DATE AND RETURN TO PROXY TALLY AGENT: CHEMICAL BANK P.O. BOX 24036, NEW YORK, N.Y. 10242-4036 -----END PRIVACY-ENHANCED MESSAGE-----