<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1994 Commission File No. 0-959
------------------------
BAYBANKS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MASSACHUSETTS 04-2008039
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
175 FEDERAL STREET,
BOSTON, MASSACHUSETTS 02110
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (617) 482-1040
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
As of October 31, 1994, 18,997,854 shares of the registrant's common stock,
$2.00 par value, were outstanding.
The list of exhibits to this report appears on page 28.
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<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
<TABLE>
BAYBANKS, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<CAPTION>
SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
1994 1993 1993
------------ ----------- ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks.................................... $ 658,070 $ 632,985 $ 592,011
Interest-bearing deposits and other short-term
investments.............................................. 155,503 803,068 353,912
Trading accounts........................................... 21,521 14,595 64,751
Securities available for sale -- amortized cost $140,599 at
September 30, 1994, market value $633,446 at December 31,
1993, and $858,947 at September 30, 1993................. 141,406 629,003 851,548
Investment securities -- market value $2,842,806 at
September 30, 1994, $1,605,091 at December 31, 1993, and
$1,392,595 at September 30, 1993......................... 2,892,584 1,599,060 1,381,339
Loans, net of unearned income and fees
Commercial............................................... 1,421,961 1,324,968 1,309,032
Commercial real estate................................... 910,185 935,471 934,884
Residential mortgage..................................... 1,283,960 1,242,597 1,171,226
Instalment............................................... 2,736,869 2,600,134 2,498,715
----------- ----------- ----------
6,352,975 6,103,170 5,913,857
Less allowance for loan losses........................... 150,614 171,496 180,604
----------- ----------- ----------
6,202,361 5,931,674 5,733,253
Premises and equipment, net................................ 191,629 192,554 193,859
Other real estate owned and in-substance foreclosures,
net...................................................... 77,566 113,679 138,156
Other assets............................................... 196,297 193,966 204,572
----------- ----------- ----------
Total assets...................................... $10,536,937 $10,110,584 $9,513,401
=========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand................................................... $ 2,063,635 $ 2,077,206 $1,999,317
NOW accounts............................................. 1,415,506 1,481,859 1,362,389
Savings.................................................. 1,486,199 1,459,134 1,423,346
Money market deposit accounts............................ 2,602,956 2,731,720 2,750,279
Consumer time............................................ 1,014,838 993,945 1,042,401
Time -- $100,000 or more................................. 112,932 34,957 27,574
----------- ----------- ----------
8,696,066 8,778,821 8,605,306
Federal funds purchased and other short-term borrowings.... 951,037 507,820 109,269
Accrued expenses and other accounts payable................ 60,653 53,952 47,494
Long-term debt............................................. 54,009 54,488 54,519
Guarantee of ESOP indebtedness............................. 9,451 12,241 12,241
Stockholders' equity:
Common stock, par value $2.00 per share
Shares authorized -- 50,000,000
Shares issued -- 18,999,093 at September 30, 1994,
18,742,934 at December 31, 1993, and 18,724,755 at
September 30, 1993................................... 37,998 37,486 37,449
Surplus.................................................. 313,968 310,355 309,700
Retained earnings........................................ 423,206 367,662 349,664
----------- ----------- ----------
775,172 715,503 696,813
Less guarantee of ESOP indebtedness...................... 9,451 12,241 12,241
----------- ----------- ----------
Total stockholders' equity........................ 765,721 703,262 684,572
----------- ----------- ----------
Total liabilities and stockholders' equity........ $10,536,937 $10,110,584 $9,513,401
=========== =========== ==========
</TABLE>
2
<PAGE> 3
<TABLE>
BAYBANKS, INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<CAPTION>
THIRD QUARTER NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
--------------------------- ---------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income on interest-bearing deposits and other
short-term investments....................... $ 1,822 $ 3,168 $ 6,232 $ 15,754
Interest on securities available for sale and
investment securities........................ 40,754 23,791 101,299 65,671
Interest and fees on loans..................... 130,240 120,179 368,008 362,314
----------- ----------- ----------- -----------
Total income on earning assets................. 172,816 147,138 475,539 443,739
Interest expense on deposits and borrowings
Deposits..................................... 39,640 37,398 109,027 124,850
Short-term borrowings........................ 12,475 924 23,199 2,575
Long-term debt............................... 697 534 1,827 1,587
----------- ----------- ----------- -----------
Total interest expense......................... 52,812 38,856 134,053 129,012
----------- ----------- ----------- -----------
Net interest income............................ 120,004 108,282 341,486 314,727
Provision for loan losses...................... 6,000 9,000 18,000 29,500
----------- ----------- ----------- -----------
Net interest income after provision for loan
losses....................................... 114,004 99,282 323,486 285,227
Noninterest income
Service charges and fees on deposit
accounts.................................. 28,176 26,265 82,218 78,046
Other noninterest income..................... 24,381 25,639 74,085 69,505
----------- ----------- ----------- -----------
Total noninterest income....................... 52,557 51,904 156,303 147,551
Net securities gains........................... -- 49 475 407
Operating expenses
Salaries and benefits........................ 58,264 54,416 172,081 158,552
Occupancy and equipment...................... 21,877 21,474 65,923 66,295
Other operating expenses..................... 34,565 36,334 103,609 109,576
----------- ----------- ----------- -----------
Total operating expenses....................... 114,706 112,224 341,613 334,423
Provision for OREO reserve, net................ 2,415 7,800 7,852 22,692
----------- ----------- ----------- -----------
Total operating expenses and OREO provision.... 117,121 120,024 349,465 357,115
----------- ----------- ----------- -----------
Income before taxes and cumulative effect of
accounting change............................ 49,440 31,211 130,799 76,070
Provision for income taxes..................... 20,407 13,210 53,133 31,101
----------- ----------- ----------- -----------
Income before cumulative effect of
accounting change............................ 29,033 18,001 77,666 44,969
Less cumulative effect of accounting change
(net of tax benefit of $683)................. -- -- 932 --
----------- ----------- ----------- -----------
NET INCOME..................................... $ 29,033 $ 18,001 $ 76,734 $ 44,969
=========== =========== =========== ===========
Earnings Per Share
Income before accounting change.............. $ 1.51 $ 0.95 $ 4.06 $ 2.37
Less cumulative effect of accounting
change.................................... -- -- 0.05 --
----------- ----------- ----------- -----------
Net Income................................... $ 1.51 $ 0.95 $ 4.01 $ 2.37
=========== =========== =========== ===========
Average shares outstanding..................... 19,187,890 19,000,208 19,145,704 18,936,862
</TABLE>
3
<PAGE> 4
<TABLE>
BAYBANKS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<CAPTION>
COMMON RETAINED TREASURY ESOP LOAN
STOCK SURPLUS EARNINGS STOCK GUARANTEE TOTAL
------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AS OF DECEMBER 31, 1992... $37,016 $304,890 $316,812 $ (26) $(14,473) $644,219
Net income -- Nine months ended
September 30, 1993........... 44,969 44,969
Cash dividends declared ($0.65
per share)................... (12,117) (12,117)
Amortization of restricted stock
compensation expense......... 1,039 1,039
Other equity transactions....... 433 3,771 26 2,232 6,462
------- -------- -------- ------ --------- --------
BALANCE AS OF SEPTEMBER 30,
1993............................ $37,449 $309,700* $349,664 $ -- $(12,241) $684,572
======= ======== ======== ====== ======== ========
BALANCE AS OF DECEMBER 31, 1993... $37,486 $310,355 $367,662 $ -- $(12,241) $703,262
Net income -- Nine months ended
September 30, 1994........... 76,734 76,734
Cash dividends declared ($1.15
per share)................... (21,659) (21,659)
Net change in valuation reserve
related to securities
available for sale portfolio,
net of tax................... 469 469
Stock issued (112,000 shares)
in connection with restricted
stock plan................... 224 (224) --
Amortization of restricted stock
compensation expense......... 1,010 1,010
Other equity transactions....... 288 2,827 -- 2,790 5,905
------- -------- -------- ------ -------- --------
BALANCE AS OF SEPTEMBER 30,
1994............................ $37,998 $313,968* $423,206 $ -- $ (9,451) $765,721
======= ======== ======== ====== ======== ========
<FN>
- - - - - ---------------
* Net of unamortized restricted stock compensation expense of $6,844 and $1,801
at September 30, 1994 and 1993, respectively.
</TABLE>
4
<PAGE> 5
<TABLE>
BAYBANKS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-------------------------
1994 1993
----------- -----------
<S> <C> <C>
Operating Activities
Net income.................................................................. $ 76,734 $ 44,969
Adjustments to reconcile net income to net cash provided by operating
activities:
Fixed-rate mortgages sold................................................. 255,043 647,989
Fixed-rate mortgages originated for sale.................................. (149,286) (596,000)
Student loans transferred from portfolio and sold......................... 127,013 67,184
Proceeds from sales and maturities of trading account assets.............. 1,927,406 1,382,406
Purchases of trading account assets....................................... (1,949,810) (1,375,163)
Provision for loan losses................................................. 18,000 29,500
Amortization of security premium.......................................... 19,100 5,410
Provision for OREO reserve, net........................................... 7,852 22,692
Deferred income taxes..................................................... 13,243 1,168
Gains on sales of premises and equipment.................................. (903) --
Depreciation and amortization of premises and equipment................... 19,131 18,749
Net securities gains...................................................... (475) (407)
Change in other assets.................................................... (2,589) (33,450)
Change in accrued expenses and other accounts payable..................... 7,400 (159)
Change in interest receivable............................................. (13,987) (3,021)
Change in interest payable................................................ 1,255 (3,190)
----------- -----------
Net cash provided by operating activities............................ 355,127 208,677
----------- -----------
Investing Activities
Proceeds from sales of securities available for sale........................ 264,758 424,851
Proceeds from maturities of securities available for sale................... 329,197 104,631
Purchases of securities available for sale.................................. (95,655) (374,889)
Proceeds from maturities of investment securities........................... 496,191 105,319
Purchases of investment securities.......................................... (1,802,954) (815,733)
Net cash provided (used) by:
Short-term investments.................................................... 647,565 738,073
Loans(1)(2)............................................................... (541,480) (155,552)
Customers' acceptances.................................................... 860 7,928
Proceeds from sales of premises and equipment............................... 1,469 125
Purchases of premises and equipment......................................... (18,772) (14,303)
Proceeds from sales and payments related to OREO(2)......................... 48,284 53,663
----------- -----------
Net cash provided (used) by investing activities..................... (670,537) 74,113
----------- -----------
Financing Activities
Net cash provided (used) by:
Demand deposits, NOW, and savings accounts................................ (52,859) 43,497
Money market deposits..................................................... (128,764) (217,012)
Consumer time deposits.................................................... 20,893 (192,346)
Time deposits -- $100,000 or more......................................... 77,975 (11,381)
Short-term borrowings..................................................... 443,217 (30,700)
Customers' acceptances.................................................... (860) (7,928)
Long-term debt............................................................ (438) 680
Dividends paid.............................................................. (21,659) (12,117)
Other equity transactions................................................... 2,990 2,802
----------- -----------
Net cash provided (used) by financing activities..................... 340,495 (424,505)
----------- -----------
Net change in cash and cash equivalents....................................... 25,085 (141,715)
Cash and cash equivalents at beginning of year(3)............................. 632,985 733,726
----------- -----------
Cash and cash equivalents at September 30(3).................................. $ 658,070 $ 592,011
============ ============
Supplemental disclosure of cash flow information
Interest paid............................................................... $ 132,798 $ 132,202
Taxes paid.................................................................. 37,584 50,398
<FN>
- - - - - ---------------
(1) Excludes transfers of loans to the other real estate owned category of $27.2 million and $34.6 million
in 1994 and 1993, respectively.
(2) Excludes loan originations in conjunction with OREO sales of $7.2 million and $15.7 million in 1994 and
1993, respectively.
(3) Cash and cash equivalents consist of cash on hand and due from banks.
</TABLE>
5
<PAGE> 6
BAYBANKS, INC.
NOTE 1. ACCOUNTING ADJUSTMENTS
In the opinion of management, all of the adjustments (consisting of normal
recurring accruals unless otherwise indicated) necessary for a fair statement of
the results of operations have been included in the accompanying financial
statements. Certain 1993 amounts have been reclassified to conform with 1994
presentation.
NOTE 2. SECURITIES PORTFOLIOS
<TABLE>
<CAPTION>
PERIOD-END SECURITIES PORTFOLIOS
------------------------------------------------------------
GROSS GROSS WEIGHTED
AMORTIZED UNREALIZED UNREALIZED MARKET AVERAGE
COST GAINS LOSSES VALUE YIELD*
---------- ---------- ---------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SEPTEMBER 30, 1994
SECURITIES AVAILABLE FOR SALE
U.S. Government securities, maturing
Within 1 year........................... $ 24,741 $ -- $ (3) $ 24,738 4.72%
---------- ---------- ---------- -----------
24,741 -- (3) 24,738 4.72
---------- ---------- ---------- -----------
State and local governments, maturing
Within 1 year........................... 5,029 -- (3) 5,026 4.82
---------- ---------- ---------- -----------
5,029 -- (3) 5,026 4.82
---------- ---------- ---------- -----------
Corporate, maturing
Within 1 year........................... 58,100 -- -- 58,100 5.23
---------- ---------- ---------- -----------
58,100 -- -- 58,100 5.23
---------- ---------- ---------- -----------
Mortgage-backed securities................ 25,075 328 -- 25,403 6.49
Other**................................... 27,654 485 -- 28,139 8.08
---------- ---------- ---------- -----------
Total Securities Available for
Sale.......................... $ 140,599 $ 813 $ (6) $ 141,406 5.91%
========== ========== ========== ===========
INVESTMENT SECURITIES
U.S. Government securities, maturing
Within 1 year........................... $ 850,299 $ 9 $ (3,995) $ 846,313 4.55%
After 1 year but within 5 years......... 1,552,485 -- (39,121) 1,513,364 5.42
After 5 years but within 10 years....... 23,899 -- (270) 23,629 7.05
---------- ---------- ---------- -----------
2,426,683 9 (43,386) 2,383,306 5.13
State and local governments, maturing
Within 1 year........................... 127,563 20 (91) 127,492 5.09
After 1 year but within 5 years......... 27,084 73 (410) 26,747 6.39
After 5 years but within 10 years....... 5,168 16 (166) 5,018 7.29
---------- ---------- ---------- -----------
159,815 109 (667) 159,257 5.38
Asset-backed securities................... 203,089 -- (4,097) 198,992 4.33
Mortgage-backed securities................ 49,488 -- (1,746) 47,742 5.14
Industrial revenue bonds.................. 51,652 -- -- 51,652 10.10
Other..................................... 1,857 -- -- 1,857 --
---------- ---------- ---------- -----------
Total Investment Securities..... $2,892,584 $ 118 $ (49,896) $ 2,842,806 5.17%
========== ========== ========== ===========
<FN>
- - - - - ---------------
* Tax equivalent basis.
** BayBank, the Company's principal bank subsidiary, is a member of the Federal
Home Loan Bank (FHLB). As of September 30, 1994, $27,555,500 in stock of the
FHLB is included in the Securities Available for Sale portfolio in the Other
category at cost, which approximates market value. Outstanding advances as of
September 30, 1994 due to the FHLB were $100,000,000, at an average interest
rate of 4.78% and with an average maturity of .1 years, and are included on
the consolidated balance sheet in the other short-term borrowings category.
</TABLE>
6
<PAGE> 7
<TABLE>
BAYBANKS, INC.
NOTE 2. SECURITIES PORTFOLIOS (CONTINUED)
<CAPTION>
PERIOD-END SECURITIES PORTFOLIOS
--------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---------- ---------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1993
SECURITIES AVAILABLE FOR SALE
U.S. Government securities......................... $ 322,707 $ 3,280 $ (3) $ 325,984
State and local governments........................ 18,964 6 (2) 18,968
Mortgage-backed securities......................... 30,832 1,162 -- 31,994
Corporate.......................................... 256,500 -- -- 256,500
---------- -------- ------ -----------
Total Securities Available for Sale...... $ 629,003 $ 4,448 $ (5) $ 633,446
========== ======== ====== ===========
INVESTMENT SECURITIES
U.S. Government securities......................... $1,203,315 $ 6,447 $ (59) $ 1,209,703
State and local governments........................ 128,997 380 (25) 129,352
Asset-backed securities............................ 204,798 115 (827) 204,086
Industrial revenue bonds........................... 59,958 -- -- 59,958
Other.............................................. 1,992 -- -- 1,992
---------- -------- ------ -----------
Total Investment Securities.............. $1,599,060 $ 6,942 $ (911) $ 1,605,091
========== ======== ====== ===========
SEPTEMBER 30, 1993
SECURITIES AVAILABLE FOR SALE
U.S. Government securities......................... $ 774,217 $ 6,084 $ -- $ 780,301
State and local governments........................ 2,700 -- -- 2,700
Mortgage-backed securities......................... 33,081 1,315 -- 34,396
Corporate.......................................... 41,550 -- -- 41,550
---------- -------- ------ -----------
Total Securities Available for Sale...... $ 851,548 $ 7,399 $ -- $ 858,947
========== ======== ====== ===========
INVESTMENT SECURITIES
U.S. Government securities......................... $1,019,209 $ 10,517 $ -- $ 1,029,726
State and local governments........................ 88,431 370 -- 88,801
Asset-back securities.............................. 205,389 481 (112) 205,758
Industrial revenue bonds........................... 66,334 -- -- 66,334
Other.............................................. 1,976 -- -- 1,976
---------- -------- ------ -----------
Total Investment Securities.............. $1,381,339 $ 11,368 $ (112) $ 1,392,595
========== ======== ====== ===========
</TABLE>
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS
PERFORMANCE OVERVIEW
BayBanks' net income was $29.0 million for the third quarter of 1994, or
$1.51 per share, an increase of 59% on a per share basis, compared with net
income of $18.0 million, or $.95 per share, for the third quarter of 1993. Net
income for the first nine months of 1994 was $76.7 million, or $4.01 per share,
an increase of 69% on a per share basis, compared with $45.0 million, or $2.37
per share, for the first nine months of 1993. The increase in net income was
affected by the following items:
- Operating income (defined below) increased 21% in the third quarter of
1994 compared with the third quarter of 1993, primarily as the result of
an 11% increase in net interest income.
- Asset quality continued to improve; nonperforming assets were reduced to
$137 million, a 39% decrease from December 31, 1993, and a 50% decrease
from September 30, 1993. As a consequence, the combined provisions for
loan losses and the other real estate owned (OREO) reserve decreased 50%
to $8.4 million in the third quarter of 1994 from $16.8 million in the
third quarter of 1993. The
7
<PAGE> 8
comparable decrease for the first nine months of 1994 was 50%, to $25.9
million, compared with $52.2 million for the same period in 1993.
EARNINGS ANALYSIS
Operating Income
Operating income, presented in TABLE A, is on a tax equivalent basis;
excludes net securities gains, and the provisions for loan losses and the OREO
reserve, and is before income taxes and the cumulative effect of an accounting
change. For the third quarter of 1994, total operating income was $59.7 million,
compared with $54.2 million in the second quarter and $49.4 million in the third
quarter of 1993. The increase over the previous year was primarily the result of
an 11% increase in net interest income. There was a 1% increase in noninterest
income and a 2% increase in operating expenses.
For the nine-month periods, operating income increased 23% to $162.0
million in 1994, compared with $131.6 million in 1993. Increases in the
combination of net interest income and noninterest income were partially offset
by a 2% increase in operating expenses.
<TABLE>
TABLE A
SUMMARY OF OPERATIONS
FOR THE FOLLOWING PERIODS
TAX EQUIVALENT BASIS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<CAPTION>
THIRD SECOND THIRD NINE MONTHS
QUARTER QUARTER QUARTER -------------------
1994 1994 1993 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income on earning assets..................... $174,632 $158,305 $148,539 $481,395 $447,436
Interest on deposits and borrowings.......... 52,812 43,423 38,856 134,053 129,012
-------- -------- -------- -------- --------
Net interest income.......................... 121,820 114,882 109,683 347,342 318,424
Noninterest income........................... 52,557 54,031 51,904 156,303 147,551
-------- -------- -------- -------- --------
Total income from operations................. 174,377 168,913 161,587 503,645 465,975
Operating expenses........................... 114,706 114,712 112,224 341,613 334,423
-------- -------- -------- -------- --------
Operating Income before Net Securities Gains
and Provisions for Loan Losses and OREO
Reserve.................................... 59,671 54,201 49,363 162,032 131,552
-------- -------- -------- -------- --------
Net securities gains......................... -- 436 49 475 407
-------- -------- -------- -------- --------
Provision for loan losses.................... 6,000 6,000 9,000 18,000 29,500
Provision for OREO reserve, net.............. 2,415 2,500 7,800 7,852 22,692
-------- -------- -------- -------- --------
Total credit provisions...................... 8,415 8,500 16,800 25,852 52,192
-------- -------- -------- -------- --------
Income before taxes and cumulative effect of
accounting change.......................... 51,256 46,137 32,612 136,655 79,767
Income taxes and tax equivalent adjustment... 22,223 19,715 14,611 58,989 34,798
-------- -------- -------- -------- --------
Income before cumulative effect of accounting
change..................................... 29,033 26,422 18,001 77,666 44,969
Less cumulative effect of accounting change
(net of tax benefit)....................... -- -- -- 932 --
-------- -------- -------- -------- --------
Net Income................................... $ 29,033 $ 26,422 $ 18,001 $ 76,734 $ 44,969
======== ======== ======== ======== ========
Earnings Per Share
Income before accounting change............ $ 1.51 $ 1.38 $ 0.95 $ 4.06 $ 2.37
Less cumulative effect of accounting
change.................................. -- -- -- 0.05 --
-------- -------- -------- -------- --------
Net Income.............................. $ 1.51 $ 1.38 $ 0.95 $ 4.01 $ 2.37
======== ======== ======== ======== ========
</TABLE>
8
<PAGE> 9
Net Interest Income (tax equivalent basis)
Net interest income was $121.8 million in the third quarter of 1994, $114.9
million in the preceding quarter and $109.7 million in the third quarter of
1993. The net interest margin in the third quarter of 1994 was 5.03%, compared
with 5.00% in the previous quarter and 5.11% in the third quarter of 1993. Net
interest income and the net interest margin are affected by the quantity and mix
of interest-bearing assets and liabilities, movements in interest rates, and the
level of nonperforming assets.
The increase in net interest income in the third quarter of 1994 compared
with 1993 was primarily the result of the 13% growth in average earning assets.
In particular, net interest income was affected by the general expansion of the
securities portfolios over the course of the year, financed by purchased funds.
For the third quarter, however, loan growth played a significant role in earning
asset increases. As a result, the yield on earning assets was 7.20% in the third
quarter of 1994 compared with 6.91% for the same period of the previous year.
The increase of 29 basis points was due to increased yields on the securities
portfolios as maturities were reinvested at higher rates and to higher rates on
the commercial and commercial real estate loan portfolios as market rates
increased. The cost of total interest-bearing liabilities increased 44 basis
points to 2.68% in the third quarter of 1994 compared to 1993.
Average earning assets increased 5% and net interest income increased $6.9
million in the third quarter of 1994 compared with the second quarter of 1994.
The increase in the net interest margin from 5.00% in the second quarter to
5.03% in the third quarter was due to the increased yield on earning assets
partially offset by the increased level of higher cost purchased funds.
For the nine-month periods, net interest income increased to $347.3 million
in 1994 from $318.4 million in 1993. Average earning assets increased 8% in 1994
compared with 1993, primarily in the securities held for investment category, as
described above. The net interest margin increased to 5.01% in 1994 from 4.97%
in 1993. The cost of total interest bearing liabilities fell 7 basis points to
2.40% for the first nine months of 1994, compared with 2.47% in 1993. For the
same period the yield on average earning assets fell by 5 basis points to 6.94%,
compared with 6.99% in 1993. The yield on the loan portfolio decreased from
8.21% to 8.05% partially offset by an increase in the yield on the securities
portfolios from 4.28% in 1993 to 4.80% in 1994 as maturities were reinvested at
higher rates and the average maturity of the securities portfolios was
lengthened.
Fees, Service Charges, and Other Noninterest Income
Noninterest income consists primarily of service charges and fees on
deposit accounts and fees from credit and non-credit services and is well
diversified among consumer, corporate, and small business banking activities.
Noninterest income (TABLE B page 10) increased slightly to $52.6 million in
the third quarter of 1994 from $51.9 million in the third quarter of 1993. Lower
mortgage banking fees and the timing of the sale of student loans affect the
quarterly comparison as explained below. For the first nine months, noninterest
income increased 6% to $156.3 million in 1994 from $147.6 million in 1993.
Service charges and fees on deposit accounts continued to provide over one
half of noninterest income. Total service charges and fees on deposits increased
7% to $28.2 million in the third quarter of 1994, compared with $26.3 million in
the third quarter of 1993. For the first nine months, service charges and fees
on deposit accounts were up 5% to $82.2 million in 1994 from $78.0 million in
1993. The increase was attributable to higher service charges and fees on
consumer accounts as a result of an increase in the number of accounts and
selected repricings partially offset by a decline in corporate service charges
due to higher earnings credit rates on compensating deposit balances.
The increase in credit card fees in 1994 is due to higher merchant volume
and the implementation of late charges in June 1994.
Processing fees increased 19% to $4.0 million in the third quarter of 1994
from $3.4 million in the third quarter of 1993. For the nine-month periods,
processing fees were $11.4 million in 1994 and $10.0 million in
9
<PAGE> 10
1993. The increase in processing fees in 1994 was primarily due to an increasing
volume of point-of-sale transactions and higher revenue from non-BayBank
cardholders using BayBank ATMs.
Investment management and brokerage fees increased 13% to $1.9 million in
the third quarter of 1994 from $1.7 million in the third quarter of 1993. For
the nine-month periods, investment management and brokerage fees increased 31%
to $5.9 million in 1994 from $4.5 million in 1993. The increase in investment
management and brokerage fees was due primarily to investment advisory fees from
BayFunds(R). Total assets under management in BayFunds were $1.3 billion at
September 30, 1994, compared with $1.1 billion at September 30, 1993.
Mortgage banking fees decreased 38% to $1.9 million in the third quarter of
1994 from $3.0 million in the third quarter of 1993. For the nine-month periods,
mortgage banking fees were $5.6 million in 1994 and $8.4 million in 1993. The
decrease in mortgage banking fees was due to a lower level of secondary market
activity resulting from a decrease in refinance volumes in 1994 as market
interest rates increased.
The Company periodically sells student loans when these primarily
government-guaranteed loans are no longer in a deferred payment status. During
the second quarter of 1994, the Company sold student loans resulting in a gain
of $4.4 million. The 1993 student loan sales occurred in the second and third
quarters, resulting in gains of $223 thousand and $1.5 million, respectively.
The increase in other noninterest income for the quarter and year-to-date
was primarily due to gains on sales of buildings no longer utilized by the
Company.
There were no securities gains in the third quarter of 1994 and were
minimal in the third quarter of 1993.
<TABLE>
TABLE B
NONINTEREST INCOME
FOR THE PERIODS ENDED SEPTEMBER 30
(IN THOUSANDS)
<CAPTION>
THIRD QUARTER NINE MONTHS
--------------------------- -----------------------------
1994 1993 CHANGE 1994 1993 CHANGE
------- ------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Service charges and fees on deposit
accounts............................. $28,176 $26,265 $ 1,911 $ 82,218 $ 78,046 $ 4,172
Credit card fees....................... 5,212 5,027 185 14,917 14,069 848
Processing fees........................ 4,049 3,408 641 11,381 10,004 1,377
Trust fees............................. 3,599 3,785 (186) 10,749 10,998 (249)
International fees..................... 1,949 1,692 257 4,793 4,557 236
Investment management and brokerage
fees................................. 1,913 1,691 222 5,892 4,511 1,381
Mortgage banking fees.................. 1,858 3,008 (1,150) 5,627 8,425 (2,798)
Student loan sales gains............... -- 1,539 (1,539) 4,395 1,762 2,633
Other noninterest income............... 5,801 5,489 312 16,331 15,179 1,152
------- ------- ------- -------- -------- -------
Total noninterest income..... $52,557 $51,904 $ 653 $156,303 $147,551 $ 8,752
======= ======= ======= ======== ======== =======
</TABLE>
10
<PAGE> 11
Operating Expenses
The operating expense analysis presented in TABLE C separates OREO and
legal expenses related to the workout of problem assets from other operating
expenses. Operating expenses, excluding OREO and legal expenses related to loan
workouts, were $113.5 million in the third quarter of 1994, compared with $109.1
million in the third quarter of 1993; for the first nine months, these operating
expenses were $333.8 million in 1994, compared with $321.1 million in 1993.
Salaries and benefits increased 7% to $58.3 million in the third quarter of
1994, compared with $54.4 million in the third quarter of 1993 primarily as the
result of normal salary increases, additional staffing requirements and higher
accruals for performance awards. For the first nine months, salaries and
benefits increased 9% to $172.1 million in 1994, compared with $158.6 million in
1993.
Occupancy and equipment was $21.9 million in the third quarter of 1994,
compared with $21.5 million in the third quarter of 1993. For the first nine
months of 1994, occupancy and equipment declined slightly to $65.9 million,
compared with $66.3 million for the first nine months of 1993, as renegotiation
of telecommunications and other equipment rental contracts in 1994 lowered costs
and were only partially offset by increased maintenance expenses.
Marketing and public relations was $6.3 million in the third quarter of
1994 and $5.8 million in the third quarter of 1993. For the first nine months of
1994, marketing and public relations was $17.6 million, compared with $16.8
million in 1993 due to increased promotional activity related to consumer
lending programs and community banking.
Other operating expenses at $16.4 million for the third quarter of 1994
were virtually unchanged from the third quarter of 1993. For the first nine
months of 1994, other operating expenses decreased 1% to $46.6 million, compared
with $47.2 million for the first nine months of 1993, due to decreased expenses
for professional services, which also positively impacted the third quarter of
1994 as compared with the third quarter of 1993.
The cost of administering, managing, and disposing of OREO properties and
legal expenses related to such workout was $1.2 million in the third quarter of
1994, compared with $3.1 million in the third quarter of 1993, reflecting the
continued disposition of OREO. For the first nine months of 1994, these costs
were $7.8 million, down from $13.3 million in 1993.
<TABLE>
TABLE C
OPERATING EXPENSES
FOR THE PERIODS ENDED SEPTEMBER 30
(IN THOUSANDS)
<CAPTION>
THIRD QUARTER NINE MONTHS
----------------------------- -----------------------------
1994 1993 CHANGE 1994 1993 CHANGE
-------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Salaries and benefits................ $ 58,264 $ 54,416 $ 3,848 $172,081 $158,552 $13,529
Occupancy and equipment.............. 21,877 21,474 403 65,923 66,295 (372)
Marketing and public relations....... 6,270 5,774 496 17,631 16,841 790
FDIC insurance....................... 5,403 5,460 (57) 16,305 16,512 (207)
Postage and supplies................. 5,278 5,530 (252) 15,206 15,658 (452)
Other................................ 16,437 16,447 (10) 46,617 47,239 (622)
-------- -------- ------- -------- -------- -------
Operating expenses excluding OREO
expenses........................... 113,529 109,101 4,428 333,763 321,097 12,666
OREO and legal expenses related to
workout............................ 1,177 3,123 (1,946) 7,850 13,326 (5,476)
-------- -------- ------- -------- -------- -------
Total operating expenses... $114,706 $112,224 $ 2,482 $341,613 $334,423 $ 7,190
======== ======== ======= ======== ======== =======
</TABLE>
11
<PAGE> 12
Provision for Loan Losses and Other Real Estate Owned Reserve
Due to the continued improvement in credit quality, the provisions for loan
losses and the OREO reserve (credit provisions) declined substantially in the
third quarter of 1994 to $8.4 million, compared with $16.8 million in the third
quarter of 1993.
The provision for loan losses was $6.0 million in the third quarter of
1994, compared with $9.0 million in the third quarter of 1993. For the first
nine months of 1994, the provision for loan losses was $18.0 million, compared
with $29.5 million in 1993.
The provision for the OREO reserve was $2.4 million in the third quarter of
1994, compared with $7.8 million in the third quarter of 1993. For the first
nine months of 1994, the provision for the OREO reserve was $7.9 million,
compared with $22.7 million in 1993. The OREO provision includes $1.7 million of
net gains on sales of properties in the third quarter of 1994 and $1.0 million
in the third quarter of 1993. For the first nine months of 1994, net gains on
the sales of OREO properties were $4.8 million as compared with $3.0 million in
1993.
Income Taxes
The Company reported a provision for income taxes of $20.4 million in the
third quarter of 1994, compared with $13.2 million in the third quarter of 1993.
The effective tax rate in the third quarter of 1994 was 41.3%, compared with
42.3% in the third quarter of 1993. The lower effective tax rate in the 1994
third quarter as compared with the 1993 third quarter rate was due to a
retroactive increase in the federal income tax rate from 34% to 35% reflected in
the third quarter of 1993. For the 1994 and 1993 first nine-month periods, the
effective tax rates were 40.6% and 40.9%, respectively.
BALANCE SHEET REVIEW
Trends in Earning Assets
Average earning assets increased to $9.6 billion during the third quarter
of 1994, compared with $8.5 billion in the third quarter of 1993. The increase
was due primarily to the expansion of the securities portfolios, financed by
purchased funds although in the third quarter of 1994 loan volume increases were
significant. Average earning assets were $9.3 billion for the first nine months
of 1994, compared with $8.5 billion for the first nine months of 1993.
Loan Portfolio
The loan portfolio of the Company is diversified (TABLE D). Consumer loans
represent 63% of the quarter-end loan portfolio, with $1.3 billion in
residential loan balances and $2.7 billion in various types of instalment loan
balances. The consumer lending activities of the Company are focused primarily
on the Massachusetts market. The remaining 37% of the loan portfolio is
commercial and commercial real estate loans. The majority of the Company's
commercial loans are to New England-based companies, primarily local
middle-market companies and small businesses in Massachusetts.
The Company originates fixed- and adjustable-rate residential mortgage
loans. The majority of fixed-rate residential real estate loan originations are
securitized and sold to the secondary market with servicing retained. The
remainder of the fixed-rate and floating-rate residential real estate loan
originations are held in the loan portfolio or may be securitized and
transferred to the securities available for sale portfolio.
An analysis of the changes in major loan categories for the third quarters
and first nine months of 1994 and 1993 is presented in TABLE D. Net business
volume was $298 million in the third quarter of 1994, compared with $201 million
in the third quarter of 1993. Residential real estate loan volume for the third
quarter of 1994 was principally the result of mortgages for purchases as
refinance activity continued to decline during 1994. The Company sold $26
million of fixed-rate residential real estate loans during the third quarter of
1994, compared with $209 million in the third quarter of 1993. At September 30,
1994 loans held for resale were $8 million, compared with $138 million at
December 31, 1993, due to the decreased refinancing activity.
12
<PAGE> 13
Instalment loan net business volume was $151 million in the third quarter of
1994, compared with $127 million in the third quarter of 1993. Net business
volume in the commercial real estate portfolio was negative $2 million during
the third quarter of 1994, compared with negative $13 million during the third
quarter of 1993; however, volume for the first nine months of 1994 was $4
million compared with negative $66 million in 1993. Commercial loan volume was
$73 million, primarily related to short-term money market-priced loans, in
particular to major retailers in the Company's market area and reflects a
decline of $17 million in international trade finance activities.
<TABLE>
TABLE D
CHANGES IN THE LOAN PORTFOLIO
(IN THOUSANDS)
<CAPTION>
THIRD QUARTER 1994 NET
ANALYSIS OF CHANGE IN LOAN CATEGORIES BUSINESS
------------------------------------------ VOLUME
GROSS TRANSFERS NET THIRD
SEPTEMBER 30 JUNE 30 INCREASE CHARGE- TO BUSINESS QUARTER
1994 1994 (DECREASE) OFFS OREO SALES VOLUME 1993
------------ ---------- ---------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial................... $1,421,961 $1,352,961 $ 69,000 $ (2,364) $(1,821) $ -- $ 73,185 $(102,138)
Commercial real estate....... 910,185 916,731 (6,546) (3,535) (900) -- (2,111) (13,443)
Residential mortgage......... 1,283,960* 1,239,026* 44,934 (1,648) (3,361) (26,302) 76,245 189,475
Instalment loans
Automobile and other....... 1,306,555 1,236,018 70,537 (1,488) -- -- 72,025 73,363
Home equity................ 735,683 712,438 23,245 (503) (348) -- 24,096 13,258
Credit card................ 304,237 300,054 4,183 (3,090) -- -- 7,273 605
Student loans.............. 257,803 216,115 41,688 (159) -- (9) 41,856 35,393
Reserve credit............. 132,591 128,228 4,363 (1,229) -- -- 5,592 4,001
---------- ---------- -------- --------- ------- -------- -------- ---------
Total instalment
loans.................... 2,736,869 2,592,853 144,016 (6,469) (348) (9) 150,842 126,620
----------- ---------- -------- -------- ------- -------- -------- ---------
Total loans.......... $6,352,975 $6,101,571 $251,404 $(14,016) $(6,430) $(26,311) $298,161 $ 200,514
============ ========== ======== ======== ======= ======== ======== =========
<FN>
- - - - - ---------------
* Includes residential mortgage loans held for sale of $8 million at September
30, 1994, and $18 million at June 30, 1994.
</TABLE>
<TABLE>
<CAPTION>
NET
NINE MONTHS ENDED SEPTEMBER 30, 1994 BUSINESS
ANALYSIS OF CHANGE IN LOAN CATEGORIES VOLUME
------------------------------------------- NINE MONTHS
GROSS TRANSFERS NET ENDED
SEPTEMBER 30 DECEMBER 31 INCREASE CHARGE- TO BUSINESS SEPTEMBER 30
1994 1993 (DECREASE) OFFS OREO SALES VOLUME 1993
------------ ----------- ---------- -------- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial............. $1,421,961 $1,324,968 $ 96,993 $ (9,421) $ (2,984) $ -- $109,398 $ (78,288)
Commercial real
estate............... 910,185 935,471 (25,286) (17,250) (11,764) -- 3,728 (66,167)
Residential mortgage... 1,283,960* 1,242,597* 41,363 (5,580) (12,113) (255,043) 314,099 595,527
Instalment loans
Automobile and
other.............. 1,306,555 1,173,950 132,605 (5,280) -- -- 137,885 235,981
Home equity.......... 735,683 700,055 35,628 (1,452) (351) -- 37,431 17,881
Credit card.......... 304,237 325,794 (21,557) (9,177) -- -- (12,380) (9,644)
Student loans........ 257,803 276,923 (19,120) (283) -- (127,013) 108,176 78,381
Reserve credit....... 132,591 123,412 9,179 (3,936) -- -- 13,115 9,437
---------- ---------- -------- -------- -------- --------- -------- ----------
Total instalment
loans.............. 2,736,869 2,600,134 136,735 (20,128) (351) (127,013) 284,227 332,036
---------- ---------- -------- -------- -------- --------- -------- ----------
Total loans.... $6,352,975 $6,103,170 $249,805 $(52,379) $(27,212) $(382,056) $711,452 $ 783,108
========== ========== ======== ======== ======== ========= ======== ==========
<FN>
- - - - - ---------------
* Includes residential mortgage loans held for sale of $8 million at September
30, 1994, and $138 million at December 31, 1993.
</TABLE>
13
<PAGE> 14
Securities Portfolios
The securities portfolios are presented in TABLE E and consist of
short-term investments, securities available for sale, and investment
securities. The securities portfolio was $3.2 billion at September 30, 1994,
$3.0 billion at December 31, 1993 and $2.6 billion at September 30, 1993. The
weighted average maturity of the securities portfolio was 1.7 years at September
30, 1994, compared with .8 years at December 31, 1993 and 1.1 years at September
30, 1993.
Short-term investments were $155.5 million at September 30, 1994, compared
with $803.1 million at December 31, 1993 and $353.9 million at September 30,
1993. The decline in the balance reflects the reinvestment of certain proceeds
from maturing short-term investments into the securities available for sale and
investment securities portfolios.
Securities available for sale, consisting principally of debt securities,
are stated at market value in 1994, and at the lower of aggregate cost or market
for previous periods. Decisions to purchase or sell these securities as part of
the Company's ongoing asset and liability management process are based on
management's assessment of changes in economic and financial market conditions,
interest rate environments, the Company's balance sheet and its interest
sensitivity position, liquidity, and capital. During 1994, the proceeds from the
sales and maturities of securities available for sale have been reinvested in
the investment portfolio and the loan portfolio. At September 30, 1994,
securities available for sale had gross unrealized gains of $813 thousand and
gross unrealized losses of $6 thousand.
The investment securities portfolio, consisting principally of debt
securities, is stated at amortized cost. This basis for valuation reflects
management's intention and ability to hold these securities until maturity. The
Company's investment securities portfolio was $2.9 billion at September 30,
1994, $1.6 billion at December 31, 1993 and $1.4 billion at September 30, 1993.
The aggregate market value of the investment securities portfolio was $2.8
billion and $1.4 billion at September 30, 1994 and 1993, respectively. The
weighted average maturity of the investment securities portfolio was 1.8 years
at September 30, 1994, compared with 1.3 years at December 31, 1993, and 1.5
years at September 30, 1993. At September 30, 1994, gross unrealized gains were
$118 thousand, and gross unrealized losses were $49.9 million.
The Company's investment securities portfolio contains U.S. Government
securities, state and local government securities, asset-backed securities,
mortgage-backed securities, and industrial revenue bonds. The total state and
local government portfolio was $160 million at September 30, 1994, with the
single largest issue being approximately $5 million. Of this total, $110 million
were securities rated investment grade and $50 million were unrated. All
municipal securities are subject to an internal review process that assigns a
rating to the securities. In the case of rated securities, the process verifies
or adjusts the independent rating. In the case of unrated securities only
securities determined to be equivalent to investment grade are purchased.
Industrial revenue bonds are also subject to a credit review process. While
there is no ready market for the Company's holdings of industrial revenue bonds,
management has determined that, based on periodic private placement quotes,
their amortized cost is a reasonable estimate of market value.
Trading account securities, consisting of debt securities, are recorded at
market value. Trading account gains were $513 thousand in the third quarter of
1994 and $733 thousand in the third quarter of 1993. For the first nine months
of 1994, trading account gains were $1.5 million compared with $1.8 million in
1993.
14
<PAGE> 15
<TABLE>
TABLE E
SECURITIES PORTFOLIOS
AT PERIOD-END
(DOLLARS IN THOUSANDS)
<CAPTION>
SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
1994 1993 1993
------------ ----------- ------------
<S> <C> <C> <C>
Short-term investments............................ $ 155,503 $ 803,068 $ 353,912
---------- ----------- ----------
Securities available for sale
U.S. Government securities...................... 24,738 322,707 774,217
U.S. Agency mortgage-backed securities.......... 25,403 30,832 33,081
State and local governments..................... 5,026 18,964 2,700
Corporate and other............................. 86,239 256,500 41,550
---------- ----------- ----------
141,406 629,003 851,548
---------- ----------- ----------
Investment securities
U.S. Government securities...................... 2,426,683 1,203,315 1,019,209
Asset-backed securities......................... 203,089 204,798 205,389
State and local governments..................... 159,815 128,997 88,431
Industrial revenue bonds........................ 51,652 59,958 66,334
U.S. Agency mortgage-backed securities.......... 49,488 -- --
Corporate and other............................. 1,857 1,992 1,976
---------- ----------- ----------
2,892,584 1,599,060 1,381,339
---------- ----------- ----------
Total................................... $3,189,493 $ 3,031,131 $2,586,799
========== =========== ==========
Weighted average maturity of securities available
for sale and investment securities in years*.... 1.8 1.1 1.2
Weighted average maturity of total securities in
years*.......................................... 1.7 0.8 1.1
<FN>
- - - - - ---------------
* The weighted average maturity calculation excludes amortizing IRBs and reflects estimated prepayments
for mortgage-backed securities.
</TABLE>
Deposits and Other Sources of Funds
The Company's extensive product lines and banking network of 204
full-service offices and 359 automated banking facilities generate significant
core deposits, which accounted for 99% of total average deposits during the
third quarters of 1994 and 1993.
Core deposits include transaction accounts (demand, NOW, and savings
accounts), money market deposit accounts, and consumer time certificates.
Average core deposits were $8.5 billion in the third quarter of 1994 and $8.6
billion in the third quarter of 1993. Average core deposits were $8.5 billion
and $8.6 billion for the first nine months of 1994 and 1993, respectively.
Average transaction accounts were $4.9 billion in the third quarter of 1994,
compared with $4.7 billion in the third quarter of 1993, reflecting certain
customers' preferences to maintain significant balances in lower-yielding
transaction accounts, thus having a positive impact on the Company's net
interest margin.
Average money market deposit and consumer certificate of deposit balances
were $3.6 billion during the third quarter of 1994, compared with $3.9 billion
in the third quarter of 1993, and were $3.7 billion and $4.0 billion in the
first nine months of 1994 and 1993, respectively. During the third quarter of
1994, average consumer certificate of deposit balances were $981 million,
compared with an average balance of $945 million in the second quarter of 1994.
Average corporate certificates of deposit in excess of $100 thousand (CDs),
which represent a small portion of the Company's total funding, were $125
million in the third quarter of 1994, compared with
15
<PAGE> 16
$29 million in the third quarter of 1993, and were $75 million and $34 million
in the first nine months of 1994 and 1993, respectively.
Purchased funds were $951 million at September 30, 1994, compared with $508
million at December 31, 1993, and $109 million at September 30, 1993, as the
securities portfolios were increased, as discussed in the Trends in Earning
Assets section. The use of purchased funds to finance the securities portfolios
is designed to take advantage of the Company's strong capital position. While
these funding and investment actions increased net interest income, the net
interest margin reflects the lower net interest spread on such transactions.
Interest Rate Risk Management and Liquidity
BayBanks' Capital Markets Committee monitors and manages the overall
on - and off - balance sheet interest sensitivity position, the securities
portfolios, funding and liquidity. Interest sensitivity, as measured by the
Company's gap position, is affected by the level and direction of interest
rates and current liquidity preferences of its customers. These factors, as
well as projected balance sheet growth, current and potential pricing actions,
competitive influences, national monetary and fiscal policy, and the national
and regional economic environment, are considered in the asset and liability
management decision process.
The Company's interest sensitivity gap position in TABLE F is first
presented based on contractual maturities and repricing opportunities. In a
period of rising or falling interest rates this basis of presentation does not
reflect lags that may occur in the repricing of certain loans and deposits. For
example, in 1994 the cost of certain interest-bearing core deposit categories
have lagged changes in market interest rates, although the Company contractually
could change the interest rates on these deposits at any time. A management
adjustment provides for the expected repricing lags. The management adjustment
also recognizes that interest rate changes in these core deposit categories are
not as sensitive to changes in market interest rates.
In addition to the gap analysis presented in the table, the Company also
uses a simulation model under varying interest rate scenarios, including the
effect of rapid changes (both increases and decreases up to 200 basis points) in
interest rates on its net interest income and net interest margin. The Company's
policy is to minimize volatility in its net interest income and net interest
margin.
At September 30, 1994, the Company's adjusted gap position for the total
within-180-day period moved from a positive gap position of $116 million at
December 31, 1993, to a negative gap position of $299 million at September 30,
1994. The total within-one-year gap moved from a positive $132 million at
December 31, 1993, to a negative $213 million at September 30, 1994. The Company
believes its overall management-adjusted gap is essentially neutral, and
therefore the effect on net interest income of a change in market interest rates
should not be significant.
16
<PAGE> 17
<TABLE>
TABLE F
INTEREST RATE SENSITIVITY POSITION
AT PERIOD-END
(IN MILLIONS)
<CAPTION>
0-30 31-90 91-180 TOTAL WITHIN 181-365 TOTAL WITHIN
DAYS DAYS DAYS 180 DAYS DAYS ONE YEAR
------- ------- ------ ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
September 30, 1994
Total assets..................... $ 3,220 $ 559 $ 881 $ 4,660 $ 1,255 $ 5,915
Total liabilities................ 6,868 186 173 7,227 245 7,472
------- ------- ------ -------- ------- --------
Net contractual gap position..... (3,648) 373 708 (2,567) 1,010 (1,557)
Net interest rate swaps.......... -- 5 -- 5 -- 5
------- ------- ------ -------- ------- --------
Net gap position including
interest rate swaps at
September 30, 1994............. (3,648) 378 708 (2,562) 1,010 (1,552)
Management adjustment............ 5,378 (2,653) (462) 2,263 (924) 1,339
------- ------- ------ -------- ------- --------
Management adjusted gap at
September 30, 1994............... $ 1,730 $(2,275) $ 246 $ (299) $ 86 $ (213)
======= ======= ===== ======== ======= ========
Management adjusted gap at December
31, 1993......................... $ 2,625 $(2,325) $(184) $ 116 $ 16 $ 132
======= ======= ===== ======== ======= ========
Management adjusted gap at
September 30, 1993............... $ 2,654 $(2,329) $(285) $ 40 $ 91 $ 131
======= ======= ===== ======== ======= ========
</TABLE>
Liquidity, for commercial banking activities, is the ability to respond to
maturing obligations, deposit withdrawals, and loan demand. The liquidity
positions of the Company's bank subsidiaries are closely monitored by the
Company's Capital Markets Committee. BayBank's retail network provides a stable
base of in-market core deposits and limits the need to raise funds from the
national market.
The Company's net liquidity position (short-term investments, securities
available for sale and investment securities, less pledged securities, large
CDs, and purchased funds) was $1.9 billion, or 20% of total deposits and
borrowings at September 30, 1994, compared with $2.1 billion, or 24% of total
deposits and borrowings, at September 30, 1993. The Company also has additional
liquidity flexibility due to the relatively short average maturity (1.7 years)
of its securities portfolios.
The statement of cash flows provides additional information on liquidity.
The statement of cash flows includes operating, investing, and financing
categories. Operating activities included $76.7 million in net income for the
first nine months of 1994, before adjustment of noncash items. Investing
activities are primarily comprised of both proceeds from sales and purchases of
short-term investments and securities and net loan originations. Financing
activities present the net change in the Company's various deposit accounts,
short-term borrowings, and dividends paid.
Cash and cash equivalents were $633 million at December 31, 1993. During
the first nine months of 1994, net cash provided by operating activities was
$355 million, net cash used in investing activities totaled $670 million and net
cash provided by financing activities was $340 million. Cash and cash
equivalents were $658 million at September 30, 1994.
The parent company's sources of liquidity are dividend and interest income
received from its subsidiaries and income earned on its securities portfolios.
The most significant uses of the parent company's resources are dividends paid
to stockholders and capital contributions to banking and other subsidiaries when
appropriate. In managing liquidity, regulatory limitations on the extent to
which bank subsidiaries can pay dividends or supply funds to the parent company
are taken into account. During the first nine months of 1994 the parent company
did not provide any capital to its subsidiaries. Dividends received from bank
subsidiaries were $18.8 million and dividends from nonbank subsidiaries were
$4.5 million during the first nine months of 1994. The parent company paid $21.7
million in dividends to its stockholders during the first nine months of 1994.
At September 30, 1994, the parent company had $76 million in cash, short-term
investments, and other securities. The parent company does not sell commercial
paper and does not have any revolving credit lines or short-term debt
outstanding.
17
<PAGE> 18
CREDIT QUALITY REVIEW
Overview
The Company continually monitors the credit quality of its loan portfolio.
Employing a standard system for grading loans, individual account officers
assign their loans a grade, or risk rating, and, if necessary, a specific loan
loss reserve. An independent Loan Review Department then reviews loan grades and
specific loan loss reserves. Any loan or portion of a loan determined to be
uncollectible is charged off. On a quarterly basis, senior management reviews
the loan portfolio, with particular emphasis on higher-risk loans, to assess the
credit quality and loss potential inherent in the portfolio. Also considered in
this review are delinquency trends and the adequacy of reserves. The size of the
allowance for loan losses, the OREO reserve and the related provisions reflect
this analysis.
Nonperforming assets, presented in TABLE G (which exclude restructured,
accruing loans, and accruing loans 90 days or more past due), include
nonperforming loans and OREO and were $137 million at September 30, 1994, a 39%
decrease from $224 million at December 31, 1993, and a 50% decrease from $272
million at September 30, 1993. In the third quarter of 1994, nonperforming
assets declined 21% from June 30, 1994, continuing the favorable trend that
began in the first quarter of 1991. While the Company expects to experience
continued improvement in nonperforming assets, the pace of that improvement will
depend on many factors, including national and regional economic conditions.
<TABLE>
TABLE G
NONPERFORMING ASSETS, RESTRUCTURED, ACCRUING LOANS, AND
ACCRUING LOANS 90 DAYS OR MORE PAST DUE
AT PERIOD-END
(DOLLARS IN THOUSANDS)
<CAPTION>
SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
1994 1993 1993
------------ ----------- ------------
<S> <C> <C> <C>
Nonperforming loans..................................... $ 59,538 $ 110,001 $134,240
Other real estate owned
In-substance foreclosures............................. 52,737 72,505 79,673
Foreclosed property................................... 51,685 70,950 87,817
-------- --------- --------
104,422 143,455 167,490
Less OREO reserve..................................... 26,856 29,776 29,334
-------- --------- --------
OREO, net of reserve.................................. 77,566 113,679 138,156
-------- --------- --------
Total nonperforming assets.............................. $137,104 $ 223,680 $272,396
======== ========= ========
Restructured, accruing loans............................ $ 8,772 $ 18,398 $ 18,025
======== ========= ========
Accruing loans 90 days or more past due................. $ 43,483 $ 51,749 $ 60,559
======== ========= ========
Nonperforming assets as a percentage of loans and OREO.. 2.1% 3.6% 4.5%
Nonperforming assets as a percentage of total assets.... 1.3 2.2 2.9
</TABLE>
The decline in nonperforming assets, presented in TABLE H (which exclude
restructured, accruing loans and accruing loans 90 days or more past due), is
affected by successful workout activities that include property sales, payments
on nonperforming loans, and loans that qualified for and were returned to
accrual status. The net outflow of nonperforming assets increased in the first
nine months of 1994 compared with the first nine months of 1993, primarily due
to a lower level of additions to nonperforming assets. Favorable resolutions
were $37 million in the third quarter of 1994, or 22% of nonperforming assets at
the beginning of the period. During the third quarter of 1994, additions to
nonperforming assets were $10 million; additions to nonperforming assets in the
third quarter of 1993 were $27 million. As of September 30, 1994, the Company
held $674 thousand in deposits on OREO property sales pending of $7.7 million.
18
<PAGE> 19
<TABLE>
TABLE H
CHANGE IN ASSET QUALITY
(IN THOUSANDS)
<CAPTION>
1994 1993 NINE MONTHS
------------------------------ ------------------- ENDED SEPTEMBER 30
THIRD SECOND FIRST FOURTH THIRD --------------------
QUARTER QUARTER QUARTER QUARTER QUARTER 1994 1993
-------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Nonperforming assets*............. $137,104 $172,921 $203,744 $223,680 $272,396 $137,104 $ 272,396
======== ======== ======== ======== ======== ======== =========
Nonperforming asset activity
Additions....................... $ 10,233 $ 23,446 $ 20,656 $ 14,752 $ 27,034 $ 54,335 $ 91,453
-------- -------- -------- -------- -------- -------- ---------
Payments........................ (10,428) (10,879) (8,070) (9,832) (15,515) (29,377) (57,102)
Returns to accrual.............. (11,990) (9,992) (4,349) (9,545) (8,021) (26,331) (14,459)
OREO sales...................... (15,058) (19,525) (21,477) (27,514) (20,651) (56,060) (62,552)
-------- -------- -------- -------- -------- -------- ---------
Total improvements....... (37,476) (40,396) (33,896) (46,891) (44,187) (111,768) (134,113)
-------- -------- -------- -------- -------- -------- ---------
Net outflow.............. (27,243) (16,950) (13,240) (32,139) (17,153) (57,433) (42,660)
-------- -------- -------- -------- -------- -------- ---------
Charge-offs....................... (7,911) (14,648) (9,504) (16,135) (11,967) (32,063) (39,609)
Net change in OREO reserve........ (663) 775 2,808 (442) (6,858) 2,920 (21,501)
-------- -------- -------- -------- -------- -------- ---------
Total decrease in nonperforming
assets.......................... $(35,817) $(30,823) $(19,936) $(48,716) $(35,978) $(86,576) $(103,770)
======== ======== ======== ======== ======== ======== =========
<FN>
- - - - - ---------------
* At period-end, excluding restructured, accruing loans and accruing loans 90 days or more past due.
</TABLE>
Nonperforming Loans
Total nonperforming loans, TABLE I (which exclude restructured, accruing
loans and accruing loans 90 days or more past due), declined 56% to $60 million
at September 30, 1994, compared with $134 million at September 30, 1993.
Nonperforming commercial loans decreased 68% to $20 million at September 30,
1994, compared with $62 million at September 30, 1993; commercial real estate
nonperforming loans declined 51% during the same period to $28 million at
September 30, 1994, compared with $57 million at September 30, 1993. The
nonperforming loans in the consumer portfolio, which includes residential
mortgages and instalment loans, decreased 22% to $12 million at September 30,
1994, from $15 million at September 30, 1993.
<TABLE>
TABLE I
NONPERFORMING LOANS
AT PERIOD-END
(DOLLARS IN THOUSANDS)
<CAPTION>
SEPTEMBER 30,
1994 DECEMBER 31, 1993 SEPTEMBER 30, 1993
----------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial..................... $19,763 33% $ 47,751 43% $ 62,403 46%
Commercial real estate......... 28,000 47 49,014 45 56,706 42
Residential mortgage........... 10,318 17 11,473 10 13,083 10
Instalment..................... 1,457 3 1,763 2 2,048 2
------- --- -------- --- -------- ---
Total nonperforming
loans.............. $59,538 100% $110,001 100% $134,240 100%
======= === ======== === ======== ===
</TABLE>
Other Real Estate Owned
OREO consists of foreclosed properties and in-substance foreclosures.
Foreclosed properties are being prepared for sale or are currently listed for
sale. The Company is also involved in managing in-substance foreclosures, taking
operating control to stabilize values while the properties are being prepared
for sale, or working closely with borrowers to obtain new equity. OREO (net of
reserve) declined 44% to $78 million at September 30, 1994, from $138 million at
September 30, 1993, primarily due to property sales.
19
<PAGE> 20
Restructured, Accruing Loans
The Company restructures credits with borrowers experiencing a period of
financial difficulty if such arrangements are likely to minimize losses the
Company may otherwise incur on a particular credit. Loans that have been
restructured generally remain on nonaccrual status until the customer has
demonstrated a period of performance under the new contractual terms.
Restructured, accruing loans were $9 million at September 30, 1994, compared
with $18 million at September 30, 1993.
Accruing Loans 90 Days or More Past Due
Accruing loans 90 days or more past due presented in TABLE J declined 28%
to $43 million at September 30, 1994, compared with $61 million at September 30,
1993. Accruing loans 90 days or more past due increased slightly during the
third quarter of 1994 compared with $42 million at the end of the previous
quarter. Of the $43 million in accruing loans 90 days or more past due at
September 30, 1994, $11 million were residential real estate loans and $19
million were instalment loans, which together represented 70% of the total.
Residential real estate and instalment loans by their nature include a large
number of smaller loans. Of the $11 million in such residential real estate
loans, $10 million were in owner-occupied properties. Commercial and commercial
real estate accruing loans 90 days or more past due at September 30, 1994 were
$13 million, compared with $18 million at September 30, 1993.
TABLE J
ACCRUING LOANS 90 DAYS OR MORE PAST DUE
AT PERIOD-END
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1994 DECEMBER 31, 1993 1993
----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Commercial........................... $ 3,503 8% $ 3,558 7% $ 8,124 13%
Commercial real estate............... 9,643 22 5,093 10 9,981 17
Residential mortgage................. 11,587 27 20,698 40 21,350 35
Instalment........................... 18,750 43 22,400 43 21,104 35
------- --- ------- --- ------- ---
Total...................... $43,483 100% $51,749 100% $60,559 100%
======= === ======= === ======= ===
</TABLE>
Allowance for Loan Losses
The allowance for loan losses is increased by the provision for loan losses
and is reduced by net loans charged off (TABLE K). Net loans charged off were
$9.5 million in the third quarter of 1994, compared with $12.2 million in the
third quarter of 1993. Net charge-offs were $38.9 million for the first nine
months of 1994 and $41.6 million for the first nine months of 1993. The
provision for loan losses was $6.0 million in the third quarter of 1994,
compared with $9.0 million in the third quarter of 1993. For the first nine
months of 1994, the provision for loan losses was $18.0 million, compared with
$29.5 million for the first nine months of 1993. Since older problem assets are
being resolved and the rate of emerging problem assets continued to decline, the
allowance for loan losses was not replenished to the full extent of charge-offs.
The allowance for loan losses was $150.6 million at September 30, 1994, and
$180.6 million at September 30, 1993. While the overall
20
<PAGE> 21
allowance for loan losses declined, its coverage of nonperforming loans
increased to 253% at September 30, 1994, from 135% at September 30, 1993.
<TABLE>
TABLE K
SUMMARY OF LOAN LOSS EXPERIENCE
(DOLLARS IN THOUSANDS)
<CAPTION>
THIRD QUARTER NINE MONTHS
------------------------- -------------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Loans outstanding at September 30......... $6,352,975 $5,913,857 $6,352,975 $5,913,857
========== ========== ========== ==========
Average loans............................. $6,201,580 $5,955,295 $6,100,086 $5,892,709
========== ========== ========== ==========
Allowance for loan losses:
Balance at beginning of period............ $ 154,126 $ 183,794 $ 171,496 $ 192,700
Loans charged off
Commercial........................... 2,364 4,828 9,421 15,848
Commercial real estate............... 3,535 2,673 17,250 10,621
Residential mortgage................. 1,648 3,226 5,580 8,835
Instalment........................... 6,469 6,871 20,128 22,148
---------- ---------- ---------- ----------
Total loans charged off.............. 14,016 17,598 52,379 57,452
---------- ---------- ---------- ----------
Recoveries
Commercial........................... 2,017 2,774 5,902 8,512
Commercial real estate............... 371 472 966 1,123
Residential mortgage................. 483 817 1,692 1,679
Instalment........................... 1,633 1,345 4,937 4,542
---------- ---------- ---------- ----------
Total recoveries..................... 4,504 5,408 13,497 15,856
---------- ---------- ---------- ----------
Net loans charged off................ 9,512 12,190 38,882 41,596
Provision for loan losses................. 6,000 9,000 18,000 29,500
---------- ---------- ---------- ----------
Balance at September 30................... $ 150,614 $ 180,604 $ 150,614 $ 180,604
========== ========== ========== ==========
Annualized net charge-offs as a percentage
of average period-to-date loans......... 0.6% 0.8% 0.9% 0.9%
Allowance for loan losses as a percentage
of period-end loans..................... 2.4 3.1 2.4 3.1
Allowance for loan losses as a percentage
of nonperforming loans.................. 253.0 134.5 253.0 134.5
Allowance for loan losses as a percentage
of nonperforming loans, restructured,
accruing loans, and accruing loans past
due 90 days or more..................... 134.7 84.9 134.7 84.9
</TABLE>
21
<PAGE> 22
CAPITAL AND DIVIDENDS
BayBanks' consolidated risk-based capital ratios were 13.46% for total
capital and 11.74% for core capital at September 30, 1994, compared with 13.06%
and 11.14%, respectively, at September 30, 1993. At December 31, 1993, the
consolidated risk-based capital ratios were 12.40% for total capital and 10.68%
for core capital. The consolidated leverage ratio was 7.21% at September 30,
1994, and 7.26% at December 31, 1993 and September 30, 1993. (TABLE L).
<TABLE>
TABLE L
CAPITAL RATIOS
SEPTEMBER 30, 1994
<CAPTION>
RISK-BASED RATIOS
--------------------------------------------------------
TIER 1 CAPITAL TOTAL CAPITAL LEVERAGE RATIO
--------------------------- --------------------------- ---------------------------
REQUIRED TO BE REQUIRED TO BE REQUIRED TO BE
WELL CAPITALIZED* REPORTED WELL CAPITALIZED* REPORTED WELL CAPITALIZED* REPORTED
----------------- -------- ----------------- -------- ----------------- --------
<S> <C> <C> <C> <C> <C> <C>
BayBanks, Inc................ n/a 11.74% n/a 13.46% n/a 7.21%
BayBank...................... 6.00% 9.86 10.00% 11.60 5.00% 6.05
BayBank Boston, N.A.......... 6.00 11.16 10.00 13.01 5.00 6.60
BayBank Connecticut, N.A..... 6.00 12.66 10.00 13.92 5.00 11.51
<FN>
- - - - - ---------------
* Under Federal Prompt Corrective Action and Risk-based Deposit Insurance Assessment Regulations.
n/a -- not applicable
</TABLE>
BayBanks paid a dividend in the third quarter of 1994 of $.45 per share.
Dividends paid since reinstatement of the quarterly cash dividend in the first
quarter of 1993 are presented in TABLE M.
<TABLE>
TABLE M
DIVIDENDS PAID
<CAPTION>
1994 1993
NINE MONTHS ------------------------------- -------------------------------------------
- - - - - --------------- THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
1994 1993 QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
- - - - - ----- ----- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1.15 $0.65 $0.45 $0.35 $0.35 $0.25 $0.25 $0.20 $0.20
===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
On October 27, 1994, BayBanks declared its fourth quarter dividend at $.45
per share payable December 1, 1994.
IMPENDING ACCOUNTING CHANGE
In May 1993, the Financial Accounting Standards Board (FASB) issued
Statement No. 114, "Accounting by Creditors for Impairment of a Loan" which was
amended by Statement No. 118, "Accounting by Creditors for Impairment of a
Loan -- Income Recognition and Disclosures," issued in October 1994. These
statements are effective for fiscal years beginning after December 15, 1994 and
will require changes in the disclosure of nonperforming assets. Loans currently
reported as nonperforming and in-substance foreclosures will be reported as
impaired loans in a financial statement footnote. Restructured loans, reported
as restructured, accruing loans prior to the adoption of Statement No. 114, will
not be regarded as impaired loans when the statement is adopted if they are
performing under the restructured terms. Restructured accruing loans entered
into after the adoption of Statement No. 114 will be accounted for as impaired
loans. The amount of impairment will be determined by the difference between the
present value of the expected cash flows related to the loan using the
contractual interest rate and its recorded value, or as a practical expedient in
the case of collateralized loans, the difference between the appraised value of
the collateral and the recorded amount of the loan. Any additional impairment
will be recorded as an adjustment to the existing allowance for
22
<PAGE> 23
loan losses account. The adoption of Statement No. 114 and Statement No. 118 is
not expected to have a material effect on the Company's reported results of
operations or financial condition.
In October 1994, the FASB issued Statement No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments." This
statement is effective for fiscal years ending after December 15, 1994 and
requires disclosures about derivative financial instruments including futures,
forward, swap, and option contracts, and other financial instruments with
similar characteristics.
23
<PAGE> 24
<TABLE>
BAYBANKS, INC.
AVERAGE BALANCES AND CAPITAL RATIOS
(DOLLARS IN MILLIONS)
<CAPTION>
1994 1993
NINE MONTHS --------------------------- -----------------
---------------- THIRD SECOND FIRST FOURTH THIRD
1994 1993 QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing deposits and other short-term
investments................................. $ 231 $ 652 $ 175 $ 204 $ 315 $ 420 $ 412
Securities available for sale, at cost........ 545 1,380 420 597 618 831 974
Investment securities, at cost................ 2,378 621 2,840 2,347 1,938 1,469 1,201
Loans*
Commercial.................................. 1,342 1,391 1,372 1,360 1,294 1,288 1,371
Commercial real estate...................... 916 966 915 908 926 930 945
Residential mortgage........................ 1,219 1,163 1,256 1,193 1,209 1,194 1,178
Instalment.................................. 2,622 2,372 2,659 2,594 2,613 2,550 2,461
------- ------ ------- ------- ------- ------- -------
6,099 5,892 6,202 6,055 6,042 5,962 5,955
Less allowance for loan losses.............. 163 190 155 164 172 184 185
------- ------ ------- ------- ------- ------- -------
5,936 5,702 6,047 5,891 5,870 5,778 5,770
------- ------ ------- ------- ------- ------- -------
Total earning assets................. 9,253 8,545 9,637 9,203 8,913 8,682 8,542
Cash and due from banks....................... 625 620 651 622 602 659 630
Other assets.................................. 485 559 480 480 495 519 539
------- ------ ------- ------- ------- ------- -------
Total assets......................... $10,200 $9,534 $10,613 $10,141 $ 9,838 $ 9,676 $ 9,526
======= ====== ======= ======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand...................................... $ 1,964 $1,838 $ 1,992 $ 1,946 $ 1,955 $ 2,031 $ 1,914
NOW accounts................................ 1,393 1,324 1,388 1,399 1,391 1,372 1,338
Savings..................................... 1,497 1,385 1,502 1,509 1,481 1,443 1,422
Money market deposit accounts............... 2,699 2,901 2,655 2,700 2,742 2,758 2,823
Consumer time............................... 967 1,131 981 945 975 1,016 1,069
Time -- $100,000 or more.................... 75 34 125 63 37 30 29
------- ------ ------- ------- ------- ------- -------
8,595 8,613 8,643 8,562 8,581 8,650 8,595
Federal funds purchased and other short-term
borrowings.................................. 749 131 1,086 728 425 209 139
Long-term debt................................ 54 54 54 54 54 55 55
------- ------ ------- ------- ------- ------- -------
Total deposits and borrowings............... 9,398 8,798 9,783 9,344 9,060 8,914 8,789
Other liabilities**........................... 70 72 77 66 66 70 60
Stockholders' equity.......................... 732 664 753 731 712 692 677
------- ------ ------- ------- ------- ------- -------
Total liabilities and stockholders'
equity............................. $10,200 $9,534 $10,613 $10,141 $ 9,838 $ 9,676 $ 9,526
======= ====== ======= ======= ======= ======= =======
CAPITAL RATIOS
Risk-Based
Core (Min. regulatory standard -- 4.00%).... 11.74% 11.14% 11.74% 11.71% 11.32% 10.68% 11.14%
Total (Min. regulatory standard -- 8.00%)... 13.46 13.06 13.46 13.45 13.06 12.40 13.06
Leverage...................................... 7.21 7.26 7.21 7.32 7.33 7.26 7.26
<FN>
- - - - - ---------------
* Nonperforming loans are included in the average balances.
** Includes guarantee of ESOP indebtedness.
</TABLE>
24
<PAGE> 25
<TABLE>
BAYBANKS, INC.
SUMMARY OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<CAPTION>
1994 1993
NINE MONTHS ------------------------------ -------------------
------------------- THIRD SECOND FIRST FOURTH THIRD
1994 1993 QUARTER QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Income on earning assets (tax
equivalent basis)................ $481,395 $447,436 $174,632 $158,305 $148,458 $148,393 $148,539
Interest expense on deposits and
borrowings....................... 134,053 129,012 52,812 43,423 37,818 37,636 38,856
-------- -------- -------- -------- -------- -------- --------
Net interest income................ 347,342 318,424 121,820 114,882 110,640 110,757 109,683
Noninterest income................. 156,303 147,551 52,557 54,031 49,715 50,973 51,904
-------- -------- -------- -------- -------- -------- --------
Total income from operations....... 503,645 465,975 174,377 168,913 160,355 161,730 161,587
Operating expenses................. 341,613 334,423 114,706 114,712 112,195 112,282 112,224
-------- -------- -------- -------- -------- -------- --------
Operating Income before Net
Securities Gains and Provisions
for Loan Losses and OREO
Reserve.......................... 162,032 131,552 59,671 54,201 48,160 49,448 49,363
Net securities gains............... 475 407 -- 436 39 4 49
Provision for loan losses.......... 18,000 29,500 6,000 6,000 6,000 7,000 9,000
Provision for OREO reserve, net.... 7,852 22,692 2,415 2,500 2,937 2,138 7,800
-------- -------- -------- -------- -------- -------- --------
Total credit provisions............ 25,852 52,192 8,415 8,500 8,937 9,138 16,800
-------- -------- -------- -------- -------- -------- --------
Pre-tax income..................... 136,655 79,767 51,256 46,137 39,262 40,314 32,612
Less tax equivalent adjustment
included above................... 5,856 3,697 1,816 2,067 1,973 1,661 1,401
-------- -------- -------- -------- -------- -------- --------
Income before taxes and cumulative
effect of accounting change...... 130,799 76,070 49,440 44,070 37,289 38,653 31,211
Provision for income taxes......... 53,133 31,101 20,407 17,648 15,078 15,971 13,210
-------- -------- -------- -------- -------- -------- --------
Income before cumulative effect of
accounting change................ 77,666 44,969 29,033 26,422 22,211 22,682 18,001
Less cumulative effect of
accounting change (net of tax
benefit of $683)................. 932 -- -- -- 932 -- --
-------- -------- -------- -------- -------- -------- --------
Net Income......................... $ 76,734 $ 44,969 $ 29,033 $ 26,422 $ 21,279 $ 22,682 $ 18,001
======== ======== ======== ======== ======== ======== ========
Earnings Per Share
Income before accounting
change........................ $ 4.06 $ 2.37 $ 1.51 $ 1.38 $ 1.16 $ 1.19 $ 0.95
Less cumulative effect of
accounting change............. 0.05 -- -- -- 0.05 -- --
-------- -------- -------- -------- -------- -------- --------
Net Income....................... $ 4.01 $ 2.37 $ 1.51 $ 1.38 $ 1.11 $ 1.19 $ 0.95
======== ======== ======== ======== ======== ======== ========
Dividends Paid Per Share........... $ 1.15 $ 0.65 $ 0.45 $ 0.35 $ 0.35 $ 0.25 $ 0.25
Financial Ratios
Return on average equity........... 14.0% 9.1% 15.3% 14.5% 12.1% 13.0% 10.5%
Return on average assets........... 1.01 0.63 1.09 1.05 0.88 0.93 0.75
Common Stock Data
Period-end book value per share.... $ 40.30 $ 36.56 $ 40.30 $ 39.47 $ 38.51 $ 37.52 $ 36.56
Dividend payout ratio.............. 28.7% 27.4% 29.7% 25.4% 31.5% 21.0% 26.3%
Range of BayBanks, Inc., last sale
price
High............................. $ 64.13 $ 52.13 $ 63.00 $ 64.13 $ 57.25 $ 50.75 $ 50.50
Low.............................. 50.00 38.25 54.25 54.50 50.00 43.25 43.25
Close............................ 55.00 48.75 55.00 60.25 54.50 50.75 48.75
</TABLE>
25
<PAGE> 26
<TABLE>
BAYBANKS, INC.
AVERAGE YIELDS, RATES PAID, AND NET INTEREST MARGIN*
<CAPTION>
1994 1993
NINE MONTHS --------------------------- -----------------
------------- THIRD SECOND FIRST FOURTH THIRD
1994 1993 QUARTER QUARTER QUARTER QUARTER QUARTER
---- ---- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits and other
short-term investments.................. 3.77% 3.33% 4.38% 3.94% 3.32% 3.24% 3.28%
Securities available for sale**........... 4.96 4.44 5.42 4.98 4.64 4.70 4.40
Investment securities..................... 4.86 4.92 5.13 4.80 4.55 4.52 4.67
Loans..................................... 8.05 8.21 8.35 7.98 7.81 7.90 8.03
Commercial.............................. 7.16 6.57 7.68 7.19 6.57 6.48 6.50
Commercial real estate.................. 8.06 7.78 8.54 8.05 7.58 7.74 7.73
Residential mortgage.................... 7.36 8.02 7.48 7.24 7.35 7.51 7.74
Instalment.............................. 8.83 9.44 9.03 8.72 8.71 8.86 9.14
Total earning assets...................... 6.94% 6.99% 7.20% 6.89% 6.72% 6.80% 6.91%
Interest-bearing funds.................... 2.40% 2.47% 2.68% 2.35% 2.16% 2.16% 2.24%
NOW accounts............................ 1.35 1.79 1.37 1.34 1.33 1.42 1.54
Savings................................. 1.93 2.17 1.96 1.93 1.90 1.92 1.96
Money market deposit accounts........... 2.25 2.37 2.50 2.20 2.04 2.08 2.13
Consumer time........................... 3.57 3.84 3.80 3.46 3.45 3.52 3.65
Time -- $100,000 or more................ 3.90 2.67 4.29 3.69 2.91 2.63 2.57
Short-term borrowings................... 4.09 2.59 4.50 3.97 3.21 2.86 2.60
Long-term debt.......................... 4.46 3.85 5.05 4.44 3.88 3.75 3.83
Interest expense as a percentage of
average earning assets.................. 1.93% 2.02% 2.17% 1.89% 1.72% 1.72% 1.80%
Net interest margin....................... 5.01% 4.97% 5.03% 5.00% 5.00% 5.08% 5.11%
<FN>
- - - - - ---------------
* Tax equivalent basis.
** Yields based on average cost.
</TABLE>
PART II -- OTHER INFORMATION
ITEM 6. -- EXHIBITS AND REPORTS ON FORM 8-K
a) See Exhibit List and Index on page 28.
b) No report on Form 8-K was filed during the third quarter ended September
30, 1994.
26
<PAGE> 27
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BayBanks, Inc.
--------------------------------------
(Registrant)
By: /s/ MICHAEL W. VASILY
-----------------------------------
Michael W. Vasily
Executive Vice President
and Chief Financial Officer
(Duly Authorized and
Principal Financial Officer)
Date: November 10, 1994
27
<PAGE> 28
<TABLE>
BAYBANKS, INC.
EXHIBIT LIST AND INDEX
<CAPTION>
EXHIBIT NO. DESCRIPTION
- - - - - ----------- -----------
<S> <C> <C>
ARTICLES OF INCORPORATION AND BY-LAWS
3.1 -- By-Laws, as amended through October 27, 1994.
MATERIAL CONTRACTS -- EXECUTIVE COMPENSATION PLANS
10.1 -- Amendment dated October 27, 1994, to 1978 Stock Option Plan for Key Employees
of Bay Banks, Inc. and Affiliates.
10.2 -- 1988 Stock Option Plan for Key Employees of BayBanks, Inc. and Affiliates, as
amended.
10.3 -- 1982 Restricted Stock Plan for Key Employees of BayBanks, Inc. and Affiliates,
as amended.
10.4 -- BayBanks, Inc. 1994 Restricted Stock Plan, as amended.
10.5 -- BayBanks, Inc. Incentive Compensation Plan, as amended.
10.6 -- BayBanks, Inc. Compensation Plan for Directors, as amended.
10.7 -- BayBanks, Inc. 1990 Stock Plan for Directors, as amended.
10.8 -- Third Amendment dated October 27, 1994, to BayBanks Supplemental Executive
Retirement Plan.
10.9 -- BayBanks, Inc. Severance Benefits Plan, as amended.
10.10 -- First Amendment dated October 27, 1994, to BayBanks Deferred Payment Plans
Trust Agreement.
MISCELLANEOUS
11.1 -- Computation of Primary and Fully Diluted Earnings Per Share. See Page 29.
27 -- Financial Data Schedule.
</TABLE>
28
<PAGE> 1
EXHIBIT 3.1
As amended through
October 27, 1994.
BAYBANKS, INC.
BY-LAWS
ARTICLE I
OFFICERS: ELECTION, POWERS AND DUTIES
SECTION 1. OFFICERS. The officers of the Company shall
be a President, a Treasurer, a Clerk, a Board of Directors,
as hereinafter provided for, and if deemed expedient by the
Board of Directors, a Chairman of said Board, an Executive
Committee of said Board, and such other officers as the Board
of Directors may elect or appoint. So far as permitted by
law, the same person may simultaneously occupy more than one
office, but no officer shall execute, acknowledge, or verify
any instrument in more than one capacity if such instrument
is required by law to be executed, acknowledged or verified
by two or more officers.
SECTION 2. Terms: VACANCIES. All officers other than Directors
shall hold office for the term of one year and until their successors are
chosen and qualified. In case a vacancy shall occur from any cause in any
office or in the Board of Directors, the Board of Directors (or the remaining
Directors, although less than a quorum) may by a majority vote fill such
vacancy. An officer or Director so elected to fill such vacancy shall hold
office only until the next meeting of the stockholders or Directors at which
the office would regularly be filled and until a successor is chosen and
qualified.
SECTION 3. REMOVAL. Any officer or Director may for cause, and any
officer elected or appointed by the Board of Directors may for or without
cause, be removed at any time by a majority vote of the Board. Any officer or
any Director whom the stockholders have power to elect may be removed for or
without cause at any regular meeting of the stockholders, or at any special
meeting of the stockholders called for the purpose, by a vote of the holders of
a majority of a quorum of the stock outstanding and entitled to vote. An
officer or Director may be removed for cause only after reasonable notice and
opportunity to be heard before the body proposing to remove him.
<PAGE> 2
SECTION 4. RESIGNATION. Any officer or Director or
member of the Executive Committee may at any time by
resignation in writing delivered to the Company resign his
office and an acceptance thereof shall not be necessary to
make said resignation effective unless so stated in the
resignation.
SECTION 5. BOARD OF DIRECTORS. From and after the 1945 annual meeting
of stockholders or any meeting of stockholders held in lieu thereof until the
1948 annual meeting of stockholders or any meeting of stockholders held in lieu
thereof, the Board of Directors shall consist of nine (9) members, including
the Chairman of said Board if one be then in office. At the 1945 annual
meeting of the stockholders or at any meeting of the stockholders held in lieu
thereof three Directors shall be elected to hold office for the term of one
year and until their respective successors are chosen and qualified, three
Directors shall be elected to hold office for the term of two years and until
their respective successors are chosen and qualified and three Directors shall
be elected to hold office for the term of three years and until their
respective successors are chosen and qualified. Subsequent to 1945 and prior
to 1948 the stockholders shall annually reelect, or elect successors to, those
Directors whose terms then expire, to hold office for the term of three (3)
years and until their respective successors are chosen and qualified.
Beginning with the 1948 annual meeting of stockholders, or with any meeting of
stockholders held in lieu thereof, and until the 1984 annual meeting of
stockholders, or any meeting of stockholders held in lieu thereof, the Board of
Directors shall consist of eleven (11) members, including the Chairman of said
Board if one be then in office. At the 1948 annual meeting of stockholders, or
at any meeting of stockholders held in lieu thereof, the stockholders shall
reelect, or elect successors to those Directors whose terms then expire to hold
office for the term of three (3) years and until their respective successors
are chosen and qualified, and shall elect two (2) additional Directors, one (1)
to hold office for the term of three (3) years and until his successor is
chosen and qualified, and the other to hold office for the term of two (2)
years and until his successor is chosen and qualified. Beginning with the 1984
annual meeting of stockholders, or with any meeting of stockholders held in
lieu thereof, and continuing thereafter the Board of Directors shall consist of
twelve (12) members, including the Chairman of said Board if one be then in
office. At the 1984 annual meeting of stockholders, or at any meeting of the
stockholders held in lieu thereof, the stockholders shall reelect, or elect
successors to, those Directors whose terms then expire to hold office for the
term of three (3) years and until their respective successors are chosen and
qualified, and shall elect one (1) additional
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<PAGE> 3
Director to hold office for the term of one (1) year and until his successor is
chosen and qualified. Subsequent to 1984 the stockholders shall annually
reelect, or elect successors to, those Directors whose terms then expire,
to hold office for the term of three (3) years and until their respective
successors are chosen and qualified. Directors need not be stockholders of the
corporation.
The Board of Directors shall have the general management and control
of all the property and affairs of the Company and shall exercise all the
powers of the Company except such as are conferred by law, by the Articles of
Organization of the Company as the same may be from time to time amended, or by
these By-Laws upon the stockholders. Without limiting the generality of the
foregoing, the Board of Directors shall have full power to fix the compensation
of all officers, agents and attorneys of the Company and to provide such fees
or other compensation to Directors for their services to the Company as said
Board may deem reasonable.
The Board of Directors shall have power and authority to make
contributions, in such amounts as the Board of Directors may determine to be
reasonable, to corporations, trusts, funds or foundations organized and
operated exclusively for charitable, scientific or educational purposes, no
part of the net earnings of which inures to the benefit of any private
shareholder or individual, provided that such contributions in any fiscal year
shall not in the aggregate exceed one-half of one percent of the capital and
surplus of the Company as of the end of the preceding fiscal year. Nothing in
this paragraph shall be construed as directly or indirectly restricting or
otherwise affecting, except as herein provided, the rights and powers of the
Company with reference to payments of the nature above specified.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the
Board of Directors, if there be one, shall be elected
annually by and from the Board and shall preside at all
meetings of the stockholders and Directors at which he shall
be present. When so designated by the Board of Directors, he
shall be the chief executive officer of the Company and, if
so designated, shall have general charge and control of all
its affairs, subject to the supervision of the Board.
SECTION 7. EXECUTIVE COMMITTEE. The Board of Directors
may elect at any time from its members an Executive Committee
which shall have and may exercise such powers (which may
include powers vested in the Board of Directors) as are
delegated (to the extent permitted by law) to the Executive
Committee by the Board of Directors.
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<PAGE> 4
The members of the Executive Committee shall hold office
subject to the pleasure of the Board of Directors, and the
Board may at any time remove one or more members of said
Committee and elect as aforesaid another person in lieu of
any member so removed. The Board of Directors may also
designate one or more Directors as alternate members of the
Executive Committee, who may replace any absent member at any
meeting of such Committee.
SECTION 8. PRESIDENT. The President shall be annually elected by and
from the Board of Directors. He shall be the chief executive officer of the
Company and, subject to the supervision of the Board, shall have general charge
and control of all the affairs of the Company, unless the Board of Directors
shall have designated the Chairman of the Board as the chief executive officer
of the Company. He shall have such other powers and be charged with such other
duties as the Board may prescribe. In the absence of a Chairman of the Board
of Directors, he shall preside at all meetings of the stockholders and
Directors at which he shall be present.
SECTION 9. VICE PRESIDENT. The Vice President, if there be one, shall
be elected by, but not necessarily from, the Board of Directors. Unless his
authority is expressly limited, he shall have such powers and be charged with
such duties including any and all of the powers and duties of the President as
the Board may prescribe.
The Board of Directors may elect other Vice Presidents
and may establish the powers and duties to be exercised by
each.
SECTION 10. TREASURER. The Treasurer, who shall be
annually elected by the Board of Directors, shall keep or
cause to be kept regular books of account which shall be open
at all times to any Director, and shall report to the Board
of Directors on the financial condition of the Company. He
shall have the custody of the corporate seal, of all
documents of title and valuable papers, and, unless and until
the same be delegated by the Board of Directors to a Transfer
Agent, of the stock and transfer books of the Company.
Subject to the supervision and control of the Board of
Directors, he shall receive and disburse the funds of the
Company and shall borrow money on its behalf.
One or more Assistant Treasurers may from time to time be appointed by
the Board of Directors, with such powers and duties, including any or all of
the powers and duties of the Treasurer, as the Board may prescribe.
SECTION 11. CLERK. The Clerk, who shall be a resident
of the Commonwealth of Massachusetts, shall be annually
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<PAGE> 5
elected by the Board of Directors, shall attend all meetings of the
stockholders and Board of Directors, shall keep minutes of the business
transacted thereat, and shall see to the giving and serving of notice of all
meetings of the stockholders. One or more Assistant Clerks may from time to
time be appointed by the Board of Directors, with such powers and duties,
including any or all of the powers and duties of the Clerk as the Board may
prescribe.
SECTION 12. MISCELLANEOUS DUTIES AND POWERS. In addition to the
foregoing especially enumerated duties and powers, the several officers of the
Company shall be charged with such other duties and shall have such other
powers as may be delegated to them by the Board of Directors or may be imposed
upon them by law.
ARTICLE II
STOCKHOLDERS' MEETINGS
SECTION 1. ANNUAL MEETING. The annual meeting of stockholders shall be
held in every year on the fourth Thursday in April (or if that day falls on a
legal holiday on the next succeeding business day, other than a Saturday) at
the principal office of the Company within the Commonwealth at 10:00 o'clock
A.M., or on such other date within six months after the end of the fiscal year
of the Company or at such other hour or place as the Directors shall determine.
In lieu of the annual meeting, a special meeting may be held either before or
after the date specified in this section for the annual meeting, such special
meeting to be called by the President or the Directors and held in the same
manner as provided for special meetings of stockholders set forth in Section 2
of this Article II. The purposes for which an annual meeting or special
meeting in lieu thereof is to be held shall only be those prescribed by law, by
the Articles of Organization, or by these By-Laws and those that are specified
by the Board of Directors.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders may
be called at any time by the President or by the Directors, and shall be called
by the Clerk, or in the case of his death, absence, incapacity, or refusal, by
any other officer upon written application of stockholders who hold at least
sixty-six and two-thirds percent (or, to the extent legally required, the
maximum lesser percentage permitted by law, but in no case less than forty
percent) in interest of the capital stock entitled to vote at such meeting,
stating the time, place, and purposes of the meeting. Special meetings of
stockholders may be held at such hour and such place within the Commonwealth of
Massachusetts as shall be fixed by the Board of Directors, provided that if the
Board of Directors shall not fix the hour and place of any special meeting it
shall be held at 10:30
- 5 -
<PAGE> 6
o'clock A.M. at the principal office of the Company within the Commonwealth.
SECTION 3. NOTICE. A written or printed notice of any meeting of the
stockholders, stating the place, day, hour, and purposes thereof, shall be
given by the Clerk, or, in the case of his death, absence, incapacity or
refusal, by a person designated by the Board of Directors or Executive
Committee, at least seven (7) days before the date of the meeting to each
stockholder entitled to vote thereat or entitled to receive notice thereof by
leaving such notice with the stockholder or at his residence or usual place of
business or by mailing the same, postage prepaid, directed to him at his
address as last recorded on the books of the Company. Whenever notice of a
meeting is required to be given a stockholder under any provisions of the
General Laws of the Commonwealth of Massachusetts or of the Company's Articles
of Organization or By-Laws, a written waiver thereof, executed before or after
the meeting by such stockholder or his attorney thereunto authorized and filed
with the records of the meeting, shall be deemed equivalent to such notice.
SECTION 4. QUORUM, ADJOURNMENT, AND CANCELLATION. A majority in
interest of the capital stock outstanding and at the time entitled to vote
represented at a meeting in person or by proxy shall constitute a quorum for
the transaction of business; but less than a quorum may adjourn or dissolve a
meeting which has been called. The vote of a majority of any quorum shall be
sufficient to elect Directors and transact any business, except as a larger
vote may be required or a lesser vote may be permitted by the provisions of the
Agreement of Association and Articles of Organization and amendments thereto,
or by law. No proxy which is dated more than six months before the meeting
named therein shall be accepted, and no such proxy shall be valid after the
final adjournment of such meeting. The Chairman of the meeting or a majority
of the shares present or represented may adjourn the meeting from time to time
or dissolve the meeting, whether or not there is a quorum. No notice of the
time and place of adjourned meetings need be given, except as required by law.
Any previously scheduled meeting of the stockholders may be postponed, and any
special meeting of the stockholders called by the President or by the Directors
may be cancelled, by resolution of the Board of Directors upon a public
announcement made by the Company prior to the date previously scheduled for
such meeting of stockholders. For purposes of Article II of these By-Laws,
"public announcement" shall mean disclosure in a press release reported by the
Dow Jones News Service, Associated Press, or comparable national news service,
or in a document publicly filed by the Company with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
SECTION 5. VOTING. Every holder of stock entitled to
vote at a meeting of stockholders shall, if present in person
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<PAGE> 7
or represented by valid proxy, have one vote at such meeting for each share
held of record by such holder on the date fixed for determination of
stockholders entitled to vote at such meeting. Action with respect to any
matter may be taken by ballot but need not be so taken unless a stockholder
requests that a ballot be taken.
SECTION 6. Notice of Stockholder Business and Nominations.
-----------------------------------------------
A. Annual Meetings of Stockholders.
--------------------------------
(1) Only such business shall be conducted at an
annual meeting or special meeting in lieu thereof as shall have been
specified in the Company's notice of meeting or, to the extent
permitted by law, as shall be approved by the Chairman of the meeting
or the Board of Directors.
(2) Nominations of persons for election to the Board
of Directors of the Company may be made at an annual meeting of
stockholders or special meeting in lieu thereof (a) pursuant to the
Company's notice of meeting, (b) by, or at, the direction of the Board
of Directors or, (c) by any stockholder of the Company who complies
with the requirements set forth in this By-Law.
(3) Any nomination or other business that a
stockholder may bring before an annual meeting or special meeting in
lieu thereof pursuant to this By-Law, may only be brought before such
meeting by a stockholder of the Company who was a stockholder of
record at the time of giving notice provided for in this By-Law, who
is entitled to vote at the meeting, and who complies with the notice
procedures and other requirements set forth in this By-Law.
(4) For nominations or other business to be properly
brought before an annual meeting or special meeting in lieu thereof by
a stockholder pursuant to this By-Law, the stockholder must have given
timely notice thereof in writing to the Clerk of the Company and such
other business must otherwise be a proper matter for stockholder
action.
To be timely, a stockholder's notice of nominations
of persons for election to the Board of Directors shall be delivered
to the Clerk at the principal executive office of the Company not
later than the close of business on the 60th day, nor earlier than the
close of business on the 90th day, prior to the first anniversary of
the preceding year's annual meeting or special meeting in lieu
thereof; provided, however, that in the event that the date of the
annual meeting or special meeting in lieu thereof is more than 30 days
before, or more than 60 days after, such anniversary date, notice by
the stockholder to be timely must be so delivered not earlier than the
close of business on the 90th day prior to such meeting, and not later
than the close of business on the later of the 60th
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<PAGE> 8
day prior to such meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made by the Company.
To be timely, a stockholder's notice of other business to be brought
before the annual meeting or special meeting in lieu thereof shall be delivered
to the Clerk at the Company's principal executive office not less than 120
calendar days in advance of the date of the Company's proxy statement in
connection with the previous year's annual meeting or special meeting in lieu
thereof, except that, if no annual meeting or special meeting in lieu thereof
was held in the previous year, or if the date of the annual meeting or special
meeting in lieu thereof has been changed by more than 30 calendar days from the
date contemplated at the time of the previous year's proxy statement, the
stockholder's notice of other business shall be delivered to the Clerk at the
Company's principal executive office not less than 60 calendar days before the
Company's proxy solicitation is made.
In no event shall the public announcement of an adjournment of an
annual meeting or special meeting in lieu thereof commence a new time period
for the giving of a stockholder's notice as described above.
Such stockholder's notice shall set forth (a) as to each person whom
the stockholder proposes to nominate for election or reelection as a Director
all information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or
is otherwise required, in each case pursuant to Regulation 14A under the
Exchange Act and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
Director if elected); (b) as to any other business that the stockholder
proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting, and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the Company's books, and of such
beneficial owner and (ii) the class and number of shares of the Company that
are owned beneficially and of record by such stockholder and such beneficial
owner.
(5) Notwithstanding anything in the second sentence of paragraph A.(4)
of this By-Law to the contrary, if the number of directors to be elected to the
Board of Directors of the Company is increased between annual meetings and one
or more of the new positions is subject to
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<PAGE> 9
election at the next annual meeting, and if no public announcement is
made by the Company naming all of the nominees for director or
specifying the size of the increased Board of Directors at least 70
days prior to the first anniversary of the preceding year's annual
meeting or special meeting in lieu thereof, then with respect only to
nominees for any such new positions created by such increase, a
stockholder's notice required by this By-Law shall be considered
timely, if it shall be delivered to the Clerk at the principal
executive office of the Company not later than the close of business
on the 10th day following the day on which such public announcement is
first made by the Company.
B. SPECIAL MEETINGS OF STOCKHOLDERS. Only such business
shall be conducted at a special meeting of stockholders as shall have
been specified in the Company's notice of meeting.
C. GENERAL. (1) Only such persons who are nominated in
accordance with the procedures set forth in this By- Law shall be
eligible to be elected as Directors at an annual meeting or special
meeting in lieu thereof, and only such business shall be conducted at
a meeting of stockholders as shall have been brought before the
meeting in accordance with the procedures and requirements set forth
in this By-Law. Except as otherwise provided by law, the Articles of
Organization, or these By-Laws, the Chairman of the meeting shall have
the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made or proposed, as the
case may be, in accordance with applicable law and the procedures and
requirements set forth in this By-Law, and, if any proposed nomination
or business is not in compliance with applicable law and this By-Law,
to declare that such defective nomination or proposal shall be
disregarded.
(2) A stockholder proposal of business that the
Company is required under Rule 14a-8 under the Exchange Act to set
forth in its proxy statement for an annual meeting or special meeting
in lieu thereof shall be subject to the requirements of this By-Law.
A stockholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with respect
to the matters set forth in this By-Law.
ARTICLE III
DIRECTORS' MEETINGS:
MEETINGS OF THE EXECUTIVE COMMITTEE
SECTION 1. MEETINGS OF DIRECTORS. A regular meeting of
the Board of Directors shall be held in every year as soon as
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<PAGE> 10
may be after the annual meeting of stockholders or any special meeting held in
lieu of such annual meeting, for the election of officers and such other
business as may properly come before the meeting.
Any other regular meetings may be held at such time as may be fixed by
the Board of Directors. Special meetings of the Board of Directors may be
called on order of the Chairman of the Board, or of the President, or any two
Directors.
Any regular or special meeting of the Board of Directors may be held
within or without the Commonwealth of Massachusetts.
SECTION 2. NOTICE. Notice of any regular or special meeting of the
Board of Directors shall be given by the Clerk, or other officer calling the
meeting orally, or by mail, telephone, cable, radio, or telegraph. Notice so
sent to a Director's usual and last known place of business or residence two
(2) days at least before the meeting shall be sufficient notice in all cases;
and any notice received by a Director in time to enable him to attend the
meeting concerning which such notice is given shall be likewise sufficient.
Notice of a meeting need not be given to any Director if a written waiver of
notice, executed by him before or after the meeting, is filed with the records
of the meeting, or to any Director who attends a meeting without protesting
prior thereto or at its commencement the lack of notice to him of the meeting.
Any business whatever may be transacted at a meeting of the Board, although it
may not have been specified in the notice or waiver of notice of the meeting.
SECTION 3. QUORUM. Four members of the Board of Directors shall
(except as otherwise provided in Section 2 of Article I hereof) constitute a
quorum for the transaction of business; but a smaller number may adjourn or
dissolve a meeting which had been called. Except as otherwise provided in or
permitted by these By-Laws, the Agreement of Association or the Articles of
Organization of the Corporation, as any of the same may be amended from time to
time, and irrespective of the existence of a vacancy or vacancies in the Board
of Directors, the vote of a majority of the Directors present at a meeting at
which a quorum is present shall be sufficient to transact all business coming
before the meeting.
SECTION 4. MEETINGS OF THE EXECUTIVE COMMITTEE. Except as the Board of
Directors may otherwise determine, the manner of conducting the business of the
Executive Committee, whether at a meeting or otherwise, including the calling
of meetings, shall be as determined from time to time by the members of such
Committee. A majority of the members of the Executive Committee in office for
the time being shall constitute a quorum for the transaction of business at a
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<PAGE> 11
meeting, but in the absence of a quorum, less than a quorum may adjourn a
meeting to another time without further notice and may dissolve a meeting.
SECTION 5. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken at any meeting of the Board of Directors may be taken without a
meeting if all the Directors consent to the action in writing and the written
consents are filed with the records of the meetings of Directors. Such
consents shall be treated as a vote for all purposes.
SECTION 6. TELEPHONIC MEETINGS. Members of the Board of Directors may
participate in any regular or special meeting of the Board of Directors by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at the same
time. Participation in a meeting by such means shall constitute presence in
person at such meeting for all purposes.
ARTICLE IV
OFFICE AND SEAL
SECTION 1. LOCATION. The Company shall have such offices in addition
to the principal office set forth in the Agreement of Association and Articles
of Organization as the Board of Directors or stockholders may from time to time
designate.
SECTION 2. SEAL. The corporate seal shall be in such form as the Board
of Directors may from time to time determine.
ARTICLE V
CAPITAL STOCK AND TRANSFER OF STOCK
SECTION 1. STOCK CERTIFICATE. Certificates of stock shall be in such
form as the Board of Directors may from time to time determine, except insofar
as such form is prescribed by law, and shall be signed by the President or a
Vice President and by the Treasurer or an Assistant Treasurer and bear the seal
of the Company, provided that when any certificate is signed by a transfer
agent or transfer clerk and by a registrar, the signature of the President or a
Vice President, or of the Treasurer or an Assistant Treasurer, or both such
signatures, or the seal of the corporation upon such certificate or either or
both such signatures and such seal may be a facsimile thereof, engraved or
printed.
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<PAGE> 12
SECTION 2. LOST OR DESTROYED CERTIFICATES. In case any stock
certificate shall be lost, mutilated or destroyed, a new certificate may be
issued in place thereof on reasonable evidence of the loss, mutilation or
destruction and upon such indemnity, if any, as the Board of Directors may
require for the Company, the Transfer Agent, and/or the Registrar.
SECTION 3. TRANSFER OF STOCK. Shares of stock shall be transferable
only on the books of the Company by assignment in writing, signed by the holder
of record thereof, his attorney legally constituted, or his legal
representatives, upon surrender of the certificate or certificates therefor.
The Company shall not be bound to take notice of or recognize any
trust, expressed, implied, or constructive, or any charge or equity affecting
any of the shares of the capital stock; or to ascertain or inquire whether any
sale or transfer of any such share by any holder of record thereof, his
attorney legally constituted, or his legal representative, is authorized by
such trust, charge or equity; or to recognize any person as having any interest
therein, except the holder of record thereof for the time being.
SECTION 4. TRANSFER AGENT AND REGISTRAR. The Board of Directors may
appoint, subject to revocation, reappointment or change, a Transfer Agent and a
Registrar of capital stock of any class, or make either one of such
appointments with respect to any class of its stock; and while any such
appointment is in force with respect to any class of its stock, no certificate
issued for stock of such class shall be valid without being countersigned by
such Transfer Agent, if one be so appointed, and registered by such Registrar,
if one be so appointed. The same person may be appointed to serve as both
Transfer Agent and Registrar.
SECTION 5. SETTING RECORD DATE AND CLOSING TRANSFER BOOKS. The Board
of Directors may fix in advance a time, which shall not be more than sixty (60)
days before the date of any meeting of stockholders or the date for the payment
of any dividend or the making of any distribution to stock holders or the last
day on which the consent or dissent of stockholders may be effectively
expressed for any purpose, as the record date for determining the stockholders
having the right to notice of and to vote at such meeting and any adjournment
thereof or the right to receive such dividend or distribution or the right to
give such consent or dissent, and in such case only stockholders of record on
such record date shall have such right, notwithstanding any transfer of stock
on the books of the Company after the record date, or without fixing such
record date, the Board of Directors may for any of such purposes close the
stock transfer books of the Company for all or any part of said sixty (60) day
period.
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<PAGE> 13
ARTICLE VI
INDEMNIFICATION
The Company shall, to the fullest extent legally permissible, indemnify
each person at any time elected or appointed a Director or officer of the
Company, each person who serves at the Company's request as a director or
officer of another organization and each person who serves at the Company's
request in any capacity with respect to any employee benefit plan against any
and all costs and expenses (including but not limited to court costs and legal
fees) reasonably incurred by, and any and all liabilities imposed upon, him in
connection with, or arising out of, or resulting from, any claim made, or any
action, suit or proceeding (whether civil, criminal, administrative or
investigative) threatened or brought, against him or in which he may be
involved as a party or otherwise by reason of his having so served or by reason
of any action taken or omitted or alleged to have been taken or omitted by him
in such capacity unless in any proceeding such person shall have been finally
adjudicated with respect to the matter or matters as to which indemnification
is sought hereunder not to have acted in good faith in the reasonable belief
that his action was in the best interest of the Company or, to the extent that
such matter or matters relate to service with respect to an employee benefit
plan, in the best interests of the participants or beneficiaries of such
employee benefit plan.
The indemnification provided hereunder shall also include the payment
by the Company from time to time of expenses incurred in defending any such
action, suit or proceeding in advance of the final disposition of such action,
suit or proceeding, upon receipt of an undertaking by or on behalf of the
person indemnified to repay such payment if he shall be adjudicated to be not
entitled to indemnification hereunder which undertaking shall be accepted
without reference to the financial ability of such person to make repayment.
The right of indemnification under this Article shall not extend to
amounts incurred or paid in connection with any matter which shall be disposed
of through a compromise payment or other settlement prior to such final
adjudication, whether by or pursuant to a consent decree or otherwise, unless
such compromise or other settlement shall be approved by the Company, which
approval shall not unreasonably be withheld, or by a court of competent
jurisdiction.
The payment of any indemnification shall be conclusively deemed
approved by the Company under this Article, and each Director of the Company
approving such payment shall be wholly protected if:
- 13 -
<PAGE> 14
(i) the payment has been approved or ratified (1) by a majority vote of
a quorum of the Directors consisting of persons who are not at that time
parties to the action, suit or proceeding, (2) by a majority vote of a
committee of two or more Directors who are not at that time parties to the
action, suit or proceeding and are selected for this purpose by the full Board
of Directors (in which selection Directors who are parties may participate) or
(3) by a majority vote of a quorum of the outstanding shares of stock of all
classes entitled to vote for Directors, voting as a single class, which
majority shall include a majority of the shares voted by stockholders who are
not at that time parties to the proceeding; or
(ii) the action is taken in reliance upon the opinion of independent
legal counsel (who may be counsel to the Company) appointed for the purpose by
vote of the Directors or in the manner specified in clauses (1), (2) or (3) of
sub-paragraph (i) above; or
(iii) the Directors have otherwise acted in accordance with the
standard of conduct set forth in the Massachusetts Business Corporation Law.
Any indemnification or advance of expenses under this Article shall be
paid promptly, and in any event within 30 days, after the receipt by the
Company of a written request therefor from the person to be indemnified, unless
with respect to a claim for indemnification the Company shall have determined
that the person is not entitled to indemnification. If the Company denies the
request or if payment is not made within such 30 day period, the person seeking
to be indemnified may at any time thereafter seek to enforce his rights
hereunder in a court of competent jurisdiction and, if successful in whole or
in part, he shall be entitled also to indemnification for the expenses of
prosecuting such action. Unless otherwise provided by law, the burden of
proving that the person is not entitled to indemnification shall be on the
Company.
The right of indemnification under this Article shall be a contract
right inuring to the benefit of the Directors, officers and other persons
entitled to be indemnified hereunder, and no amendment or repeal of this
Article shall adversely affect any right of such Director, officer or other
person existing at the time of such amendment or repeal. The right of
indemnification under this Article shall be in addition to and shall not
exclude or affect any other rights to which any such Director or officer or
other person may be entitled.
The right of indemnification under this Article shall inure to the
benefit of the heirs, executors, administrators and legal representatives of a
Director, officer or other person entitled to indemnification hereunder. The
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<PAGE> 15
indemnification provided hereunder shall be provided to a Director, officer or
other person entitled to indemnification whether or not he continues in such
capacity at the time any indemnifiable costs and expenses are incurred or any
indemnifiable liability is imposed.
ARTICLE VII
MISCELLANEOUS
SECTION 1. BONDS. The Board of Directors may from time to time
require from any one or more of the officers or agents of the Company that he
or they shall give bond for the faithful performance of duties; and the
premiums for all such bonds shall be paid by the Company.
SECTION 2. FISCAL YEAR. The fiscal year of the Company
shall, unless otherwise fixed by the Board of Directors, end
on the last day of December in every year.
SECTION 3. VOTING STOCK IN OTHER CORPORATIONS. Whenever the Company
shall own stock of another corporation, the Chairman of the Board, President, a
Vice Chairman of the Board, or Treasurer, acting either in person or by proxy,
may exercise in the name and on behalf of the Company all voting and
subscription rights thereof, but the Board may from time to time, either
generally or in any specific instance, delegate like authority to any one or
more other persons.
SECTION 4. EXECUTION OF WRITINGS. Unless the Board of Directors,
Executive Committee, or stockholders shall otherwise generally or in any
specific instance provide: (a) any bill, note, check, or negotiable instrument
shall be signed or endorsed in the name and on behalf of the Company by the
Chairman of the Board, or President, or a Vice Chairman of the Board, or a Vice
President, or Treasurer, or an Assistant Treasurer, and shall bear such
countersignature of an officer of the Company other than the officer so signing
or endorsing as may be required by the Board of Directors; and (b) any other
instrument whatsoever shall be signed in the name and on behalf of the Company
by the Chairman of the Board, or President, or a Vice Chairman of the Board, or
a Vice President, or Treasurer, or an Assistant Treasurer, and any officer so
signing any instrument may also seal, acknowledge and deliver the instrument.
SECTION 5. EXECUTION OF CERTIFICATIONS. Any action
taken by the stockholders, Board of Directors, or Executive
Committee at any meeting may be certified by the officer
whose duty it is to keep the minutes of such meeting or by
the officer or Director keeping the records thereof or
presiding thereat; and any such certificate shall be
conclusive evidence for all purposes that the action so
certified was taken.
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<PAGE> 16
SECTION 6. CONTROL SHARE ACQUISITIONS. The provisions of Chapter 110D
of the Massachusetts General Laws, Regulation of Control Share Acquisitions, as
amended from time to time, shall not apply to control share acquisitions of the
Company.
SECTION 7. AMENDMENT. These By-Laws may be altered,
added to, amended or repealed either: (1) by the stock
holders at any meeting of the stockholders by affirmative
vote of a majority in interest of the stock outstanding and
entitled to vote thereat, provided notice of the proposed
alteration, addition, amendment or repeal shall have been
given in the notice of such meeting; or (2) by the Board of
Directors at any meeting of said Board by affirmative vote of
a majority of the Directors then in office, except with
respect to any provision as to which stockholder action is
required by law, the Articles of Organization, or these By-
Laws; and further provided that not later than the time of
giving notice of the meeting of stockholders next following
any such change in the By-Laws by the Directors, notice
thereof stating such change or the substance thereof shall be
given to all stockholders entitled to vote on amending the
By-Laws.
- 16 -
<PAGE> 1
EXHIBIT 10.1
BAYBANKS, INC.
--------------
1978 Stock Option Plan for Key Employees of
-------------------------------------------
BayBanks, Inc. and Affiliates
-----------------------------
Amendment Dated as of October 27, 1994
--------------------------------------
The BayBanks, Inc. 1978 Stock Option Plan for Key Employees of
BayBanks, Inc. and Affiliates, as heretofore amended, is hereby amended
effective as of October 27, 1994, by adding a new subsection 14(e) to read as
follows:
(e) WITHHOLDING TAXES. The Corporation or an Affiliate, as
the case may be, shall have the right to deduct from amounts payable
to the Optionee, or to require the Optionee to pay, the amount of any
taxes required by law to be withheld with respect to the exercise of
Non-qualified Stock Options or Rights. In the Committee's discretion,
the Optionee may be given the right to elect that such required
withholding, as well as additional withholding with respect to such
exercise, be paid in whole or in part in shares of Common Stock,
including shares retained from those that otherwise would be delivered
to the Optionee upon such exercise, valued at their fair market value
on the date of delivery.
<PAGE> 1
EXHIBIT 10.2
As Amended 10/27/94
BAYBANKS, INC.
1988 Stock Option Plan for Key Employees of
-------------------------------------------
BayBanks, Inc. and Affiliates
-----------------------------
1. PURPOSE.
--------
The purpose of this Stock Option Plan (the "Plan"), is to provide an
incentive to Eligible Employees, as hereinafter defined, of BayBanks, Inc. (the
"Corporation") and its bank and other Affiliates, as hereinafter defined, which
will stimulate their efforts on behalf of the Corporation and its Affiliates
and strengthen their desire to remain with the Corporation or its Affiliates.
2. STOCK SUBJECT TO THE PLAN.
--------------------------
The stock subject to the options and other provisions of the Plan
shall be the Common Stock, $2.00 par value, of the Corporation. The total
amount of shares of such stock which may be issued pursuant to options under
the Plan shall not exceed an aggregate of 800,000 shares (except as such amount
may be adjusted in accordance with the provisions of Section 8 hereof). Such
shares may be either unissued shares or reacquired shares. No option may be
granted which if exercised would cause the total number of shares issued and
issuable under the Plan to exceed such maximum limit.
<PAGE> 2
If options lapse for any reason, new options may be granted from time
to time for the purchase of such number of shares as were subject to such
lapsed options.
3. ELIGIBILITY.
------------
For all purposes of the Plan, the term "Eligible Employee" shall mean
any key employee of the Corporation or any Affiliate. No director of the
Corporation or of an Affiliate who is not an officer or salaried employee of
the Corporation or of an Affiliate shall be an Eligible Employee.
4. ADMINISTRATION OF THE PLAN.
---------------------------
The Plan shall be administered by a Stock Option Committee (the
"Committee") appointed by, and to serve at the pleasure of, the Board of
Directors of the Corporation and consisting of three or more disinterested
directors. The Committee shall have authority, subject to the express
provisions hereof, to determine (i) the present and future Eligible Employees
who are to receive options hereunder and the number and option price of shares
to be covered by each such option, and (ii) the time or times when each option
shall become exercisable in whole or in part. A director shall be deemed to be
a disinterested director only if he is not eligible to receive options under
this Plan at the time such determinations are made by the Committee and has not
at any time within one year prior thereto been eligible to receive options
under this Plan or any other plan of the Corporation or any of its Affiliates
entitling the participants therein to acquire stock, stock options or stock
appreciation rights of the Corporation or any of its Affiliates. The Committee
shall also have authority to adopt rules and
- 2 -
<PAGE> 3
regulations for carrying out the Plan and to interpret, construe, implement and
otherwise administer the provisions of the Plan. Decisions of the Committee
shall be final. A majority of the Committee shall constitute a quorum. The
acts of a majority of the members present at any meeting at which a quorum is
present (or acts approved in writing by a majority of the Committee) shall be
the acts of the Committee. The Committee shall keep minutes of its proceedings
and from time to time make such reports to the Board of Directors as the Board
shall direct.
5. EFFECTIVE DATE.
---------------
The Effective Date of the Plan shall be the date upon which the Plan
is adopted by the Board of Directors of the Corporation. The Plan shall
terminate if it is not approved within twelve months after the Effective Date
by vote of the holders of a majority of the stock of the Corporation present in
person or by proxy and entitled to vote at a special or annual meeting of the
stockholders of the Corporation.
6. TERMS AND CONDITIONS OF STOCK OPTIONS.
--------------------------------------
Stock options granted pursuant to the Plan shall be designated by the
Committee either as "Non-qualified Stock Options" or as "Incentive Stock
Options". Incentive Stock Options granted pursuant to the Plan are intended to
comply with the provisions of Section 422(b) of the Internal Revenue Code and
shall be construed by the Committee in accordance with such provisions.
Each stock option granted pursuant to the Plan shall be evidenced by
a written option agreement, in form not inconsistent with the Plan, duly
executed and delivered on behalf of the
- 3 -
<PAGE> 4
Corporation and by the individual to whom the option is granted (the
"Optionee").
6.1 Non-Qualified Stock Options
---------------------------
Option agreements with respect to Non-qualified Stock Options shall
contain in substance the following terms and conditions:
(a) PRICE. The option price per share shall be as determined by the
Committee from time to time but in no instance shall it be less than 100% of
the fair market value of the Common Stock of the Corporation on the date an
option is granted. Such fair market value shall be as determined by the
Committee in good faith.
(b) NUMBER OF SHARES. The option agreement shall specify the number
of shares to which it pertains.
(c) PERIOD FOR EXERCISE. At the time an option is granted, the
Committee in its discretion shall determine the time or times when the option
will become exercisable in whole or in part, and this time or these times shall
be specified in the option agreement except that any option may be made fully
exercisable as to all or part of the entire then remaining balance of shares
covered by it upon determination by the Committee that such earlier exercise
would be advisable owing to the death or retirement of the Optionee or physical
or mental disability preventing the Optionee from performing the Optionee's
regular duties. All or any part of the number of whole shares with respect to
which such right to purchase has accrued may be purchased at the time of such
accrual or at any time thereafter before the tenth anniversary of the date on
which the option is
- 4 -
<PAGE> 5
granted or such earlier expiration date as may be determined by the Committee
and specified in the option agreement. Each option shall expire completely,
however, to the extent that it is not exercised before the tenth anniversary of
the date it was granted or such earlier expiration date as may be determined by
the Committee and specified in the option agreement.
(d) TRANSFERABILITY. No option shall be assignable or transferable
by the Optionee except by will or under the laws of descent and distribution,
and during the life of an Optionee, the option shall be exercisable only by the
Optionee.
(e) EXERCISE AND PAYMENT. An Optionee electing to exercise an
option shall give written notice of such election to the Corporation specifying
the option agreement under which the option was granted and the number of whole
shares as to which the exercise is being made. Such notice shall be
accompanied by payment in full in cash of the purchase price for the number of
shares as to which the exercise relates, except that in the discretion of the
Committee, payment of such purchase price may be made in whole or in part by
the transfer to the Corporation of shares of the Common Stock of the
Corporation valued at their fair market value on the date of exercise, as
determined by the Committee. Upon receipt of such notice and payment the
Corporation shall promptly issue and deliver to the Optionee (or other person
entitled to exercise the option) a certificate or certificates for such number
of shares.
(f) DEATH. Any option, if not expired, shall be exercisable at any
time within twelve months after the date of the Optionee's death by the
executor or administrator of the
- 5 -
<PAGE> 6
estate of the Optionee or by the legatees or heirs of the Optionee, whichever
may be entitled, but only if and to the extent that the option might have been
exercised by the Optionee at the date of his or her death, or as determined by
the Committee under the provisions of Section 6.1(c) hereof, and in no case
after the option has expired.
(g) TERMINATION OF EMPLOYMENT OTHER THAN BY DEATH. If the
employment of an Optionee with the Corporation or an Affiliate is terminated
because of retirement or physical or mental disability preventing the Optionee
from performing his or her regular duties, the option, if not expired, may be
exercised by the Optionee at any time within three months after the date of
such termination, but only if and to the extent that the Optionee was entitled
to exercise the option at the time of such termination, or as determined by the
Committee under the provisions of Section 6.1(c) hereof, and in no case after
the option has expired, except that in the case of an employee who is
permanently and totally disabled because of an inability to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than
twelve months, the three month period shall be six months.
If the employment of an Optionee with the Corporation or an Affiliate
shall terminate for any reason other than death, retirement, or physical or
mental disability preventing the Optionee from performing the Optionee's
regular duties, all rights to purchase shares pursuant to his or her option
- 6 -
<PAGE> 7
(including rights to purchase shares thereunder which have accrued but which
then remain unexercised) shall forthwith cease and terminate on the date of
such termination.
(h) LEAVE OF ABSENCE. The Committee shall determine whether an
authorized leave of absence shall constitute a termination of employment for
the purposes of the Plan and the terms respecting continuance and exercise of
an option in any such case except that no such determination by the Committee
shall permit an option to be exercised after the expiration of its term.
(i) TERMINATION DUE TO CONSOLIDATION OR MERGER. The Committee may
cause an option agreement to contain a provision that the Corporation in its
discretion may give an Optionee not less than thirty days written notice of a
proposed consolidation or merger affecting the Corporation, such notice to
state either (A) that (i) it is given to cause the option to be exercised or
terminated, (ii) the Optionee may exercise during a thirty day period after the
sending of such notice, and not after the expiration of the term of the
Optionee's option, any part or all of his or her option not previously
exercised, whether or not, in the absence of such notice, it might have been
exercised in such thirty day period, and (iii) all of said option not exercised
within such thirty-day period shall be cancelled or (B) that the Corporation
will at or before the time any such consolidation and merger takes place
terminate such option and pay to the Optionee in cash the amount, if any, by
which the value per share to be received by the holders of the Corporation's
Common Stock (after giving effect to any such payment to the holders of
options) in
- 7 -
<PAGE> 8
such consolidation or merger, as determined by the Board of Directors, exceeds
the option price multiplied by the number of shares covered by such option.
(j) SECURITIES AND OTHER LAWS. In any case where in the opinion of
the Committee the issue and delivery of shares upon the exercise of an option
would violate requirements of Federal or state securities or other laws, the
Corporation shall be entitled to postpone such issue and delivery until such
requirements have been complied with.
Each option agreement shall contain such provisions as the Committee
shall require in order to insure compliance with Federal or state securities or
other laws. Any representation or agreement required by the Committee for that
purpose, such as a representation or agreement that the Optionee is acquiring
shares for investment and not for distribution or resale, may contain
provisions to the effect that it shall not prevent or restrict resales of the
shares in conformity with such laws.
(k) RIGHTS AS STOCKHOLDER. No Optionee shall have any rights as a
stockholder with respect to any shares covered by his or her option until the
date of issuance of a stock certificate to the Optionee for such shares. No
adjustment shall be made for dividends or other rights for which the record
date is prior to the date such stock certificate is issued.
(1) OTHER PROVISIONS. An option agreement may contain such other
terms, provisions and conditions as are not inconsistent with the Plan.
- 8 -
<PAGE> 9
6.2 Incentive Stock Options
-----------------------
Option agreements with respect to Incentive Stock Options shall
contain in substance the same terms and conditions as those with respect to
Non-qualified Stock Options.
6.3 Change in Control
-----------------
Notwithstanding the preceding provisions of this Section 6, any
agreements evidencing options granted under this Plan or Rights granted
pursuant to Section 10 hereof may contain such provisions as the Committee
shall approve permitting all or some part of the options or Rights evidenced by
such agreements to be exercised at any time after a Change in Control of the
Corporation even though such options or Rights have not yet become exercisable
under the other provisions of such agreements and even though such Change in
Control of the Corporation occurs less than two years after the date such
options or Rights were granted. However, no provisions included in an
agreement pursuant to this Section 6.3 shall permit exercising any option or
Right after the expiration date thereof specified in such agreement.
Provisions so included may contain such limitations and conditions as the
Committee shall determine, applying to the exercise of options and Rights
pursuant thereto. The provisions authorized by this Section 6.3 may be
incorporated in agreements evidencing options or Rights to be granted or, by
amendment, in existing agreements.
A "Change in Control" of the Corporation shall be deemed to
have occurred upon the occurrence of any of the following:
- 9 -
<PAGE> 10
(a) Any transaction or series of transactions, as a result of
which any "person" (as defined in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder) (a "Person") is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under such act),
directly or indirectly, of securities of the Corporation
representing thirty percent (30%) or more of the combined
voting power of the Corporation's then outstanding voting
securities (the "Corporation's Outstanding Voting
Securities"); provided, however, that a Change in Control
shall not be deemed to have occurred solely because of the
acquisition of securities of the Corporation by (i) one or
more employee benefit plans or related trusts established for
the benefit of the employees of the Corporation or any
Affiliate of the Corporation; or (ii) any Person when such
acquisition (A) is effected primarily to prevent the
Corporation from being declared insolvent and (B) is approved
by the Board of Directors of the Corporation (the "Board").
(b) Any change in the membership of the Board such that
individuals who are Incumbent Directors (as defined herein)
cease for any reason to constitute at least a majority of the
Board. The Incumbent Directors shall be (i) those members of
the Board who were Directors as of October 27, 1994, and who
have served continuously as Directors since such date, and
(ii) any other member
- 10 -
<PAGE> 11
of the Board who subsequently became a Director and whose
election or nomination for election by the Corporation's
stockholders at the beginning of his or her current tenure was
approved by a vote of at least a majority of the Directors who
were then Incumbent Directors, except that no individual shall
be an Incumbent Director if such individual's initial
assumption of office as a Director occurred as a result of an
actual or threatened election contest with respect to the
election or removal of Directors, or other actual or
threatened solicitation of proxies or consents, by, or on
behalf of, a Person other than the Board.
(c) The approval by the Corporation's stockholders of a
reorganization, merger, consolidation, sale or other
disposition of all or substantially all of the assets of the
Corporation, or similar transaction (a "Business
Combination"), unless all of the following conditions are met,
with such conditions being applied as of the date of such
approval as if the Business Combination were consummated on
such date on the terms then specified in the agreement or plan
providing for the Business Combination:
(i) the individuals and entities who are the beneficial
owners of the Corporation's Outstanding Voting
Securities as of the date of such approval would
beneficially own, directly or indirectly, securities
representing more than 50% of the
- 11 -
<PAGE> 12
outstanding combined voting power of the voting
securities that would be outstanding and entitled to
vote generally in the election of the governing body
of the corporation or other entity resulting from
such Business Combination (including, without
limitation, a corporation or other entity that as a
result of such transaction would own the
Corporation or all or substantially all of the
Corporation's assets, either directly or through one
or more subsidiaries) (the "Resulting Entity"), and
the securities of the Resulting Entity that would be
owned by such beneficial owners of the Corporation's
Outstanding Voting Securities would be owned by them
in substantially the same proportions as they own
the Corporation's Outstanding Voting Securities;
(ii) no Person (excluding any corporation or other entity
resulting from such Business Combination, and
excluding any employee benefit plan or related trust
of the Corporation or of such corporation or other
entity resulting from such Business Combination)
would beneficially own, directly or indirectly, 30%
or more of the combined voting power of the
outstanding voting securities of the Resulting Entity
except to the extent that such ownership existed
prior to the Business Combination; and
- 12 -
<PAGE> 13
(iii) at least a majority of the members of the board of
directors of the Resulting Entity would be persons
who were Incumbent Directors at the time of the
execution of the initial agreement or of the action
of the Board providing for such Business Combination.
(d) Approval by the Corporation's stockholders of a liquidation or
dissolution of the Corporation (unless the liquidation or
dissolution is part of a Business Combination excepted from
clause (c) above).
(e) The close of business on the latest of the following dates:
(i) the date that a tender or exchange offer by any
Person (other than the Corporation, any Affiliate of
the Corporation, or any employee benefit plan or
related trust established for the benefit of the
employees of the Corporation or any Affiliate of the
Corporation) that, if consummated, would result in
such Person becoming a "beneficial owner" (as defined
in clause (a) above), directly or indirectly, of
securities of the Corporation representing thirty
percent (30%) or more of the combined voting power of
the Corporation's then outstanding voting securities,
is first published or sent or given within the
meaning of Rule 14d-2(a) of the Securities Exchange
Act of 1934, as amended, and the rules and
regulations thereunder;
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<PAGE> 14
(ii) the date upon which all regulatory approvals required
for the acquisition of securities pursuant to the
tender or exchange offer referred to in clause (i)
have been obtained or waived; or
(iii) the date upon which any approval of the security
holders of the Person publishing or sending or giving
the tender or exchange offer referred to in clause
(i) required for the acquisition of securities
pursuant to such tender or exchange offer is obtained
or waived.
7. WITHHOLDING TAXES.
------------------
The Corporation or an Affiliate, as the case may be, shall have the
right to deduct from amounts payable to the Optionee, or to require the
Optionee to pay, the amount of any taxes required by law to be withheld with
respect to the exercise of Non-qualified Stock Options or Rights. In the
Committee's discretion, the Optionee may be given the right to elect that such
required withholding, as well as additional withholding with respect to such
exercise, be paid in whole or in part in shares of Common Stock, including
shares retained from those that otherwise would be delivered to the Optionee
upon such exercise, valued at their fair market value on the date of delivery;
provided that the use of Common Stock to pay required withholding with respect
to the exercise of Non-qualified Stock Options granted before October 27, 1994
shall not be subject to the discretion of the Committee, consistent with the
terms of the Stock Option Agreements outstanding as of the aforementioned date.
- 14 -
<PAGE> 15
8. ADJUSTMENT IN NUMBER OF SHARES AND OPTION PRICE.
------------------------------------------------
In the event that there are any changes in the outstanding Common
Stock of the Corporation by reason of stock dividends, split-ups,
recapitalizations, mergers, consolidations, combinations, or exchanges of
shares or the like, the aggregate number and kind of shares available under the
Plan, the number and kind of shares subject to each outstanding option, and the
option price, shall be appropriately adjusted by the Committee, if necessary,
to reflect equitably such change or changes. The determination of the
Committee shall be conclusive.
9. OPTIONS IN SUBSTITUTION FOR STOCK OPTIONS
GRANTED BY OTHER CORPORATIONS.
-----------------------------------------
Options may be granted under the Plan from time to time in
substitution for stock options held by employees of other corporations who are
about to become key employees of the Corporation or an Affiliate as the result
of such other corporation becoming an Affiliate or the acquisition by the
Corporation or an Affiliate of the assets of such other corporation. The terms
and conditions of the substitute options so granted may vary from the terms and
conditions set forth in Section 6 hereof, as appropriate, to such extent as the
Committee at the time of grant may deem appropriate to conform, in whole or in
part, to the provisions of the options in substitution for which they are
granted.
10. STOCK APPRECIATION RIGHTS.
--------------------------
(a) Stock appreciation rights ("Rights") may be granted under the
Plan by and in the discretion of the Committee in accordance with the
provisions of this Section 10.
- 15 -
<PAGE> 16
(b) Rights may be granted in connection with any stock option
granted or to be granted under the Plan. In addition, Rights may be granted
separately, without being connected with any stock option, in any case where a
stock option could be granted under the Plan. Rights connected with stock
options may be granted either at the time of the grant of the option or at any
time thereafter during the term of the option.
(c) Each Right shall when exercised entitle the holder to the same
rights as a stock option for one share of Common Stock, except that a holder of
Rights, instead of purchasing shares of Common Stock, shall be entitled to an
amount determined and payable as provided in (g) below.
(d) Rights shall be evidenced in the same manner as stock options
granted under the Plan by an agreement between the Corporation and the holder
stating the date of grant, the number of Rights, the option price per share,
and the period or periods during which the Rights shall be exercisable; and
otherwise containing such provisions and restrictions as the Plan requires or
the Committee shall determine. Except as specifically permitted in agreements
evidencing Rights, no Rights shall be exercisable without the approval of the
Committee in each instance, and each agreement evidencing Rights shall so
provide.
(e) Rights not connected with stock options shall be subject to all
the provisions of the Plan applying to stock options, and shall contain the
same provisions as would be required in the case of such options, with the sole
exception that upon the exercise of Rights the holder shall receive a payment
as herein provided instead of purchasing shares.
- 16 -
<PAGE> 17
(f) Rights connected with stock options shall have the same option
price and shall be exercisable to the same extent and during the same period or
periods as the related stock option, subject to approval by the Committee as
herein provided, and to any limitations imposed by the Committee when such
Rights are granted; provided that no Rights shall be exercisable within six
months after the date they are granted. However, such restriction on exercise
shall cease to apply if the holder's employment is terminated before the end of
the six-month period because of death or disability. Rights connected with
stock options shall otherwise be governed by the terms of such options and the
provisions of the Plan applying to such options. Upon exercise of Rights
connected with stock options or stock options connected with Rights, the holder
shall be deemed to have surrendered an equal number of options, if Rights are
exercised, or of Rights, if options are exercised; and the Rights or options so
surrendered shall thereupon cease to be exercisable.
(g) Upon exercise of Rights the holder shall be entitled to receive,
for each Right exercised, an amount equal to the fair market value per share of
the Common Stock of the Corporation on the date of exercise, minus the option
price per share stated in the Right. The total amount due the holder upon the
exercise of Rights shall be paid in cash or in shares of Common Stock of the
Corporation at their fair market value on the date of exercise, or partly in
cash and partly in shares of Common Stock, all as the Committee in its sole
discretion shall determine. The fair market value of the Common Stock on the
date of exercise shall be as determined by the Committee.
- 17 -
<PAGE> 18
(h) The number of stock options and Rights authorized to be granted
under the Plan is limited so that the total number of shares of stock issued on
the exercise of options granted under the Plan plus the total number of Rights
exercised shall not exceed the total number of shares of Common Stock
authorized for the Plan. Accordingly, the exercise of Rights shall have the
same effect for the purposes of Section 2 hereof as the exercise of stock
options for a number of shares equal to the number of Rights exercised.
11. EMPLOYMENT.
----------
Nothing in the Plan or in any options or Rights granted pursuant to
the Plan shall confer on any Optionee or holder any right to continue in the
employ of the Corporation or any of its Affiliates, or interfere in any way
with the right of the Corporation or any of its Affiliates to terminate his or
her employment at any time as freely as if no option or Right had been granted
and no Plan had been in existence.
12. TERM OF PLAN.
-------------
Unless sooner terminated the Plan shall terminate ten years from the
Effective Date and no option shall be granted thereafter.
13. AMENDMENT AND TERMINATION OF PLAN.
----------------------------------
The Plan may be terminated at any time by vote of the holders of a
majority of the stock of the Corporation present in person or by proxy and
entitled to vote at a special or annual meeting of the stockholders of the
Corporation or by the Board of Directors of the Corporation, provided, however,
that no outstanding option may be terminated other than pursuant to
- 18 -
<PAGE> 19
Section 5 or Section 6.1(i) above. The Board of Directors of the Corporation
may make such amendments to the Plan, and with the consent of the Optionee or
the holder of Rights, to the terms and conditions of his or her option or
Rights, as it shall deem advisable, but may not, without approval by vote of
the holders of a majority of the stock of the Corporation present in person or
by proxy and entitled to vote at a special or annual meeting of the
stockholders of the Corporation, (i) increase the maximum number of shares as
to which options may be granted under the Plan, except as provided in Section
8, or (ii) extend the last date for the grant or exercise of options or (iii)
reduce the price at which options may be granted, or (iv) withdraw the
administration of the Plan from a committee of three or more disinterested
directors of the Corporation.
14. USE OF PROCEEDS.
----------------
The proceeds derived from the sale of stock pursuant to options
granted under the Plan shall constitute general funds of the Corporation
available for all corporate purposes.
15. MISCELLANEOUS.
--------------
(a) TRANSFER OF EMPLOYMENT. The transfer of employment of an
employee from the Corporation to an Affiliate or from an Affiliate to the
Corporation or to another Affiliate shall not constitute a termination of
employment for the purposes of the Plan.
(b) DEFINITION OF AFFILIATE. For all purposes of the Plan the term
"Affiliate" means any corporation which is either a "Parent Corporation" or a
"Subsidiary Corporation" of the
- 19 -
<PAGE> 20
Corporation, as those terms are defined in Sections 424(e) and 424(f),
respectively, of the Internal Revenue Code.
(c) INTERNAL REVENUE CODE REFERENCES. Except where otherwise
indicated, references in this Plan to sections of the Internal Revenue Code
shall include any amendments thereto and subsequently enacted sections of the
Internal Revenue Code which replace or correspond to the sections referred to
in this Plan.
(d) ENFORCEMENT.* After a Change in Control, the Corporation
shall pay all reasonable legal fees, costs, and other expenses incurred by a
holder of options or Rights in enforcing rights under this Plan or the
agreement evidencing such options or Rights.
- - - - - ----------------------------------
* This subsection does not apply to officers of the Corporation who are subject
to the provisions of Section 16 of the Securities Exchange Act of 1934.
- 20 -
<PAGE> 1
EXHIBIT 10.3
As Amended 10/27/94
BAYBANKS, INC.
--------------
1982 Restricted Stock Plan for Key Employees of
-----------------------------------------------
BayBanks, Inc. and Affiliates
-----------------------------
1. PURPOSE.
- - - - - -----------
The purpose of this Restricted Stock Plan (the "Plan") is to attract,
motivate and retain outstanding individuals as employees of BayBanks, Inc. (the
"Corporation") and its bank and other Affiliates, as hereinafter defined, and
to reward those who make substantial contributions to the success and welfare
of the Corporation and the benefit of the Corporation's stockholders.
2. STOCK SUBJECT TO THE PLAN.
- - - - - -----------------------------
The stock which may be granted under the Plan shall be the Common
Stock, $2.00 par value, of the Corporation. The maximum total number of shares
of such stock which may be issued under the Plan shall be 400,000 shares
(except as such amount may be adjusted in accordance with the provisions of
Section 9 hereof). Such shares may be either unissued shares or reacquired
shares. No more than a total of 60,000 shares shall be granted under the Plan
to any one participant.
If previously awarded shares revert to the Corporation by reason of
termination of employment during the applicable Restriction Period, or for any
other reason, such shares may again be awarded under the Plan.
<PAGE> 2
3. ELIGIBILITY AND PARTICIPATION.
- - - - - ---------------------------------
Participants in the Plan shall consist of those key employees of the
Corporation and its Affiliates to whom the Committee may, from time to time,
make grants of Restricted Stock, as hereinafter defined, provided, however,
that each participant must have been employed by the Corporation or an
Affiliate for a period of at least six months immediately preceding the date of
such grant. No director of the Corporation or an Affiliate who is not an
officer or salaried employee of the Corporation or an Affiliate shall be
eligible to be a participant in the Plan. Committee selection of a participant
in any year shall neither preclude nor require selection of such person to
participate in any other year, or, if so selected, require that the participant
receive the same type or amount of award as in any other year, or as may be
received by any other participant in any year. Neither the Plan nor any action
taken under the Plan shall be construed as giving any participant the right to
be retained in the employ of the Corporation or an Affiliate.
4. ADMINISTRATION OF THE PLAN.
- - - - - ------------------------------
The Plan shall be administered by a Committee (the "Committee")
appointed by, and to serve at the pleasure of, the Board of Directors of the
Corporation and consisting of three or more disinterested directors. Until the
Board of Directors shall otherwise determine the Committee shall be the
Corporate Compensation Committee. Subject to the express provisions hereof,
the Committee shall have sole and complete authority to
- 2 -
<PAGE> 3
make grants of Restricted Stock. Such authority shall include but not be
limited to selecting participants, determining the number of shares of Common
Stock (subject to the limitations in Section 2 hereof) to be granted to each of
the participants under the Plan and the terms and conditions under which such
grants shall be made, and determining the duration of each Restriction Period.
A director shall be deemed to be a disinterested director only if he is
not eligible at the time such determinations are made by the Committee and has
not at any time within one year prior thereto been eligible for selection as a
person to whom stock may be allocated or to whom stock options or stock
appreciation rights may be granted pursuant to this Plan or any other plan of
the Corporation or any of its Affiliates entitling the participants therein to
acquire stock, stock options or stock appreciation rights of the Corporation or
any of its Affiliates. The Committee shall also have authority to adopt rules
and regulations for carrying out the Plan and to interpret, construe, implement
and otherwise administer the provisions of the Plan. Decisions of the Committee
shall be final. A majority of the Committee shall constitute a quorum. The
acts of a majority of the members present at any meeting at which a quorum is
present (or acts approved in writing by a majority of the Committee) shall be
the acts of the Committee. The Committee shall keep minutes of its proceedings
and from time to time make such reports to the Board of Directors as the Board
shall direct.
- 3 -
<PAGE> 4
5. EFFECTIVE DATE.
- - - - - ------------------
The Effective Date of the Plan shall be the date upon which the Plan is
adopted by the Board of Directors of the Corporation. The Plan shall terminate
if it is not approved within twelve months after the Effective Date by vote of
the holders of a majority of the stock of the Corporation present in person or
by proxy and entitled to vote at a special or annual meeting of the
stockholders of the Corporation.
6. TERMS AND CONDITIONS OF GRANTS.
- - - - - ----------------------------------
6.1. Grants under the Plan shall consist of Restricted Stock which
shall be shares of Common Stock of the Corporation transferred to participants
in furtherance of the purposes of the Plan without, unless otherwise provided,
other payment and subject to the restrictions referred to in this Section 6.
All shares of Restricted Stock granted to participants under the Plan shall be
so granted solely for, and in consideration of, past services rendered to the
Corporation or an Affiliate and shall be subject to the following terms and
conditions and to such other terms and conditions, not inconsistent with the
Plan, as shall be prescribed by the Committee in its sole discretion and as
shall be contained in the Agreement referred to in Section 6.1(d) hereof.
(a) At the time of a grant of shares of Restricted Stock to a
participant, the Committee shall establish for all such shares (or, if it is
the intent that the total of such shares shall be divided into separate parts,
for each part of such total) a period of time (the "Restriction Period")
commencing with the date of the grant of such shares during which
- 4 -
<PAGE> 5
time the shares may not be sold, assigned, transferred, pledged or otherwise
encumbered, except as herein provided. Different Restriction Periods may be
fixed for different parts of the shares that are being granted to a
participant, and the Restriction Period for one grant may differ from the
Restriction Period of other grants. Except for such restrictions, the
participant as owner of such Restricted Stock shall have all the rights of a
stockholder including but not limited to the right to receive all dividends
paid on such Restricted Stock and the right to vote such Restricted Stock. The
restrictions shall terminate upon the earliest to occur of the expiration of
the Restriction Period or the participant's death, disability, or retirement.
The Agreement referred to in Section 6.1(d) hereof may be amended at any time
to modify the Restriction Period with respect to any shares of Restricted Stock
the restrictions on which have not then lapsed.
(b) If a participant ceases to be an employee of the
Corporation or an Affiliate, for any reason except death, disability, or
retirement, all shares of Restricted Stock theretofore granted to him, which
are still subject to the restrictions imposed under this Section 6, shall,
except as provided in Section 7 hereof, upon such termination of employment be
forfeited and returned to the Corporation unless the Committee, in its
discretion, otherwise determines.
(c) Each certificate issued in respect of shares of
Restricted Stock granted under the Plan shall be registered in the name of the
participant and deposited by him, together with a
- 5 -
<PAGE> 6
stock power endorsed in blank, with the Corporation and shall bear the
following (or a similar) legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms, conditions and
restrictions (including forfeiture) contained in a Plan and an
Agreement between the registered owner and BayBanks, Inc. A copy of
such Plan and Agreement will be furnished to the holder of this
certificate upon written request and without charge."
(d) The participant shall enter into an Agreement with the
Corporation, in form not inconsistent with the Plan, agreeing to the terms and
conditions of the grant and such other matters as the Committee shall in its
sole discretion determine.
(e) Upon the termination of the restrictions imposed under
this Section 6, the Corporation shall return to the participant (or his legal
representative, beneficiary or heir) certificates, without a legend, for the
shares of Common Stock deposited with it pursuant to subsection (c) hereof.
6.2. The Corporation or an Affiliate, as the case may be, shall have
the right to deduct from amounts payable to the participant, or to require the
participant to pay, the amount of any taxes required by law to be withheld with
respect to such Restricted Stock. In the Committee's discretion, the
participant may be given the right to elect that such required withholding, as
well as additional withholding with respect to such Restricted Stock, be paid
in whole or in part in shares of Common Stock, including shares retained from
the grant creating the tax
- 6 -
<PAGE> 7
obligation, valued at their fair market value on the date of delivery.
6.3. No rights or interests of a participant under the Plan may be
assigned, encumbered or transferred except by will or the laws of descent and
distribution.
7. LAPSE OF RESTRICTIONS.
- - - - - -------------------------
In the event of death, disability or retirement of a participant, all
restrictions on the Restricted Stock of such participant shall lapse. Also,
the Committee, in its discretion, may include in the Agreement referred to in
Section 6.1(d) hereof provisions permitting restrictions on Restricted Stock to
lapse, in whole or in part, upon a Change in Control of the Corporation. A
"Change in Control" of the Corporation shall be deemed to have occurred upon
the occurrence of any of the following:
(a) Any transaction or series of transactions, as a result of
which any "person" (as defined in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder) (a
"Person") is or becomes a "beneficial owner" (as defined in Rule 13d-3 under
such act), directly or indirectly, of securities of the Corporation
representing thirty percent (30%) or more of the combined voting power of the
Corporation's then outstanding voting securities (the "Corporation's
Outstanding Voting Securities"); provided, however, that a Change in Control
shall not be deemed to have occurred solely because of the acquisition of
securities of the Corporation by (i) one or more employee benefit plans or
related trusts established for the benefit of the employees of the Corporation
or any Affiliate of the Corporation; or (ii) any
- 7 -
<PAGE> 8
Person when such acquisition (A) is effected primarily to prevent the
Corporation from being declared insolvent and (B) is approved by the Board of
Directors of the Corporation (the "Board").
(b) Any change in the membership of the Board such that
individuals who are Incumbent Directors (as defined herein) cease for any
reason to constitute at least a majority of the Board. The Incumbent Directors
shall be (i) those members of the Board who were Directors as of October 27,
1994, and who have served continuously as Directors since such date, and (ii)
any other member of the Board who subsequently became a Director and whose
election or nomination for election by the Corporation's stockholders at the
beginning of his or her current tenure was approved by a vote of at least a
majority of the Directors who were then Incumbent Directors, except that no
individual shall be an Incumbent Director if such individual's initial
assumption of office as a Director occurred as a result of an actual or
threatened election contest with respect to the election or removal of
Directors, or other actual or threatened solicitation of proxies or consents,
by, or on behalf of, a Person other than the Board.
(c) The approval by the Corporation's stockholders of a
reorganization, merger, consolidation, sale or other disposition of all or
substantially all of the assets of the Corporation, or similar transaction (a
"Business Combination"), unless all of the following conditions are met, with
such conditions being applied as of the date of such approval as if the
Business Combination were consummated on such date on the
- 8 -
<PAGE> 9
terms then specified in the agreement or plan providing for the Business
Combination:
(i) the individuals and entities who are the beneficial
owners of the Corporation's Outstanding Voting
Securities as of the date of such approval would
beneficially own, directly or indirectly, securities
representing more than 50% of the outstanding
combined voting power of the voting securities that
would be outstanding and entitled to vote generally
in the election of the governing body of the
corporation or other entity resulting from such
Business Combination (including, without limitation,
a corporation or other entity that as a result of
such transaction would own the Corporation or all or
substantially all of the Corporation's assets, either
directly or through one or more subsidiaries) (the
"Resulting Entity"), and the securities of the
Resulting Entity that would be owned by such
beneficial owners of the Corporation's Outstanding
Voting Securities would be owned by them in
substantially the same proportions as they own the
Corporation's Outstanding Voting Securities;
(ii) no Person (excluding any corporation or other entity
resulting from such Business Combination, and
excluding any employee benefit plan or related trust
of the Corporation or of such corporation or other
entity resulting from such Business
- 9 -
<PAGE> 10
Combination) would beneficially own, directly or
indirectly, 30% or more of the combined voting power
of the outstanding voting securities of the Resulting
Entity except to the extent that such ownership
existed prior to the Business Combination; and
(iii) at least a majority of the members of the board of
directors of the Resulting Entity would be persons
who were Incumbent Directors at the time of the
execution of the initial agreement or of the action
of the Board providing for such Business Combination.
(d) Approval by the Corporation's stockholders of a
liquidation or dissolution of the Corporation (unless the liquidation or dis-
solution is part of a Business Combination excepted from clause (c) above).
(e) The close of business on the latest of the following
dates:
(i) the date that a tender or exchange offer by any
Person (other than the Corporation, any Affiliate of
the Corporation, or any employee benefit plan or
related trust established for the benefit of the
employees of the Corporation or any Affiliate of the
Corporation) that, if consummated, would result in
such Person becoming a "beneficial owner" (as defined
in clause (a) above), directly or indirectly, of
securities of the Corporation representing thirty
percent (30%) or more of the
- 10 -
<PAGE> 11
combined voting power of the Corporation's then out-
standing voting securities, is first published or
sent or given within the meaning of Rule 14d-2(a)
of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder;
(ii) the date upon which all regulatory approvals required
for the acquisition of securities pursuant to the
tender or exchange offer referred to in clause (i)
have been obtained or waived; or
(iii) the date upon which any approval of the security
holders of the Person publishing or sending or giving
the tender or exchange offer referred to in clause
(i) required for the acquisition of securities
pursuant to such tender or exchange offer is obtained
or waived.
8. SECURITIES AND OTHER LAWS.
- - - - - -----------------------------
In any case where in the opinion of the Committee, the issue and/or
delivery of shares of Common Stock under the Plan would violate requirements of
Federal or state securities or other laws, or the requirements of any exchange
on which the securities are listed, the Corporation shall be entitled to
postpone such issue and/or delivery until such requirements have been met. The
Committee may require representations and agreements from any participant in
order to insure compliance with Federal or state securities or other laws.
- 11 -
<PAGE> 12
9. ADJUSTMENT IN NUMBER OF SHARES.
- - - - - ----------------------------------
In the event that there are any changes in the outstanding Common Stock
of the Corporation by reason of stock dividends, stock splits, or
recapitalizations (whether by way of mergers, consolidations, combinations, or
exchanges of shares or the like) the aggregate number and kind of shares
available under the Plan shall be appropriately adjusted by the Committee, if
necessary, to reflect equitably such change or changes. Any shares of stock or
other securities received by a participant with respect to shares still subject
to the restrictions imposed by Section 6 will be subject to the same
restrictions and shall be deposited with the Corporation in accordance with
Section 6.
10. NOTICE OF ELECTION UNDER SECTION 83(b).
- - - - - -------------------------------------------
Each employee making an election under Section 83(b) of the Internal
Revenue Code of 1954, as amended, and the regulations and rulings promulgated
thereunder, will provide a copy thereof to the Corporation within thirty days
of the filing of such election with the Internal Revenue Service and the
Agreement referred to in Section 6 shall so provide.
11. TERM OF PLAN.
- - - - - -----------------
Unless sooner terminated the Plan shall terminate ten years from the
Effective Date and no Restricted Stock shall be granted thereafter.
12. AMENDMENTS AND TERMINATION.
- - - - - -------------------------------
The Plan or any portion hereof may be amended at any time and from time
to time or terminated by the Board of Directors, but no amendment which
increases the aggregate number of shares of Common Stock which may be granted
pursuant to the
- 12 -
<PAGE> 13
Plan (otherwise than as contemplated by Section 9 hereof) or which extends the
period during which Restricted Stock may be granted under the Plan shall be
effective unless and until the same is approved by the affirmative vote of the
holders of a majority of the shares of the stock of the Corporation present in
person or by proxy and entitled to vote at a meeting held to take such action.
No amendment or termination shall adversely affect the terms and conditions of
outstanding grants of a participant without his written consent, except that
the Plan may be amended without the consent of any participant in order to
conform to restrictions or limitations imposed by the Federal securities laws
or regulations, or any other laws or regulations deemed by the Corporation to
be binding upon it.
13. MISCELLANEOUS.
- - - - - ------------------
13.1. TRANSFER OF EMPLOYMENT. The transfer of employment of an
employee from the Corporation to an Affiliate or from an Affiliate to the
Corporation or to another Affiliate shall not constitute a termination of
employment for the purposes of the Plan.
13.2. DEFINITION OF AFFILIATE. For all purposes of the Plan the term
"Affiliate" means any corporation of which the Corporation owns or controls
more than 50% of the outstanding shares of capital stock entitled ordinarily
(rather than in some contingency) to vote for the election of directors
(counting shares owned or controlled by an Affiliate within this definition as
being owned or controlled by the Corporation).
- 13 -
<PAGE> 14
13.3. ENFORCEMENT.* After a Change in Control, the Corporation shall
pay all reasonable legal fees, costs, and other expenses incurred by any
participant in enforcing rights under this Plan or the participant's Agreement.
- - - - - ----------------------------------
* This subsection does not apply to officers of the Corporation who are
subject to the provisions of Section 16 of the Securities Exchange Act of
1934.
- 14 -
<PAGE> 1
EXHIBIT 10.4
As Amended 10/27/94
BAYBANKS, INC.
--------------
1994 RESTRICTED STOCK PLAN
--------------------------
1. PURPOSE.
--------
The purpose of this Restricted Stock Plan (the "Plan") is to attract,
motivate, and retain outstanding individuals as employees of BayBanks, Inc.
(the "Corporation") and its Subsidiaries, as hereinafter defined, to align
their future interests with those of the Corporation's stockholders, and to
reward appropriately those who make substantial contributions to the success
and welfare of the Corporation.
2. STOCK SUBJECT TO THE PLAN.
--------------------------
The stock that may be granted under the Plan shall be the Common Stock,
$2.00 par value, of the Corporation. The maximum total number of shares of
such stock that may be issued under the Plan shall be 500,000 shares (except as
such amount may be adjusted in accordance with the provisions of Section 9
hereof). Such shares may be either unissued shares or reacquired shares.
If previously awarded shares are forfeited to the Corporation by reason
of termination of employment during the applicable Restriction Period, or for
any other reason, such shares shall not again be awarded under the Plan unless
the respective grant recipient has not had the benefits of ownership thereof
(other than voting rights). In the event the Corporation acquires or merges or
consolidates with another company, Common Stock issuable under the Plan as a
result of the Corporation's assumption of outstanding awards from such other
company or the substitution of grants under the Plan for outstanding awards of
such other company shall not reduce the shares available for grant under the
Plan.
3. ELIGIBILITY AND PARTICIPATION.
------------------------------
Individuals eligible to receive grants of Restricted Stock, as
hereinafter defined, under the Plan shall be those employees of the Corporation
and its Subsidiaries selected from time to time by the Plan's administrative
committee, provided, however, that each grant recipient must have been employed
by the Corporation or a Subsidiary for a period of at least six months
immediately preceding the date of grant. No person who is not an officer or
salaried employee of the Corporation or a Subsidiary shall be eligible to
receive a grant under the Plan. Grants made under the Plan in any year shall
neither preclude nor require selection of a grantee to receive future grants or
require that the grantee receive the same type or amount of award as at any
other time, or as may be received by any other grant recipient at any time.
Neither the Plan nor any action taken under the Plan shall be construed as
giving any grantee the right to be retained in the employ of the Corporation or
a Subsidiary.
<PAGE> 2
4. ADMINISTRATION OF THE PLAN.
---------------------------
The Plan shall be administered by a Committee (the "Committee")
appointed by, and to serve at the pleasure of, the Board of Directors of the
Corporation and consisting of three or more directors, each of whom is a
"disinterested person" within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, or any successor provision, as applicable to
the Corporation at the time. Until the Board of Directors shall otherwise
determine, that Committee shall be the Corporate Compensation Committee.
Subject to the express provisions hereof, the Committee shall have sole and
complete authority to make grants of Restricted Stock. Such authority shall
include, but not be limited to, selecting individuals to receive grants under
the Plan, determining the number of shares of Common Stock (subject to the
limitations in Section 2 hereof) to be awarded to each grant recipient under
the Plan and the terms and conditions under which such grants shall be made,
and determining the duration and terms of each Restriction Period.
The Committee also shall have authority to adopt rules and regulations
for carrying out the Plan and to interpret, construe, implement, and otherwise
administer the provisions of the Plan. Decisions of the Committee shall be
final. A majority of the Committee shall constitute a quorum. The acts of a
majority of the members present at any meeting at which a quorum is present (or
acts approved in writing by a majority of the Committee) shall be the acts of
the Committee. The Committee shall keep minutes of its proceedings and from
time to time make such reports to the Board of Directors as the Board shall
direct.
5. EFFECTIVE DATE.
---------------
The Effective Date of the Plan shall be the date upon which the Plan
is adopted by the Board of Directors of the Corporation. The Plan shall
terminate if it is not approved within twelve months after the Effective Date
by vote of the holders of a majority of the stock of the Corporation present in
person or by proxy and entitled to vote at a special or annual meeting of the
stockholders of the Corporation.
6. TERMS AND CONDITIONS OF GRANTS.
-------------------------------
6.1 Grants under the Plan shall consist of Restricted Stock, which shall
be shares of Common Stock of the Corporation transferred to grant recipients in
furtherance of the purposes of the Plan without, unless otherwise provided,
other payment and subject to the restrictions referred to in this Section 6.
All shares of Restricted Stock granted under the Plan shall be so granted for,
and in consideration of, past services rendered to the Corporation or a
Subsidiary and shall be subject to the following terms and conditions and to
such other terms and conditions, not inconsistent with the Plan, as shall be
prescribed by the Committee in its sole discretion and as shall be contained in
the Agreement referred to in Section 6.1(d) hereof.
(a) At the time of a grant of shares of Restricted Stock, the
Committee shall establish for all such shares received by a grantee (or, if it
is the intent that the total of such shares shall be divided into separate
parts, for each part of such total) a period of time (the "Restriction Period")
commencing with the date of the grant of such shares during which
- 2 -
<PAGE> 3
time the shares may not be sold, assigned, transferred, pledged, or otherwise
encumbered, except as herein provided. Different Restriction Periods may be
fixed for different parts of the shares that are being granted to a recipient,
and the Restriction Period for one grant may differ from the Restriction Period
for other grants. Except for such restrictions, unless otherwise determined by
the Committee, the grant recipient as owner of such Restricted Stock shall have
all the rights of a stockholder, including but not limited to the right to
receive all dividends paid on such Restricted Stock and the right to vote such
Restricted Stock. Unless otherwise determined by the Committee, the
restrictions shall terminate upon the earliest to occur of the expiration of
the Restriction Period or the grantee's death, disability, or retirement, or in
any other circumstances determined by the Committee at the time of the grant or
at any time thereafter.
(b) If a grant recipient ceases to be an employee of the Corporation
or a Subsidiary, all shares of Restricted Stock theretofore granted to him as
to which the restrictions imposed under this Section 6 have not terminated or
do not thereby terminate shall, except as provided in Section 7 hereof, upon
such cessation of employment be forfeited and returned to the Corporation
unless the Committee, in its discretion, otherwise determines.
(c) Each certificate issued in respect of shares of Restricted Stock
granted under the Plan shall be registered in the name of the grantee and
deposited by him, together with a stock power endorsed in blank, with the
Corporation and shall bear the following (or a similar) legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms, conditions and
restrictions (including forfeiture) contained in a Plan and an
Agreement between the registered owner and BayBanks, Inc. A copy of
such Plan and Agreement will be furnished to the holder of this
certificate upon written request and without charge."
(d) The grant recipient shall enter into an Agreement with the
Corporation, in a form not inconsistent with the Plan, agreeing to the terms
and conditions of the grant and such other matters as the Committee shall in
its sole discretion determine. The Agreement may be amended by the Committee
at any time to modify the Restriction Period with respect to any shares of
Restricted Stock the restrictions on which have not then lapsed or in any other
respect; provided that, except as provided in Section 12, no amendment shall
adversely affect the terms and conditions of an outstanding grant without the
written consent of the grant recipient.
(e) Upon the termination of the restrictions imposed under this
Section 6, the Corporation shall return to the grantee (or his legal
representative, beneficiary, or heir) certificates, without a legend, for the
shares of Common Stock deposited with it pursuant to subsection (c) hereof.
6.2 The Corporation or a Subsidiary, as the case may be, shall have
the right to deduct from amounts payable to the grantee, or to require the
grantee to pay, the amount of any taxes required by law to be withheld with
respect to such Restricted Stock. In the Committee's discretion, the grantee
may be given the right to elect that such required
- 3 -
<PAGE> 4
withholding, as well as additional withholding with respect to such Restricted
Stock, be paid in whole or in part in shares of Common Stock, including shares
retained from the grant creating the tax obligation, valued at their fair
market value on the date of delivery.
6.3 No rights or interests of a grant recipient under the Plan may be
assigned, encumbered or transferred except by will or the laws of descent and
distribution.
7. CHANGE IN CONTROL.
------------------
In order to preserve the rights of a grant recipient in the event of a
Change in Control of the Corporation, the Committee may in its discretion
include in the grant Agreement or in any amendment thereto (subject to the
proviso of Section 6.1(d)) provisions: (i) permitting restrictions on
Restricted Stock to lapse, in whole or in part, immediately prior to such
event, (ii) adjusting the terms of a grant in a manner determined by the
Committee to reflect the Change in Control, (iii) causing a grant to be
assumed, or new rights substituted therefor, by another entity, and/or (iv)
making such other provision as the Committee may consider equitable and in the
best interests of the Corporation. After a Change in Control of the
Corporation, the Corporation shall pay all reasonable legal fees, costs, and
other expenses incurred by any grantee in enforcing rights under this Plan or
the grant Agreement. The term "Change in Control" shall have such meaning with
respect to any grant of Restricted Stock as the Committee determines and is
specified in the Agreement for such grant.
8. SECURITIES AND OTHER LAWS.
--------------------------
In any case where in the opinion of the Committee, the issue and/or
delivery of shares of Common Stock under the Plan would violate requirements of
Federal or state securities or other laws, or the requirements of any exchange
on which the securities are listed, the Corporation shall be entitled to
postpone such issue and/or delivery until such requirements have been met. The
Committee may require representations and agreements from any grant recipient
in order to ensure compliance with Federal or state securities or other laws.
9. ADJUSTMENT IN NUMBER OF SHARES.
-------------------------------
In the event that there are any changes in the outstanding Common
Stock of the Corporation by reason of stock dividends, stock splits, or
recapitalizations (whether by way of mergers, consolidations, combinations, or
exchanges of shares or the like) the aggregate number and kind of shares
available under the Plan shall be appropriately adjusted by the Committee, if
necessary, to reflect equitably such change or changes. Any shares of stock or
other securities received by a grant recipient with respect to shares still
subject to the restrictions imposed by Section 6 will be subject to the same
restrictions and shall be deposited with the Corporation in accordance with
Section 6.
10. NOTICE OF ELECTION UNDER SECTION 83(b).
---------------------------------------
Each grant recipient making an election under Section 83(b) of the
Internal Revenue Code of 1986, as amended, and the regulations and rulings
promulgated thereunder, will provide a
- 4 -
<PAGE> 5
copy thereof to the Corporation within thirty days of the filing of such
election with the Internal Revenue Service and the Agreement referred to in
Section 6 shall so provide.
11. TERM OF PLAN.
-------------
Unless sooner terminated the Plan shall terminate ten years from the
Effective Date and no Restricted Stock shall be granted thereafter.
12. AMENDMENTS AND TERMINATION.
---------------------------
The Plan or any portion hereof may be amended at any time and from
time to time or terminated by the Board of Directors, subject to such approval
of the stockholders as the Board of Directors shall deem necessary or
advisable. No amendment or termination shall adversely affect the terms and
conditions of outstanding grants without the written consent of the grantee,
except that the Plan and any Agreement may be amended without the consent of
any grant recipient in order to conform to restrictions or limitations imposed
by securities or tax laws or regulations, or any other laws or regulations
deemed by the Corporation to be binding upon it.
13. MISCELLANEOUS.
--------------
13.1 TRANSFER OF EMPLOYMENT. The transfer of employment of an
employee from the Corporation to a Subsidiary or from a Subsidiary to the
Corporation or to another Subsidiary shall not constitute a termination of
employment for the purposes of the Plan.
13.2 DEFINITION OF SUBSIDIARY. For all purposes of the Plan, the term
"Subsidiary" means any corporation of which the Corporation owns or controls
more than 50% of the outstanding shares of capital stock entitled ordinarily
(rather than in some contingency) to vote for the election of directors
(counting shares owned or controlled by a Subsidiary within this definition as
being owned or controlled by the Corporation).
- 5 -
<PAGE> 1
EXHIBIT 10.5
BAYBANKS, INC.
--------------
INCENTIVE COMPENSATION PLAN DESCRIPTION
---------------------------------------
Issues
------
The issues covered in this document include:
I. Participation in the Incentive Compensation Plan
II. Award formula
III. Payout of incentive awards
IV. Plan administration
V. Change in Control
<PAGE> 2
BAYBANKS, INC.
--------------
INCENTIVE COMPENSATION PLAN DESCRIPTION
---------------------------------------
October 27, 1994
<PAGE> 3
BAYBANKS, INC.
--------------
INCENTIVE COMPENSATION PLAN DESCRIPTION
---------------------------------------
I. Participation
-------------
Prior to the commencement of a plan year the management of BayBanks,
Inc. will select the participants in the Plan for the coming plan
year. Certain open positions also may be designated as carrying with
them eligibility for incentive compensation.
In general, participation is dependent on the degree to which a
position has those characteristics that suggest a discernible and
significant effect on profits can result from job performance. Thus
participation runs more to the job than to the individual, and a
person once selected will generally participate as long as he or she
holds such a position. A person will be selected only if it is clear
that he or she will be able to complete a particular plan year. Once
selected, a participant will qualify for an award only if he or she
remains employed by BayBanks at the end of that plan year.
During the plan year, an individual who is hired into a position that
has been designated as eligible for incentive compensation may be
allowed to participate in the Plan on a pro-rated basis for the
duration of the plan year if such plan participation has been
pre-approved by the BayBanks, Inc. Chairman and provided for in the
employment offer letter.
The BayBanks, Inc. Corporate Compensation Committee will approve award
eligibility levels for participants based upon the recommendation of
BayBanks, Inc. management.
The Board of Directors of BayBanks, Inc. is the final determinant of
plan participation and any modification or exceptions to any aspects
of the Plan or its administration.
II. Award Formula
-------------
The incentive compensation program is designed to meet three
requirements:
. The Plan should have a balance between overall corporate
performance and individual performance.
. The formulation of awards should focus both on external
comparisons and on internal standards and objectives.
. The program should contain qualitative as well as quantitative
measures.
Incentive awards will be determined by a combination of individual and
corporate performance factors.
<PAGE> 4
A. Corporate Performance - Weighted 1/3
------------------------------------
The measures used to assess the corporate performance of BayBanks,
Inc. are:
1. The accomplishment of earnings objectives as reflected
in the Company's annual budget
2. The Company's Return on Earning Assets (ROEA) and
Return on Equity (ROE)
The Board will use such external comparisons as may be appropriate
(e.g., the Keefe Bank Index of Money Center Regional Banks, or indices
composed solely of New England Banks or solely of selected Regional
Banks) to test the comparative adequacy of the Company's ROEA and/or
ROE.
B. The Individual Performance Factor - Weighted 2/3
---------------------------------
The individual performance factor is expressed as the sum of two
percentage ratings, one based on attainment of goals and objectives
(0-50%) and one on judgmental evaluation (0-50%).
1. Goals and Objectives (0-50%)
--------------------
The yardsticks for measurement of individual performance will vary
depending upon the characteristics of the individual's job.
Participants will be measured based upon task accomplishment or sales
or other goals that will be put in writing and discussed with each of
them at the beginning of a plan year. In the case of a Chief
Executive Officer these may include measures similar to those used for
corporate performance as described above e.g., a bank's ROEA/ROE) and
earnings or profit margin performance against goals or budget.
2. Judgmental Factors (0-50%)
------------------
In addition to performance measurement against established goals and
objectives, Plan participants also will be evaluated based on broader
judgmental considerations that might include, for example, their
overall leadership, support for organizational and Company-wide
objectives, quality of individual initiatives, effectiveness in
responding to new developments during the course of the year, and
personal growth -- among others. The judgmental factor reflects
management assessment of the character of an individual's contribution
to his or her assigned area of responsibility and to the Company
generally.
C. Application
-----------
Awards are determined by the product of corporate and individual
performance factors. Based on measures of corporate performance, the
Board in its sole discretion establishes a percentage ranging from
66-2/3% to 100% as the factor for corporate
- 2 -
<PAGE> 5
performance*. Based on measures of individual performance, the
evaluation of each participant's performance will produce a percentage
ranging from 0% to 100% as the factor for individual performance. The
product of these two factors then represents the size of the award to
be made relative to the maximum award a participant can earn. For
example:
<TABLE>
- - -Performance Factors- - -
<CAPTION>
Formula: Corporate Individual Maximum Actual
Factor times Factor times Award = Award
-------- ----- ---------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Range = Range = (as a (as a
66.67-100% 0-100% % of % of
salary) salary)
Example: 80.00% 80.00% 25.00% 16.00%
</TABLE>
III. Award Payout
------------
The normal method of payment will be in cash, following the close of a
plan year;I.E., approximately March of the year following the plan
year. (Certain participants in the incentive program may be given the
option of receiving their awards on a deferred basis, as permitted by
law. Under current regulations, such participants must elect to do so
prior to the plan year for which the award is being made, on forms and
in a manner prescribed for this purpose.)
IV. Plan Administration
-------------------
A. Oversight
---------
Overall responsibility for administering the Incentive Compensation
Plan is vested in the Corporate Compensation Committee of BayBanks,
Inc. The Committee shall perform the following tasks:
1. Review and determine for appropriateness: (1) the reference
group of competitive bank holding companies that will be used
in determining the corporate performance factor, and (2) the
standards of internal and external comparison used for
performance evaluation.
2. Review all award proposals for appropriateness and to ensure
compliance with the Plan.
3. Review all exceptions to the Plan and bring them to the full
Board for ratification.
- - - - - ----------------------------------
*The effect of this factor is to weight the corporate portion of the award 1/3
and the individual performance portion 2/3. However, in unusual circumstances,
(E.G., very poor earnings), the Board may set a lower percentage for the
corporate performance factor.
- 3 -
<PAGE> 6
4. Recommend to the full Board of Directors any modification to
the Plan that the Committee feels is appropriate.
B. Annual Procedure
----------------
At the beginning of each plan year, participants will be selected and
notified in writing, and incentive targets will be established. The
Chief Executive Officer of BayBanks, Inc., or other appropriate
BayBanks officer, will review with each participant in the Plan
his/her objectives for the year, which also will be prepared in
written form.
Following the close of the plan year, the Chief Executive Officer of
BayBanks, Inc., or other appropriate BayBanks officer, will review the
performance of Plan participants and develop initial individual award
recommendations based on individual performance and judgmental
factors. These recommendations will be forwarded to the Corporate
Compensation Committee of the BayBanks, Inc. Board.
The Corporate Compensation Committee of BayBanks, Inc. will request
the chief financial officer of BayBanks, Inc. to develop appropriate
data for external comparisons and internal targets. These financial
comparisons then will be translated into a corporate percentage and
used to adjust individual award recommendations as provided for by the
award formula (described above).
Awards will be approved by the Corporate Compensation Committee of
BayBanks, Inc., ratified by the BayBanks, Inc. Board, and, in the case
of bank executives, also ratified by that executive's board. Awards
will then be discussed with each executive by his or her immediate
administrative and functional superior.
Awards will come from the general funds of each executive's direct
employer to the respective executive.
V. Change in Control
-----------------
A. Application of Article
----------------------
This Article will apply following a Change in Control of
BayBanks, Inc. (the "Corporation") and will supersede any
conflicting provisions of the Plan. For purposes of the Plan
and any documents referring to it, a "Change in Control" of
the Corporation shall be deemed to have occurred upon the
occurrence of any of the following:
1. Any transaction or series of transactions, as a
result of which any "person" (as defined in Sections
13(d) and 14(d) of the Securities Exchange Act of
1934, as amended, and the rules and regulations
thereunder) (a "Person") is or becomes a "beneficial
owner" (as defined in Rule 13d-3 under such act),
directly or indirectly, of securities of the
Corporation representing thirty percent (30%) or more
of the combined voting power of the Corporation's
then outstanding voting securities
- 4 -
<PAGE> 7
(the "Corporation's Outstanding Voting Securities"); provided,
however, that a Change in Control shall not be deemed to have occurred
solely because of the acquisition of securities of the Corporation by
(i) one or more employee benefit plans or related trusts established
for the benefit of the employees of the Corporation or any affiliate
of the Corporation; or (ii) any Person when such acquisition (A) is
effected primarily to prevent the Corporation from being declared
insolvent and (B) is approved by the Board of Directors of the
Corporation (the "Board").
2. Any change in the membership of the Board such that individuals who
are Incumbent Directors (as defined herein) cease for any reason to
constitute at least a majority of the Board. The Incumbent Directors
shall be (i) those members of the Board who were Directors as of
October 27, 1994, and who have served continuously as Directors since
such date, and (ii) any other member of the Board who subsequently
became a Director and whose election or nomination for election by the
Corporation's stockholders at the beginning of his or her current
tenure was approved by a vote of at least a majority of the Directors
who were then Incumbent Directors, except that no individual shall be
an Incumbent Director if such individual's initial assumption of
office as a Director occurred as a result of an actual or threatened
election contest with respect to the election or removal of Directors,
or other actual or threatened solicitation of proxies or consents, by,
or on behalf of, a Person other than the Board.
3. The approval by the Corporation's stockholders of a reorganization,
merger, consolidation, sale or other disposition of all or
substantially all of the assets of the Corporation, or similar
transaction (a "Business Combination"), unless all of the following
conditions are met, with such conditions being applied as of the date
of such approval as if the Business Combination were consummated on
such date on the terms then specified in the agreement or plan
providing for the Business Combination:
a. the individuals and entities who are the beneficial owners of
the Corporation's Outstanding Voting Securities as of the date of
such approval would beneficially own, directly or indirectly,
securities representing more than 50% of the outstanding combined
voting power of the voting securities that would be outstanding
and entitled to vote generally in the election of the governing
body of the corporation or other entity resulting from such
Business Combination (including, without limitation, a
corporation or other entity that as a result of such transaction
would own the Corporation or all or substantially all of the
Corporation's assets, either directly or through one or more
subsidiaries) (the "Resulting Entity"), and the securities of the
Resulting Entity that would be owned by such beneficial owners
- 5 -
<PAGE> 8
of the Corporation's Outstanding Voting Securities
would be owned by them in substantially the same
proportions as they own the Corporation's Outstanding
Voting Securities;
b. no Person (excluding any corporation or other
entity resulting from such Business
Combination, and excluding any employee
benefit plan or related trust of the
Corporation or of such corporation or other
entity resulting from such Business
Combination) would beneficially own, directly
or indirectly, 30% or more of the combined
voting power of the outstanding voting
securities of the Resulting Entity except to
the extent that such ownership existed prior
to the Business Combination; and
c. at least a majority of the members of the
board of directors of the Resulting Entity
would be persons who were Incumbent Directors
at the time of the execution of the initial
agreement or of the action of the Board
providing for such Business Combination.
4. Approval by the Corporation's stockholders of a
liquidation or dissolution of the Corporation (unless
the liquidation or dissolution is part of a Business
Combination excepted from clause 3. above).
B. Award Payout
------------
Awards paid under this Article shall be paid as soon as
possible after the Change in Control unless the participant
has elected to receive awards on a deferred basis and has not
elected to accelerate deferred awards upon a Change in
Control.
C. Awards for Preceding Year
-------------------------
If a Change in Control has occurred following the end of a
plan year but before awards have been approved for such year,
awards for that year shall be determined by the Corporate
Compensation Committee at the time of the Change in Control
based on any estimates then available of corporate and
individual performance levels for such year. In making the
attained performance determination, the Corporate Compensation
Committee will make appropriate allowances for the effects of
the Change in Control and any related events and circumstances
that have a bearing on corporate or individual performance
levels.
D. Pro-Rated Awards for Partial Years
----------------------------------
If a Change in Control has occurred in any year after March,
the amount of the award will be equal to the participant's
individual performance factor for the most recent year for
which individual performance factors were determined
multiplied by the maximum incentive award for which the
participant is
- 6 -
<PAGE> 9
eligible for the year in which the Change in Control occurs, pro-rated
to reflect the portion of the year that elapsed prior to the Change in
Control. If a current Plan participant was not a Plan participant in
the most recent year for which individual performance factors were
determined and therefore does not have an applicable individual
performance factor, the award for such individual shall equal the
average of the applicable individual performance factors for all
participants in the same percentage-eligibility category as the
participant, multiplied by the participant's salary for the current
year.
E. Ratification of Awards
----------------------
Awards paid under this Article are automatically deemed to be
ratified by the BayBanks, Inc. Board and, in the case of bank
executives, by the board of directors of the executive's
employer. By ratification and approval of this Plan, each
such employer's board hereby delegates to the Corporate
Compensation Committee of BayBanks, Inc. authority to
determine whether such a Change in Control has occurred and
the amount of any awards payable under the Plan upon a Change
in Control.
F. Amendment of Plan
-----------------
After a Change in Control, no amendment or modification of
this Plan may be made that would materially adversely affect
the rights of participants under this Plan, including without
limitation any change in the award deferral provisions that
would materially adversely affect the rights of participants
to receive previously deferred amounts at the time or times
they elect or that would reduce the rate at which interest
would accrue on such amounts below the benchmark in use at the
time of the Change in Control.
G. Enforcement of Awards
---------------------
After a Change in Control, each BayBanks employer will pay all
reasonable legal fees, costs and other expenses incurred by
any of its executives in enforcing his or her rights under
this Plan.
10/20/76
Revised: 10/1/78
12/11/80
1/27/83
3/5/84
1/2/85
3/2/85
12/14/89
6/27/91
10/27/94
- 7 -
<PAGE> 1
EXHIBIT 10.6
As Amended 10/27/94
BAYBANKS, INC.
COMPENSATION PLAN FOR DIRECTORS
PLAN DESCRIPTION
----------------
A. Basic Plan
----------
Each Director of BayBanks, Inc. ("BayBanks") who becomes entitled to
receive cash compensation for services as a Director of BayBanks may elect to
have the cash compensation to which he or she becomes entitled during any year
paid in the manner provided by any one of the following:
1. Full payment in cash following determination of the amount.
2. Such portion of compensation as he or she may elect to be
deferred, with payment to commence on such specific date as he
or she may select, provided payment shall not commence earlier
than the beginning of the second year after the date of
election, and to be paid
(a) in full in cash on the specified date, or
(b) in such number of annual cash installments not to
exceed twenty as he or she may elect.
3. Such portion of compensation as he or she may elect to be
deferred, with payment to commence on termination of services
as a Director of BayBanks and to be paid
(a) in full in cash on the specified date, or
(b) in such number of annual cash installments not to
exceed twenty as he or she may elect.
4. Such portion of compensation as he or she may elect to be
deferred, with payment to commence on his or her reaching age
seventy-two and to be paid
(a) in full in cash on the specified date, or
(b) in such number of annual cash installments not to
exceed twenty as he or she may elect.
<PAGE> 2
If any payments elected have not been completed at the time of the
Director's death, payment shall be made to such beneficiary as he or she may
have designated and otherwise to his or her estate.
B. Change in Control
-----------------
For purposes of this plan and any documents referring to it, a Change
in Control will be deemed to have occurred upon the occurrence of any of the
following:
(a) Any transaction or series of transactions, as a
result of which any "person" (as defined in Sections
13(d) and 14(d) of the Securities Exchange Act of
1934, as amended, and the rules and regulations
thereunder) (a "Person") is or becomes a "beneficial
owner" (as defined in Rule 13d-3 under such act),
directly or indirectly, of securities of BayBanks
representing thirty percent (30%) or more of the
combined voting power of BayBanks' then outstanding
voting securities (the "BayBanks' Outstanding Voting
Securities"); provided, however, that a Change in
Control shall not be deemed to have occurred solely
because of the acquisition of securities of BayBanks
by (i) one or more employee benefit plans or related
trusts established for the benefit of the employees
of BayBanks or any affiliate of BayBanks; or (ii) any
Person when such acquisition (A) is effected
primarily to prevent BayBanks from being declared
insolvent and (B) is approved by the Board of
Directors of BayBanks (the "Board").
(b) Any change in the membership of the Board such that
individuals who are Incumbent Directors (as defined
herein) cease for any reason to constitute at least a
majority of the Board. The Incumbent Directors shall
be (i) those members of the Board who were Directors
as of October 27, 1994, and who have served
continuously as Directors since such date, and (ii)
any other member of the Board who subsequently became
a Director and whose election or nomination for
election by BayBanks' stockholders at the beginning
of his or her current tenure was approved by a vote
of at least a majority of the Directors who were then
Incumbent Directors, except that no individual shall
be an Incumbent Director if such individual's initial
assumption of office as a Director occurred as a
result of an actual or threatened election contest
with respect to the election or removal of Directors,
or other actual or threatened solicitation of proxies
or consents, by, or on behalf of, a Person other than
the Board.
(c) The approval by BayBanks' stockholders of a
reorganization, merger, consolidation, sale or other
disposition of all or substantially all of the assets
of BayBanks, or similar transaction (a "Business
Combination"), unless all of the following conditions
are met, with such conditions being applied as of the
date of such approval as if the Business Combination
were consummated on such date on the terms then
- 2 -
<PAGE> 3
specified in the agreement or plan providing for the Business
Combination:
(i) the individuals and entities who are the
beneficial owners of BayBanks' Outstanding
Voting Securities as of the date of such
approval would beneficially own, directly or
indirectly, securities representing more than
50% of the outstanding combined voting power
of the voting securities that would be
outstanding and entitled to vote generally in
the election of the governing body of the
corporation or other entity resulting from
such Business Combination (including, without
limitation, a corporation or other entity
that as a result of such transaction would
own BayBanks or all or substantially all of
BayBanks' assets, either directly or through
one or more subsidiaries) (the "Resulting
Entity"), and the securities of the Resulting
Entity that would be owned by such beneficial
owners of BayBanks' Outstanding Voting
Securities would be owned by them in
substantially the same proportions as they
own BayBanks' Outstanding Voting Securities;
(ii) no Person (excluding any corporation or other
entity resulting from such Business
Combination, and excluding any employee
benefit plan or related trust of BayBanks or
of such corporation or other entity resulting
from such Business Combination) would
beneficially own, directly or indirectly, 30%
or more of the combined voting power of the
outstanding voting securities of the
Resulting Entity except to the extent that
such ownership existed prior to the Business
Combination; and
(iii) at least a majority of the members of the
board of directors of the Resulting Entity
would be persons who were Incumbent Directors
at the time of the execution of the initial
agreement or of the action of the Board
providing for such Business Combination.
(d) Approval by BayBanks' stockholders of a liquidation or dissolution
of BayBanks (unless the liquidation or dissolution is part of a
Business Combination excepted from clause (c) above).
A Director may elect to have all amounts that he or she has deferred
under the Plan prior to a Change in Control paid automatically in cash on an
accelerated basis at the time of the Change in Control. A special one-time
irrevocable election will also be permitted to allow Directors to elect this
option for amounts for which a deferral election was made before the date of
the one-time election. This election must be made no later than December 31,
1991.
- 3 -
<PAGE> 4
After a Change in Control, no amendment or modification of the Plan
may be made that would materially adversely affect the rights of participants
to receive previously deferred amounts at the time or times they elected or
that would reduce the rate at which interest would accrue on such amounts below
the benchmark in effect at the time of the Change in Control.
C. Plan Administration
-------------------
Except for the special one-time election referred to above, all
elections shall (i) be made annually in writing and delivered to the Secretary
of BayBanks on or before December 31 of each year, (ii) apply only to
compensation earned with respect to the immediately following year, and (iii)
be irrevocable once made. If any Director shall not make any timely election,
option 1 above shall apply to his or her compensation.
The obligations of BayBanks under this Plan shall not be funded,
although BayBanks may establish a grantor trust to provide for the payment of
amounts deferred under this Plan. BayBanks shall be treated as the owner of
any such trust under Section 671 of the Internal Revenue Code of 1986.
Interest shall accrue on amounts of compensation that are deferred at such
appropriate published market rate as may be designated from time to time by
vote of the Board of Directors (e.g., 10-year Treasury note rate). Accrued
interest shall be paid pro-rata on the dates elected for payment of deferred
amounts.
- 4 -
<PAGE> 1
EXHIBIT 10.7
As Amended 10/27/94
BAYBANKS, INC.
1990 Stock Plan for Directors
-----------------------------
1. PURPOSE.
--------
The purpose of this 1990 Stock Plan for Directors (the "Plan") is to
attract and retain outstanding individuals as Directors of BayBanks, Inc. (the
"Corporation") and to increase their equity interest in the Corporation.
2. STOCK SUBJECT TO THE PLAN.
--------------------------
The stock to be granted under the Plan shall be the Common Stock,
$2.00 par value, of the Corporation. The maximum total number of shares of
such stock that may be issued under the Plan shall be 60,000 shares (except as
such amount may be adjusted in accordance with the provisions of Section 8
hereof). Such shares may be either unissued shares or reacquired shares. If
previously granted shares revert to the Corporation for any reason, such shares
may again be granted under the Plan.
3. ELIGIBILITY AND PARTICIPATION.
------------------------------
Participants in the Plan shall be the Directors of the Corporation who
are not employees of the Corporation. The Plan shall not be construed as
giving any Director the right to be renominated or retained as such.
4. TERMS AND CONDITIONS OF GRANTS OF STOCK.
----------------------------------------
4.1 NATURE OF GRANTS. Grants under the Plan shall consist of shares
of Common Stock of the Corporation transferred to the Director in furtherance
of the purposes of the Plan. All grants shall be solely for, and in
consideration of, past services rendered to the Corporation and shall be
subject to the terms and conditions of this Plan.
4.2 DATE OF GRANT AND NUMBER OF SHARES. Subject to Section 4.3,
grants, which are not subject to the discretion of any person, shall be made
automatically on the date of the annual meeting of stockholders in each year to
each Director of the Corporation who is elected at such annual meeting and to
each Director otherwise continuing in office. The total number of shares
granted to each Director shall equal the Annual Retainer (as defined in Section
6) divided by the average of the closing prices of the Common Stock of the
Corporation on the ten business days immediately preceding the date of the
annual meeting, computed in the case of fractions to the next higher whole
share.
<PAGE> 2
4.3 DIRECTORS SERVING LESS THAN SIX MONTHS. The shares granted to
any Director who, at the time of the first annual meeting at which he or she is
elected by the stockholders or otherwise continues in office, has served less
than six months as a Director, shall take place on the date that is six months
from the effective date of his or her election as a Director either by the
Board of Directors or by the stockholders. The number of shares granted to him
or her shall be computed as set forth in Section 4.2 above.
4.4 ELECTION OF RESTRICTIONS. In order to defer taxation, each
Director may elect to subject to the Restrictions described in Section 5 all,
but not less than all, of the shares granted with respect to any Annual
Retainer. All elections shall be made annually in writing and delivered to the
Secretary of the Corporation on or before December 31 of each year. The
elections shall apply only to the Annual Retainer earned with respect to the
period commencing during the immediately following year and shall be
irrevocable once made, provided that the election with respect to grants made
for the Annual Retainer for 1991 may be made at any time before the 1991 annual
meeting of stockholders.
4.5 NO ASSIGNMENT. No rights or interests of a participant under the
Plan may be assigned, encumbered or transferred except by will or the laws of
descent and distribution.
5. RESTRICTED STOCK.
-----------------
5.1 DESCRIPTION OF RESTRICTIONS. Restricted Stock shall be shares
that a Director elects under Section 4.4 to subject to the Restrictions set
forth in this Section 5 or that were granted under this Plan during 1990.
Until the termination of Restrictions as provided in Section 5.2, Restricted
Stock may not be sold, assigned, transferred, pledged, or otherwise encumbered.
Except for such Restrictions, the Director as owner of such Restricted Stock
shall have all the rights of a stockholder, including but not limited to the
right to receive all dividends paid on such Restricted Stock and the right to
vote such Restricted Stock. If a Director ceases to be a Director of the
Corporation for any reason (other than resignation as a Director for the
purpose of standing for election as a Director by the stockholders pursuant to
nomination by the Board of Directors or for the purpose of being elected as a
Director by the Board of Directors), all shares of Restricted Stock theretofore
granted to him or her that are still subject to Restrictions imposed hereunder
shall, except as provided in Section 5.2, thereupon be forfeited and returned
to the Corporation at no cost to the Corporation.
5.2 TERMINATION OF RESTRICTIONS. The Restrictions with respect to
all shares of Restricted Stock granted to any Director shall terminate upon the
earliest to occur of:
- 2 -
<PAGE> 3
(a) the Director's reaching the age, as determined by the Board of
Directors, at which a participant is no longer eligible to
stand for election;
(b) the Director's death or physical or mental disability that
renders him or her substantially unable to function as a
Director of the Corporation;
(c) the Director's resignation from the Board of Directors in
order to enter government service;
(d) the Director's failure to be reelected as a Director by the
stockholders at the expiration of the Director's term of
office, whether or not nominated for reelection; or
(e) a Change in Control of the Corporation, as defined in
Section 6 hereof.
Upon the recommendation of the Chairman, the Board of Directors shall
have the right in its sole and absolute discretion to terminate the
Restrictions earlier with respect to any or all of the shares of Restricted
Stock of any Director.
5.3 STOCK CERTIFICATES. Each certificate issued in respect of shares
of Restricted Stock granted under the Plan shall be registered in the name of
the Director and deposited by him or her, together with a stock power endorsed
in blank, with the Corporation and shall bear the following (or a similar)
legend:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms, conditions,
and restrictions (including forfeiture) contained in Section 5
of the 1990 Stock Plan for Directors and an Agreement under
that Plan between the registered owner and BayBanks, Inc. A
copy of such Plan and Agreement will be furnished to the
holder of this certificate upon written request and without
charge."
Within thirty days after the termination of the Restrictions imposed
hereunder, the Corporation shall deliver to the Director (or his or her legal
representative or heir) certificates, without a legend, for the shares of
Common Stock deposited with it pursuant to this section; provided, that the
Corporation may require, as a condition of such delivery, that the Director or
such other person pay any taxes required by law to be withheld with respect to
such Restricted Stock. The amount of such taxes may, at the election of the
Director or such other person, be deducted from amounts otherwise payable to
the Director.
- 3 -
<PAGE> 4
6. CERTAIN DEFINITIONS.
--------------------
As used in this Plan, the following terms shall have the following
meanings.
6.1 ANNUAL RETAINER. "Annual Retainer" means the amount that is
payable to a Director for service on the Board of Directors during the period
from the date of the annual meeting as of which the respective grant is made
until the annual meeting of stockholders in the following year, excluding fees
paid for attendance at any meeting of the Board or of any committee thereof.
6.2 CHANGE IN CONTROL. A "Change in Control" of the Corporation
shall be deemed to have occurred upon the occurrence of any of the following:
(a) Any transaction or series of transactions, as a
result of which any "person" (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder) (a "Person") is or becomes a "beneficial owner" (as defined in Rule
13d-3 under such act), directly or indirectly, of securities of the Corporation
representing thirty percent (30%) or more of the combined voting power of the
Corporation's then outstanding voting securities (the "Corporation's
Outstanding Voting Securities"); provided, however, that a Change in Control
shall not be deemed to have occurred solely because of the acquisition of
securities of the Corporation by (i) one or more employee benefit plans or
related trusts established for the benefit of the employees of the Corporation
or any affiliate of the Corporation; or (ii) any Person when such acquisition
(A) is effected primarily to prevent the Corporation from being declared
insolvent and (B) is approved by the Board of Directors of the Corporation (the
"Board").
(b) Any change in the membership of the Board such that
individuals who are Incumbent Directors (as defined herein) cease for any
reason to constitute at least a majority of the Board. The Incumbent Directors
shall be (i) those members of the Board who were Directors as of October 27,
1994, and who have served continuously as Directors since such date, and (ii)
any other member of the Board who subsequently became a Director and whose
election or nomination for election by the Corporation's stockholders at the
beginning of his or her current tenure was approved by a vote of at least a
majority of the Directors who were then Incumbent Directors, except that no
individual shall be an Incumbent Director if such individual's initial
assumption of office as a Director occurred as a result of an actual or
threatened election contest with respect to the election or removal of
Directors, or other actual or threatened solicitation of proxies or consents,
by, or on behalf of, a Person other than the Board.
(c) The approval by the Corporation's stockholders of a
reorganization, merger, consolidation, sale or other
- 4 -
<PAGE> 5
disposition of all or substantially all of the assets of the Corporation, or
similar transaction (a "Business Combination"), unless all of the following
conditions are met, with such conditions being applied as of the date of such
approval as if the Business Combination were consummated on such date on the
terms then specified in the agreement or plan providing for the Business
Combination:
(i) the individuals and entities who are the beneficial
owners of the Corporation's Outstanding Voting
Securities as of the date of such approval would
beneficially own, directly or indirectly, securities
representing more than 50% of the outstanding
combined voting power of the voting securities that
would be outstanding and entitled to vote generally
in the election of the governing body of the
corporation or other entity resulting from such
Business Combination (including, without limitation,
a corporation or other entity that as a result of
such transaction would own the Corporation or all or
substantially all of the Corporation's assets, either
directly or through one or more subsidiaries) (the
"Resulting Entity"), and the securities of the
Resulting Entity that would be owned by such
beneficial owners of the Corporation's Outstanding
Voting Securities would be owned by them in
substantially the same proportions as they own the
Corporation's Outstanding Voting Securities;
(ii) no Person (excluding any corporation or other entity
resulting from such Business Combination, and
excluding any employee benefit plan or related trust
of the Corporation or of such corporation or other
entity resulting from such Business Combination)
would beneficially own, directly or indirectly, 30%
or more of the combined voting power of the
outstanding voting securities of the Resulting Entity
except to the extent that such ownership existed
prior to the Business Combination; and
(iii) at least a majority of the members of the board of
directors of the Resulting Entity would be persons
who were Incumbent Directors at the time of the
execution of the initial agreement or of the action
of the Board providing for such Business Combination.
(d) Approval by the Corporation's stockholders of a liquidation
or dissolution of the Corporation (unless the liquidation or dissolution is
part of a Business Combination excepted from clause (c) above).
- 5 -
<PAGE> 6
(e) The close of business on the latest of the following dates:
(i) the date that a tender or exchange offer by
any Person (other than the Corporation, any
affiliate of the Corporation, or any employee
benefit plan or related trust established for
the benefit of the employees of the
Corporation or any affiliate of the
Corporation) that, if consummated, would
result in such Person becoming a "beneficial
owner" (as defined in clause (a) above),
directly or indirectly, of securities of the
Corporation representing thirty percent (30%)
or more of the combined voting power of the
Corporation's then outstanding voting
securities, is first published or sent or
given within the meaning of Rule 14d-2(a) of
the Securities Exchange Act of 1934, as
amended, and the rules and regulations
thereunder;
(ii) the date upon which all regulatory approvals
required for the acquisition of securities
pursuant to the tender or exchange offer
referred to in clause (i) have been obtained
or waived; or
(iii) the date upon which any approval of the
security holders of the Person publishing or
sending or giving the tender or exchange
offer referred to in clause (i) required for
the acquisition of securities pursuant to
such tender or exchange offer is obtained or
waived.
7. SECURITIES AND OTHER LAWS.
--------------------------
In any case where, in the opinion of counsel for the Corporation, the
issue and/or delivery of shares of Common Stock under the Plan would violate
requirements of Federal or state securities or other laws, or the requirements
of any exchange on which the securities are listed, the Corporation shall be
entitled to postpone such issue and/or delivery until such requirements have
been met. The Corporation may require representations and agreements from any
Director in order to ensure compliance with Federal or state securities or
other laws.
8. ADJUSTMENT IN NUMBER OF SHARES.
-------------------------------
In the event that there is any change in the outstanding Common Stock
of the Corporation by reason of stock dividends, stock splits, or
recapitalizations (whether by way of mergers, consolidations, combinations, or
exchanges of shares or the like), the aggregate number and kind of shares or
other securities issuable under the Plan shall be appropriately
- 6 -
<PAGE> 7
adjusted by the Corporation, if necessary, to reflect equitably such change.
Any shares of stock or other securities received by a Director with respect to
shares subject to the Restrictions imposed by Section 5 will be subject to the
same Restrictions and shall be deposited with the Corporation in accordance
with Section 5.3.
9. AGREEMENT WITH CORPORATION.
---------------------------
The Director shall enter into an Agreement with the Corporation, in a
form not inconsistent with the Plan, agreeing to the terms and conditions of
grants under the Plan. After a Change in Control (as defined in Section 6),
the Corporation shall pay all reasonable legal fees, costs and other expenses
incurred by any Director in enforcing his or her rights under the Plan or his
or her Agreement.
10. NOTICE OF ELECTION UNDER SECTION 83(b).
---------------------------------------
Each Director making an election under Section 83(b) of the Internal
Revenue Code of 1986, as amended, and the regulations and rulings promulgated
thereunder, shall provide a copy thereof to the Corporation within thirty days
of the filing of such election with the Internal Revenue Service, and the
Agreement referred to in Section 9 shall so provide.
11. AMENDMENTS AND TERMINATION.
---------------------------
This Plan or any portion hereof may be amended at any time and from
time to time or terminated by the Board of Directors. No amendment or
termination shall adversely affect the terms and conditions of outstanding
grants of a Director without his or her written consent, except that the Plan
may be amended without the consent of any individual Director in order to
conform to restrictions or limitations imposed by the Federal securities laws
or regulations, or any other laws or regulations deemed by the Corporation to
be binding upon it.
- 7 -
<PAGE> 1
EXHIBIT 10.8
BAYBANKS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Third Amendment
---------------
The BayBanks Supplemental Executive Retirement Plan is hereby amended effective
as of October 27, 1994, as follows:
1. Subsection 4.1(e) is amended by deleting the words "BayBanks,
Inc. Plan Supplementing Statutory Severance Pay" in each place they appear, and
by inserting in their place the words "BayBanks, Inc. Severance Benefits Plan".
2. Subsection 4.1(e)(iii) is amended in its entirety to read as
follows:
"(iii) For purposes of this subsection (e), a CHANGE IN CONTROL OF
BAYBANKS, INC. (hereinafter in this subsection "the Corporation") shall be
deemed to have occurred upon the occurrence of any of the following:
(A) Any transaction or series of transactions, as a result of which
any "person" (as defined in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder) (a "Person")
is or becomes a "beneficial owner" (as defined in Rule 13d-3 under such act),
directly or indirectly, of securities of the Corporation representing thirty
percent (30%) or more of the combined voting power of the Corporation's then
outstanding voting securities (the "Corporation's Outstanding Voting
Securities"); provided, however, that a Change in Control shall not be deemed
to have occurred solely because of the acquisition of securities of the
Corporation by (1) one or more employee benefit plans or related trusts
established for the benefit of the employees of the Corporation or any
Affiliate of the Corporation; or (2) any Person when such acquisition (A) is
effected primarily to prevent the Corporation from being declared insolvent and
(B) is approved by the Board of Directors of the Corporation (the "Board").
(B) Any change in the membership of the Board such that individuals
who are Incumbent Directors (as defined herein) cease for any reason to
constitute at least a majority of the Board. The Incumbent Directors shall be
(1) those members of the Board who were Directors as of October 27, 1994, and
who have served continuously as Directors since such date, and (2) any other
member of the Board who subsequently became a Director and whose election or
nomination for election by the Corporation's stockholders at the beginning of
his or her current tenure was approved by a
<PAGE> 2
vote of at least a majority of the Directors who were then Incumbent Directors,
except that no individual shall be an Incumbent Director if such individual's
initial assumption of office as a Director occurred as a result of an actual or
threatened election contest with respect to the election or removal of
Directors, or other actual or threatened solicitation of proxies or consents,
by, or on behalf of, a Person other than the Board.
(C) The approval by the Corporation's stockholders of a
reorganization, merger, consolidation, sale or other disposition of all or
substantially all of the assets of the Corporation, or similar transaction (a
"Business Combination"), unless all of the following conditions are met, with
such conditions being applied as of the date of such approval as if the
Business Combination were consummated on such date on the terms then specified
in the agreement or plan providing for the Business Combination:
(1) the individuals and entities who are the beneficial
owners of the Corporation's Outstanding Voting Securities as of the
date of such approval would beneficially own, directly or indirectly,
securities representing more than 50% of the outstanding combined
voting power of the voting securities that would be outstanding and
entitled to vote generally in the election of the governing body of the
corporation or other entity resulting from such Business Combination
(including, without limitation, a corporation or other entity that as a
result of such transaction would own the Corporation or all or
substantially all of the Corporation's assets, either directly or
through one or more subsidiaries) (the "Resulting Entity"), and the
securities of the Resulting Entity that would be owned by such
beneficial owners of the Corporation's Outstanding Voting Securities
would be owned by them in substantially the same proportions as they
own the Corporation's Outstanding Voting Securities;
(2) no Person (excluding any corporation or other entity
resulting from such Business Combination, and excluding any employee
benefit plan or related trust of the Corporation or of such corporation
or other entity resulting from such Business Combination) would
beneficially own, directly or indirectly, 30% or more of the combined
voting power of the outstanding voting securities of the Resulting
Entity except to the extent that such ownership existed prior to the
Business Combination; and
(3) at least a majority of the members of the board of
directors of the Resulting Entity would be persons who were Incumbent
Directors at the time of the
<PAGE> 3
execution of the initial agreement or of the action of the Board
providing for such Business Combination.
(D) Approval by the Corporation's stockholders of a liquidation or
dissolution of the Corporation (unless the liquidation or dissolution is part
of a Business Combination excepted from clause (C) above)."
THE CORPORATE COMPENSATION
COMMITTEE OF BAYBANKS, INC.
By: /s/ Ilene Beal
-----------------------------------
Executive Vice President
Dated: November 2, 1994
--------------------------------
BayBanks, Inc. hereby consents to the foregoing Third Amendment.
BAYBANKS, INC.
By: /s/ Ilene Beal
----------------------------------
Executive Vice President
Dated: November 2, 1994
--------------------------------
<PAGE> 1
EXHIBIT 10.9
As Amended 10/27/94
BayBanks Severance Benefits Plan
--------------------------------
The purpose of this Plan is to provide severance benefits to employees
of BayBanks, Inc. ("BayBanks") and its subsidiaries in the event of termination
of employment following a change in control. Benefits under the Plan are
intended to replace the benefits otherwise payable under Sections 183 and 184
of Chapter 149 of the Massachusetts General Laws and any other legislation in
effect from time to time ("Severance Benefit Legislation"). This Plan shall be
administered by the Corporate Compensation Committee of the BayBanks Board of
Directors or such other committee as the Board may designate (the "Plan
Committee").
SECTION 1. DEFINITIONS
As used in this Plan, the following terms have the meanings set forth
below.
1.1 "BayBanks Employer" -- BayBanks and each subsidiary
of BayBanks that adopts this Plan. The BayBanks Employer for a particular
employee is the BayBanks Employer that is responsible for paying that
employee's salary.
1.2 "Cause" -- an Employee's (a) willful and continued
failure substantially to perform the Employee's duties with his or her BayBanks
Employer (other than such failure occurring within 90 days after a Constructive
Discharge Event) after written notice specifying such failure in reasonable
detail is delivered to the Employee by such BayBanks Employer, (b) willful
misconduct that is materially injurious to such BayBanks Employer, monetarily
or otherwise, or (c) conviction of any crime involving an act of dishonesty or
breach of trust. For purposes of determining whether Cause exists, no action
or omission by an Employee shall be considered willful unless the Employee
acted in bad faith and without reasonable belief that the action or omission
was consistent with the best interests of his or her BayBanks Employer.
1.3 A "Change in Control" of BayBanks shall be deemed to
have occurred upon the occurrence of any of the following:
(a) Any transaction or series of transactions, as
a result of which any "person" (as defined in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder) (a "Person") is or becomes a "beneficial
owner" (as defined in Rule 13d-3 under such act), directly or
indirectly, of securities of BayBanks representing thirty percent
(30%) or more of the combined voting power of BayBanks' then
outstanding voting securities ("BayBanks' Outstanding Voting
Securities"); provided, however, that a Change in Control shall not be
deemed to have occurred solely because of the acquisition of
securities of BayBanks by (i) one or more
<PAGE> 2
employee benefit plans or related trusts established for the
benefit of the employees of any BayBanks Employer; or (ii) any Person
when such acquisition (A) is effected primarily to prevent BayBanks
from being declared insolvent and (B) is approved by the Board of
Directors of BayBanks (the "Board").
(b) Any change in the membership of the Board
such that individuals who are Incumbent Directors (as defined herein)
cease for any reason to constitute at least a majority of the Board.
The Incumbent Directors shall be (i) those members of the Board who
were Directors as of October 27, 1994, and who have served
continuously as Directors since such date, and (ii) any other member
of the Board who subsequently became a Director and whose election or
nomination for election by BayBanks' stockholders at the beginning of
his or her current tenure was approved by a vote of at least a
majority of the Directors who were then Incumbent Directors, except
that no individual shall be an Incumbent Director if such individual's
initial assumption of office as a Director occurred as a result of an
actual or threatened election contest with respect to the election or
removal of Directors, or other actual or threatened solicitation of
proxies or consents, by, or on behalf of, a Person other than the
Board.
(c) The approval by BayBanks' stockholders of a
reorganization, merger, consolidation, sale or other disposition of
all or substantially all of the assets of BayBanks, or similar
transaction (a "Business Combination"), unless all of the following
conditions are met, with such conditions being applied as of the date
of such approval as if the Business Combination were consummated on
such date on the terms then specified in the agreement or plan
providing for the Business Combination:
(i) the individuals and entities who are
the beneficial owners of BayBanks' Outstanding Voting
Securities as of the date of such approval would beneficially
own, directly or indirectly, securities representing more than
50% of the outstanding combined voting power of the voting
securities that would be outstanding and entitled to vote
generally in the election of the governing body of the
corporation or other entity resulting from such Business
Combination (including, without limitation, a corporation or
other entity that as a result of such transaction would own
BayBanks or all or substantially all of BayBanks' assets,
either directly or through one or more subsidiaries) (the
"Resulting Entity"), and the securities of the Resulting
Entity that would be owned by such beneficial owners of
BayBanks' Outstanding Voting Securities would be owned by them
in substantially the same proportions as they own BayBanks
Outstanding Voting Securities;
(ii) no Person (excluding any corporation
or other entity resulting from such Business Combination, and
excluding any employee benefit plan or related trust of
BayBanks or of such corporation or other entity resulting from
such Business Combination) would beneficially own, directly or
indirectly, 30% or more of the combined voting power of the
outstanding voting securities of the Resulting Entity except
to the extent that such ownership existed prior to the
Business Combination; and
- 2 -
<PAGE> 3
(iii) at least a majority of the members
of the board of directors of the Resulting Entity would be
persons who were Incumbent Directors at the time of the
execution of the initial agreement or of the action of the
Board providing for such Business Combination.
(d) Approval by BayBanks' stockholders of a
liquidation or dissolution of BayBanks (unless the liquidation or
dissolution is part of a Business Combination excepted from clause (c)
above).
1.4 "Constructive Discharge Event" --
(a) with respect to all Employees, the occurrence
within two years following a Change in Control of any of the following
without the Employee's written consent:
(i) a reduction of the Employee's base
salary of at least 10% from the base salary in effect
immediately prior to the Change in Control;
(ii) a reduction subsequent to the Change
in Control of at least 10% in the dollar amount of the
BayBanks Employer's contribution for the Employee's medical
insurance from the amount contributed immediately prior to the
Change in Control;
(iii) a material adverse change applicable
to the Employee in any formula for the accrual of pension
benefits under any pension plan in which the Employee was
participating immediately prior to the Change in Control; or
(iv) a relocation of the Employee's
assigned work location of more than 30 miles from his or her
principal work location immediately prior to the Change in
Control, unless the new work location is closer to the
Employee's principal residence.
(b) with respect to Employees who are eligible
for benefits under Sections 2.2, 2.3, and/or 2.4, the occurrence
within two years following a Change in Control of any of the following
without the Employee's written consent shall also constitute a
Constructive Discharge Event:
(i) the termination or reduction of, or
failure to provide, compensation opportunities or benefits at
least equal to those provided pursuant to any retirement,
benefit, or compensation plan or arrangement in which the
Employee was participating immediately prior to the Change in
Control (except when such action would not constitute a
Constructive Discharge Event under subsection (a) above or is
offset by a concurrent increase in the Employee's annual base
salary in an amount equal to the annual compensation
opportunity or benefit lost by the Employee);
- 3 -
<PAGE> 4
(ii) a material increase in the level of
business travel required of the Employee;
(iii) a material change, including a
material reduction or increase, in the Employee's title, job
authorities, or responsibilities existing immediately prior to
the Change in Control; or
(iv) a material reduction in any
significant perquisites provided to the Employee immediately
prior to the Change in Control.
1.5 "Eligible Employee" -- any person employed by any
BayBanks Employer as a "Full-time" employee or "WorkStyle" employee, in each
case with three or more Years of Service at the time of a Qualifying
Termination. The terms "Full- time" employee and "WorkStyle" employee are
defined in the BayBanks Human Resources Policies and Procedures manual as in
effect on January 1, 1991 and as the manual may be amended prior to the Change
in Control.
1.6 "Employee" -- any Eligible Employee or Short-Service
Employee, other than an employee who is subject to a written separation,
retirement or other severance agreement with a BayBanks Employer.
1.7 "Short-Service Employee" -- any person employed by
any BayBanks Employer as a "Full-time Employee" or "WorkStyle Employee" with
less than 6.5 Years of Service at the time of a Qualifying Termination, who has
been designated by the Plan Committee as eligible for additional benefits under
Section 2.
1.8 "Qualifying Termination" -- any termination of
employment (a) of an Employee by his or her BayBanks Employer without Cause
within two years following a Change in Control, other than by reason of
disability or death or (b) by an Employee during the period commencing on the
occurrence of a Constructive Discharge Event and ending 90 days following the
Employee's receipt of written notice thereof under Section 3.3. A termination
of employment by an Employee following a Constructive Discharge Event may
constitute a Qualifying Termination notwithstanding that the Employee may have
other reasons for terminating employment, including a desire to accept other
employment.
1.9 "Weekly Compensation" --
(a) with respect to (i) a Full-time Employee is
the annual rate of pay in effect as of the last payroll period ending
prior to the Change in Control or prior to a Qualifying Termination,
whichever is greater, divided by 52 and (ii) a WorkStyle Employee is
the hourly rate of pay in effect as of the last payroll period ending
prior to the Change in Control or prior to a Qualifying Termination,
whichever is greater, multiplied by the number of hours per week that
the Employee was regularly scheduled to work during that pay period;
and
(b) with respect to any Employee who is eligible for
benefits under Sections 2.2, 2.3, and/or 2.4, (i) Weekly Compensation
shall include the maximum
- 4 -
<PAGE> 5
annual incentive or similar award for which the Employee is eligible
immediately prior to the Change in Control or the Qualifying
Termination, whichever is higher, divided by 52, or (ii) if the
Employee was eligible for sales incentive bonuses, commissions or
other forms of variable pay (in each case, "Variable Pay") as of the
last payroll period ending either prior to the Change in Control or
prior to a Qualifying Termination, the Employee's annual rate of pay
for purposes of subsection (a)(i) for such payroll period shall
include an additional amount equal to the total of all Variable Pay
received by the Employee from a BayBanks Employer for the last
calendar year prior to the payroll period but not exceeding 50% of
such annual rate of pay as determined without regard to this
subsection (ii).
1.10 "Years of Service" -- the aggregate number of full
calendar months whether or not consecutive, during which an Employee has been
employed and paid by any BayBanks Employer, divided by 12, with the result
rounded to the nearest one-tenth of a year.
SECTION 2. BENEFITS PAYABLE TO EMPLOYEES TERMINATED FOLLOWING A CHANGE IN
CONTROL
All Eligible Employees shall be entitled to the benefits
described in Section 2.1 following a Qualifying Termination. In addition, the
Plan Committee may in its discretion designate certain Employees as eligible
for the additional benefits described in Sections 2.2, 2.3, or 2.4. All
benefits under this Plan are subject to the limitations contained in Section 4.
2.1 BENEFITS FOR ALL ELIGIBLE EMPLOYEES. Each BayBanks
Employer shall provide the following benefits to each of its Eligible Employees
who experiences a Qualifying Termination in lieu of any benefits provided by
the Severance Benefit Legislation (unless the Severance Benefit Legislation
would provide an equal or higher level of benefits as described in Section
4.1):
(a) CASH PAYMENT -- a lump sum cash payment equal
to the Eligible Employee's Weekly Compensation, multiplied by two
times his or her Years of Service, provided that such payment shall
not exceed 78 times his or her Weekly Compensation; and
(b) INSURANCE COVERAGE -- subject to Section 3.5,
continued participation in all life, medical, health, accident, or
other insurance plans, programs, or arrangements in which the Eligible
Employee was enrolled with a BayBanks Employer immediately prior to
the Change in Control on substantially the same terms and conditions
for a number of weeks following the Qualifying Termination equal to
two times the Eligible Employee's Years of Service, but not to exceed
78 weeks.
2.2 ADDITIONAL BENEFITS FOR DESIGNATED EMPLOYEES. In
addition to the benefits described in Section 2.1, each BayBanks Employer shall
provide the following additional benefits to each of its Eligible Employees who
experiences a Qualifying Termination and who has been designated by the Plan
Committee as eligible to receive benefits under this Section 2.2:
- 5 -
<PAGE> 6
(a) CASH PAYMENT -- for each of the paragraphs
set forth below under which the Employee qualifies, an additional lump
sum cash payment equal to the Eligible Employee's Weekly Compensation
multiplied by two times his or her Years of Service, provided that the
Employee shall not be entitled to receive a total amount under
Sections 2.1 and 2.2 that exceeds 78 times his or her Weekly
Compensation:
(i) AGE 50 OR 10 YEARS OF SERVICE. The
Employee is age 50 or older, or has ten or more Years of
Service, on the date of the Qualifying Termination.
(ii) BASE SALARY $100,000. The
Employee's annualized base salary on the date of the
Qualifying Termination, or at the time of the Constructive
Discharge Event in the case of a Qualifying Termination under
Section 1.8(b), is at least $100,000 or such higher amount as
may be applicable under Section 3.2.
(iii) QUALIFYING POSITION. The Employee
was designated by the Plan Committee on or before the Change
in Control expressly for purposes of this Plan as holding a
qualifying administrative, staff, or senior business unit
position, and such designation was not revoked under Section
3.1(a) prior to the Change in Control.
(b) INSURANCE COVERAGE -- subject to Section 3.5,
continued participation in the insurance coverage described in Section
2.1(b) for a number of weeks following the Qualifying Termination
equal to the total number of weeks of such Employee's Weekly
Compensation paid under Sections 2.1, 2.2(a)(i), 2.2(a)(ii), and/or
2.2(a)(iii), but not to exceed a total of 78 weeks under both Sections
2.1 and 2.2. (For example, if an Employee with nine Years of Service
qualifies under all of Sections 2.1, 2.2(a)(i), 2.2(a)(ii), and
2.2(a)(iii), he or she would be entitled to continued insurance
coverage for 72 weeks following the Qualifying Termination).
(c) OUTPLACEMENT ASSISTANCE -- outplacement
assistance available from an independent outplacement firm on terms to
be determined by the Plan Committee, at a cost to the BayBanks
Employer of not less than $5,000.
(d) RETIREMENT SUPPLEMENT -- if the Employee is
not entitled to benefits under a supplemental executive retirement
plan sponsored by a BayBanks Employer, the Employee shall receive a
lump sum cash payment equal to the difference between (i) the
actuarial present value of the benefits to which the Employee is
entitled under the Retirement Plan for Employees of BayBanks, Inc. and
Affiliated Companies (the "Retirement Plan") and (ii) the
corresponding value of those benefits calculated assuming that the
Employee's age and service under the Retirement Plan is increased by
the number of weeks of such Employee's Weekly Compensation payable
under Sections 2.1, 2.2, and/or 2.3. Actuarial present value shall be
based on the interest and mortality factors specified in the
Retirement Plan for the valuation of lump sum benefits, as in effect
immediately prior to the Change in Control calculated as of the date
of the Qualifying Termination. The retirement supplement for an
Employee entitled to benefits
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<PAGE> 7
under a supplemental executive retirement plan sponsored by a BayBanks
Employer is provided under the provisions of the supplemental
executive retirement plan.
2.3 ADDITIONAL BENEFITS FOR DESIGNATED SENIOR EXECUTIVES.
Each BayBanks Employer shall provide to each of its Eligible Employees who
experiences a Qualifying Termination and who has been designated by the Plan
Committee as eligible to receive benefits under this Section 2.3, the benefits
described in Sections 2.1 and 2.2, with the following modifications:
(a) CASH PAYMENT -- the Employee shall receive up
to 156 times his or her Weekly Compensation, rather than up to 78
times such compensation;
(b) INSURANCE COVERAGE -- the limitation in
Section 2.2(b) of 78 weeks of continued insurance coverage shall
instead be 156 weeks of such coverage; and
(c) OUTPLACEMENT ASSISTANCE -- the amount of
outplacement assistance made available to the Employee under Section
2.2(c) shall be at a cost to the BayBanks Employer of not less than
15% of the Employee's Weekly Compensation multiplied by 52. For
purposes of this subsection (c) only, Weekly Compensation will not
include any annual incentive or similar award for which the Employee
is eligible.
2.4 BENEFITS FOR DESIGNATED SHORT-SERVICE EMPLOYEES.
Each BayBanks Employer shall provide the following benefits (instead of any
benefits under Sections 2.1, 2.2, and/or 2.3) to each of its Short-Service
Employees who experiences a Qualifying Termination (unless the Severance
Benefit Legislation would provide an equal or higher level of benefits as
described in Section 4.1.
(a) CASH PAYMENT -- a lump sum cash payment equal
to 13 times the Short-Service Employee's Weekly Compensation, plus an
additional 13 times Weekly Compensation for each of the paragraphs set
forth below under which the Short-Service Employee qualifies:
(i) AGE 50. The Short-Service Employee
is age 50 or older on the date of the Qualifying Termination.
(ii) BASE SALARY $100,000. The
Short-Service Employee's annualized base salary on the date of
the Qualifying Termination, or at the time of the Constructive
Discharge Event in the case of a Qualifying Termination under
Section 1.8(b), is at least $100,000 or such higher amount as
may be applied under Section 3.2.
(iii) QUALIFYING POSITION. The
Short-Service Employee was designated by the Plan Committee on
or before the Change in Control expressly for purposes of this
Plan as holding a qualifying administrative, staff, or senior
business unit position and such designation was not revoked
under Section 3.1(a) prior to the Change in Control.
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<PAGE> 8
(b) INSURANCE COVERAGE -- subject to Section 3.5,
continued participation in all life, medical, health, accident, or
other insurance plans, programs, or arrangements in which the
Short-Service Employee was enrolled with a BayBanks Employer
immediately prior to the Change in Control on substantially the same
terms and conditions for a number of weeks following the Qualifying
Termination equal to the total number of weeks of his or her Weekly
Compensation paid under subsection (a) hereof.
(c) OUTPLACEMENT ASSISTANCE -- outplacement
assistance made available from an independent outplacement firm on
terms to be determined by the Plan Committee, (i) at a cost to the
BayBanks Employer of not less than $5,000 if the Short-Service
Employee was designated by the Plan Committee as eligible for benefits
under Section 2.2, or (ii) at a cost to the BayBanks Employer of not
less than 15% of the Short-Service Employee's Weekly Compensation
multiplied by 52 if the Short-Service Employee was designated as
eligible for benefits under Section 2.3.
(d) RETIREMENT SUPPLEMENT -- if the Employee is
not entitled to benefits under a supplemental executive retirement
plan sponsored by a BayBanks Employer, the Employee shall receive the
lump sum cash retirement supplement described in Section 2.2(d).
2.5. LIABILITY FOR BENEFITS. If, for any reason, any
payments or benefits that any Employee is entitled to receive from his or her
BayBanks Employer under this Plan cannot be paid or provided when due, then
BayBanks, Inc. shall be liable to make such payment or provide such benefits to
such Employee, provided that there shall be no duplication of recovery by the
Employee. Without limiting its liability to any Employee, BayBanks, Inc. shall
be entitled to reimbursement from the BayBanks Employer that is otherwise
liable for making such payments or providing such benefits.
SECTION 3. PROCEDURES FOR OPERATION OF THE PLAN
3.1 DESIGNATION OF ELIGIBILITY FOR PARTICIPATION UNDER
SECTIONS 2.2, 2.3, AND 2.4. The Plan Committee shall from time to time
designate Employees who it determines are eligible for the benefits described
in Sections 2.2, 2.3, or 2.4 and shall communicate such designation to the
Employee in writing in such form and at such time as the Plan Committee may
determine. Any such designation may not be changed after it has been
communicated to the Employee, except that prior to a Change in Control, the
Plan Committee may revoke at any time, without prior notice, the qualifying
position designations under Sections 2.2(a)(iii) and 2.4(a)(iii) if such
revocation is made because (i) the Employee no longer holds a qualifying
administrative, staff, or senior business unit position or (ii) the Plan
Committee determines that the position held by the Employee is no longer
appropriate for such designation as a result of changes in responsibilities
associated with that position or changes in organizational structure.
3.2 INCREASES IN $100,000 THRESHOLD. The Plan Committee
may from time to time, prior to a Change in Control, increase the base salary
threshold for qualification under Sections 2.2(a)(ii) or 2.4(a)(ii), provided
that the increase shall not exceed the percentage increase in the Consumer
Price Index (All Items) for All Urban Consumers in the Boston,
- 8 -
<PAGE> 9
Massachusetts area (or some comparable index if such index is discontinued or
unavailable) since January 31, 1991 or since the most recent increase in such
threshold amount hereunder, as the case may be. Any increase in the base
salary threshold shall not apply to any Employee who had received notice of
designation of eligibility for benefits under Sections 2.2, 2.3 or 2.4 prior to
such increase.
3.3 NOTICE OF CHANGE IN CONTROL OR CONSTRUCTIVE DISCHARGE
EVENT. BayBanks shall cause written notice of the occurrence of a Change in
Control to be sent to each Employee within 30 days thereof. Each BayBanks
Employer shall cause written notice of the occurrence of a Constructive
Discharge Event to be sent to each of its affected Employees within 30 days
thereof.
3.4 NOTICE OF REASONS FOR TERMINATION.
(a) If a BayBanks Employer terminates the
employment of an Employee for Cause within two years following a
Change in Control, the BayBanks Employer shall notify the Employee in
writing within three days of such termination of the particular
reason(s) for such termination.
(b) If a Qualifying Termination occurs following
a Constructive Discharge Event under Section 1.8(b), the Employee
shall within 15 days after the termination notify his or her BayBanks
Employer in writing of the particular reason(s) for such termination.
The written notices required by this section may be delivered to the Employee
at his or her home address on the personnel records of the BayBanks Employer,
and to the BayBanks Employer c/o Director-Human Resources Department, BayBanks,
Inc., 175 Federal Street, Boston, Massachusetts 02110, in each case by hand or
by first-class mail postmarked within the applicable notice period.
3.5 PAYMENT OF BENEFITS. The BayBanks Employer shall, in
the event of a Qualifying Termination, make the lump- sum payments required by
Section 2 to the Employee within 30 days after the Qualifying Termination. If
the BayBanks Employer is unable to continue the insurance coverage as required
by Section 2 because the plan providing such insurance does not permit it, or
for other reasons beyond the control of the BayBanks Employer, the BayBanks
Employer shall within 30 days after the Qualifying Termination make a lump-sum
payment to the Employee in an amount equal, after-tax, to the projected cost to
the Employee of comparable replacement insurance coverage.
3.6 CLAIMS AND CLAIMS REVIEW PROCEDURES. The Plan
Committee shall establish appropriate procedures for the presentation and
review of claims by Employees for benefits under this Plan.
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<PAGE> 10
SECTION 4. LIMITATIONS ON PAYMENT OF BENEFITS
4.1 EFFECT OF SEVERANCE BENEFIT LEGISLATION. If for any
particular termination, the benefits that an Employee would receive under
Severance Benefit Legislation equal or exceed the benefits that the Employee
would be entitled to receive under the Plan, the provisions of the Severance
Benefit Legislation shall govern and no benefits shall be paid or provided
under this Plan. If the benefits that an Employee would receive under this
Plan exceed the benefits that the Employee would be entitled to receive under
Severance Benefit Legislation, the benefits under this Plan shall replace the
benefits under the Legislation.
4.2 LIMITATION FOR RETIREMENT AGE EMPLOYEES.
Notwithstanding any other provision of this Plan, in no event shall the number
of weeks of Weekly Compensation or continued insurance coverage that the
Employee is entitled to receive under Section 2 exceed the number of weeks
remaining between the date of the Qualifying Termination and the date of the
Employee's 65th birthday, except to the extent otherwise required under
applicable law.
4.3 LIMITATION IN THE EVENT OF "EXCESS PARACHUTE
PAYMENTS." It is intended that all severance benefits payable pursuant to
Section 2, together with all amounts payable under any benefit or compensation
plan of BayBanks Employers upon or in connection with a Change in Control, are
reasonable compensation for Employees' services to their BayBanks Employers.
Notwithstanding the foregoing, should BayBanks determine, based upon the
opinion of BayBanks' independent accounting advisors ("Accounting Firm")
serving as such immediately prior to a Change in Control, that payment to any
Employee of any amounts pursuant to Section 2, together with any other amounts
that must be included in such determination, would result in the payment of an
"Excess Parachute Payment," as defined in Appendix A, then the BayBanks
Employer that is obligated to the Employee under this Plan shall reduce the
amounts otherwise payable to the Employee under Section 2 to the maximum amount
that would permit a determination that the Employee has not received an Excess
Parachute Payment unless the after-tax amount payable to the Employee hereunder
without regard to the foregoing limitation ("Uncapped After-Tax Amount," as
defined in Appendix A) exceeds the after-tax amount payable to the Employee
with regard to such limitation ("Capped After-Tax Amount," as defined in
Appendix A) by 10% or more. Any such determination or reduction in amounts
payable pursuant to Section 2 shall be made in accordance with Appendix A.
4.4 EFFECT OF 12 U.S.C. [SECTION] 1828(K).
Notwithstanding any other provision of this Plan, a BayBanks Employer shall not
be obligated to pay, and an Employee shall not be entitled to receive, any
payments or benefits under this Plan to the extent that it is finally and
conclusively determined by the Federal Deposit Insurance Corporation, with
respect to such Employee, that such Employee is not entitled to such payments
pursuant to the provisions of 12 U.S.C. Section 1828(k).
- 10 -
<PAGE> 11
SECTION 5. MISCELLANEOUS
5.1 AMENDMENT AND TERMINATION.
(a) PRIOR TO A CHANGE IN CONTROL. This Plan may
be amended or terminated by the BayBanks Board of Directors at any
time prior to or upon a Change in Control; provided, however, that
upon such amendment or termination the Plan as it existed prior to the
amendment or termination shall remain in effect with respect to
persons who are then employed by a BayBanks Employer and who
experience a Qualifying Termination following a Change in Control
occurring at the same time as or within two years after the amendment
or termination.
(b) FOLLOWING A CHANGE IN CONTROL. This Plan may
be amended or terminated by the BayBanks Board of Directors at any
time following a Change in Control; provided, however, that upon such
amendment or termination the Plan as it existed prior to the amendment
or termination shall remain in effect with respect to persons who were
employed by a BayBanks Employer at the time of the Change in Control
and experience a Qualifying Termination within two years following the
Change in Control.
(c) OTHER PROVISIONS. Notwithstanding
subsections (a) and (b) above, (i) this Plan may be amended by the
BayBanks Board of Directors in any respect and such amendment shall be
effective immediately, to the extent it does not materially adversely
affect the rights under this Plan of any persons who are then employed
by a BayBanks Employer or who have experienced a Qualifying
Termination and (ii) prior to a Change in Control, this Plan shall
terminate immediately with respect to a BayBanks Employer other than
BayBanks, Inc. and with respect to the employees of such BayBanks
Employer if it ceases to be a majority-owned subsidiary of BayBanks as
the result of a transaction unrelated to a Change in Control.
5.2 NO CONTRACT OF EMPLOYMENT. This Plan does not
constitute a contract of employment, and nothing herein shall affect any
BayBanks Employer's ability to terminate an Employee's employment at any time,
with or without cause, nor shall this Plan be construed as establishing a
policy for, or providing a right to require a BayBanks Employer to provide, any
benefits prior to a Change in Control.
5.3 RIGHTS OF EMPLOYEES.
(a) Employees shall not be required to mitigate
damages or the amount of any payments under this Plan, nor shall the
amount of any such payment be reduced by any compensation earned by
the Employee as a result of his or her employment after termination of
employment with a BayBanks Employer.
(b) No rights of any Employee under this Plan may
be released, modified, waived, or discharged by an Employee except in
a writing signed by the Employee. No failure or delay by any Employee
in exercising any right under this Plan shall operate as a waiver
thereof. This Plan shall not supersede or in any way limit the
- 11 -
<PAGE> 12
rights, duties, or obligations the Employee may have under any other
written agreement with any BayBanks Employer.
(c) After a Change in Control, each BayBanks
Employer shall pay all reasonable legal fees, costs, and other
expenses incurred by any of its Employees in enforcing his or her
rights under this Plan.
(d) This Plan shall inure to the benefit of and
be enforceable by each Employee's heirs and personal or legal
representatives. Upon the death of an Employee any amount that would
be payable if he or she had continued to live shall be paid in
accordance with the terms of this Plan to his or her designated
beneficiary or, if none has been designated, to his or her estate. To
the extent permitted by law, the rights of an Employee under this Plan
may not be sold, assigned, pledged, or otherwise transferred and shall
not be subject to attachment, garnishment, levy, or execution.
5.4 RELATIONSHIP TO OTHER EMPLOYEE BENEFITS; FUNDING.
(a) Subject to Section 4.1, all benefits provided
under this Plan shall be in addition to any pension, disability,
worker's compensation, other benefit plan distribution, unpaid
vacation, or other unpaid compensation plan rights that the Employee
has at the date of termination.
(b) Subject to Section 4.1, nothing in this Plan
shall be deemed to limit the type or amount of benefits that may be
provided to any Employee or any other employee of any BayBanks
Employer under other plans or arrangements, whether or not in
connection with a Change in Control.
(c) The BayBanks Employers may elect to fund
their obligations under this Plan but shall not be required to do so.
In any event, this Plan shall not be construed to grant to any
Employee any right or interest in any property of any BayBanks
Employer.
5.5 SUCCESSORS. Subject to Section 5.1, the obligations
of each BayBanks Employer under this Plan shall be binding upon such BayBanks
Employer and any successor thereto or any successor to all or substantially all
of its business or assets by purchase, merger, consolidation, or otherwise.
Each BayBanks Employer shall, in connection with any Change in Control and
thereafter, require any successor to all or substantially all of its business
or assets to expressly assume and agree to perform the obligations of such
BayBanks Employer under this Plan, whether the succession is direct or
indirect, by purchase, merger, consolidation, or otherwise.
5.6 GOVERNING LAW. This Plan shall be governed by the
laws of Massachusetts.
5.7 SEVERABILITY. If a provision of this Plan shall be
held illegal or invalid, the illegality or invalidity shall not affect the
other provisions hereof, and this Plan shall be construed and enforced as if
the illegal or invalid provision had not been included.
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<PAGE> 13
5.8 HEADINGS. The section headings herein are for
convenience only and shall not affect the interpretation of this Plan.
5.9 WITHHOLDING. All amounts payable under this Plan
shall be subject to appropriate tax withholding by each BayBanks Employer.
5.10 ERISA MATTERS. This Plan is intended to qualify as a
severance pay plan as defined in DOL Reg.[Section] 2510.3-2(b) and to the extent
not so qualified is intended to qualify as an unfunded deferred compensation
plan for a select group of management or highly compensated employees within
the meaning of ERISA. This Plan shall be administered and interpreted
accordingly. The Plan Committee is the named fiduciary of this Plan and has
the authority to control and manage the operation and administration of the
Plan.
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<PAGE> 14
Appendix A
----------
Determination of Limitation On Payments
Under Section 4.3 of the Plan
---------------------------------------
A. EXCESS PARACHUTE PAYMENTS. For purposes of Section 4.3 of the
Plan, an "Excess Parachute Payment" shall have the meaning set forth in Section
280G of the Internal Revenue Code of 1986, as amended ("Code") and in proposed
or final regulations for applying Section 280G of the Code.
B. DETERMINATION OF AFTER-TAX AMOUNTS. For purposes of
determining whether the amounts payable to any Employee pursuant to Section 2
of the Plan shall be reduced under Section 4.3 of the Plan to the maximum
amount ("Maximum Amount") that would permit a determination that the Employee
has not received an Excess Parachute Payment, the following rules shall apply:
(1) The "Uncapped After-Tax Amount" shall be equal to the
sum of the amounts payable pursuant to Section 2 of the Plan (without regard to
Section 4.3 of the Plan) and pursuant to all benefit and compensation plans and
arrangements that must be included in determining whether an Excess Parachute
Payment has been made, less the Income Tax Amount on such sum and the 20%
excise tax under Section 4999 of the Code that would be due on all Excess
Parachute Payments.
(2) The "Capped After-Tax Amount" shall be equal to the
sum of the Maximum Amount and all amounts payable pursuant to all benefit and
compensation plans and arrangements that must be included in determining
whether an Excess Parachute Payment has been made, less the Income Tax Amount
on such sum.
(3) The "Income Tax Amount" shall be equal to the amount
of Federal, state and local income taxes that would be due on an amount (after
taking into account the deductibility of state and local income taxes for
Federal income tax purposes) if the highest marginal federal, state and local
income tax rate in effect at the time of the Change in Control were imposed on
the value of the payments after applying the following rules:
(a) the amounts payable pursuant to Section 2 of
the Plan and all benefit and compensation plans and arrangements shall be
treated as paid in full on the date of the Change in Control;
(b) the value of payments resulting from the
vesting of restricted stock shall be treated as equal to the fair market value
of such stock on the date of the Change in Control, regardless of whether the
Employee would, in the absence of an election pursuant to Section 83(b) of the
Code ("Section 83(b) Election"), recognize income in connection with such
vesting on a later date; and
(c) the value of payments resulting from the
vesting of a stock option shall be treated as equal to the excess over the
option exercise price of the fair market value of the stock subject to the
option on the date of the Change in Control, regardless of (i) whether
<PAGE> 15
the option is a nonqualified stock option or an incentive stock option, (ii)
when the option is exercised, and (iii) whether the Employee would, in the
absence of a Section 83(b) Election, recognize income in connection with the
transfer of stock pursuant to the exercise of the option on a later date.
C. ACCOUNTING FIRM OPINION. The BayBanks Employer that is
obligated to the Employee under the Plan may reduce, by applying the Excess
Parachute Payment provisions of Section 4.3 of the Plan, the severance benefit
amounts payable pursuant to Section 2 of the Plan only if within 60 days of the
Employee's Qualifying Termination it provides the Employee with an opinion of
the Accounting Firm that the Employee would be considered to have received
Excess Parachute Payments if he or she were to receive the full amounts owing
pursuant to Section 2 of the Plan. Such opinion shall be based upon Sections
280G and 4999 of the Code and on proposed or final regulations for applying
those Code sections, or on substantial authority within the meaning of Section
6662 of the Code, and shall set forth with particularity the smallest amount by
which the amounts due to the Employee under Section 2 of the Plan would have to
be reduced to avoid the imposition of any excise tax or the denial of any
deduction pursuant to Sections 280G and 4999 of the Code and shall demonstrate
the methodology by which such smallest amount was calculated.
D. SUBSEQUENT DETERMINATION. As a result of possible uncertainty
in the application of Section 280G of the Code at the time of the
determinations by the Accounting Firm hereunder, amounts may have been paid
that should not have been paid ("Overpayment") or additional amounts may not
have been paid that could have been paid ("Underpayment"), in each case,
consistent with the calculations required to be made hereunder. In the event
that the Internal Revenue Service asserts a deficiency against the Employee or
the Employee's BayBanks Employer in such a case and the Accounting Firm
determines that an Overpayment has been made, any such Overpayment shall be
treated for all purposes as a loan to the Employee from the date such
Overpayment was made in an amount equal to the value of such Overpayment, which
loan the Employee shall repay to the BayBanks Employer that made the
Overpayment together with interest at the applicable federal rate under Section
7872(f)(2)(B) of the Code within 60 business days after receipt by the Employee
of written notice of such determination by the Accounting Firm, including the
amount of the loan and the interest calculation; provided, however, that no
such loan shall be deemed to have been made and no amount shall be payable by
the Employee to such BayBanks Employer if and to the extent such deemed loan
and repayment with interest would not eliminate the excise tax under Section
4999 of the Code, or the disallowance of the deduction under Section 280G(a) of
the Code, for the amounts previously paid to the Employee. In the event that
the Accounting Firm determines that an Underpayment has been made, such
Underpayment shall be promptly paid by the BayBanks Employer obligated to the
Employee under the Plan to or for the benefit of the Employee, together with
interest at the applicable federal rate provided for in Section 7872(f)(2)(B)
of the Code.
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<PAGE> 1
EXHIBIT 10.10
BAYBANKS DEFERRED PAYMENT PLANS
TRUST AGREEMENT
First Amendment
---------------
The BayBanks Deferred Payment Plans Trust Agreement (hereinafter
called the "Agreement") is hereby amended effective as of October 27, 1994, as
follows:
1. Section 2.4 of the Agreement is deleted in its entirety and
replaced by the following new section:
"2.4 CHANGE IN CONTROL DEFINITION. A "Change in Control" of BayBanks
shall be deemed to have occurred upon the occurrence of any of the
following:
(a) Any transaction or series of transactions, as a result of
which any "person" (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder) (a "Person") is or becomes a "beneficial
owner" (as defined in Rule 13d-3 under such act), directly or
indirectly, of securities of BayBanks representing thirty percent
(30%) or more of the combined voting power of BayBanks' then
outstanding voting securities ("BayBanks' Outstanding Voting
Securities"); provided, however, that a Change in Control shall not be
deemed to have occurred solely because of the acquisition of
securities of BayBanks by (i) one or more employee benefit plans or
related trusts established for the benefit of the employees of
BayBanks or any subsidiary of BayBanks; or (ii) any Person when such
acquisition (A) is effected primarily to prevent BayBanks from being
declared insolvent and (B) is approved by the Board of Directors of
BayBanks (the "Board").
(b) Any change in the membership of the Board such that
individuals who are Incumbent Directors (as defined herein) cease for
any reason to constitute at least a majority of the Board. The
Incumbent Directors shall be (i) those members of the Board who were
Directors as of October 27, 1994, and who have served continuously as
Directors since such date, and (ii) any other member of the Board who
subsequently became a Director and whose election or nomination for
election by BayBanks' stockholders at the beginning of his or her
current tenure was approved by a vote of at least a majority of the
Directors who were then Incumbent Directors, except that no individual
shall be an Incumbent Director if such individual's initial assumption
of office as a Director occurred as a result of an actual or
threatened election contest with respect to the election or removal of
Directors, or other actual or threatened solicitation of proxies or
consents, by, or on behalf of, a Person other than the Board.
<PAGE> 2
(c) The approval by BayBanks' stockholders of a reorganization,
merger, consolidation, sale or other disposition of all or
substantially all of the assets of BayBanks, or similar transaction (a
"Business Combination"), unless all of the following conditions are
met, with such conditions being applied as of the date of such
approval as if the Business Combination were consummated on such date
on the terms then specified in the agreement or plan providing for the
Business Combination:
(i) the individuals and entities who are the beneficial
owners of BayBanks' Outstanding Voting Securities as
of the date of such approval would beneficially own,
directly or indirectly, securities representing more
than 50% of the outstanding combined voting power of
the voting securities that would be outstanding and
entitled to vote generally in the election of the
governing body of the corporation or other entity
resulting from such Business Combination (including,
without limitation, a corporation or other entity
that as a result of such transaction would own
BayBanks or all or substantially all of BayBanks'
assets, either directly or through one or more
subsidiaries) (the "Resulting Entity"), and the
securities of the Resulting Entity that would be
owned by such beneficial owners of BayBanks'
Outstanding Voting Securities would be owned by them
in substantially the same proportions as they own
BayBanks' Outstanding Voting Securities;
(ii) no Person (excluding any corporation or other entity
resulting from such Business Combination, and
excluding any employee benefit plan or related trust
of BayBanks or of such corporation or other entity
resulting from such Business Combination) would
beneficially own, directly or indirectly, 30% or more
of the combined voting power of the outstanding
voting securities of the Resulting Entity except to
the extent that such ownership existed prior to the
Business Combination; and
(iii) at least a majority of the members of the board of
directors of the Resulting Entity would be persons
who were Incumbent Directors at the time of the
execution of the initial agreement or of the action
of the Board providing for such Business Combination.
(d) Approval by BayBanks' stockholders of a liquidation or
dissolution of BayBanks (unless the liquidation or dissolution is part
of a Business Combination excepted from clause (c) above)."
2. Except as amended hereby, the Agreement remains in full force
and effect.
- 2 -
<PAGE> 3
IN WITNESS WHEREOF, BayBanks, Inc., for itself and its subsidiaries,
and the Trustee have executed this First Amendment as of the date first above
written.
BAYBANKS, INC., for itself and its
subsidiaries
By: /s/ ILENE BEAL
--------------------------------
Title: Executive Vice President
-----------------------------
MARINE MIDLAND BANK, N.A.,
as Trustee
By: /s/ STEPHEN J. DAVIDSON
--------------------------------
Title: Assistant Vice President
-----------------------------
- 3 -
<PAGE> 1
<TABLE>
EXHIBIT 11.1
BAYBANKS, INC.
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
FOR THE NINE MONTHS AND QUARTERS ENDED SEPTEMBER 30
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<CAPTION>
NINE MONTHS ENDED QUARTER ENDED
SEPTEMBER 30 SEPTEMBER 30
---------------------------- ----------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PRIMARY:
Weighted average shares........... 18,827,078 18,649,823 18,883,516 18,709,968
Common Stock Equivalents (CSE):
Stock options................... 318,626 287,039 304,374 290,240
----------- ----------- ----------- -----------
Primary weighted average shares... 19,145,704 18,936,862 19,187,890 19,000,208
=========== =========== =========== ===========
Income before cumulative effect of
accounting change............... $ 77,666 $ 44,969 $ 29,033 $ 18,001
Less cumulative effect of
accounting change............... 932 -- -- --
----------- ----------- ----------- -----------
Net Income........................ $ 76,734 $ 44,969 $ 29,033 $ 18,001
=========== =========== =========== ===========
Primary earnings per share:
Income before cumulative effect
of accounting change......... $ 4.06 $ 2.37 $ 1.51 $ 0.95
Less cumulative effect of
accounting change............ 0.05 -- -- --
----------- ----------- ----------- -----------
Net Income...................... $ 4.01 $ 2.37 $ 1.51 $ 0.95
=========== =========== =========== ===========
FULLY DILUTED:
Weighted average shares........... 18,827,078 18,649,823 18,883,516 18,709,968
Common Stock Equivalents (CSE):
Stock options................... 318,626 287,039 304,374 290,240
Stock options not CSE............. 5,015 28,175 -- 18,306
5% convertible debentures......... -- 4,073(1) -- 4,073(1)
----------- ----------- ----------- -----------
Fully diluted weighted average
shares.......................... 19,150,719 18,969,110 19,187,890 19,022,587
=========== =========== =========== ===========
Income before cumulative effect of
accounting change............... $ 77,666 $ 44,969 $ 29,033 $ 18,001
Less cumulative effect of
accounting change............... 932 -- -- --
----------- ----------- ----------- -----------
Net income........................ 76,734 44,969 29,033 18,001
5% debentures interest
expense -- net of tax........... -- 2 -- 1
----------- ----------- ----------- -----------
Net Income -- fully diluted
basis........................... $ 76,734 $ 44,971 $ 29,033 $ 18,002
=========== =========== =========== ===========
Fully diluted earnings per share:
Income before cumulative effect
of accounting change......... $ 4.06 $ 2.37 $ 1.51 $ 0.95
Less cumulative effect of
accounting change............ 0.05 -- -- --
----------- ----------- ----------- -----------
Net Income...................... $ 4.01 $ 2.37 $ 1.51 $ 0.95
=========== =========== =========== ===========
<FN>
- - - - - ---------------
(1) $50 convertible at $13.75 per share.
</TABLE>
29
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BAYBANKS, INC. FOR THE NINE MONTH PERIOD ENDED SEPTEMBER
30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<EXCHANGE-RATE> 1.0
<CASH> 658,070
<INT-BEARING-DEPOSITS> 155,503
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 21,521
<INVESTMENTS-HELD-FOR-SALE> 141,406
<INVESTMENTS-CARRYING> 2,892,584
<INVESTMENTS-MARKET> 2,842,806
<LOANS> 6,352,975
<ALLOWANCE> 150,614
<TOTAL-ASSETS> 10,536,937
<DEPOSITS> 8,696,066
<SHORT-TERM> 951,037
<LIABILITIES-OTHER> 60,653
<LONG-TERM> 54,009
<COMMON> 37,998
0
0
<OTHER-SE> 727,723
<TOTAL-LIABILITIES-AND-EQUITY> 10,536,937
<INTEREST-LOAN> 368,008
<INTEREST-INVEST> 101,299
<INTEREST-OTHER> 6,232
<INTEREST-TOTAL> 475,539
<INTEREST-DEPOSIT> 109,027
<INTEREST-EXPENSE> 134,053
<INTEREST-INCOME-NET> 341,486
<LOAN-LOSSES> 18,000
<SECURITIES-GAINS> 475
<EXPENSE-OTHER> 349,465
<INCOME-PRETAX> 130,799
<INCOME-PRE-EXTRAORDINARY> 77,666
<EXTRAORDINARY> 0
<CHANGES> (932)
<NET-INCOME> 76,734
<EPS-PRIMARY> 4.01
<EPS-DILUTED> 4.01
<YIELD-ACTUAL> 6.94
<LOANS-NON> 59,538
<LOANS-PAST> 43,483
<LOANS-TROUBLED> 8,772
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 171,496
<CHARGE-OFFS> 52,379
<RECOVERIES> 13,497
<ALLOWANCE-CLOSE> 150,614
<ALLOWANCE-DOMESTIC> 12,242
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 138,372
</TABLE>
