<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------- --------
Commission file number 1-6522
BANK OF BOSTON CORPORATION
(Exact name of Registrant as specified in its charter)
Massachusetts 04-2471221
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Federal Street, Boston, Massachusetts 02110
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 434-2200
Former name, former address and former fiscal year, if changed since last
report: Not applicable
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 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes x No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of April 30, 1996:
Common Stock, $1.50 par value 110,835,158
<PAGE>
BANK OF BOSTON CORPORATION
--------------------------
TABLE OF CONTENTS
-----------------
Page
CONSOLIDATED SELECTED FINANCIAL DATA 3
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
-------
Bank of Boston Corporation and Subsidiaries
Consolidated Balance Sheet 4
Consolidated Statement of Income 6
Consolidated Statement of Changes in Stockholders' Equity 7
Consolidated Statement of Cash Flows 8
Notes to Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial Condition
------- and Results of Operations 13
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings 33
-------
Item 4. Submission of Matters to a Vote of Security Holders 33
-------
Item 6. Exhibits and Reports on Form 8-K 35
-------
Signatures 36
LIST OF TABLES
Consolidated Average Balance Sheet - Nine Quarters 28
Consolidated Statement of Income - Nine Quarters 29
Average Balances and Interest Rates - Quarter 30
Change in Net Interest Revenue - Volume and Rate Analysis 32
2
<PAGE>
BANK OF BOSTON CORPORATION
Consolidated Selected Financial Data
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Quarters Ended March 31 1996 1995
------- ------
<S> <C> <C>
Income Statement Data:
Net interest revenue $ 434 $ 426
Provision for credit losses 50 90
Noninterest income 226 293
Noninterest expense 405 383
Net income 117 125
Per common share:
Primary .97 1.08
Fully diluted .95 1.04
Market value per common share:
High 50 30 3/8
Low 41 5/8 25 5/8
At March 31
Balance Sheet Data:
Loans and lease financing $ 31,402 $ 30,439
Total assets 46,457 43,462
Deposits 31,235 28,275
Total stockholders' equity 3,711 3,328
Book value per common share 28.98 25.36
Regulatory capital ratios
Risk-based capital ratios
Tier 1 8.1% 7.8%
Total 12.9 13.3
Leverage ratio 7.2 7.3
</TABLE>
3
<PAGE>
BANK OF BOSTON CORPORATION
Consolidated Balance Sheet
( dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
ASSETS March 31 December 31
1996 1995
------------ ------------
<S> <C> <C>
Cash and due from banks $ 2,208 $ 2,645
Interest bearing deposits in other banks 1,425 1,250
Federal funds sold and securities
purchased under agreements to resell 1,426 1,350
Trading securities 1,302 1,109
Loans held for sale 96 889
Securities
Available for sale 5,064 5,014
Held to maturity (fair value of
$639 in 1996 and $620 in 1995) 647 613
Loans and lease financing
United States Operations 22,796 22,498
International Operations 8,606 8,569
------ ------
Total loans and lease financing
(net of unearned income of $262
in 1996 and $253 in 1995) 31,402 31,067
Reserve for credit losses (732) (736)
------ ------
Net loans and lease financing 30,670 30,331
Premises and equipment, net 620 617
Due from customers on acceptances 377 359
Accrued interest receivable 452 456
Other assets 2,170 2,764
------ ------
TOTAL ASSETS $ 46,457 $ 47,397
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
BANK OF BOSTON CORPORATION
Consolidated Balance Sheet
(dollars in millions, except per share amounts)
(continued)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY March 31 December 31
1996 1995
--------- ------------
<S> <C> <C>
Deposits
Domestic offices
Noninterest bearing $ 4,982 $ 4,839
Interest bearing 16,491 16,564
Overseas offices:
Noninterest bearing 629 552
Interest bearing 9,133 8,993
------ ------
Total deposits 31,235 30,948
Funds borrowed
Federal funds purchased 644 1,675
Term federal funds purchased 600 869
Securities sold under agreements to
repurchase 1,355 1,226
Other funds borrowed 4,602 4,993
Acceptances outstanding 378 359
Accrued expenses and other liabilities 1,433 1,437
Notes payable 2,499 2,139
------ ------
TOTAL LIABILITIES 42,746 43,646
------ ------
Commitments and contingencies
Stockholders' equity
Preferred stock without par value
Authorized shares - 10,000,000
Issued and outstanding shares -
4,593,941 508 508
Common stock, par value $2.25
Authorized shares - 200,000,000
Issued shares - 112,503,413 in 1996
and 112,571,508 in 1995
Outstanding shares - 110,530,356 in
1996 and 112,086,150 in 1995 253 253
Surplus 926 932
Retained earnings 2,077 2,020
Net unrealized gain on securities
available for sale, net of tax 41 64
Treasury stock, at cost (1,973,057
shares in 1996 and 485,358 shares in
1995) (89) (22)
Cumulative translation adjustments,
net of tax (5) (4)
------ ------
TOTAL STOCKHOLDERS' EQUITY 3,711 3,751
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 46,457 $ 47,397
====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
BANK OF BOSTON CORPORATION
Consolidated Statement of Income
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Quarters Ended March 31 1996 1995
------- -------
<S> <C> <C>
Interest Income:
Loans and lease financing, including
fees $ 810 $ 746
Securities 103 76
Trading securities 41 41
Loans held for sale 16 3
Federal funds sold and securities
purchased under agreements to resell 41 102
Deposits in other banks 24 65
--------- ---------
Total interest income 1,035 1,033
--------- ---------
Interest Expense:
Deposits of domestic offices 169 140
Deposits of overseas offices 187 222
Funds borrowed 202 206
Notes payable 43 39
--------- ---------
Total interest expense 601 607
--------- ---------
Net interest revenue 434 426
Provision for credit losses 50 90
--------- ---------
Net interest revenue after provision for
credit losses 384 336
--------- ---------
Noninterest Income:
Financial service fees 7 106
Trust and agency fees 51 53
Trading profits and commissions 12 1
Net securities gains 13 6
Other income 143 127
--------- ---------
Total noninterest income 226 293
--------- ---------
Noninterest Expense:
Salaries 186 176
Employee benefits 43 41
Occupancy expense 37 35
Equipment expense 26 24
Other expense 113 107
--------- ---------
Total noninterest expense 405 383
--------- ---------
Income before income taxes 205 246
Provision for income taxes 88 121
--------- ---------
NET INCOME $ 117 $ 125
========= =========
NET INCOME APPLICABLE TO
COMMON STOCK $ 108 $ 116
========= =========
Per Common Share:
Primary $ .97 $ 1.08
Fully diluted $ .95 $ 1.04
Dividends declared $ .37 $ .27
Average Number of Common Shares (in
thousands):
Primary 111,034 107,278
Fully diluted 112,864 111,820
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
BANK OF BOSTON CORPORATION
Consolidated Statement of Changes in Stockholders' Equity
(dollars in millions)
<TABLE>
<CAPTION>
1996 1995
Quarters ended March 31
Preferred Stock
<S> <C> <C>
Balance, January 1 $ 508 $ 508
------ ------
Balance, March 31 508 508
------ ------
Common Stock
Balance, January 1 253 242
Common stock issued
Conversion of subordinated
convertible debentures 8
------ ------
Balance, March 31 253 250
------ ------
Surplus
Balance, January 1 932 810
Dividend reinvestment and stock
purchase plan 1
Exercise of stock options (11) 2
Conversion of subordinated convertible
debentures 71
Acquisition of Ganis Credit Corporation 1
Restricted stock grants, net of
forfeitures 2
Other, principally employee benefit
plans 3 1
------ ------
Balance, March 31 926 886
------ ------
Retained Earnings
Balance, January 1 2,020 1,655
Net income 117 125
Restricted stock grants, net of
forfeitures (9) (6)
Cash dividends declared
Preferred stock (10) (9)
Common stock (41) (29)
------ ------
Balance, March 31 2,077 1,736
------ ------
Net Unrealized Gain (Loss) on
Securities Available for Sale
Balance, January 1 64 (40)
Change in net unrealized gain (loss) on
securities available for sale, net of
tax (23) (9)
------ ------
Balance, March 31 41 (49)
------ ------
Treasury Stock
Balance, January 1 (22) (27)
Purchase of treasury stock-2,705,000
shares in 1996 (121) (28)
Treasury stock reissued
Dividend reinvestment and stock
purchase plan-230,355 shares in
1996 10 9
Exercise of stock options-522,987
shares in 1996 23 1
Conversion of subordinated
convertible debentures 15
Acquisition of Ganis Credit 7 21
Corporation-153,741 shares in 1996
Restricted stock grants-220,410
shares in 1996 10 7
Other, principally employee
benefit plans-89,808 shares in
1996 4 2
------ ------
Balance, March 31 (89)
------ ------
Cumulative Translation Adjustments
Balance, January 1 (4) (6)
Translation adjustments, net of tax (1) 3
------ ------
Balance, March 31 (5) (3)
------ ------
Total Stockholders' Equity, March 31 $3,711 $3,328
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
BANK OF BOSTON CORPORATION
Consolidated Statement of Cash Flows
(in millions)
<TABLE>
<CAPTION>
Quarters Ended March 31 1996 1995
------- -------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 117 $ 125
Reconciliation of net income to net cash
provided from operating activities
Provision for credit losses 50 90
Depreciation and amortization 26 47
Provision for deferred taxes 49
Net gains on sales of securities
and other assets (108) (105)
Change in trading securities (193) (376)
Change in mortgages held for sale,
net 151 13
Net change in interest receivables
and payables 14 14
Other, net 8 324
------ ------
Net cash provided from operating
activities 114 132
------ ------
Cash Flows From Investing Activities:
Net cash provided from (used for)
interest bearing deposits in other
banks (175) 293
Net cash provided from (used for)
federal funds sold and
securities purchased under agreements
to resell (76) 309
Purchases of securities held to maturity (45) (254)
Purchases of securities available for
sale (1,286) (507)
Sales of securities available for sale 925 843
Maturities of securities held to
maturity 10 97
Maturities of securities available for
sale 266 256
Dispositions of equity and mezzanine
financing investments 25 37
Loans and lease financing originated by
nonbank entities (3,378) (2,421)
Loans and lease financing collected by
nonbank entities 3,064 2,292
Proceeds from sales of loan portfolios
by bank subsidiaries 1,409
Net cash used for lending activities of
bank subsidiaries (81) (819)
Proceeds from sales of other real
estate owned 7 12
Expenditures for premises and equipment (55) (44)
Proceeds from sales of business units,
premises and equipment 143 117
Other, net 60 4
------ ------
Net cash provided from (used for)
investing activities (596) 1,624
------ ------
Cash Flows From Financing Activities:
Net cash provided from (used for)
deposits 287 (3,081)
Net cash provided from (used for) funds
borrowed, net (450) 1,392
Net proceeds from issuance of notes
payable 360 18
Net proceeds from issuance of common
stock 26 15
Purchases of treasury stock (121) (28)
------ ------
Dividends paid (51) (38)
------ ------
Net cash provided from (used for)
financing activities 51 (1,722)
Effect of foreign currency translation
on cash (6) (5)
------ ------
NET CHANGE IN CASH AND DUE FROM BANKS (437) 29
Cash and Due from Banks at January 1 2,645 2,317
------ ------
Cash and Due from Banks at March 31 $ 2,208 $ 2,346
====== ======
Interest payments made $ 982 $ 595
Income tax payments made $ 57 $ 116
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
BANK OF BOSTON CORPORATION
Notes to Financial Statements
1. The accompanying interim consolidated financial statements of Bank of
Boston Corporation (the Corporation) are unaudited. In the opinion of
management, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the information contained
herein have been made. Certain amounts reported in prior periods have been
reclassified for comparative purposes. This information should be read in
conjunction with the Corporation's 1995 Annual Report on Form 10-K.
2. Acquisitions and Divestitures:
In October 1995, the Corporation entered into an agreement to acquire
The Boston Bancorp (Bancorp), the holding company of South Boston Savings
Bank, a Massachusetts chartered savings bank with approximately $1.3
billion in deposits at March 31, 1996. The Corporation will acquire
Bancorp with shares of its common stock, which it expects to purchase in
the open market. The transaction, with a purchase price currently
estimated at $235 million, will be accounted for as a purchase.
Stockholders of Bancorp approved the acquisition in April 1996. The
Corporation expects to close the transaction, which is subject to the
receipt of required regulatory approvals, in the second quarter of 1996.
In December 1995, the Corporation entered into a merger agreement with
BayBanks, Inc. (BayBanks), a bank holding company based in Boston with
assets of $11.6 billion at March 31, 1996. The Corporation expects to
issue approximately 43 million shares of its common stock in connection
with the merger, based on an exchange ratio of 2.2 shares of its common
stock for each outstanding BayBanks common share. The transaction is
expected to be accounted for as a pooling of interests. Stockholders of
both companies approved the merger in April 1996. The Corporation
expects to close the merger, which is subject to the receipt of required
regulatory approvals, in the third quarter of 1996.
In March 1996, the Corporation recognized a gain of $60 million, or $39
million net of tax, from the sale of its mortgage banking subsidiary to a
newly formed independent mortgage company, HomeSide, Inc. (HomeSide). The
Corporation retained a 45% interest in the new company, and two equity
investment firms held the remaining interest. The second phase of this
transaction, in which Barnett Mortgage Company will be acquired by
HomeSide, is expected to be completed in the second quarter of 1996,
resulting in an additional after-tax gain of approximately $30 million.
Subsequent to the completion of the second phase of the transaction, the
Corporation, Barnett Banks and the two equity investment firms will each
hold an approximate one-third interest in HomeSide.
3. Significant Noncash Transactions - Statement of Cash Flows:
During the first quarters of 1996 and 1995, the Corporation transferred
approximately $7 million and $12 million, respectively, to Other Real
Estate Owned (OREO) from loans.
9
<PAGE>
Notes to Financial Statements, continued
4. Securities:
A summary comparison of securities available for sale by type is as
follows:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
------------------------------------ --------------------------------
(in millions) Cost Carrying value Cost Carrying value
--------- -------------- -------- --------------
<S> <C> <C> <C> <C>
U.S. Treasury $ 578 $ 573 $ 660 $ 665
U.S. government
agencies and corporations -
Mortgage-backed securities 3,222 3,225 2,969 3,037
States and political subdivisions 20 21 19 21
Foreign debt securities 631 629 698 685
Other debt securities 287 283 299 290
Marketable equity
securities 102 172 100 152
Other equity securities 161 161 164 164
----- ----- ----- -----
$ 5,001 $ 5,064 $ 4,909 $ 5,014
===== ===== ===== =====
</TABLE>
Other equity securities included in securities available for sale are not
traded on established exchanges, and are carried at cost.
A summary comparison of securities held to maturity by type is as follows:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
------------------------------------ --------------------------------
Amortized Amortized
(in millions) Cost Fair value Cost Fair value
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
U.S. Treasury $ 4 $ 4 $ 4 $ 4
U.S. government
agencies and corporations -
Mortgage-backed securities 557 549 523 530
States and political subdivisions 5 5 5 5
Foreign debt securities 11 11 11 11
Other equity securities 70 70 70 70
----- ----- ----- -----
$ 647 $ 639 $ 613 $ 620
===== ===== ===== =====
</TABLE>
Other equity securities included in securities held to maturity represent
securities, such as Federal Reserve Bank and Federal Home Loan Bank stock,
which are not traded on established exchanges and have only redemption
capabilities. Fair values for such securities are considered to approximate
cost.
10
<PAGE>
Notes to Financial Statements, continued
5. Loans and Lease Financing:
The following are the details of loan and lease financing balances:
<TABLE>
<CAPTION>
March 31 December 31
(in millions) 1996 1995
--------- ------------
<S> <C> <C> <C>
United States Operations:
Commercial, industrial and financial $ 11,361 $ 11,439
Commercial real estate:
Construction 323 336
Other commercial 2,096 2,272
Consumer-related loans:
Secured by 1-4 family residential properties 3,976 3,861
Other 3,843 3,397
Lease financing 1,414 1,409
Unearned income (217) (216)
------ ------
22,796 22,498
------ ------
International Operations:
Loans and lease financing 8,651 8,606
Unearned income (45) (37)
------ ------
8,606 8,569
------ ------
$ 31,402 $ 31,067
====== ======
</TABLE>
6. Reserve for Credit Losses:
An analysis of the reserve for credit losses is as follows:
<TABLE>
<CAPTION>
(in millions)
Quarters Ended March 31 1996 1995
---- ----
<S> <C> <C>
Balance, beginning of period $ 736 $ 680
Provision 50 90
Reserves of entities sold (11) (32)
Domestic credit losses:
Commercial, industrial
and financial (4) (10)
Commercial real estate (13) (7)
Consumer-related loans:
Secured by 1-4 family residential
properties (7) (5)
Other (25) (14)
International credit losses (9) (18)
---- ----
Total credit losses (58) (54)
---- ----
Domestic recoveries:
Commercial, industrial
and financial 4 1
Commercial real estate 1 1
Consumer-related loans:
Secured by 1-4 family residential
properties 1 1
Other 5 6
International recoveries 4 3
---- ----
Total recoveries 15 12
---- ----
Net credit losses (43) (42)
---- ----
Balance, end of period $ 732 $ 696
==== ====
</TABLE>
At March 31, 1996, loans for which impairment has been recognized in
accordance with SFAS No. 114 totaled $211 million, of which $65 million
related to loans with no valuation reserve and $146 million related to
loans with a valuation reserve of $30 million. For the quarter ended March
31, 1996, average impaired loans were approximately $206 million. Interest
recognized on impaired loans during the first quarter of 1996 was not
material.
11
<PAGE>
Notes to Financial Statements, continued
7. Notes Payable:
In January 1996, the Corporation completed the issuance of $125 million in
senior floating rate medium-term notes, due 1997 and $75 million in senior
floating rate medium-term notes, due 1999. The interest rates on such
notes ranged from 5.41% to 5.52% and 5.66% to 5.68%, respectively, at March
31, 1996.
8. Contingencies:
The Corporation and its subsidiaries are defendants in a number
of legal proceedings arising in the normal course of business. Management,
after reviewing all actions and proceedings pending against or involving
the Corporation and its subsidiaries, considers that the aggregate loss, if
any, resulting from the final outcome of these proceedings should not be
material to the Corporation's financial statements.
9. Subsequent Event:
In April 1996, stockholders of the Corporation authorized an increase in
the authorized shares of the Corporation's common stock from 200 million
shares, par value $2.25 per share, to 300 million shares, par value $1.50
per share.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
GENERAL
The Corporation's net income for the quarter ended March 31, 1996 was $117
million, compared with net income of $125 million for the same period in 1995.
Net income per common share was $.97 on a primary basis and $.95 on a fully
diluted basis in the first quarter of 1996, compared with net income per common
share of $1.08 on a primary basis and $1.04 on a fully diluted basis for the
first quarter of 1995. The comparisons include a $31 million net after-tax loss
recorded in the first quarter of 1996 in connection with a transaction related
to the sale of the Corporation's mortgage banking subsidiary and that
subsidiary's risk management activities during the quarter (see further
discussion below). The comparisons also reflect the acquisition of Ganis Credit
Corporation (Ganis) and the sales of the Corporation's banking subsidiaries in
Maine and Vermont in the first quarter of 1995, and the sale of the
Corporation's corporate trust business and the joint venture of its stock
transfer business in the fourth quarter of 1995.
During the first quarter of 1996, the Corporation completed its previously
announced transaction with two equity investment firms, in which the
Corporation's mortgage banking subsidiary, BancBoston Mortgage Corporation
(BBMC), was sold to a newly formed independent mortgage company, HomeSide, Inc.
(HomeSide), with the Corporation retaining a 45 percent interest in HomeSide.
The second phase of this transaction, in which Barnett Mortgage Company will be
acquired by HomeSide, is expected to be completed in the second quarter of 1996.
Upon completion of this transaction, the Corporation, Barnett Bank and the
equity investment firms will each hold an approximate one-third interest in
HomeSide. Under the agreement relating to the sale of BBMC, the Corporation
agreed to receive a fixed price of $225 million and maintain a risk management
program designed to protect the enterprise value of BBMC. Upon closing the
transaction, the Corporation realized a gain of $60 million ($39 million after-
tax). An additional after-tax gain of approximately $30 million is expected to
be recognized in the second quarter of 1996 upon the closing of the second phase
of the transaction mentioned above. These gains are offset by an after-tax loss
related to BBMC's risk management activities of approximately $70 million
recorded in the first quarter of 1996 (see "Noninterest Income" section).
On December 12, 1995, the Corporation and BayBanks, Inc. (BayBanks), a $12
billion bank holding company based in Boston, jointly announced an agreement
under which the Corporation would acquire BayBanks in a tax-free exchange of
stock, whereby the Corporation will exchange 2.2 shares of its common stock for
each outstanding share of BayBanks common stock. On April 25, 1996, the
stockholders of both companies approved the transaction, which is expected to be
accounted for as a pooling of interests. The transaction is expected to be
completed during the third quarter of 1996, and is subject to a number of
conditions, including approval by federal and state regulators. No assurance can
be given that approvals of the regulators will be obtained. The Corporation
anticipates incurring restructuring costs of approximately $140 million (on a
pre-tax basis) in connection with the transaction. The combination of the two
Boston-based institutions will create a consumer and corporate banking entity
operating in 36 states and 23 countries, with approximately $60 billion in
assets and $40 billion in deposits.
In October 1995, the Corporation announced an agreement to acquire The Boston
Bancorp (Bancorp), the holding company of South Boston Savings Bank, a
Massachusetts chartered savings bank with approximately $1.3 billion in
deposits. On April 11, 1996, the stockholders of Bancorp approved the
transaction, which will be accounted for as a purchase. The acquisition is
currently anticipated to close in the second quarter of 1996, and is subject to
a number of conditions, including approval by federal and state regulators. No
assurance can be given that the approvals of the regulators will be obtained.
In August 1995, the Corporation announced its intent to purchase 93 branches
and approximately $200 million in assets of Banco Integrado Departmental (BID)
from the Central Bank of Argentina (the Central Bank). During the first quarter
of 1996, as a result of certain changes in Argentine law, an Argentine court
suspended the Corporation's offer, and the Central Bank reopened the bidding
process for BID. The Corporation subsequently declined to re-enter the bidding
process.
Additional information on certain of these transactions can be found in Note 2
to the Financial Statements.
13
<PAGE>
NET INTEREST REVENUE - (Fully Taxable Equivalent Basis)
The discussion of net interest revenue should be read in conjunction with
Average Balances and Interest Rates and Change in Net Interest Revenue - Volume
and Rate Analysis appearing elsewhere in this report. For this review, interest
income that is either exempt from federal income taxes or taxed at a
preferential rate has been adjusted to a fully taxable equivalent basis. This
adjustment has been calculated using a federal income tax rate of 35 percent,
plus applicable state and local taxes, net of related federal tax benefits.
The following table presents a summary of net interest revenue, on a fully
taxable equivalent basis, and related average earning asset balances and net
interest margins for United States and International Operations:
<TABLE>
<CAPTION>
Quarters Ended March 31
(dollars in millions) 1996 1995 Change
---------- ---------- ---------
<S> <C> <C> <C>
United States Operations:
Net interest revenue $ 312 $ 330 $ (18)
Average loans and lease financing 22,610 22,742 (132)
Average earning assets 29,144 27,647 1,497
Net interest margin 4.31% 4.85% (.54)%
International Operations:
Net interest revenue $ 124 $ 97 $ 27
Average loans and lease financing 8,747 7,381 1,366
Average earning assets 12,461 10,340 2,121
Net interest margin 3.99% 3.81% .18%
Consolidated:
Net interest revenue $ 436 $ 427 $ 9
Average loans and lease financing 31,357 30,123 1,234
Average earning assets 41,605 37,987 3,618
Net interest margin 4.21% 4.56% (.35)%
</TABLE>
The $18 million decrease in domestic net interest revenue and the 54 basis point
decline in domestic net interest margin from the first quarter of 1995 were
primarily due to narrower spreads caused by higher funding costs mainly
associated with the introduction and aggressive marketing of a new savings
deposit product subsequent to the first quarter of 1995. Also contributing to
narrower spreads was the reversal of the trend noted in the first quarter of
1995 whereby increases in rates on average earning assets generally outpaced
increases in rates on interest bearing liabilities, particularly certain retail
deposit products. The absence of prior year interest recoveries on loans and
lower dividends from venture investments also contributed to the declines in net
interest revenue and margin. A higher level of average earning assets partially
offset the impact of the narrower spreads on net interest revenue.
The $27 million increase in international net interest revenue from the first
quarter of 1995 reflected an increase of over $2.1 billion in average earning
assets, including roughly $1.4 billion in average loans and lease financing,
mainly from Brazil and Argentina. Also contributing to the increase in
international net interest revenue, and driving the 18 basis point increase in
international net interest margin, were wider spreads and an improvement in the
mix of earning assets from the Corporation's Brazilian operation. The
improvements in earning asset mix represented a shifting from lower yielding
treasury assets to higher yielding loans and lease financing. These improvements
were partially offset by a decline in Argentine net interest margin.
The level of net interest revenue and margin reported for the quarter ended
March 31, 1996 is not necessarily indicative of future results. The Corporation
could experience continued pressure on margin in the future. Future levels of
net interest revenue and margin will be affected by competitive pricing pressure
on retail deposits, loans and other products; the mix and volume of assets
14
<PAGE>
and liabilities; the current interest rate environment; the economic and
political situations in countries where the Corporation does business; and other
factors.
NONINTEREST INCOME
The following table sets forth the components of noninterest income.
<TABLE>
<CAPTION>
Quarters Ended March 31
(in millions) 1996 1995 Change
--------- ----- ------
<S> <C> <C> <C>
Financial service fees
Deposit fees $ 31 $ 30 $ 1
Letter of credit and acceptance fees 16 19 (3)
Net mortgage servicing fees (91) 21 (112)
Loan-related fees 20 13 7
Other financial service fees 31 23 8
----- ----- ------
Total financial service fees 7 106 (99)
Trust and agency fees 51 53 (2)
Trading profits and commissions 12 1 11
Net securities gains 13 6 7
Net equity and mezzanine profits 37 16 21
Net foreign exchange trading profits 12 12
Other income 34 24 10
Gain on sales of businesses 60 75 (15)
----- ----- ------
Total $ 226 $ 293 $ (67)
===== ===== ======
</TABLE>
Lower financial service fees reflected approximately $111 million of pre-tax
losses ($70 million after-tax), net of decreased servicing amortization, from
the change in market value of contracts used to manage the prepayment risk in
the mortgage servicing portfolio and the economic value of BBMC pending the
completion of its sale to HomeSide. The value of mortgage servicing rights
is affected by the expected level of prepayments made by mortgage holders
resulting from changes in mortgage rates. The value of the contracts purchased
to manage this risk fluctuates inversely with the value of the mortgage
servicing assets. Due to the sharp increase in long-term interest rates during
the first quarter of 1996, the value of these contracts declined. Concurrently,
the value of the mortgage servicing assets and the amount of gain to be
recognized by the Corporation on the disposition of BBMC increased. As a
result, in the first quarter of 1996, the Corporation recognized a gain of $60
million ($39 million after-tax) on the sale of BBMC, and expects to recognize an
additional after-tax gain of approximately $30 million in the second quarter of
1996, when the second phase of the transaction is completed.
Excluding the mortgage banking-related losses, financial service fees increased
by approximately $12 million over the first quarter of 1995, primarily
reflecting higher loan syndication fees resulting from the Corporation's
expansion of its capital markets business, and the growth of other financial
service fees including increases in capital markets-related advisory fees and
credit card fees in Latin America.
The lower trust and agency fees reflected the Corporation's sale of its
corporate trust business and joint venture of its stock transfer business in the
fourth quarter of 1995. Excluding the effects of these transactions, trust and
agency fees increased by $10 million from the first quarter of 1995, due to
growth in the Corporation's Brazilian mutual funds under management, which have
nearly doubled in the past year to $3.0 billion, and due to increased domestic
personal trust fees in the first quarter of 1996. Trading profits and
commissions increased $11 million due to increases from the Corporation's Latin
American and Emerging Markets businesses. The $21 million increase in net
equity and mezzanine profits reflected a higher level of sales activity and an
increase in income from investments in partnerships. Net securities gains
increased $7 million from the prior year as certain domestic securities were
sold as part of a repositioning of the available for sale securities portfolio.
Other income increased $10 million, which reflected higher profits from various
joint ventures, principally those related to the Corporation's Argentine pension
management business and domestic stock transfer business.
15
<PAGE>
The gain on sales of businesses in 1996 reflected the above-noted gain on the
sale of BBMC, and, in 1995, reflected the sale of the Corporation's Maine and
Vermont banking subsidiaries for a gain of $75 million ($30 million after-tax).
PROVISION FOR CREDIT LOSSES
The provision for credit losses was $50 million for the quarter ended
March 31, 1996, compared with $90 million, including a special provision of
$50 million, for the same period in 1995. The special provision recorded in the
first quarter of 1995 reflected management's intent to strengthen further the
Corporation's loan loss reserve as a result of the uncertainly caused by
economic events in Mexico and their impact on the Argentine economy in the early
part of 1995, and industry trends in consumer credit, combined with the growth
in the Corporation's Latin American lending and domestic consumer lending
portfolios. The provision for credit losses in each quarter reflected
management's assessment of the adequacy of the reserve for credit losses,
considering the current risk characteristics of the loan portfolio and economic
conditions.
The amount of future provisions will continue to be a function of the regular
quarterly review of the reserve for credit losses, based upon management's
assessment of risk at that time, and, as such, there can be no assurance as to
the level of future provisions.
NONINTEREST EXPENSE
The following table sets forth the components of noninterest expense.
<TABLE>
<CAPTION>
Quarters Ended March 31
(in millions) 1996 1995 Change
---- ---- -----
<S> <C> <C> <C>
Employee costs $229 $ 217 $ 12
Occupancy and equipment 63 59 4
FDIC insurance premiums 0 12 (12)
Other 111 93 18
--- --- ---
Noninterest expense before
OREO costs 403 381 22
OREO costs 2 2 0
--- --- ---
Total $405 $ 383 $ 22
=== === ===
</TABLE>
The increase in noninterest expense resulted from ongoing expansion in
several of the Corporation's growth businesses, mainly Latin America, consumer
finance, global capital markets and private banking. The increases stemmed from
additional staffing, new product offerings, office openings and technology
expenditures, as well as higher levels of advertising and travel expenses. These
increases were partially offset by the virtual elimination of FDIC insurance
premiums in 1996, lower professional fees and the impact of business
divestitures. The Corporation's total staff level declined by about 5 percent,
or 1,000, from the end of 1995, principally due to the sale of BBMC at the end
of the first quarter of 1996.
PROVISION FOR INCOME TAXES
The Corporation's tax provision was $88 million in the first quarter of 1996,
compared with $121 million in the first quarter of 1995. The 1995 provision
included $45 million associated with the $75 million pre-tax gain on the sales
of the Maine and Vermont banking subsidiaries. The high level of tax associated
with this gain reflected the lower tax bases in these investments as a result of
$35 million of non-tax deductible goodwill associated with these subsidiaries.
Excluding this gain and related tax provision, the Corporation's effective tax
rate in the first quarter of 1995 was 44 percent, compared to an effective tax
rate of 43 percent in the first quarter of 1996. The reduction in the effective
tax rate reflected the effect of mid-1995 changes in Massachusetts tax law which
permit apportionment of a bank's taxable income and reduce the state income tax
rate for banks from 12.5 percent to 10.5 percent to be phased in over five
years.
16
<PAGE>
FINANCIAL CONDITION
-------------------
CONSOLIDATED BALANCE SHEET
At March 31, 1996, the Corporation's total assets were $46.5 billion compared
with $47.4 billion at December 31, 1995. The decline was mainly due to the BBMC
transaction during the first quarter of 1996, which removed over $800 million in
mortgages held for sale and over $500 million of mortgage servicing rights from
the balance sheet.
CREDIT PROFILE
A discussion of the Corporation's credit management policies is included on page
28 of its 1995 Annual Report to Stockholders, which is incorporated by reference
into its 1995 Annual Report on Form 10-K.
The segments of the lending portfolio are as follows:
<TABLE>
<CAPTION>
March 31 Dec. 31 Sept. 30 June 30 March 31
(in millions) 1996 1995 1995 1995 1995
--------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
United States Operations:
Commercial, industrial and financial $ 11,361 $ 11,439 $ 11,789 $ 11,907 $ 11,684
Commercial real estate:
Construction 323 336 412 327 355
Other commercial 2,096 2,272 2,303 2,489 2,645
Consumer-related loans:
Secured by 1-4 family properties 3,976 3,861 4,978 4,752 4,635
Other 3,843 3,397 3,131 2,834 2,603
Lease financing 1,414 1,409 1,373 1,356 1,350
Unearned income (217) (216) (216) (211) (216)
------ ------ ------ ------ ------
22,796 22,498 23,770 23,454 23,056
------ ------ ------ ------ ------
International Operations:
Loans and lease financing, net of
unearned income 8,606 8,569 7,921 7,934 7,383
------ ------ ------ ------ ------
Total loan and lease financing $ 31,402 $ 31,067 $ 31,691 $ 31,388 $ 30,439
====== ====== ====== ====== ======
</TABLE>
Domestic loans and leases increased approximately $300 million from December 31,
1995, principally driven by growth in loans in the national consumer finance
portfolio, as well as in the credit card and home equity portfolios. The
Corporation reentered the domestic credit card business during the latter part
of 1995. Consistent with the Corporation's emphasis on reducing low-return
assets, the domestic commercial and industrial portfolio continued to trend
downward as growth in the New England and asset-based finance portfolios was
more than offset by declines in other areas. The steady decline in the
commercial real estate portfolio continued as well. Approximately 72 percent of
domestic commercial real estate loans were located in New England at March 31,
1996, compared with approximately 67 percent at December 31, 1995.
The Corporation's total loan portfolio at March 31, 1996 and December 31, 1995
included $1.3 billion of highly leveraged transaction (HLT) loans to 101
customers. The average HLT loan size at March 31, 1996 and December 31, 1995
was $13 million. The amount of unused commitments for HLTs at March 31, 1996
was $667 million, compared with $639 million at December 31, 1995. The amount of
unused commitments does not necessarily represent the actual future funding
requirements of the Corporation, since a portion can be syndicated or assigned
to others or may expire without being drawn upon. At March 31, 1996 and
December 31, 1995, there were no nonaccrual loans in the HLT portfolio. There
were no credit losses from the HLT portfolio in the first quarter of 1996 or in
the previous quarter. The Corporation does not currently anticipate a
substantial increase in HLT lending over the March 31, 1996 level.
17
<PAGE>
A discussion of the Corporation's real estate and HLT lending activities,
policies and the effect of these activities on results of operations is included
on page 30 of its 1995 Annual Report to Stockholders, which is incorporated by
reference into its 1995 Annual Report on Form 10-K.
The modest increase in international loans and lease financing reflected ongoing
growth in the Latin American portfolio, partially offset by a decline in the
European portfolio. A further discussion of the Argentine and Brazilian
operations is included in the "Cross-Border Outstandings" section.
NONACCRUAL LOANS AND OREO
The details of consolidated nonaccrual loans and OREO are as follows:
<TABLE>
<CAPTION>
March 31 Dec. 31 Sept. 30 June 30 March 31
(dollars in millions) 1996 1995 1995 1995 1995
--------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
United States:
Commercial, industrial and financial $ 79 $ 66 $ 105 $ 106 $ 111
Commercial real estate:
Construction 21 24 23 16 20
Other 74 78 82 85 97
Consumer-related loans:
Secured by 1-4 family residential
properties 47 43 46 45 44
Other 39 32 30 21 22
---- ---- ---- ---- ----
260 243 286 273 294
---- ---- ---- ---- ----
International 63 66 69 66 57
---- ---- ---- ---- ----
Total nonaccrual loans 323 309 355 339 351
OREO 48 50 62 78 71
---- ---- ---- ---- ----
Total $ 371 $ 359 $ 417 $ 417 $ 422
==== ==== ==== ==== ====
Nonaccrual loans and OREO as a
percent of related asset categories 1.2% 1.2% 1.3% 1.3% 1.4%
</TABLE>
The increase in nonaccrual loans and OREO included increases in commercial and
industrial nonaccrual loans, reflecting higher nonaccrual loans in the
diversified and asset-based finance portfolios (primarily one large new
nonaccrual loan) partially offset by lower nonaccrual loans in the New England
corporate banking portfolio. Increased consumer-related nonaccrual loans
occurred in the Fidelity Acceptance Corporation portfolio. Partially offsetting
these increases were decreases in nonaccrual loans in the commercial real estate
portfolio and in the international portfolio, the latter driven by lower
nonaccrual loans in Argentina. The level of nonaccrual loans and OREO is
influenced by the economic environment, interest rates, the regulatory
environment and other internal and external factors. As such, no assurance can
be given as to future levels of nonaccrual loans and leases and OREO.
RESERVE FOR CREDIT LOSSES
The reserve for credit losses at March 31, 1996 was $732 million, or 2.33
percent of outstanding loans and leases, compared with $736 million, or 2.37
percent, at December 31, 1995. The reserve for credit losses was 227 percent of
nonaccrual loans and leases at March 31, 1996, compared with 238 percent at
December 31, 1995, and 198 percent at March 31, 1995.
Net credit losses were $43 million and $42 million in the first quarters of 1996
and 1995, respectively. During the first quarter of 1996, higher net credit
losses from the commercial real estate and consumer-related portfolios were
substantially offset by lower net credit losses
18
<PAGE>
from the domestic commercial and industrial portfolio, which experienced lower
credit losses coupled with higher credit recoveries, and the international
portfolios of Argentina, Uruguay and Brazil. The increase in net credit losses
from the other consumer-related portfolio, which amounted to $20 million in the
first quarter of 1996, compared to $16 million in the fourth quarter of 1995
and $8 million in the first quarter of 1995, was partially due to the 48
percent increase in other consumer-related loans that has occurred since March
31, 1995. As a percentage of average loans and leases on an annualized basis,
net credit losses were .54 percent in the first quarter of 1996, compared with
.55 percent for the fourth quarter of 1995, and .56 percent for the first
quarter of 1995.
Net credit losses are as follows:
<TABLE>
<CAPTION>
Quarters ended March 31
(in millions) 1996 1995
---- ----
<S> <C> <C>
United States Operations:
Commercial, industrial and $ 9
financial
Commercial real estate $ 12 6
Consumer-related loans:
Secured by 1-4 family 6 4
residential properties
Other 20 8
---- ----
38 27
International Operations 5 15
---- ----
Total $ 43 $ 42
==== ====
</TABLE>
CROSS-BORDER OUTSTANDINGS
At March 31, 1996 and December 31, 1995, total cross-border outstandings
represented 16 percent of consolidated total assets. In accordance with the bank
regulatory rules, cross-border outstandings are:
. Amounts payable to the Corporation in U.S. dollars or other non-local
currencies.
. Amounts payable in local currency but funded with U.S. dollars or other
non-local currencies.
Included in these outstandings are deposits in other banks, resale agreements,
trading securities, securities available for sale, securities held to maturity,
loans and lease financing, amounts due from customers on acceptances and accrued
interest receivable.
In addition to credit risk, cross-border outstandings have the risk that, as a
result of political or economic conditions in a country, borrowers are unable to
meet their contractual payment obligations of principal and/or interest when due
because of the unavailability of, or restrictions on, foreign exchange needed by
borrowers to repay their obligations. The Corporation manages its cross-border
outstandings using country exposure limits. A discussion of the Corporation's
credit management policies is included on page 28 of its 1995 Annual Report to
Stockholders, which is incorporated by reference into its 1995 Annual Report on
Form 10-K.
Excluded from cross-border outstandings for a given country are:
. Local currency assets funded with U.S. dollars or other non-local
currency where the providers of funds agree that, in the event their
claims cannot be repaid in the designated currency due to currency
exchange restrictions in a given country, they may either accept payment
in local currency or wait to receive the non-local currency until such
time as it becomes available in the local market. At March 31, 1996,
such transactions related to emerging markets countries totaled $1.6
billion compared with $1.3 billion at December 31, 1995.
. Local currency outstandings funded with local currency.
. U.S. dollar or other non-local currency outstandings reallocated as a
result of external guarantees or cash collateral.
. U.S. dollar or other non-local currency outstandings reallocated as a
result of insurance contracts, primarily issued by U.S. government
agencies.
19
<PAGE>
Cross-border outstandings in countries which individually amounted to 1.0
percent or more of consolidated total assets at March 31, 1996 and December 31,
1995 were approximately as follows:
<TABLE>
<CAPTION>
Consolidated Percentage of
Public Banks Other Total Total Assets Commitments (2)
------ ----- ----- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
(dollars in millions)
March 31, 1996(1)
Argentina $ 355 $ 55 $ 1,830 $2,240 4.8% $ 45
Brazil 15 40 880 935 2.0 20
Chile 140 175 320 635 1.4 20
December 31, 1995(1)
Argentina $ 465 $ 50 $ 1,710 $2,225 4.7% $ 45
Brazil 25 20 980 1,025 2.2 35
Chile 150 125 365 640 1.4 15
United Kingdom 100 570 670 1.4 130
</TABLE>
(1) Cross-border outstandings in countries which fell within .75 percent and 1
percent of consolidated total assets at March 31, 1996 and December 31, 1995,
were approximately as follows: South Korea $365 million at March 31, 1996 and
December 31, 1995.
(2) Included within commitments are letters of credit, guarantees and the
undisbursed portion of loan commitments.
To comply with the regulatory definition of cross-border outstandings, the
Corporation included approximately $1.3 billion of Argendollar outstandings in
its cross-border totals for Argentina at March 31, 1996 and December 31, 1995.
These outstandings are payable to the Corporation in U.S. dollars, which are
funded entirely by U.S. dollars borrowed within Argentina.
Emerging Markets Countries
At March 31, 1996, approximately $4.7 billion of the Corporation's cross-border
outstandings, or approximately 10 percent of total assets, were to emerging
markets countries, of which the majority were to countries in which the
Corporation maintains a branch network and/or subsidiaries, compared to $4.6
billion at December 31, 1995. These cross-border outstandings, of which
approximately 83 percent were loans, were mainly comprised of short-term trade
credits, non-trade-related loans and leases not subject to country debt
rescheduling agreements, government securities and capital investments in
branches and subsidiaries.
Argentina and Brazil
During the first quarter of 1996, the Argentine economy continued to improve
slowly with the government's announcement of a series of political and economic
measures aimed at stimulating growth. Among these measures was the Argentine
Congress' approval of special powers to the executive branch which would allow
the government to consolidate public administrative functions and to modify the
tax system. The government has expressed expectations for continued low
inflation and an increase in credit activity, accompanied by declining interest
rates. During the first quarter, the Corporation's Argentine loan levels
increased by approximately $280 million from the December 31, 1995 level,
including increases in both commercial and consumer lending. The level of
Argentine nonaccrual loans declined from $52 million at December 31, 1995, to
$46 million at March 31, 1996, and quarterly net credit losses also declined
from $10 million in the fourth quarter of 1995, to $4 million in the first
quarter of 1996.
Since the inception of Brazil's new economic program in July 1994, average
monthly inflation has remained relatively stable in comparison to pre-economic
program levels. During the first quarter of 1996, Brazil's inflation averaged
approximately .5 percent per month, with an increase to 1.6 percent in the month
of April 1996, reflecting the strong monetary expansion of recent months and an
increase in oil and certain textile prices. This
20
<PAGE>
compares to average monthly inflation of 1.9 percent in 1995. The government
continued to maintain a floating band exchange rate policy, which currently
stands at .97 to 1.06 Reais to the U.S. dollar. The exchange rate at March 31,
1996 was .99 Reais to the U.S. dollar.
A number of local Brazilian banks experienced liquidity and other problems in
1995, which continued into the first quarter of 1996. This has generally
resulted in customers moving their funds to banks perceived to have more
stability, contributing, in part, to the increases in the Corporation's deposit
and mutual funds levels. The Corporation's average deposit levels in Brazil
increased from the fourth quarter of 1995 by approximately $300 million, or 52
percent, to approximately $860 million during the first quarter of 1996.
Additionally, the Corporation's mutual funds under management in Brazil
increased approximately $500 million from December 31, 1995, and nearly doubled
from a year ago, to $3.0 billion at March 31, 1996. Brazil plans to expand its
indigenous banking operations further in 1996 through the opening of new
branches, including the expansion of its mutual fund volume and other retail
business activities.
During the first quarter of 1996, the Corporation's Argentine and Brazilian
operations continued to structure their balance sheets to take positions in
their local currencies as deemed appropriate. Such positions are taken when the
Corporation believes that it can maximize its spread from interest operations by
funding local currency assets with U.S. dollars rather than using local currency
liabilities or by funding U.S. dollar assets with local currency liabilities.
The average currency positions of the Corporation's international operations did
not change significantly from amounts previously disclosed at December 31, 1995,
with the exception of Brazil. Brazil's average currency position during the
first quarter of 1996 was approximately $112 million compared to $14 million
during the fourth quarter of 1995. These positions are actively managed and,
therefore, it is not unusual for levels to fluctuate from period to period. To
date, these positions have been liquid in nature and local management has been
able to close and re-open these positions as necessary. For additional
information related to the Corporation's currency positions, see page 37 of the
Corporation's 1995 Annual Report to Stockholders, which is incorporated by
reference into its 1995 Annual Report on Form 10-K.
The economic situation in Latin America can be volatile, including the effect of
world financial markets on these economies. As such, changes in the economies
of the Latin American countries in which the Corporation does business could
have an impact on the Corporation in the future. The Corporation has not
experienced any collection problems as a result of currency restrictions or
foreign exchange liquidity problems on its current portfolio of cross-border
outstandings to emerging markets countries. However, if actions implemented by
Latin American governments do not remain effective over time, particularly with
regard to liquidity, the Corporation's operations could experience adverse
effects, including stress on liquidity, deterioration of credit quality, a
decline in the value of its securities portfolio and declines in loan and
deposit levels. The Corporation will continue to monitor the economies of Latin
American countries in which it has local operations, cross-border outstandings
and/or currency positions. Each emerging markets country is at a different
stage of development with a unique set of economic fundamentals; therefore, it
is not possible to predict what developments will occur and what impact these
developments will ultimately have on the economies of these countries or on the
Corporation's financial statements. For additional information related to the
Corporation's Latin American cross-border outstandings, see pages 35 through 38
of the Corporation's 1995 Annual Report to Stockholders, which is incorporated
by reference into its 1995 Annual Report on Form 10-K.
LIQUIDITY MANAGEMENT
The Corporation's liquid assets, which consist primarily of interest bearing
deposits in other banks, federal funds sold and resale agreements, money market
loans and unencumbered U.S. Treasury and government agency securities, stood at
$6.3 billion at March 31, 1996, compared with $5.8 billion at December 31, 1995.
In addition, the Corporation continues to have access to funds in the public
markets at competitive rates. Based on the Corporation's liquid asset level and
its ability to access the public markets for additional funding when necessary,
management considers overall liquidity at March 31, 1996 to be adequate to meet
current obligations, support expectations for future changes in asset and
liability levels and carry on normal operations. For additional information
related to the Corporation's liquidity management, see pages 38 and 39 of the
Corporation's 1995 Annual Report to Stockholders, which is incorporated by
reference into its 1995 Annual Report on Form 10-K.
21
<PAGE>
INTEREST RATE RISK
Interest rate risk is defined as the exposure of the Corporation's net income or
financial position to adverse movements in interest rates. The Corporation
manages its interest rate risk within policies and limits established by the
Asset and Liability Management Committee (ALCO) and approved by the Board of
Directors (Board). ALCO issues strategic directives to specify the extent to
which Board-approved rate risk limits are utilized, taking into account the
results of the rate risk modeling process as well as other internal and external
factors.
Interest rate risk related to non-trading, U.S. dollar denominated positions,
which represents a significant portion of the consolidated balance sheet at
March 31, 1996, is managed centrally through the Boston Treasury Group.
Interest rate risk associated with these positions is evaluated and managed
through several modeling methodologies. The two principal methodologies used
are market value sensitivity and net interest revenue at risk. The results of
these models are reviewed monthly with ALCO and at least quarterly with the
Board.
These methodologies are designed to isolate the effects of market changes in
interest rates on the Corporation's existing positions, and they exclude other
factors, such as competitive pricing considerations, future changes in asset and
liability mix, and other management actions, and, therefore, are not by
themselves measures of future levels of net interest revenue.
These two methodologies provide different but complementary measures of the
level of interest rate risk: the longer term view is modeled through market
value sensitivity, while the shorter term view is evaluated through net interest
revenue at risk over the next twelve months. Under current ALCO directives,
market value sensitivity cannot exceed 3 percent of risk-based capital and net
interest revenue at risk cannot exceed 2 percent of net interest revenue over
the next twelve-month period. The ALCO market value sensitivity directive was
increased during the current quarter from 2 percent of risk-based capital at
December 31, 1995, to 3 percent of risk-based capital. The following table shows
the Corporation's market value sensitivity and net interest revenue at risk
positions at March 31, 1996 and December 31, 1995, respectively.
MARKET VALUE SENSITIVITY AND NET
INTEREST REVENUE AT RISK POSITIONS
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
Quarterly Quarterly
(dollars in millions) Quarter-end Average Quarter-end Average
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Market Value
Sensitivity (1)....... $161 $127 $ 87 $ 84
% of risk-based capital 2.9% 2.4% 1.6% 1.6%
- -------------------------------------------------------------------------------
Net Interest Revenue
at Risk (2)........... $ 17 $ 19 $ 24 $ 21
% of net interest revenue 1.0% 1.1% 1.4% 1.2%
- ------------------------------------------------------------------------------
</TABLE>
(1) Decline in market value based on a 100 basis point adverse interest rate
shock.
(2) Decline in net interest revenue based on the greater of a 100 basis point
adverse interest rate shock or a 200 basis point adverse change in
interest rates over the next twelve-month period. At March 31, 1996, the
adverse position was based upon a 100 basis point upward interest rate
shock. At December 31, 1995, the adverse position was based upon a 200
basis point decline in interest rates over the next twelve-month period.
See further discussion below.
At March 31, 1996, the Corporation's adverse market value sensitivity was to
rising interest rates. The increase in the market value sensitivity position
since December 31, 1995 was primarily due to an increase in fixed rate assets
and, therefore, lengthening asset durations, and the termination of $8.2 billion
of a series of interest rate futures contracts that were linked to the
Corporation's short-term floating rate wholesale funding.
22
<PAGE>
The Corporation's adverse net interest revenue at risk position was to rising
interest rates at March 31, 1996, and to declining rates at December 31, 1995.
The change in exposure is primarily due to changes in the terms and repricing
characteristics of balance sheet and off-balance sheet items at a specific point
in time, including the termination of the series of futures contracts discussed
above, which resulted in an increase in floating rate liabilities.
The market value sensitivity and the net interest revenue at risk positions were
in compliance with ALCO directives during the quarter ended March 31, 1996. The
level of exposure maintained by the Corporation is a function of the market
environment and will change from period to period based on interest rate and
other economic expectations.
Non-U.S. dollar denominated interest rate risk is managed by the Corporation's
overseas units, with oversight by the Boston Treasury group. The Corporation,
through ALCO, has established limits for its non-U.S. dollar denominated
interest rate risk using cumulative gap limits for each country in which the
Corporation has local market interest rate risk. During the first quarter of
1996, the cumulative gap positions in each country were within ALCO limits. The
level of interest rate risk positions taken by the overseas units varies based
on economic conditions in the country at the particular point in time.
Additional information with respect to the Corporation's management of interest
rate risk, is included on pages 39 to 43 of the Corporation's 1995 Annual Report
to Stockholders which is incorporated by reference into its 1995 Annual Report
on Form 10-K.
Derivative Financial Instruments
The Corporation utilizes a variety of financial instruments to manage interest
rate risk, including derivatives. Derivatives provide the Corporation with
significant flexibility in managing its interest rate risk exposure, enabling it
to manage risk efficiently and respond quickly to changing market conditions by
minimizing the impact on balance sheet leverage. The Corporation routinely uses
non-leveraged rate-related derivative instruments, primarily interest rate swaps
and futures, as part of its asset and liability management (ALM) practices. All
derivative activities are managed on a comprehensive basis, are included in the
overall market value sensitivity and net interest revenue at risk measures and
limits described above, and are subject to credit standards similar to those for
balance sheet exposures.
23
<PAGE>
The following table summarizes the notional amounts and fair values of interest
rate derivatives and foreign exchange contracts included in the Corporation's
ALM portfolio.
<TABLE>
<CAPTION>
March 31, 1996 (1) December 31, 1995 (1)
------------------------------------------------- ------------------------------------------------
Notional Fair Value (2)(3) Unrecognized (4) Notional Fair Value (2)(3) Unrecognized (4)
(in millions) Amount Asset Liability Gain (Loss) Amount Asset Liability Gain (Loss)
- -------------------------- ------------------------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest rate contracts
Futures and forwards $2,442 $ 5 ($66) $12,518 $10 ($89)
Interest rate swaps 6,824 35 $46 (3) 5,828 $ 92 7 102
Interest rate options
Purchased 390 1 1 3,968 119 2
Written or sold 15 360 34
------------------------------------------------ ------------------------------------------------
Total interest rate contract $9,671 $41 $46 ($68) $22,674 $211 $51 $15
================================================ ================================================
Foreign exchange contracts
Spot and forward contracts $ 629 $ 3 $ 1 $ 2 $ 1,257 $ 3 $ 5 ($ 2)
------------------------------------------------ ------------------------------------------------
Total foreign exchange contracts $ 629 $ 3 $ 1 $ 2 $ 1,257 $ 3 $ 5 ($ 2)
================================================ ================================================
</TABLE>
(1) Contracts under master netting agreements are shown on a net basis.
(2) Fair value represents the amount at which a given instrument could be
exchanged in an arm's length transaction with a third party as of the
balance sheet date. The majority of derivatives that are part of the ALM
portfolio are accounted for on the accrual basis, and not carried at fair
value. In certain cases, contracts, such as futures, are subject to daily
cash settlements; as such, the fair value of these instruments is zero.
(3) The credit exposure of interest rate derivatives and foreign exchange
contracts at March 31, 1996 and December 31, 1995 is represented by the
fair value of contracts reported in the "Asset" column.
(4) Unrecognized gain or loss represents the amount of gain or loss, based
on fair value, that has not been recognized in the income statement at
the balance sheet date. This includes amounts related to contracts which
have been terminated. Such amounts are recognized as an adjustment of
yield of the linked assets or liabilities over the period being managed.
At March 31, 1996, there were $26 million of unrecognized gains and $56
million of unrecognized losses related to terminated contracts that are
being amortized as an adjustment of the yield of the assets or liabilities
to which they were linked over a weighted average period of 31 months and
21 months, respectively. At December 31, 1995, unrecognized gains of $32
million and unrecognized losses of $2 million related to terminated
contracts were being amortized over weighted average periods of 32 months
and 23 months, respectively.
The decrease in fair value of interest rate derivative contracts, as reflected
in the change from a net unrecognized gain of $15 million at December 31, 1995,
to a net unrecognized loss of $68 million at March 31, 1996, was primarily due
to an increase in long-term interest rates during the quarter, which principally
impacted the interest rate swap portfolio and resulted in a decline in its fair
value.
The Corporation's utilization of derivative instruments is modified from time to
time in response to changing market conditions, as well as changes in the
characteristics and mix of the Corporation's related assets and liabilities. In
this respect, during the current quarter the Corporation terminated $8.2 billion
of a series of interest rate futures contracts that were linked to the
Corporation's short-term floating rate wholesale funding. The remaining
unrecognized loss of $56 million at March 31, 1996 related to the terminated
futures contracts will be amortized to net interest revenue as an adjustment of
the yield of the short-term liabilities to which they were linked over the
remainder of the period being managed.
24
<PAGE>
The following table summarizes the remaining maturity of interest rate
derivative financial instruments entered into for ALM purposes as of
March 31, 1996.
<TABLE>
<CAPTION>
Remaining Maturity
(dollars in millions) March December
31, 1996 31, 1995
1996 1997 1998 1999 2000 2001+ Total Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps
DOMESTIC
Receive fixed rate swaps (1)
Notional amount $ 402 $ 151 $ 65 $ 340 $ 1,500 $2,458 $ 2,453
Weighted average receive rate 6.08% 8.94% 5.87% 5.50% 6.38% 6.35% 6.35%
Weighted average pay rate 5.33% 5.27% 5.41% 5.39% 5.43% 5.40% 5.86%
Pay fixed rate swaps (1)
Notional amount $ 123 $ 39 $ 34 $ 44 $ 38 $ 53 $ 331 $ 301
Weighted average receive rate 5.31% 5.55% 5.82% 5.61% 5.63% 5.55% 5.50% 6.19%
Weighted average pay rate 6.43% 6.83% 8.70% 7.37% 7.10% 7.18% 7.03% 6.81%
Basis swaps (2)
Notional amount $ 1,249 $ 50 $ 299 $1,598 $ 1,599
Weighted average receive rate 5.47% 5.72% 5.84% 5.55% 5.97%
Weighted average pay rate 5.54% 5.47% 5.67% 5.56% 5.86%
TOTAL DOMESTIC INTEREST RATE SWAPS
Notional amount $ 1,774 $ 190 $ 99 $ 44 $ 428 $ 1,852 $4,387 $ 4,353
Weighted average receive rate (3) 5.60% 8.24% 5.85% 5.61% 5.54% 6.27% 6.00% 6.20%
Weighted average pay rate (3) 5.55% 5.59% 6.54% 7.37% 5.55% 5.52% 5.58% 5.93%
TOTAL INTERNATIONAL INTEREST RATE SWAPS
Notional Amount (4) $ 2,437 $2,437 $ 1,475
Other Derivative Products
Futures and forwards (5) $ 2,442 $2,442 $12,518
Interest rate options (6)
Purchased 227 $ 39 $ 81 $ 43 390 3,968
Written or sold 15 15 360
----- ---- ---- ---- ---- ----- ----- ------
TOTAL CONSOLIDATED NOTIONAL AMOUNT $ 6,895 $ 229 $ 180 $ 87 $ 428 $ 1,852 $9,671 $22,674
===== ==== ==== ==== ==== ===== ===== ======
</TABLE>
(1) Of the receive fixed rate swaps, $1 billion were linked to floating rate
loans, and the remainder principally to fixed rate notes payable. Of the
swaps linked to notes payable, approximately $1 billion are scheduled to
mature in 2001 and thereafter. The majority of pay fixed rate swaps are
linked to fixed rate loans and fixed rate securities.
(2) Basis swaps represent swaps where both the pay rate and receive rate are
floating rates. All of the basis swaps are linked to short-term bank notes
and floating rate mortgages.
(3) The majority of the Corporation's interest rate swaps accrue at LIBOR
(London Interbank Offered Rate). In arriving at the variable weighted
average receive and pay rates, LIBOR rates in effect as of March 31, 1996
have been implicitly assumed to remain constant throughout the terms of the
swaps. Future changes in LIBOR rates would affect the variable rate
information disclosed.
(4) The majority of the international portfolio is comprised of swaps entered
into by the Corporation's Brazilian operation with a weighted average
maturity of less than 90 days. These swaps typically include the exchange
of floating rate indices that are limited to the Brazilian market.
(5) At December 31, 1995, the majority of the futures used by the Corporation
were linked to short-term liabilities and were exchange-traded instruments.
The reference instruments for these contracts comprise the major types
available, such as Eurodollar deposits and U.S. Treasury notes. During the
first quarter of 1996, the Corporation terminated a series of futures
contracts which accounts for the majority of the decline from December 31,
1995 (see discussion above). The majority of the futures contracts at March
31, 1996 were entered into by the Corporation's Brazilian operation and are
linked to short-term interest bearing assets and liabilities. Average rates
are not meaningful for these products.
(6) At December 31, 1995, primarily includes interest rate options used to
manage prepayment risk related to the mortgage servicing portfolio of the
Corporation's mortgage banking subsidiary which was sold in the first
quarter of 1996.
25
<PAGE>
Derivatives not used for ALM purposes are included in the derivatives trading
portfolio. The primary focus of the Corporation's derivatives trading
activities is related to providing risk management products to its customers.
The following table summarizes the notional amounts and fair values of interest
rate derivatives and foreign exchange contracts included in the Corporation's
trading portfolio.
<TABLE>
<CAPTION>
March 31, 1996 (1) December 31, 1995 (1)
------------------------------------- ---------------------------------------
Notional Fair Value (2)(3)(4) Notional Fair Value (2)(3)(4)
(in millions) Amount Asset Liability Amount Asset Liability
- ----------------------------------------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest rate contracts
Futures and forwards $38,166 $ 40 $ 42 $30,789
Interest rate swaps 8,817 68 70 9,169 $ 91 $ 80
Interest rate options
Purchased 3,759 12 3,411 9
Written or sold 4,563 10 3,986 9
---------------------------------- ---------------------------------------
Total interest rate contracts $55,305 $120 $122 $47,355 $100 $ 89
================================== ========================================
Foreign exchange contracts
Spot and forward contracts $18,048 $162 $160 $13,072 $171 $167
Options purchases 987 14 1,044 13
Options written or sold 827 16 1,130 16
---------------------------------- ---------------------------------------
Total foreign exchange contracts $19,862 $176 $176 $15,246 $184 $183
================================== ========================================
</TABLE>
(1) Contracts under master netting agreements are shown on a net basis.
(2) Fair value represents the amount at which a given instrument could be
exchanged in an arm's length transaction with a third party as of the
balance sheet date. The fair value amounts of the trading portfolio are
included in other assets or other liabilities, as applicable. In certain
cases, contracts, such as futures, are subject to daily cash
settlements; as such, the fair value of these instruments is zero.
(3) The credit exposure of interest rate derivatives and foreign exchange
contracts at March 31, 1996 and December 31, 1995, is represented by the
fair value of contracts reported in the "Asset" column.
(4) The average asset and liability fair value amounts for interest rate
contracts included in the trading portfolio for the quarters ended March
31, 1996 and December 31, 1995, were $110 million and $106 million,
respectively, and $89 million and $71 million, respectively. The average
asset and liability fair value amounts for foreign exchange contracts
included in the trading portfolio were both $180 million for the quarter
ended March 31, 1996, and $233 million and $222 million, respectively, for
the quarter ended December 31, 1995.
Net trading gains from interest rate derivatives for the quarters ended
March 31, 1996 and 1995 were $5 million and $3 million, respectively. Net
trading gains from foreign exchange activities, which include foreign
exchange spot, forward and option contracts, for both quarters ended
March 31, 1996 and 1995, were $12 million.
Additional information on the Corporation's derivative products, including its
accounting policies, is included on pages 40 to 42, and in Notes 1 and 20 to
the Financial Statements, of the Corporation's 1995 Annual Report to
Stockholders, which is incorporated by reference into its 1995 Annual Report on
Form 10-K.
26
<PAGE>
CAPITAL
The Corporation's Tier 1 and total capital ratios were 8.1 percent and 12.9
percent, respectively, at March 31, 1996, compared with 8.0 percent and 12.8
percent, respectively, at December 31, 1995. The Corporation's leverage ratio
at March 31, 1996 was 7.2 percent compared with 7.4 percent at
December 31, 1995. The Tier 1 and total capital ratios benefited from a
reduction in risk-adjusted assets, principally due to the previously described
BBMC transaction as well as from the retention of earnings, offset, in part, by
a reduction in capital due to the Corporation's repurchase of 1.5 million shares
of its common stock during the first quarter of 1996. In the case of the
leverage ratio, the impact of the BBMC transaction, which occurred on
March 15 1996, on average assets was less significant than the impact of the
share repurchase on capital, causing the ratio to decline slightly from
December 31, 1995.
As of March 31, 1996, the capital ratios of the Corporation and all of its
banking subsidiaries exceeded the minimum capital ratio requirements of the
"well capitalized" category under the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA). The capital categories of the Corporation's
banking subsidiaries are determined solely for purposes of applying FDICIA's
provisions and, accordingly, such capital categories may not constitute an
accurate representation of the overall financial condition or prospects of any
of the Corporation's banking subsidiaries.
In April 1996, stockholders of the Corporation authorized an increase in the
authorized shares of the Corporation's common stock from 200 million shares, par
value $2.25 per share, to 300 million shares, par value $1.50 per share. In
addition, in April 1996, the Board voted to increase the quarterly common stock
dividend by 19 percent, from $.37 to $.44 per share, payable on May 31, 1996.
The payment and level of future common dividends will continue to be determined
by the Board based on the Corporation's financial condition, recent earnings
history and other factors.
27
<PAGE>
Consolidated Balance Sheet Averages by Quarter
Last Nine Quarters
(in millions)
<TABLE>
<CAPTION>
1994 1995 1996
-----------------------------------------------------------------------------------------------
1 2 3 4 1 2 3 4 1
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest bearing deposits
in other banks $ 1,083 $ 902 $ 1,131 $ 1,062 $ 1,262 $ 1,309 $ 1,249 $ 1,350 $ 1,309
Federal funds sold and
securities purchased
under agreements to resell 2,447 3,485 2,595 1,711 1,364 1,166 824 746 1,249
Trading securities 452 402 618 750 694 787 867 864 1,107
Loans held for sale 960 824 651 315 256 254 478 737 930
Securities 2,945 3,164 3,489 4,435 4,288 4,526 4,824 5,247 5,653
Loans and lease financing 28,615 29,105 30,362 31,076 30,123 30,928 31,625 31,763 31,357
------- ------- ------- ------- ------- ------- ------- ------- -------
Total earning assets 36,502 37,882 38,846 39,349 37,987 38,970 39,867 40,707 41,605
Other assets 4,712 4,820 5,079 5,051 4,858 5,131 5,318 5,526 5,409
------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL ASSETS $41,214 $42,702 $43,925 $44,400 $42,845 $44,101 $45,185 $46,233 $47,014
======= ======= ======= ======= ======= ======= ======= ======= =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits:
Domestic offices:
Noninterest bearing $ 4,633 $ 4,403 $ 4,477 $ 4,701 $ 4,194 $ 4,196 $ 4,291 $ 4,457 $ 4,519
Interest bearing 17,110 16,672 17,309 17,388 15,827 16,228 16,686 17,152 17,107
Overseas offices:
Noninterest bearing 497 393 415 481 415 416 501 492 499
Interest bearing 6,375 6,764 7,703 7,875 8,318 7,967 7,790 8,202 8,698
------- ------- ------- ------- ------- ------- ------- ------- -------
Total deposits 28,615 28,232 29,904 30,445 28,754 28,807 29,268 30,303 30,823
Federal funds purchased and
repurchase agreements 3,619 4,014 3,728 3,333 3,699 3,896 3,310 3,892 3,417
Other funds borrowed 2,411 4,124 3,633 3,861 3,585 4,278 5,369 4,620 5,010
Notes payable 2,194 1,957 1,987 2,141 2,133 2,062 2,065 2,109 2,374
Other liabilities 1,433 1,404 1,625 1,491 1,467 1,661 1,643 1,647 1,647
Stockholders' equity 2,942 2,971 3,048 3,129 3,207 3,397 3,530 3,662 3,743
------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $41,214 $42,702 $43,925 $44,400 $42,845 $44,101 $45,185 $46,233 $47,014
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
28
<PAGE>
Consolidated Statement of Income by Quarter - Taxable Equivalent Basis
Last Nine Quarters
(in millions, except per share amounts)
<TABLE>
<CAPTION>
1994 1995 1996
1 2 3 4 1 2 3 4 1
----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Interest Revenue: $ 340.7 $ 374.5 $ 423.9 $ 433.4 $ 425.9 $ 434.1 $ 439.4 $ 441.8 $ 433.6
Taxable equivalent adjustment 1.5 1.5 1.3 2.7 1.4 1.9 1.5 5.0 2.2
----- ----- ----- ----- ----- ----- ----- ----- -----
Total net interest revenue 342.2 376.0 425.2 436.1 427.3 436.0 440.9 446.8 435.8
Provision for credit losses 45.0 25.0 25.0 35.0 90.0 40.0 45.0 75.0 50.0
----- ----- ----- ----- ----- ----- ----- ----- -----
Net interest revenue after
provision for credit losses 297.2 351.0 400.2 401.1 337.3 396.0 395.9 371.8 385.8
----- ----- ----- ----- ----- ----- ----- ----- -----
Noninterest Income:
Financial service fees 92.4 93.9 104.3 105.5 105.6 113.3 117.6 186.2 6.8
Trust and agency fees 47.7 50.3 50.6 53.1 52.7 57.2 58.2 48.9 51.0
Trading profits and commissions 3.9 1.2 10.9 (.1) 1.1 6.1 6.6 8.3 12.3
Net securities gains 3.9 5.9 1.3 2.5 6.1 .2 .8 1.9 13.4
Other income 87.2 41.0 35.1 37.6 127.7 59.3 65.4 67.9 142.7
----- ----- ----- ----- ----- ----- ----- ----- -----
Total noninterest income 235.1 192.3 202.2 198.6 293.2 236.1 248.6 313.2 226.2
----- ----- ----- ----- ----- ----- ----- ----- -----
Noninterest Expense:
Salaries 157.8 161.5 168.1 177.8 176.4 179.6 191.1 188.8 186.5
Employee benefits 36.9 37.0 38.6 35.1 40.4 40.9 41.5 38.6 42.6
Occupancy expense 31.9 33.1 35.2 34.4 34.9 34.4 35.6 35.3 37.0
Equipment expense 23.6 23.4 24.2 24.9 24.1 25.7 25.2 25.4 26.2
Acquisition-related charges 16.4 5.0 28.2
Other expense 96.5 101.0 107.2 109.7 107.4 111.5 99.8 112.9 112.2
----- ----- ----- ----- ----- ----- ----- ----- -----
Total noninterest expense 346.7 372.4 378.3 381.9 383.2 392.1 393.2 429.2 404.5
----- ----- ----- ----- ----- ----- ----- ----- -----
Income before income
taxes and extraordinary item 185.6 170.9 224.1 217.8 247.3 240.0 251.3 255.8 207.5
----- ----- ----- ----- ----- ----- ----- ----- -----
Provision for income taxes 81.4 74.9 98.8 94.3 120.6 104.8 109.9 108.4 88.8
Taxable equivalent adjustment 1.5 1.5 1.3 2.7 1.4 1.9 1.5 5.0 2.2
----- ----- ----- ----- ----- ----- ----- ----- -----
82.9 76.4 100.1 97.0 122.0 106.7 111.4 113.4 91.0
----- ----- ----- ----- ----- ----- ----- ----- -----
Income before extraordinary item 102.7 94.5 124.0 120.8 125.3 133.3 139.9 142.4 116.5
Extraordinary item (6.6)
----- ----- ----- ----- ----- ----- ----- ----- -----
NET INCOME $ 96.1 $ 94.5 $ 124.0 $ 120.8 $ 125.3 $ 133.3 $ 139.9 $ 142.4 $ 116.5
===== ===== ===== ===== ===== ===== ===== ===== =====
Per Common Share:
Income before extraordinary item:
Primary $ .88 $ .80 $ 1.07 $ 1.04 $ 1.08 $ 1.11 $ 1.17 $ 1.18 $ .97
Fully diluted .85 .77 1.04 1.01 1.04 1.10 1.15 1.17 .95
Net Income:
Primary $ .82 $ .80 $ 1.07 $ 1.04 $ 1.08 $ 1.11 $ 1.17 $ 1.18 $ .97
Fully diluted .79 .77 1.04 1.01 1.04 1.10 1.15 1.17 .95
Cash dividends declared .22 .22 .22 .27 .27 .27 .37 .37 .37
</TABLE>
29
<PAGE>
AVERAGE BALANCES AND INTEREST RATES, Taxable Equivalent Basis
Quarter Ended March 31, 1996
(Dollars In millions)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Average Average
ASSETS Volume Interest(1) Rate
---------------------------------
<S> <C> <C> <C> <C>
Interest Bearing Deposits with
Other Banks U.S. $ 198 $ 3 5.75%
International 1,111 21 7.59
------- -----
Total 1,309 24 7.31
------- ----- -----
Federal Funds Sold and Resale
Agreements U.S. 189 3 5.13
International 1,060 38 14.64
------- -----
Total 1,249 41 13.20
------- ----- -----
Trading Securities U.S. 343 5 5.60
International 764 35 18.81
------- -----
Total 1,107 40 14.72
------- ----- -----
Loans Held for Sale U.S. 891 15 7.12
International 39 1 6.14
------- -----
Total 930 16 7.08
------- ----- -----
Securities U.S.
Available for sale (3) 4,286 71 6.16
Held to maturity 627 10 6.61
International
Available for sale (3) 646 20 13.15
Held to maturity 94 4 15.23
------- -----
Total 5,653 105 7.46
------- ----- -----
Loans and Leases
(Net of Unearned Income) U.S. 22,610 490 8.72
International 8,747 321 14.73
------- -----
Total loans and lease financing (2) 31,357 811 10.40
------- ----- -----
Earning assets 41,605 1,037 10.03
------- ----- -----
Nonearning assets 5,409
-------
Total Assets $47,014
=======
-------------------------------------------------------------------------------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits U.S.
Savings deposits $ 9,453 $ 66 2.79%
Time deposits 7,654 109 5.75
International 8,698 181 8.36
------- -----
Total 25,805 356 5.55
------- ----- -----
Federal Funds Purchased
and Repurchase Agreements U.S. 3,319 48 5.82
International 98 2 10.18
------- -----
Total 3,417 50 5.95
------- ----- -----
Other Funds Borrowed U.S. 3,940 62 6.29
International 1,070 90 33.96
------- -----
Total 5,010 152 12.20
------- ----- -----
Notes Payable U.S. 1,908 32 6.64
International 466 11 9.90
------- -----
Total 2,374 43 7.28
------- ----- -----
Total interest bearing liabilities 36,606 601 6.61
------- ----- -----
Demand deposits U.S. 4,519
Demand deposits International 499
Other noninterest bearing liabilities 1,647
Total Stockholders' Equity 3,743
-------
Total Liabilities and Stockholders' Equity $47,014
=======
---------------------------------------------------------------------------------------------
NET INTEREST REVENUE U.S. $29,144 $ 312 4.31%
AS A PERCENTAGE OF International 12,461 124 3.99
AVERAGE INTEREST ------ -----
EARNING ASSETS
Total $41,605 $ 436 4.21
------ -----
---------------------------------------------------------------------------------------------
</TABLE>
(1) Income is shown on a fully taxable equivalent basis.
(2) Loans and lease financing includes nonaccrual and renegotiated balances.
(3) Average rates for securities available for sale are based on the
securities' amortized cost.
30
<PAGE>
AVERAGE BALANCES AND INTEREST RATES, Taxable Equivalent Basis
Quarter Ended March 31, 1995
(Dollars In millions)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Average Average
ASSETS Volume Interest(1) Rate
----------------------------------
<S> <C> <C> <C> <C>
Interest Bearing Deposits with
Other Banks U.S. $ 129 $ 2 7.21%
International 1,133 63 22.47
------- ------
Total 1,262 65 20.92
------- ----- -----
Federal Funds Sold and Resale
Agreements U.S. 527 8 6.03
International 837 94 45.76
------- -----
Total 1,364 102 30.41
------- ----- -----
Trading Securities U.S. 194 3 6.52
International 500 38 30.59
------- -----
Total 694 41 23.85
------- ----- -----
Loans Held for Sale U.S. 256 4 5.95
------- ----- -----
Securities U.S.
Available for sale (3) 2,210 36 6.64
Held to maturity 1,588 26 6.77
International
Available for sale (3) 298 10 11.33
Held to maturity 192 4 7.81
------- -----
Total 4,288 76 7.22
------- ----- -----
Loans and Leases
(Net of Unearned Income) U.S. 22,742 499 8.90
International 7,381 247 13.59
------- -----
Total loans and lease financing (2) 30,123 746 10.05
------- ----- -----
Earning assets 37,987 1,034 11.05
------- ----- -----
Nonearning assets 4,858
-------
Total Assets $42,845
=======
-------------------------------------------------------------------------------------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits U.S.
Savings deposits $8,699 $ 52 2.44%
Time deposits 7,128 91 5.21
International 8,318 218 10.61
------- -----
Total 24,145 361 6.07
------- ----- -----
Federal Funds Purchased
and Repurchase Agreements U.S. 3,529 44 5.07
International 170 14 32.86
------ -----
Total 3,699 58 6.34
------ ----- -----
Other Funds Borrowed U.S. 2,621 40 6.20
International 964 109 45.75
------ -----
Total 3,585 149 16.83
------ ----- -----
Notes Payable U.S. 1,996 34 6.95
International 137 5 14.63
------ -----
Total 2,133 39 7.45
------ ----- -----
Total interest bearing liabilities 33,562 607 7.34
------- ----- -----
Demand deposits U.S. 4,194
Demand deposits International 415
Other noninterest bearing liabilities 1,467
Total Stockholders' Equity 3,207
-------
Total Liabilities and Stockholders' Equity $42,845
=======
-------------------------------------------------------------------------------------------
NET INTEREST REVENUE
AS A PERCENTAGE OF
AVERAGE INTEREST
EARNING ASSETS U.S. $27,647 $330 4.85%
International 10,340 97 3.81
------ -----
Total $37,987 $ 427 4.56
======= =====
-------------------------------------------------------------------------------------------
</TABLE>
(1) Income is shown on a fully taxable equivalent basis.
(2) Loans and lease financing includes nonaccrual and renegotiated balances.
(3) Average rates for securities available for sale are based on the securities'
amortized cost.
31
<PAGE>
CHANGE IN NET INTEREST REVENUE -- VOLUME AND RATE ANALYSIS
First Quarter 1996 Compared With First Quarter 1995
The following table presents, on a fully taxable equivalent basis, an analysis
of the effect on net interest revenue of volume and rate changes. The change
due to the volume/rate variance has been allocated to volume, and the change
because of the difference in the number of days in the periods has been
allocated to rate.
<TABLE>
<CAPTION>
Increase (Decrease)
Due to Change In
-------------------
(in millions) Volume Rate Net
------- ----- Change
-------
<S> <C> <C> <C> <C>
Interest income:
Loans and lease financing U.S. $ (3) $ (6) $ (9)
International 51 23 74
----
65
----
Other earnings assets U.S. 27 1 28
International 24 (114) (90)
----
(62)
----
Total interest income 90 (87) 3
Total interest expense 52 (58) (6)
----
Net interest revenue $ 9
====
</TABLE>
32
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
As previously reported, in March 1993, a complaint was filed in Delaware
Chancery Court against the Corporation, Society for Savings Bancorp, Inc.
("Society") and certain Society directors. The action was brought by a Society
stockholder, individually and as a class action on behalf of all Society
stockholders of record on the date the Corporation's proposed acquisition of
Society was announced, and sought an injunction with respect to the acquisition
and damages in an unspecified amount. In May 1993, the Chancery Court denied
the plaintiff's motion for a preliminary injunction and in July 1993, the
Corporation acquired Society. On January 23, 1995, the defendants filed a
motion for summary judgment with the Chancery Court and on June 15, 1995, the
Court granted summary judgment in favor of the defendants on all claims except
for an aiding and abetting claim against the Corporation on which no summary
judgment motion has yet been filed. The Chancery Court also denied plaintiff's
motion for rehearing. Following the entry of an Order of Final Judgment by the
Chancery Court, the plaintiff appealed the June 15, 1995 opinion to the Delaware
Supreme Court. The matter was argued before the Delaware Supreme Court on
February 21, 1996 and, after supplemental briefing on May 9, 1996, remains under
advisement.
As previously reported, Fidelity Acceptance Corporation ("FAC"), an indirect
subsidiary of the Corporation that is engaged in consumer lending, and/or
certain of FAC's subsidiaries (collectively referred to as FAC), are defendants
in class action and other lawsuits brought in Illinois, Alabama, Mississippi,
Georgia and Missouri by FAC borrowers. These lawsuits, which include claims for
punitive damages, often for large dollar amounts, challenge various of FAC's
lending and insurance practices, including, among others, the placing of
collateral protection insurance, calculating the amount of credit life
insurance, and the determination of applicable interest rates.
Management, after reviewing all actions and proceedings pending against the
Corporation and its subsidiaries, considers that the aggregate loss, if any,
resulting from the final outcome of these proceedings should not be material to
the Corporation's financial statements.
Item 4. Submission of Matters to a Vote of Security Holders.
(A) The Annual Meeting of Stockholders of the Corporation was held on April 25,
1996.
(B) The following matters were submitted to a vote of the Stockholders of the
Corporation:
(1) Approval of Merger Agreement with BayBanks
------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Total Votes For 78,558,798
Total Votes Against 308,462
Total Abstentions 474,845
Total Broker Nonvotes 11,060,953
</TABLE>
(2) Election of Directors
---------------------
<TABLE>
<CAPTION>
Nominee Total Votes For Total Votes Withheld
- ------- --------------- --------------------
<S> <C> <C>
Wayne A. Budd 89,317,760 1,085,298
Alice F. Emerson 89,312,951 1,090,107
Charles K. Gifford 89,355,454 1,047,604
Paul C. O'Brien 89,142,873 1,260,185
John W. Rowe 89,252,197 1,150,861
</TABLE>
33
<PAGE>
(3) Selection of Independent Auditors
---------------------------------
<TABLE>
<S> <C>
Total Votes For 89,958,471
Total Votes Against 256,294
Total Abstentions 188,293
</TABLE>
(4) Amendments to Restated Articles of Organization Increasing Authorized
---------------------------------------------------------------------
Shares of Common Stock and Changing Par Value
---------------------------------------------
<TABLE>
<S> <C>
Total Votes For 88,527,374
Total Votes Against 1,499,263
Total Abstentions 376,421
</TABLE>
(5) 1996 Long-Term Incentive Plan
-----------------------------
<TABLE>
<S> <C>
Total Votes For 73,678,313
Total Votes Against 15,937,352
Total Abstentions 787,393
</TABLE>
(6) Stockholder Proposal A regarding Political Activities
-----------------------------------------------------
<TABLE>
<S> <C>
Total Votes For 4,861,964
Total Votes Against 71,265,704
Total Abstentions 3,215,424
Total Broker Nonvotes 11,059,966
</TABLE>
(7) Stockholder Proposal B regarding Approval of Certain Transactions
-----------------------------------------------------------------
<TABLE>
<S> <C>
Total Votes For 2,266,320
Total Votes Against 74,893,921
Total Abstentions 2,182,851
Total Broker Nonvotes 11,059,966
</TABLE>
(8) Stockholder Proposal C regarding Executive Compensation
-------------------------------------------------------
<TABLE>
<S> <C>
Total Votes For 3,409,528
Total Votes Against 73,659,064
Total Abstentions 2,274,500
Total Broker Nonvotes 11,059,966
</TABLE>
(9) Stockholder Proposal D regarding Post-Meeting Reports
-----------------------------------------------------
<TABLE>
<S> <C>
Total Votes For 2,799,181
Total Votes Against 74,027,930
Total Abstentions 2,515,981
Total Broker Nonvotes 11,059,966
</TABLE>
34
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
<TABLE>
<CAPTION>
<S> <C><C>
3 - Restated Articles of Organization of the Corporation, as amended
through April 26, 1996.
11 - Computation of Earnings Per Share.
12(a) _ Computation of the Corporation's Consolidated Ratio of Earnings
to Fixed Charges (excluding interest on deposits).
12(b) - Computation of the Corporation's Consolidated Ratio of Earnings to
Fixed Charges (including interest on deposits).
27 - Financial Data Schedule
</TABLE>
(b) Current Reports on Form 8-K.
During the first quarter of 1996, the Corporation filed two Current Reports
on Form 8-K. The current reports, dated January 16, 1996 and January 18,
1996, contained information pursuant to Items 5 and 7 of Form 8-K. The
Corporation also filed a Current Report on Form 8-K, dated April 18, 1996,
which contained information pursuant to Items 5 and 7 of Form 8-K.
35
<PAGE>
SIGNATURES
----------
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.
BANK OF BOSTON CORPORATION
/s/ Charles K. Gifford
--------------------------------------
Charles K. Gifford
Chairman of the Board of Directors,
President and Chief Executive Officer
/s/ William J. Shea
--------------------------------------
William J. Shea
Vice Chairman,
Chief Financial Officer and
Treasurer
Date: May 15, 1996
36
<PAGE>
BANK OF BOSTON CORPORATION
Boston, Massachusetts
Restated
Articles of Organization, as amended
<PAGE>
BANK OF BOSTON CORPORATION
Restated
Articles of Organization
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1
Name 1
ARTICLE 2
Purpose 1
ARTICLE 3
Authorized Capital Stock 1
ARTICLE 4
Common Stock 1
Preferred Stock, General 1
Preferred Stock, Series A 2
Preferred Stock, Series B 18
Preferred Stock, Series C 34
Preferred Stock, Series D 49
Preferred Stock, Series E 60
Preferred Stock, Series F 70
ARTICLE 5
Transfer Restrictions, if any 80
ARTICLE 6
Amendment of By-Laws 80
Stockholders Meetings 80
Corporation as Partner 80
Limitation on Director Liability 80
</TABLE>
<PAGE>
BANK OF BOSTON CORPORATION
ARTICLES OF ORGANIZATION
Restated
November 24, 1993
ARTICLE 1
The name by which the corporation shall be known is "Bank of Boston
Corporation."
ARTICLE 2
The purposes for which the corporation is formed are as follows:
To buy, sell, deal in, or hold securities of every kind and description;
and in general to carry on any business permitted to corporations organized
under Chapter 156B of the Massachusetts General Laws as now in force or
hereafter amended.
ARTICLE 3
The total number of shares and the par value, if any, of each class of stock
which the corporation is authorized to issue is as follows:
Preferred Stock, no par value: 10,000,000
Common Stock par value $2.25 per share: 200,000,000
ARTICLE 4
(A) There shall be a class of common stock having a par value of $2.25 per
share consisting of 200,000,000 shares. The holders of record of such common
stock shall have one vote for each share of such common stock held by them,
respectively.
(B) There shall be a class of Preferred Stock consisting of 10,000,000 shares
without par value. The shares of the Preferred Stock are to be issuable at any
time or from time to time in one or more series as and when established by the
Board of Directors, each such series to have such
<PAGE>
designation or title as may be fixed by the Directors prior to the issuance of
any shares thereof, and each such series may differ from every other series
already outstanding as may be determined by the Directors prior to the issuance
of any shares thereof, in any or all of the following, but in no other respects:
(a) the rate of dividend (cumulative or non-cumulative) to which holders of the
Preferred Stock of any such series shall be entitled;
(b) the terms and manner of the redemption by the corporation of the Preferred
Stock of any such series;
(c) the special or relative rights of the holders of the Preferred Stock of any
such series in the event of the voluntary or involuntary liquidation,
distribution or sale of assets, dissolution or winding-up of the
corporation;
(d) the terms of the sinking fund or redemption or purchase account, if any, to
be provided for the Preferred Stock of any such series;
(e) the right, if any, of the holders of Preferred Stock of any such series to
convert the same into stock of any other class or classes or into other
securities of the corporation, and the terms and conditions of such
conversion; and
(f) the voting rights, if any, of the holders of Preferred Stock of any such
series.
(C) Preferred Stock, Series A
1. DEFINITIONS OF CERTAIN EXPRESSIONS USED IN THIS PARAGRAPH. As used in this
Article 4, the following capitalized words and expressions have the respective
meanings set out below:
"Applicable Rate" Except as provided below in this definition, the
Applicable Rate for any quarterly dividend period commencing on or after
June 16, 1984 shall be (x) 1.95% less than (y) the highest of the Treasury
Bill Rate, the Ten Year Constant Maturity Rate
2
<PAGE>
and the Twenty Year Constant Maturity Rate (each as hereinafter defined)
for such dividend period. If the corporation determines in good faith that:
(i) any one of the Treasury Bill Rate, the Ten Year Constant Maturity
Rate and the Twenty Year Constant Maturity Rate cannot be determined
for any particular quarterly dividend period, then the Applicable Rate
for such dividend period shall be 1.95% less than the higher of
whichever two of such rates can be so determined;
(ii) only one of the Treasury Bill Rate, the Ten Year Constant
Maturity Rate and the Twenty Year Constant Maturity Rate can be
determined for any particular quarterly dividend period, then the
Applicable Rate for such dividend period shall be 1.95% less than the
rate that can be so determined; or
(iii) none of the Treasury Bill Rate, the Ten Year Constant Maturity
Rate and the Twenty Year Constant Maturity Rate can be determined for
any particular quarterly dividend period, then the Applicable Rate in
effect for the preceding quarterly dividend period shall be continued
for such dividend period.
However, the Applicable Rate for any quarterly dividend period shall in no
event be less than six percent (6%) per annum nor greater than thirteen
percent (13%) per annum.
"Articles of Organization" mean the Articles of Organization of the
corporation as amended and in effect from time to time, including the
amendment thereof effected pursuant to this paragraph.
"Board of Governors" means the Board of Governors of the Federal Reserve
System or any governmental entity which may be granted the powers referred
to herein currently exercised by the Board of Governors.
"Calendar Period" means a period of fourteen calendar days.
3
<PAGE>
"Common Stock" means the capital stock of the corporation so designated and
authorized from time to time and being stock which is junior to all series
of the Preferred Stock in respect of dividend payments and of distributions
or payments upon Liquidation.
"corporation" means Bank of Boston Corporation and includes any successor
corporation by merger, consolidation or otherwise if the stockholders of
the former continue as stockholders of the continuing or combined
corporation.
"Junior Dividend Stock" means (i) the Common Stock and (ii) any series of
the Preferred Stock which is specifically made junior to the Series A
Stock, and any class of capital stock of the corporation which is
specifically made junior to the Preferred Stock, in respect of payments of
dividends.
"Junior Liquidation Stock" means (i) the Common Stock and (ii) any series
of the Preferred Stock which is specifically made junior to the Series A
Stock and any class of capital stock of the corporation which is
specifically made junior to the Preferred Stock, in respect of
distributions or payments upon Liquidation.
"Junior Stock" means the Common Stock, the Junior Dividend Stock and the
Junior Liquidation Stock.
"Liquidation" means the voluntary or involuntary liquidation, distribution
or sale of assets, dissolution or winding up of the corporation, but shall
not include (i) merger or consolidation of the corporation with another
corporation pursuant to any statute which provides in effect that the
stockholders of the former shall continue as stockholders of the continuing
or combined corporation and (ii) the acquisition by the corporation of
assets or stock of another corporation.
"Preferred Stock" means the authorized class of the capital stock of the
corporation so designated of which there are currently 10,000,000 shares
authorized.
"Series A Stock" means the series of Preferred Stock created by this
paragraph.
4
<PAGE>
"Special Securities" means securities which can, at the option of the
holder, be surrendered at face value in payment of federal estate taxes or
which provide tax benefits for the holder and are priced to reflect such
tax benefits or which were issued at a deep or substantial discount.
"Ten Year Average Yield" means the average yield to maturity for actively
traded marketable U.S. Treasury fixed interest rate securities (adjusted to
constant maturities of ten years).
"Ten Year Constant Maturity Rate" Except as provided below in this
definition, the Ten Year Constant Maturity Rate for each quarterly dividend
period shall be the arithmetic average (rounded, if not a whole multiple of
five hundredths of a percentage point, to the nearest whole such fraction
of a percentage point) of the two most recent weekly per annum Ten Year
Average Yields (or the one weekly per annum Ten Year Average Yield, if only
one such yield shall be published during the relevant Calendar Period) as
published weekly by the Board of Governors during the Calendar Period
immediately prior to the 10 calendar days preceding the 15th day of March,
June, September or December, as the case may be, occurring prior to the
commencement of the dividend period for which the dividend rate on the
shares of the Series A Stock is being determined. If the Board of Governors
does not publish such a weekly per annum Ten Year Average Yield during any
such Calendar Period, then the Ten Year Constant Maturity Rate for such
dividend period shall be the arithmetic average of the two most recent
weekly per annum Ten Year Average Yields (or the one weekly per annum Ten
Year Average Yield, if only one such yield shall be published during the
relevant Calendar Period), as published weekly during such Calendar Period
by any Federal Reserve Bank or by any U.S. Government department or agency
selected by the corporation. If a per annum Ten Year Average Yield shall
not be published by the Board of Governors or by any Federal Reserve Bank
or by any U.S. Government department or agency during such Calendar Period,
then the Ten Year Constant Maturity Rate for such dividend period shall be
the arithmetic average of the two most recent weekly per
5
<PAGE>
annum average yields to maturity (or the one weekly per annum average yield
to maturity, if only one such yield shall be published during the relevant
Calendar Period) for all of the actively traded marketable U.S. Treasury
fixed interest rate securities (other than Special Securities) then having
maturities of not less than eight nor more than 12 years, as published for
such Calendar Period by the Board of Governors or, if the Board of
Governors shall not publish such yields, by any Federal Reserve Bank or by
any U.S. Government department or agency selected by the corporation. If
the corporation determines in good faith that for any reason the
corporation cannot determine the Ten Year Constant Maturity Rate for any
dividend period as provided above in this paragraph, then the Ten Year
Constant Maturity Rate for such dividend period shall be the arithmetic
average of the per annum average yields to maturity based upon the closing
bids during such Calendar Period for each of the issues of actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities) with a final maturity date not less than eight nor more than 12
years from the date of each such quotation, as chosen and quoted daily for
each business day in New York City (or less frequently if daily quotations
shall not be generally available) to the corporation by at least three
recognized dealers in U.S. Government securities selected by the
corporation.
"Treasury Bill Rate" Except as provided below in this definition, the
Treasury Bill Rate for any quarterly dividend period shall be the
arithmetic average (rounded, if not a whole multiple of five hundredths of
a percentage point, to the nearest whole such fraction of a percentage
point) of the two most recent weekly per annum market discount rates (or
the one weekly per annum market discount rate, if only one such rate shall
be published during the relevant Calendar Period) for three-month U.S.
Treasury bills, as published weekly by the Board of Governors during the
Calendar Period immediately prior to the 10 calendar days preceding the
15th day of March, June, September or December, as the case may be,
occurring prior to the commencement of the dividend period for which the
dividend rate on the shares of the Series A Stock is being determined. If
the Board of Governors does not publish such a weekly per annum market
6
<PAGE>
discount rate during any such Calendar Period, then the Treasury Bill Rate
for such dividend period shall be the arithmetic average of the two most
recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate shall be published during the
relevant Calendar Period) for three-month U.S. Treasury bills, as published
weekly during such Calendar Period by any Federal Reserve Bank or by any
U.S. Government department or agency selected by the corporation. If a per
annum market discount rate for three-month U.S. Treasury bills shall not be
published by the Board of Governors or by any Federal Reserve Bank or by
any U.S. Government department or agency during such Calendar Period, then
the Treasury Bill Rate for such dividend period shall be the arithmetic
average of the two most recent weekly per annum market discount rates (or
the one weekly per annum market discount rate, if only one such rate shall
be published during the relevant Calendar Period) of all of the U.S.
Treasury bills then having maturities of not less than 80 nor more than 100
days, as published during such Calendar Period by the Board of Governors
or, if the Board of Governors shall not publish such rates, by any Federal
Reserve Bank or by any such U.S. Government department or agency selected
by the corporation. If the corporation determines in good faith that for
any reason no such U.S. Treasury bill rates are published as provided above
during such Calendar Period, then the Treasury Bill Rate for such dividend
period shall be the arithmetic average of the per annum market discount
rates based upon the closing bids during such Calendar Period for each of
the issues of marketable non-interest bearing U.S. Treasury securities with
a maturity of not less than 80 nor more than 100 days from the date of each
such quotation, as chosen and quoted daily for each business day in New
York City (or less frequently if daily quotations shall not be generally
available) to the corporation by at least three recognized dealers in U.S.
Government securities selected by the corporation. If the corporation
determines in good faith that for any reason the corporation cannot
determine the Treasury Bill Rate for any dividend period as provided above
in this paragraph, the Treasury Bill Rate for such dividend period shall be
the arithmetic average of the per annum market discount rates based upon
the closing bids during such Calendar Period for each of
7
<PAGE>
the issues of marketable interest-bearing U.S. Treasury securities with a
maturity of not less than 80 nor more than 100 days from the date of each
such quotation, as chosen and quoted daily for each business day in New
York City (or less frequently if daily quotations shall not be generally
available) to the corporation by a least three recognized dealers in U.S.
Government securities selected by the corporation.
"Twenty Year Average Yield" means the average yield to maturity for
actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of 20 years).
"Twenty Year Constant Maturity Rate" Except as provided below in this
definition, the Twenty Year Constant Maturity Yield for any quarterly
dividend period shall be the arithmetic average (rounded, if not a whole
multiple of five hundredths of a percentage point, to the nearest whole
such fraction of a percentage point) of the two most recent weekly per
annum Twenty Year Average Yields (or the one weekly per annum Twenty Year
Average Yield, if only one such yield shall be published during the
relevant Calendar Period), as published weekly by the Board of Governors
during the Calendar Period immediately prior to the 10 calendar days
preceding the 15th day of March, June, September or December, as the case
may be occurring prior to the commencement of the dividend period for which
the dividend rate on the shares of the Series A Stock is being determined.
If the Board of Governors does not publish such a weekly per annum Twenty
Year Average Yield during any such Calendar Period, then the Twenty Year
Constant Maturity Rate for such dividend period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year Average Yields
(or the one weekly per annum Twenty Year Average Yield, if only one such
yield shall be published during the relevant Calendar Period), as published
weekly during such Calendar Period by any Federal Reserve Bank or by any
U.S. Government department or agency selected by the corporation. If a per
annum Twenty Year Average Yield shall not be published by the Board of
Governors or by any Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, then the Twenty Year
Constant Maturity Rate for such dividend
8
<PAGE>
period shall be the arithmetic average of the two most recent weekly per
annum average yields to maturity (or the one weekly per annum average yield
to maturity, if only one such yield shall be published during the relevant
Calendar Period) for all of the actively traded marketable U.S. Treasury
fixed interest rate securities (other than Special Securities) then having
maturities of not less than 18 nor more than 22 years, as published during
such Calendar Period by the Board of Governors or, if the Board of
Governors shall not publish such yields, by any Federal Reserve Bank or by
any U.S. Government department or agency selected by the corporation. If
the corporation determines in good faith that for any reason the
corporation cannot determine the Twenty Year Constant Maturity Rate for any
dividend period as provided above in this paragraph, then the Twenty Year
Constant Maturity Rate for such dividend period shall be the arithmetic
average of the per annum average yields to maturity based upon the closing
bids during such Calendar Period for each of the issues of actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities) with a final maturity date not less than 18 nor more than 22
years from the date of each such quotation, as chosen and quoted daily for
each business day in New York City (or less frequently if daily quotations
shall not be generally available) to the corporation by at least three
recognized dealers of national reputation in U.S. Government securities
selected by the corporation.
2. NUMBER OF SHARES AND DESIGNATION. 1,045,712 shares of Preferred Stock are
hereby constituted as a series of Preferred Stock, liquidation preference $50
per share, and designated as Adjustable Rate Cumulative Preferred Stock, Series
A. No additional shares of Preferred Stock may be issued as Series A Stock.
3. PREFERENCES. The preferences of each share of the Series A Stock with
respect to dividend payments or to distributions or payments upon Liquidation
will be in every respect on a parity with the preferences of every other share
of Preferred Stock and of every other class of the capital stock of the
corporation (other than Common Stock) from time to time outstanding, which other
shares of the Preferred Stock and which other classes of capital stock are
9
<PAGE>
not made senior or junior to the Series A Stock as to dividend payments or to
distributions or payments upon Liquidation.
4. LIQUIDATION. Upon Liquidation, the holders of the then outstanding Series A
Stock shall be entitled, before any distribution or payment is made upon any of
the Junior Liquidation Stock, to be paid in cash an amount equal to $50 per
share of Series A Stock so held by them plus all accrued and unpaid dividends
thereon (whether or not earned or declared) to the date fixed for such payment.
If upon Liquidation, the amounts payable with respect to shares of Series A
Stock and to any other shares of the capital stock of the corporation ranking as
to any such distribution on a parity with the Series A Stock are not paid in
full, the holders of shares of the Series A Stock and of such other shares shall
share ratably in any such distribution of assets of the corporation in
proportion to the full respective preferential amounts to which they are
entitled.
Notice of Liquidation, stating the date when and the place where the amount
payable on Liquidation will be paid, shall be sent by the Clerk of the
corporation by first class mail, postage prepaid, at least thirty (30) but no
more than sixty (60) days prior to the date fixed for such liquidation payment,
to the holders of the shares of the Series A Stock, at their respective
addresses appearing on the books of the corporation. Any notice which is mailed
in the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the holder receives such notice, and failure duly to give
such notice by mail to any holder of shares of Series A Stock, or any defect in
such notice, shall not affect the validity of the proceedings for the making of
liquidation payments on any other shares of the Series A Stock or of any other
series or class of the capital stock of the corporation. If such notice shall
have been duly mailed and if, on or before the date fixed for liquidation
payments designated in such notice, the funds necessary for such liquidation
payments shall have been provided by the corporation in accordance with the
provisions of the following sentence, then, notwithstanding that any certificate
of shares of Series A Stock shall not have been delivered for cancellation, the
shares represented
10
<PAGE>
thereby shall no longer be deemed outstanding on and after the date such funds
shall have been so provided, the dividends thereon shall cease to accrue from
and after the date fixed for such liquidation payments so designated, and all
rights with respect to the shares of the Series A Stock shall terminate
forthwith after such liquidation payment date, excepting only the right of the
holder to receive the liquidation price thereof of $50 per share plus unpaid
dividends accrued to such liquidation payment date but without interest thereon.
The corporation's obligation to provide funds for liquidation payments shall be
deemed fulfilled if, on or before the liquidation payment date, the corporation
shall deposit with a bank or trust company (which may be an affiliate of the
corporation), having capital and surplus of at least $50,000,000, funds
necessary for such liquidation payments, in trust, with irrevocable instructions
that such funds be applied to such liquidation payments. Any interest accrued on
such funds shall be paid to the corporation from time to time. Any funds so
deposited and unclaimed at the end of five years from such liquidation payment
date shall be released or repaid to the corporation, after which the holder or
holders of shares of Series A Stock shall look only to the corporation for
payment of liquidation payments.
5. DIVIDENDS.
(a) Dividend Rate. Dividends on each share of the Series A Stock shall be
payable (i) at a quarterly rate of 10.60% per annum for the quarter ended June
15, 1984 and (ii) for each quarterly dividend period commencing on or after
June 16, 1984, at a rate computed by multiplying $50 by the Applicable Rate
(as defined herein) for such period and multiplying the result by the fraction
of a year represented by such period, based upon a year of 365 or 366 days, as
the case may be.
(b) Payment of Dividends. Dividends on each share of the Series A Stock shall
be fully cumulative and shall accrue whether or not earned, without interest,
from the date of issuance of each share, and shall be payable in arrears on
the 15th day of March, June, September and December in each year in which such
shares are outstanding out of funds legally available for the payment of
dividends, when, as and if declared by the Board of Directors.
11
<PAGE>
In the event that there shall be outstanding shares of any other series of the
Preferred Stock or of any other class of the capital stock of the corporation
ranking on a parity as to dividends with shares of the Series A Stock, the
corporation, in making any dividend payment on account of arrears on shares of
the Series A Stock or such other series of the Preferred Stock or such other
class of capital stock, shall make payment ratably upon all outstanding shares
of the Series A Stock, such other series of the Preferred Stock and such other
class of capital stock in proportion to the respective amounts of dividends in
arrears upon all such outstanding shares of the Series A Stock, such other
series of the Preferred Stock and such other class of capital stock to the
date of such dividend payment.
So long as any shares of the Series A Stock are outstanding, the corporation
shall not (i) declare or pay or set apart for payment any dividend or other
distribution (other than dividends or distributions payable in shares of
Junior Stock) for any period upon any Junior Stock or any stock of the
corporation ranking on a parity with the Series A Stock as to dividends or
upon Liquidation or (ii) redeem, purchase or otherwise acquire for any
consideration any shares of Junior Stock or any capital stock of the
corporation ranking on a parity with the Series A Stock as to dividends or
upon Liquidation, unless, in either case, all dividends payable to holders of
shares of the Series A Stock and of any stock of the corporation ranking on a
parity therewith as to dividends for its current dividend period and all past
dividend periods have been paid (or are contemporaneously being paid), or a
sum sufficient for the payment thereof has been irrevocably set aside in trust
for the holders of all such shares; except that, notwithstanding clause (i) of
this paragraph 5(b), the corporation may pay dividends on the shares of the
Series A Stock and shares of stock of the corporation ranking on a parity
therewith as to dividends ratably in accordance with the sums which would be
payable on such shares if all dividends, including accumulations, if any, were
declared and paid in full.
12
<PAGE>
6. REDEMPTION.
(a) Redemption Price. Shares of the Series A Stock shall not be redeemable on
or prior to March 30, 1989. After March 30, 1989, and in accordance with this
paragraph 6, the shares of the Series A Stock shall be redeemable at any time
or from time to time, in whole or in part, at the option of the corporation by
vote of its Board of Directors; provided, however, that any partial
redemption, in the opinion of an investment banking firm of national
reputation selected by the corporation, shall not adversely affect the
marketability of those shares of Series A Stock not redeemed. The redemption
price shall be $51.50 per share if shares are redeemed on or prior to March
30, 1994 and $50 per share if shares are redeemed thereafter, plus in each
case an amount equal to all unpaid dividends, whether or not earned or
declared, accrued to the date fixed for redemption.
(b) Redemption Procedure. Notice of any proposed redemption of all or any of
the shares of the Series A Stock under this paragraph 6 shall be sent by the
Clerk of the corporation by first class mail, postage prepaid, at least thirty
(30) but not more than sixty (60) days prior to the date fixed for such
redemption, to the holders of the shares of the Series A Stock to be redeemed,
at their respective addresses appearing on the books of the corporation. Any
notice which is mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the holder receives such
notice, and failure duly to give such notice by mail to any holder of shares
of Series A Stock designated for redemption, or any defect in such notice,
shall not affect the validity of the proceedings for the redemption of any
other shares of the Series A Stock. If such notice of redemption shall have
been duly mailed and if, on or before the date fixed for redemption designated
in such notice, the funds necessary for the redemption shall have been
provided by the corporation in accordance with the provisions of the following
sentence, then notwithstanding that any certificate of shares of Series A
Stock so called for redemption shall not have been delivered for cancellation,
the shares represented thereby shall no longer be deemed outstanding on and
after the date such
13
<PAGE>
funds shall have been so provided, the dividends thereon shall cease to accrue
from and after the date of redemption so designated, and all rights with
respect to the shares of the Series A Stock so called for redemption shall
terminate forthwith after such redemption date, excepting only the right of
each holder to receive the redemption price thereof plus unpaid dividends
accrued to such redemption date but without interest thereon. The
corporation's obligation to provide funds for redemption shall be deemed
fulfilled if, on or before the redemption date, the corporation shall deposit
with a bank or trust company (which may be an affiliate of the corporation),
having capital and surplus of at least $50,000,000, funds necessary for such
redemption, in trust, with irrevocable instructions that such funds be applied
to the redemption of the shares of Series A Stock so called for redemption.
Any interest accrued on such funds shall be paid to the corporation from time
to time. Any funds so deposited and unclaimed at the end of five years from
such redemption date shall be released or repaid to the corporation, after
which the holder or holders of such shares of Series A Stock so called for
redemption shall look only to the corporation for payment of the redemption
price.
(c) Pro Rata Redemption. If any proposed redemption of shares of the Series A
Stock shall be of less than all then outstanding shares of Series A Stock,
such redemption shall be made on a pro rata basis, as nearly as possible,
among all holders of shares of the Series A Stock outstanding at the time of
redemption in the same proportion that each such holder's then respective
holding of such shares shall bear to the aggregate number of such shares then
outstanding.
(d) Dividend Arrearages. Notwithstanding the foregoing provisions of this
paragraph 6, if any dividends on shares of the Series A Stock are in arrears,
no other shares of the Preferred Stock shall be redeemed, and the corporation
shall not purchase or otherwise acquire any shares of the Preferred Stock
unless all outstanding shares of the Series A Stock are simultaneously
redeemed in accordance with the foregoing provisions of this paragraph 6, and
the corporation shall not purchase or otherwise acquire any shares of the
Series A Stock; provided, however, that the foregoing shall not prevent the
purchase or acquisition of
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shares of the Series A Stock pursuant to a purchase or exchange offer made on
the same terms to holders of all outstanding shares of the Series A Stock.
7. VOTING RIGHTS.
(a) General. The holders of shares of Series A Stock shall not, by virtue of
their ownership thereof, be entitled to vote upon any matter except as
otherwise provided in the Articles of Organization or by law. Whenever the
holders of any shares of the Series A Stock shall be entitled to vote upon any
matter, each outstanding share of the Series A Stock entitled to vote on such
matter shall be entitled to one (1) vote.
(b) Two-Thirds Approval. So long as any shares of the Series A Stock are
outstanding, the corporation shall not, without first obtaining the consent,
given in writing or in person or by proxy or at a meeting called for the
purpose, of the holders of at least two-thirds (2/3rds) of the outstanding
shares of the Series A Stock:
(i) authorize or create any other class of capital stock (or series
thereof) the shares of which rank prior to shares of Preferred Stock in
respect of dividend payments or distributions or payments upon Liquidation;
or authorize, create or issue any bonds, notes, debentures, obligations,
stock or other securities by their terms convertible into or evidencing a
right to purchase shares of stock of any other class of capital stock (or
series thereof) the shares of which rank prior to the shares of Preferred
Stock in respect of dividend payments or distributions or payments upon
Liquidation;
(ii) authorize or create any other series of Preferred Stock, the shares of
which rank prior to shares of Series A Stock in respect of dividend
payments or distributions or payments upon Liquidation; or authorize,
create or issue any bonds, notes, debentures, obligations, stock or other
securities by their terms convertible into or evidencing a right to
purchase shares of any other series of Preferred Stock which rank prior to
the shares of Series A Stock in respect of dividend payments or
distributions or payments upon Liquidation;
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(iii) reclassify any shares of any class of capital stock into a class
ranking prior to the Preferred Stock in respect of dividend payments or
distributions or payments upon Liquidation; reclassify any shares of
Preferred Stock into a series which ranks prior to Series A Stock in
respect of dividend payments or distributions or payments upon Liquidation;
or reclassify any shares of Junior Stock into Series A Stock; or
(iv) authorize any amendment to the Articles of Organization which would
adversely affect the rights of the holders of the Series A Stock. For the
purposes of this subparagraph (iv), the term "adversely affects" shall have
the meaning as it has in Section 77 of Chapter 156B of the Massachusetts
General Laws, as in effect on April 29, 1983.
(c) Special Voting Rights. Notwithstanding the foregoing, in the event that,
at any time after the date of original issue of the shares of the Series A
Stock, an amount equal to the full accrued dividends for six or more quarterly
dividend periods, whether or not consecutive, shall not have been paid or
declared and a sum sufficient for the payment thereof irrevocably set aside in
trust for the holders of all of such shares, the Board of Directors of the
corporation shall promptly take all necessary actions to increase the
authorized number of directors of the corporation by one (1) and the holders
of the shares of the Series A Stock then outstanding shall be entitled (by
series, voting as a single class) to elect one (1) person director to the
Board of Directors of the corporation (such right to elect one (1) director
being hereinafter sometimes referred to as the "special voting rights"), each
outstanding share having such right being entitled for such purpose to one
vote; provided, however, that at such time as the arrearage in payment of
dividends which gave rise to the exercise of the special voting rights has
been cured with regard to the Series A Stock by waiver or payment of all
accrued dividends, the right of the holders of such shares so to vote as
provided in this paragraph 7(c) shall cease (subject to renewal from time to
time upon the same terms and conditions) and the term of office of the person
who is at that time a director elected by
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such holders shall terminate and the number of directors of the corporation
shall be automatically reduced by one (1).
(d) Special Voting Rights; Procedure. At any time after the special voting
rights shall have become vested in the holders of the shares of the Series A
Stock as provided in paragraph 7(c), the Clerk of the corporation, as promptly
as possible but in any event within twenty (20) days after receipt of the
written request of the holders of 10% of the shares of the Series A Stock then
outstanding, addressed to the corporation at its principal office, shall call
a special meeting of the holders of the shares of the Series A Stock for the
purpose of electing such additional director, such meeting to be held at any
place as provided by the By-Laws of the corporation for meetings of the
corporation's stockholders, and upon not less than ten (10) nor more than
twenty (20) days notice. If such meeting shall not be so called within twenty
(20) days after receipt of the request by the Clerk of the corporation, then
the holders of 10% of the shares of the Series A Stock then outstanding may,
by written notice to the Clerk of the corporation, designate any person to
call such meeting, and the person so designated may call such meeting at any
such place as provided above and upon not less than ten (10) nor more than
twenty (20) days notice and for that purpose shall have access to the
stockholder record books of the corporation. No such special meeting of the
holders of the shares of the Series A Stock and no adjournment thereof shall
be held on a date later than thirty days before the annual meeting of
stockholders of the corporation. At any meeting so called or at any annual
meeting held at any time when the special voting rights are in effect, the
holders of a majority of the shares of the Series A Stock then outstanding,
present in person or by proxy, shall be sufficient to constitute a quorum for
the election of such additional director, and such additional director,
together with any and all other directors who are then members of the Board of
Directors, shall constitute the duly elected directors of the corporation.
(e) Vacancy in Office of Director Elected by Holders of Series A Stock. With
respect to a vacancy arising in the directorship referred to in paragraph 7(c)
at any time
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when the special voting rights are in effect pursuant to paragraph 7(c), upon
the written request of the holders of 10% of the shares of the Series A Stock
then outstanding, addressed to the corporation at its principal office, the
Clerk of the corporation shall give notice of a special meeting of holders of
the shares of the Series A Stock of the election of a director to fill such
vacancy caused by the death, resignation or other inability to serve as a
director elected by such holders, to be held not less than ten (10) nor more
than twenty (20) days following receipt by the Clerk of the corporation of
such written request. So long as special voting rights are in effect pursuant
to paragraph 7(c), any director who shall have been so elected by the holders
of the Series A Stock may be removed at any time, either with or without
cause, only by the affirmative vote of the holders of the shares at the time
entitled to cast a majority of the votes entitled to be cast for the election
of such director at a special meeting of such holders called for that purpose,
and any vacancy thereby created may be filled by the vote of such holders.
8. STATUS OF REDEEMED SHARES OF SERIES A STOCK. All shares of Series A Stock
which have been redeemed by the corporation pursuant to paragraph 6 shall have,
after such redemption, the status of authorized but unissued shares of Preferred
Stock without designation of series and may be reissued but not as shares of
Series A Stock.
(D) Preferred Stock, Series B
1. DEFINITIONS OF CERTAIN EXPRESSIONS USED IN THIS PARAGRAPH. As used in this
Article 4, the following capitalized words and expressions have the respective
meanings set out below:
"Applicable Rate" Except as provided below in this definition, the Applicable
Rate for any quarterly dividend period commencing on or after September 16,
1985 shall be (x) 2.20% less than (y) the highest of the Treasury Bill Rate,
the Ten Year Constant Maturity Rate and the Twenty Year Constant Maturity
Rate (each as hereinafter defined) for such dividend period. If the
corporation determines in good faith that:
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(i) any one of the Treasury Bill Rate, the Ten Year Constant Maturity Rate
and the Twenty Year Constant Maturity Rate cannot be determined for any
particular quarterly dividend period, then the Applicable Rate for such
dividend period shall be 2.20% less than the higher of whichever two of such
rates can be so determined;
(ii) only one of the Treasury Bill Rate, the Ten Year Constant Maturity Rate
and the Twenty Year Constant Maturity Rate can be determined for any
particular quarterly dividend period, then the Applicable Rate for such
dividend period shall be 2.20% less than the rate that can be so determined;
or
(iii) none of the Treasury Bill Rate, the Ten Year Constant Maturity Rate and
the Twenty Year Constant Maturity Rate can be determined for any particular
quarterly dividend period, then the Applicable Rate in effect for the
preceding quarterly dividend period shall be continued for such dividend
period.
However, the Applicable Rate for any quarterly dividend period shall in no event
be less than six percent (6%) per annum nor greater than thirteen percent (13%)
per annum.
"Articles of Organization" means the Articles of Organization of the
corporation as amended and in effect from time to time, including the
amendment thereof effected pursuant to this paragraph.
"Board of Governors" means the Board of Governors of the Federal Reserve
System or any governmental entity which may be granted the powers referred to
herein currently exercised by the Board of Governors.
"Calendar Period" means a period of fourteen calendar days.
"Common Stock" means the capital stock of the corporation so designated and
authorized from time to time and being stock which is junior to all series of
the Preferred Stock in respect of dividend payments and of distributions or
payments upon Liquidation.
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"corporation" means Bank of Boston Corporation and includes any successor
corporation by merger, consolidation or otherwise if the stockholders of the
former continue as stockholders of the continuing or combined corporation.
"Junior Dividend Stock" means (i) the Common Stock and (ii) any series of the
Preferred Stock which is specifically made junior to the Series B Stock and
any class of capital stock of the corporation which is specifically made
junior to the Preferred Stock, in respect of payments of dividends.
"Junior Liquidation Stock" means (i) the Common Stock and (ii) any series of
the Preferred Stock which is specifically made junior to the Series B Stock
and any class of capital stock of the corporation which is specifically made
junior to the Preferred Stock, in respect of distributions or payments upon
Liquidation.
"Junior Stock" means the Common Stock, the Junior Dividend Stock and the
Junior Liquidation Stock.
"Liquidation" means the voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding up of the corporation, but shall not
include (i) the merger or consolidation of the corporation with another
corporation pursuant to any statute which provides in effect that the
stockholders of the former shall continue as stockholders of the continuing
or combined corporation and (ii) the acquisition by the corporation of assets
or stock of another corporation.
"Preferred Stock" means the authorized class of the capital stock of the
corporation so designated of which there are currently 10,000,000 shares
authorized.
"Series B Stock" means the series of Preferred Stock created by this
paragraph.
"Special Securities" means securities which can, at the option of the holder,
be surrendered at face value in payment of federal estate taxes or which
provide tax benefits for the holder and are priced to reflect such
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tax benefits or which were issued at a deep or substantial discount.
"Ten Year Average Yield" means the average yield to maturity for actively
traded marketable U.S. Treasury fixed interest rate securities (adjusted to
constant maturities of 10 years).
"Ten Year Constant Maturity Rate" Except as provided below in this
definition, the Ten Year Constant Maturity Rate for each quarterly dividend
period shall be the arithmetic average (rounded, if not a whole multiple of
five hundredths of a percentage point, to the nearest whole such fraction of
a percentage point) of the two most recent weekly per annum Ten Year Average
Yields (or the one weekly per annum Ten Year Average Yield, if only one such
yield shall be published during the relevant Calendar Period) as published
weekly by the Board of Governors during the Calendar Period immediately prior
to the 10 calendar days preceding the 15th day of March, June, September or
December, as the case may be, occurring prior to the commencement of the
dividend period for which the dividend rate on the shares of the Series B
Stock is being determined. If the Board of Governors does not publish such a
weekly per annum Ten Year Average Yield during any such Calendar Period, then
the Ten Year Constant Maturity Rate for such dividend period shall be the
arithmetic average of the two most recent weekly per annum Ten Year Average
Yields (or the one weekly per annum Ten Year Average Yield, if only one such
yield shall be published during the relevant Calendar Period), as published
weekly during such Calendar Period by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the corporation. If a per annum
Ten Year Average Yield shall not be published by the Board of Governors or by
any Federal Reserve Bank or by any U.S. Government department or agency
during such Calendar Period, then the Ten Year Constant Maturity Rate for
such dividend period shall be the arithmetic average of the two most recent
weekly per annum average yields to maturity (or the one weekly per annum
average yield to maturity, if only one such yield shall be published during
the relevant Calendar Period) for all of the actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special Securities) then
having maturities of not less than eight
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nor more than 12 years, as published for such Calendar Period by the Board of
Governors or, if the Board of Governors shall not publish such yields, by any
Federal Reserve Bank or by any U.S. Government department or agency selected
by the corporation. If the corporation determines in good faith that for any
reason the corporation cannot determine the Ten Year Constant Maturity Rate
for any dividend period as provided above in this paragraph, then the Ten
Year Constant Maturity Rate for such dividend period shall be the arithmetic
average of the per annum average yields to maturity based upon the closing
bids during such Calendar Period for each of the issues of actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities) with a final maturity date not less than eight nor more than 12
years from the date of each such quotation, as chosen and quoted daily for
each business day in New York City (or less frequently if daily quotations
shall not be generally available) to the corporation by at least three
recognized dealers in U.S. Government securities selected by the corporation.
"Treasury Bill Rate" Except as provided below in this definition, the
Treasury Bill Rate for any quarterly dividend period shall be the arithmetic
average (rounded, if not a whole multiple of five hundredths of a percentage
point, to the nearest whole such fraction of a percentage point) of the two
most recent weekly per annum market discount rates (or the one weekly per
annum market discount rate, if only one such rate shall be published during
the relevant Calendar Period) for three-month U.S. Treasury bills, as
published weekly by the Board of Governors during the Calendar Period
immediately prior to the 10 calendar days preceding the 15th day of March,
June, September or December, as the case may be, occurring prior to the
commencement of the dividend period for which the dividend rate on the shares
of the Series B Stock is being determined. If the Board of Governors does not
publish such a weekly per annum market discount rate during any such Calendar
Period, then the Treasury Bill Rate for such dividend period shall be the
arithmetic average of the two most recent weekly per annum market discount
rates (or the one weekly per annum market discount rate, if only one such
rate shall be published during the relevant Calendar Period) for three-month
U.S.
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Treasury bills, as published weekly during such Calendar Period by any
Federal Reserve Bank or any U.S. Government department or agency selected by
the corporation. If a per annum market discount rate for three-month U.S.
Treasury bills shall not be published by the Board of Governors or by any
Federal Reserve Bank or by any U.S. Government department or agency during
such Calendar Period, then the Treasury Bill Rate for such dividend period
shall be the arithmetic average of the two most recent weekly per annum
market discount rates (or the one weekly per annum market discount rate, if
only one such rate shall be published during the relevant Calendar Period) of
all of the U.S. Treasury Bills then having maturities of not less than 80 nor
more than 100 days, as published during such Calendar Period by the Board of
Governors or, if the Board of Governors shall not publish such rates, by any
Federal Reserve Bank or by any such U.S. Government department or agency
selected by the corporation. If the corporation determines in good faith that
for any reason no such U.S. Treasury Bill rates are published as provided
above during such Calendar Period, then the Treasury Bill Rate for such
dividend period shall be the arithmetic average of the per annum market
discount rates based upon the closing bids during such Calendar Period for
each of the issues of marketable non-interest bearing U.S. Treasury
securities with a maturity of not less than 80 or more than 100 days from the
date of each such quotation, as chosen and quoted daily for each business day
in New York City (or less frequently if daily quotations shall not be
generally available) to the
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corporation by at least three recognized dealers in U.S. Government
securities selected by the corporation.
"Twenty Year Average Yield" means the average yield to maturity for actively
traded marketable U.S. Treasury fixed interest rate securities (adjusted to
constant maturities of 20 years).
"Twenty Year Constant Maturity Rate" Except as provided below in this
definition, the Twenty Year Constant Maturity Yield for any quarterly
dividend period shall be the arithmetic average (rounded, if not a whole
multiple of five hundredths of a percentage point, to the nearest whole such
fraction of a percentage point) of the two most recent weekly per annum
Twenty Year Average Yields (or the one weekly per annum Twenty Year Average
Yield, if only one such yield shall be published during the relevant Calendar
Period), as published weekly by the Board of Governors during the Calendar
Period immediately prior to the 10 calendar days preceding the 15th day of
March, June, September or December, as the case may be, occurring prior to
the commencement of the dividend period for which the dividend rate on the
shares of the Series B Stock is being determined. If the Board of Governors
does not publish such a weekly per annum Twenty Year Average Yield during any
such Calendar Period, then the Twenty Year Constant Maturity Rate for such
dividend period shall be the arithmetic average of the two most recent weekly
per annum Twenty Year Average Yields, (or the one weekly per annum Twenty
Year Average Yield, if only one such yield shall be published during the
relevant Calendar Period), as published weekly during such Calendar Period by
any Federal Reserve Bank or by any U.S. Government department or agency
selected by the corporation. If a per annum Twenty Year Average Yield shall
not be published by the Board of Governors or by any Federal Reserve Bank or
by any U.S. Government department or agency during such Calendar Period, then
the Twenty Year Constant Maturity Rate for such dividend period shall be the
arithmetic average of the two most recent weekly per annum average yields to
maturity (or the one weekly per annum average yield to maturity, if only one
such yield shall be published during the relevant Calendar Period) for all of
the actively traded marketable U.S. Treasury fixed interest rate securities
(other than Special Securities)
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then having maturities of not less than 18 nor more than 22 years, as
published during such Calendar Period by the Board of Governors or, if the
Board of Governors shall not publish such yields, by any Federal Reserve Bank
or by any U.S. Government department or agency selected by the corporation.
If the corporation determines in good faith that for any reason the
corporation cannot determine the Twenty Year Constant Maturity Rate for any
dividend period as provided above in this paragraph, then the Twenty Year
Constant Maturity Rate for such dividend period shall be the arithmetic
average of the per annum average yields to maturity based upon the closing
bids during such Calendar Period for each of the issues of actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities) with a final maturity date not less than 18 nor more than 22
years from the date of each such quotation, as chosen and quoted daily for
each business day in New York City (or less frequently if daily quotations
shall not be generally available) to the corporation by at least three
recognized dealers of national reputation in U.S. Government securities
selected by the corporation.
2. NUMBER OF SHARES AND DESIGNATION. 1,576,068 shares of Preferred Stock are
hereby constituted as a series of Preferred Stock, liquidation preference $50
per share, and designated as Adjustable Rate Cumulative Preferred Stock, Series
B. No additional shares of Preferred Stock may be issued as Series B Stock.
3. PREFERENCES. The preferences of each share of the Series B Stock with
respect to dividend payments or to distributions or payments upon Liquidation
will be in every respect on a parity with the preferences of every other share
of Preferred Stock and of every other class of the capital stock of the
corporation (other than Common Stock), from time to time outstanding, which
other shares of the Preferred Stock and which other classes of capital stock are
not made senior or junior to the Series B Stock as to dividend payments or to
distributions or payments upon Liquidation.
4. LIQUIDATION. Upon Liquidation, the holders of the then outstanding Series
B Stock shall be entitled, before any distribution or payment is made upon any
of the Junior
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Liquidation Stock, to be paid in cash an amount equal to $50 per share of Series
B Stock so held by them plus all accrued and unpaid dividends thereon (whether
or not earned or declared) to the date fixed for such payment. If upon
Liquidation, the amounts payable with respect to shares of Series B Stock and to
any other shares of the capital stock of the corporation ranking as to any such
distribution on a parity with the Series B Stock are not paid in full, the
holders of shares of the Series B Stock and of such other shares shall share
ratably in any such distribution of assets of the corporation in proportion to
the full respective preferential amounts to which they are entitled.
Notice of Liquidation, stating the date when and the place where the amount
payable on Liquidation will be paid, shall be sent by the Clerk of the
corporation by first class mail, postage prepaid, at least thirty (30) but no
more than sixty (60) days prior to the date fixed for such liquidation payment,
to the holders of the shares of the Series B Stock, at their respective
addresses appearing on the books of the corporation. Any notice which is mailed
in the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the holder receives such notice, and failure duly to give
such notice by mail to any holder of shares of Series B Stock, or any defect in
such notice, shall not affect the validity of the proceedings for the making of
liquidation payments on any other shares of the Series B Stock or of any other
series or class of the capital stock of the corporation. If such notice shall
have been duly mailed and if, on or before the date fixed for liquidation
payments designated in such notice, the funds necessary for such liquidation
payments shall have been provided by the corporation in accordance with the
provisions of the following sentence, then, notwithstanding that any certificate
of shares of Series B Stock shall not have been delivered for cancellation, the
shares represented thereby shall no longer be deemed outstanding on and after
the date such funds shall have been set aside, the dividends thereon shall cease
to accrue from and after the date fixed for such liquidation payments so
designated, and all rights with respect to the shares of the Series B Stock
shall terminate forthwith after such liquidation payment date, excepting only
the right of the holder to receive the liquidation price thereof of $50 per
share plus unpaid dividends accrued to such liquidation payment date but
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without interest thereon. The corporation's obligation to provide funds for
liquidation payments shall be deemed fulfilled if, on or before the liquidation
payment date, the corporation shall deposit with a bank or trust company (which
may be an affiliate of the corporation), having a capital and surplus of at
least $50,000,000, funds necessary for such liquidation payments, in trust, with
irrevocable instructions that such funds be applied to such liquidation
payments. Any interest accrued on such funds shall be paid to the corporation
from time to time. Any funds so deposited and unclaimed at the end of five years
from such liquidation payment date shall be released or repaid to the
corporation, after which the holder or holders of shares of Series B Stock shall
look only to the corporation for payment of liquidation payments.
5. DIVIDENDS.
(a) Dividend Rate. Dividends on each share of the Series B Stock shall be
payable (i) at a quarterly rate of 8.30% per annum for the quarter ended
September 15, 1985, and (ii) for each quarterly dividend period commencing on
or after September 16, 1985, at a rate computed by multiplying $50 by the
Applicable Rate (as defined herein) for such period and multiplying the result
by the fraction of a year represented by such period, based upon a year of 365
or 366 days, as the case may be.
(b) Payment of Dividends. Dividends on each share of the Series B Stock shall
be fully cumulative and shall accrue whether or not earned, without interest,
from the date of issuance of each share, and shall be payable in arrears on
the 15th day of March, June, September, and December in each year in which
such shares are outstanding out of funds legally available for the payment of
dividends, when, as and if declared by the Board of Directors.
In the event that there shall be outstanding shares of any other series of the
Preferred Stock or of any other class of the capital stock of the corporation
ranking on a parity as to dividends with shares of the Series B Stock, the
corporation, in making any dividend payment on account of arrears on shares of
the Series B Stock or such other
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series of the Preferred Stock or such other class of capital stock, shall make
payment ratably upon all outstanding shares of the Series B Stock, such other
series of the Preferred Stock and such other class of capital stock in
proportion to the respective amounts of dividends in arrears upon all such
outstanding shares of the Series B Stock, such other series of the Preferred
Stock and such other class of capital stock to the date of such dividend
payment.
So long as any shares of the Series B Stock are outstanding, the corporation
shall not (i) declare or pay or set apart for payment any dividend or other
distribution (other than dividends or distributions payable in shares of
Junior Stock) for any period upon any Junior Stock or any stock of the
corporation ranking on a parity with the Series B Stock as to dividends or
upon Liquidation or (ii) redeem, purchase or otherwise acquire for any
consideration any shares of Junior Stock or any capital stock of the
corporation ranking on a parity with the Series B Stock as to dividends or
upon Liquidation, unless, in either case, all dividends payable to holders of
shares of the Series B Stock and of any stock of the corporation ranking on a
parity therewith as to dividends for its current dividend period and all past
dividend periods have been paid (or are contemporaneously being paid), or a
sum sufficient for the payment thereof has been irrevocably set aside in trust
for the holders of all such shares; except that, notwithstanding clause (i) of
this paragraph 5(b) the corporation may pay dividends on the shares of the
Series B Stock and shares of stock of the corporation ranking on a parity
therewith as to dividends ratably in accordance with the sums which would be
payable on such shares if all dividends, including accumulations, if any, were
declared and paid in full.
6. REDEMPTION.
(a) Redemption Price. Shares of the Series B Stock shall not be redeemable on
or prior to June 20, 1990. After June 20, 1990, and in accordance with this
paragraph 6, the shares of the Series B Stock shall be redeemable at any time
or from time to time, in whole or in part, at the option of the corporation by
vote of its Board of Directors; provided, however, that any partial
redemption,
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in the opinion of an investment banking firm of national reputation selected
by the corporation, shall not adversely affect the marketability of those
shares of Series B Stock not redeemed. The redemption price shall be $51.50
per share if shares are redeemed on or prior to June 20, 1995 and $50 per
share if shares are redeemed thereafter, plus in each case an amount equal to
all unpaid dividends, whether or not earned or declared, accrued to the date
fixed for redemption.
(b) Redemption Procedure. Notice of any proposed redemption of all or
any of the shares of the Series B Stock under this paragraph 6 shall be sent
by the Clerk of the corporation by first class mail, postage prepaid, at least
thirty (30) but not more than sixty (60) days prior to the date fixed for such
redemption, to the holders of the shares of the Series B Stock to be redeemed,
at their respective addresses appearing on the books of the corporation. Any
notice which is mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the holder receives such
notice, and failure duly to give such notice by mail to any holder of shares
of Series B Stock designated for redemption, or any defect in such notice,
shall not affect the validity of the proceedings for the redemption of any
other shares of the Series B Stock. If such notice of redemption shall have
been duly mailed and if, on or before the date fixed for redemption designated
in such notice, the funds necessary for the redemption shall have been
provided by the corporation in accordance with the provisions of the following
sentence, then, notwithstanding that any certificate of shares of Series B
Stock so called for redemption shall not have been delivered for cancellation,
the shares represented thereby shall no longer be deemed outstanding on and
after the date such funds shall have been set aside, the dividends thereon
shall cease to accrue from and after the date of redemption so designated, and
all rights with respect to the shares of the Series B Stock so called for
redemption shall terminate forthwith after such redemption date, excepting
only the right of each holder to receive the redemption price thereof plus
unpaid dividends accrued to such redemption date but without interest thereon.
The corporation's obligation to provide funds for redemption shall be deemed
fulfilled if, on or before the redemption
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date, the corporation shall deposit with a bank or trust company (which may be
an affiliate of the corporation), having a capital and surplus of at least
$50,000,000, funds necessary for such redemption, in trust, with irrevocable
instructions that such funds be applied to the redemption of the shares of
Series B Stock so called for redemption. Any interest accrued on such funds
shall be paid to the corporation from time to time. Any funds so deposited and
unclaimed at the end of five years from such redemption date shall be released
or repaid to the corporation, after which the holder or holders of shares of
Series B Stock so called for redemption shall look only to the corporation for
payment of the redemption price.
(c) Pro Rata Redemption. If any proposed redemption of shares of the Series B
Stock shall be less than all then outstanding shares of Series B Stock, such
redemption shall be made on a pro rata basis, as nearly as possible, among all
holders of shares of the Series B Stock outstanding at the time of redemption
in the same proportion that each such holder's then respective holding of such
shares shall bear to the aggregate number of such shares then outstanding.
(d) Dividend Arrearages. Notwithstanding the foregoing provisions of this
paragraph 6, if any dividends on shares of the Series B Stock are in arrears,
no other shares of the Preferred Stock shall be redeemed, and the corporation
shall not purchase or otherwise acquire any shares of the Preferred Stock,
unless all outstanding shares of the Series B Stock are simultaneously
redeemed in accordance with the foregoing provisions of this paragraph 6, and
the corporation shall not purchase or otherwise acquire any shares of the
Series B Stock; provided, however, that the foregoing shall not prevent the
purchase or acquisition of shares of the Series B Stock pursuant to a purchase
or exchange offer made on the same terms to holders of all outstanding shares
of the Series B Stock.
7. VOTING RIGHTS.
(a) General. The holders of shares of Series B Stock shall not, by virtue of
their ownership thereof, be entitled to vote upon any matter except as
otherwise provided in the Articles of Organization or by law.
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Whenever the holders of any shares of the Series B Stock shall be entitled to
vote upon any matter, each outstanding share of the Series B Stock entitled to
vote on such matter shall be entitled to one (1) vote.
(b) Two-Thirds Approval. So long as any shares of the Series B Stock are
outstanding, the corporation shall not, without first obtaining the consent,
given in writing or in person or by proxy or at a meeting called for the
purpose, of the holders of at least two-thirds (2/3rds) of the outstanding
shares of the Series B Stock:
(i) authorize or create any other class of capital stock (or series
thereof), the shares of which rank prior to shares of Preferred Stock in
respect of dividend payments or distributions or payments upon Liquidation;
or authorize, create or issue any bonds, notes, debentures, obligations,
stock or other securities by their terms convertible into or evidencing a
right to purchase shares of stock of any other class of capital stock (or
series thereof) the shares of which rank prior to the shares of Preferred
Stock in respect of dividend payments or distributions or payments upon
Liquidation;
(ii) authorize or create any other series of Preferred Stock, the shares of
which rank prior to shares of Series B Stock in respect of dividend payments
or distributions or payments upon Liquidation; or authorize, create or issue
any bonds, notes, debentures, obligations, stock or other securities by
their terms convertible into or evidencing a right to purchase shares of any
other series of Preferred Stock which rank prior to the shares of Series B
Stock in respect of dividend payments or distributions or payments upon
Liquidation;
(iii) reclassify any shares of any class of capital stock into a class
ranking prior to the Preferred Stock in respect of dividend payments or
distributions or payments upon Liquidation; reclassify any shares of
Preferred Stock into a series which ranks prior to Series B Stock in respect
of dividend payments or distributions or payments upon Liquidation; or
reclassify any shares of Junior Stock into Series B Stock; or
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(iv) authorize any amendment to the Articles of Organization which would
adversely affect the rights of the holders of the Series B Stock. For the
purposes of this subparagraph (iv), the term "adversely affects" shall have
the same meaning as it has in Section 77 of Chapter 156B of the
Massachusetts General Laws, as in effect on November 25, 1983.
(c) Special Voting Rights. Notwithstanding the foregoing, in the event that,
at any time after the date of original issue of the shares of the Series B
Stock, an amount equal to the full accrued dividends for six (6) or more
quarterly dividend periods, whether or not consecutive, shall not have been
paid or declared and a sum sufficient for the payment thereof irrevocably set
aside in trust for the holders of all of such shares, the Board of Directors
of the corporation shall promptly take all necessary actions to increase the
authorized number of directors of the corporation by one (1) and the holders
of the shares of the Series B Stock then outstanding shall be entitled (by
series, voting as a single class) to elect one (1) person director to the
Board of Directors of the corporation (such right to elect one (1) director
being hereinafter sometimes referred to as the "special voting rights"), each
outstanding share having such right being entitled for such purpose to one
vote; provided, however, that at such time as the arrearage in payment of
dividends which gave rise to the exercise of the special voting rights has
been cured with regard to the Series B Stock by waiver or payment of all
accrued dividends, the right of the holders of such shares so to vote as
provided in this paragraph 7(c) shall cease (subject to renewal from time to
time upon the same terms and conditions) and the term of office of the person
who is at that time a director elected by such holders shall terminate and the
number of directors of the corporation shall be automatically reduced by one
(1).
(d) Special Voting Rights; Procedure. At any time after the special voting
rights shall have become vested in the holders of the shares of the Series B
Stock as provided in paragraph 7(c), the Clerk of the corporation, as promptly
as possible but in any event within twenty (20) days after receipt of the
written request of the holders of 10% of
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the shares of the Series B Stock then outstanding, addressed to the
corporation at its principal office, shall call a special meeting of the
holders of the shares of the Series B Stock for the purpose of electing such
additional director, such meeting to be held at any place as provided by the
By-Laws of the corporation for meetings of the corporation's stockholders, and
upon not less than ten (10) nor more than twenty (20) days notice. If such
meeting shall not be so called within twenty (20) days after receipt of the
request by the Clerk of the corporation, then the holders of 10% of the shares
of the Series B Stock then outstanding may, by written notice to the Clerk of
the corporation, designate any person to call such meeting, and the person so
designated may call such meeting, at any such place as provided above and upon
not less than ten (10) nor more than twenty (20) days notice and for that
purpose shall have access to the stockholder record books of the corporation.
No such special meeting of the holders of the shares of the Series B Stock and
no adjournment thereof shall be held on a date later than thirty (30) days
before the annual meeting of stockholders of the corporation. At any meeting
so called or at any annual meeting held at any time when the special voting
rights are in effect, the holders of a majority of the shares of the Series B
Stock then outstanding, present in person or by proxy, shall be sufficient to
constitute a quorum for the election of such additional director, and such
additional director, together with any and all other directors who are then
members of the Board of Directors, shall constitute the duly elected directors
of the corporation.
(e) Vacancy in Office of Director Elected by Holders of Series B Stock. With
respect to a vacancy arising in the directorship referred to in paragraph 7(c)
at any time when the special voting rights are in effect pursuant to paragraph
7(c), upon the written request of the holders of 10% of the shares of the
Series B Stock then outstanding, addressed to the corporation at its principal
office, the Clerk of the corporation shall give notice of a special meeting of
holders of the shares of the Series B Stock of the election of a director to
fill such vacancy caused by the death, resignation or other inability to serve
as a director elected by such holders, to be held not less than ten (10) nor
more than twenty (20) days following receipt
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by the Clerk of the corporation of such written request. So long as special
voting rights are in effect pursuant to paragraph 7(c), any director who shall
have been so elected by the holders of the Series B Stock may be removed at
any time, either with or without cause, only by the affirmative vote of the
holders of the shares at the time entitled to cast a majority of the votes
entitled to be cast for the election of such director at a special meeting of
such holders called for that purpose, and any vacancy thereby created may be
filled by the vote of such holders.
8. STATUS OF REDEEMED SHARES OF SERIES B STOCK. All shares of the Series B
Stock which have been redeemed by the corporation pursuant to paragraph 6 shall
have, after such redemption, the status of authorized but unissued shares of
Preferred Stock without designation of series and may be reissued but not as
shares of Series B Stock.
(E) Preferred Stock, Series C
1. DEFINITIONS OF CERTAIN EXPRESSIONS USED IN THIS PARAGRAPH. As used in this
Article 4, the following capitalized words and expressions have the respective
meanings set out below:
"Applicable Rate" Except as provided below in this definition, the Applicable
Rate for any quarterly dividend period commencing on or after December 16,
1985 shall be (x) 2.75% less than (y) the highest of the Treasury Bill Rate,
the Ten Year Constant Maturity Rate and the Twenty Year Constant Maturity Rate
(each as hereinafter defined) for such dividend period. If the corporation
determines in good faith that:
(i) any one of the Treasury Bill Rate, the Ten Year Constant Maturity Rate
and the Twenty Year Constant Maturity Rate cannot be determined for any
particular quarterly dividend period, then the Applicable Rate for such
dividend period shall be 2.75% less than the higher of whichever two of such
rates can be so determined;
(ii) only one of the Treasury Bill Rate, the Ten Year Constant Maturity
Rate and the Twenty Year Constant Maturity Rate can be determined for any
particular
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quarterly dividend period, then the Applicable Rate for such dividend period
shall be 2.75% less than the rate that can be so determined; or
(iii) none of the Treasury Bill Rate, the Ten Year Constant Maturity Rate
and the Twenty Year Constant Maturity Rate can be determined for any
particular quarterly dividend period, then the Applicable Rate in effect for
the preceding quarterly dividend period shall be continued for such dividend
period.
However, the Applicable Rate for any quarterly dividend period shall in no
event be less than five and one-half percent (5 1/2%) per annum nor greater
than twelve and one-half percent (12 1/2%) per annum.
"Articles of Organization" means the Articles of Organization of the
corporation as amended and in effect from time to time, including the
amendment thereof effected pursuant to this paragraph.
"Board of Governors" means the Board of Governors of the Federal Reserve
System or any governmental entity which may be granted the powers referred
to herein currently exercised by the Board of Governors.
"Calendar Period" means a period of fourteen calendar days.
"Common Stock" means the capital stock of the corporation so designated and
authorized from time to time and being stock which is junior to all series
of the Preferred Stock in respect of dividend payments and of distributions
or payments upon Liquidation.
"corporation" means Bank of Boston Corporation and includes any successor
corporation by merger, consolidation or otherwise if the stockholders of the
former continue as stockholders of the continuing or combined corporation.
"Junior Dividend Stock" means (i) the Common Stock and (ii) any series of
the Preferred Stock which is specifically made junior to the Series C Stock,
and any class of capital stock of the corporation which is
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specifically made junior to the Preferred Stock, in respect of payments of
dividends.
"Junior Liquidation Stock" means (i) the Common Stock and (ii) any series of
the Preferred Stock which is specifically made junior to the Series C Stock
and any class of capital stock of the corporation which is specifically made
junior to the Preferred Stock, in respect of distributions or payments upon
Liquidation.
"Junior Stock" means the Common Stock, the Junior Dividend Stock and the
Junior Liquidation Stock.
"Liquidation" means the voluntary or involuntary liquidation, distribution
or sale of assets, dissolution or winding up of the corporation, but shall
not include (i) the merger or consolidation of the corporation with another
corporation pursuant to any statute which provides in effect that the
stockholders of the former shall continue as stockholders of the continuing
or combined corporation and (ii) the acquisition by the corporation of
assets or stock of another corporation.
"Preferred Stock" means the authorized class of the capital stock of the
corporation so designated of which there are currently 10,000,000 shares
authorized.
"Series C Stock" means the series of Preferred Stock created by this
paragraph.
"Special Securities" means securities which can, at the option of the
holder, be surrendered at face value in payment of federal estate taxes or
which provide tax benefits for the holder and are priced to reflect such tax
benefits or which were issued at a deep or substantial discount.
"Ten Year Average Yield" means the average yield to maturity for actively
traded marketable U.S. Treasury fixed interest rate securities (adjusted to
constant maturities of 10 years).
"Ten Year Constant Maturity Rate" Except as provided below in this
definition, the Ten Year Constant Maturity Rate for each quarterly dividend
period shall be the
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arithmetic average (rounded, if not a whole multiple of five hundredths of a
percentage point, to the nearest whole such fraction of a percentage point)
of the two most recent weekly per annum Ten Year Average Yields (or the one
weekly per annum Ten Year Average Yield, if only one such yield shall be
published during the relevant Calendar Period) as published weekly by the
Board of Governors during the Calendar Period immediately prior to the 10
calendar days preceding the 15th day of March, June, September or December,
as the case may be, occurring prior to the commencement of the dividend
period for which the dividend rate on the shares of the Series C Stock is
being determined. If the Board of Governors does not publish such a weekly
per annum Ten Year Average Yield during any such Calendar Period, then the
Ten Year Constant Maturity Rate for such dividend period shall be the
arithmetic average of the two most recent weekly per annum Ten Year Average
Yields (or the one weekly per annum Ten Year Average Yield, if only one such
yield shall be published during the relevant Calendar Period), as published
weekly during such Calendar Period by any Federal Reserve Bank or by any
U.S. Government department or agency selected by the corporation. If a per
annum Ten Year Average Yield shall not be published by the Board of
Governors or by any Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, then the Ten Year Constant
Maturity Rate for such dividend period shall be the arithmetic average of
the two most recent weekly per annum average yields to maturity (or the one
weekly per annum average yield to maturity, if only one such yield shall be
published during the relevant Calendar Period) for all of the actively
traded marketable U.S. Treasury fixed interest rate securities (other than
Special Securities) then having maturities of not less than eight nor more
than 12 years, as published for such Calendar Period by the Board of
Governors or, if the Board of Governors shall not publish such yields, by
any Federal Reserve Bank or by any U.S. Government department or agency
selected by the corporation. If the corporation determines in good faith
that for any reason the corporation cannot determine the Ten Year Constant
Maturity Rate for any dividend period as provided above in this paragraph,
then the Ten Year Constant Maturity Rate for such dividend period shall be
the arithmetic average of the per annum average yields to maturity based
upon the
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closing bids during such Calendar Period for each of the issues of actively
traded marketable U.S. Treasury fixed interest rate securities (other than
Special Securities) with a final maturity date not less than eight nor more
than 12 years from the date of each such quotation, as chosen and quoted
daily for each business day in New York City (or less frequently if daily
quotations shall not be generally available) to the corporation by at least
three recognized dealers in the U.S. Government securities selected by the
corporation.
"Treasury Bill Rate" Except as provided below in this definition, the
Treasury Bill Rate for any quarterly dividend period shall be the arithmetic
average (rounded, if not a whole multiple of five hundredths of a percentage
point, to the nearest whole such fraction of a percentage point) of the two
most recent weekly per annum market discount rates (or the one weekly per
annum market discount rate, if only one such rate shall be published during
the relevant Calendar Period) for three-month U.S. Treasury bills, as
published weekly by the Board of Governors during the Calendar Period
immediately prior to the 10 calendar days preceding the 15th day of March,
June, September or December, as the case may be, occurring prior to the
commencement of the dividend period for which the dividend rate on the
shares of the Series C Stock is being determined. If the Board of Governors
does not publish such a weekly per annum market discount rate during any
such Calendar Period, then the Treasury Bill Rate for such dividend period
shall be the arithmetic average of the two most recent weekly per annum
market discount rates, (or the one weekly per annum market discount rate, if
only one such rate shall be published during the relevant Calendar Period)
for three-month U.S. Treasury bills as published weekly during such Calendar
Period by any Federal Reserve Bank or any U.S. Government department or
agency selected by the corporation. If a per annum market discount rate for
three-month U.S. Treasury bills shall not be published by the Board of
Governors or by any Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, then the Treasury Bill
Rate for such dividend period shall be the arithmetic average of the two
most recent weekly per annum market discount rates (or the one weekly per
annum market discount rate, if only one such
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rate shall be published during the relevant Calendar Period) of all of the
U.S. Treasury bills then having maturities of not less than 80 nor more than
100 days, as published during such Calendar Period by the Board of Governors
or, if the Board of Governors shall not publish such rates, by any Federal
Reserve Bank or by any such U.S. Government department or agency selected by
the corporation. If the corporation determines in good faith that for any
reason no such U.S. Treasury bill rates are published as provided above
during such Calendar Period, or if for any reason the corporation cannot
determine the Treasury Bill Rate for any quarterly dividend period as
provided above in this paragraph, then the Treasury Bill Rate for such
dividend period shall be the arithmetic average of the per annum market
discount rates based upon the closing bids during such Calendar Period for
each of the issues of marketable non-interest bearing U.S. Treasury
securities with a maturity of not less than 80 nor more than 100 days from
the date of each such quotation, as chosen and quoted daily for each
business day in New York City (or less frequently if daily quotations shall
be generally available) to the corporation by at least three recognized
dealers in U.S. Government securities selected by the corporation.
"Twenty Year Average Yield" means the average yield to maturity for actively
traded marketable U.S. Treasury fixed interest rate securities (adjusted to
constant maturities of 20 years.
"Twenty Year Constant Maturity Rate" Except as provided below in this
definition, the Twenty Year Constant Maturity Yield for any quarterly
dividend period shall be the arithmetic average (rounded, if not a whole
multiple of five hundredths of a percentage point, to the nearest whole such
fraction of a percentage point) of the two most recent weekly per annum
Twenty Year Average Yields (or the one weekly per annum Twenty Year Average
Yield, if only one such yield shall be published during the relevant
Calendar Period), as published weekly by the Board of Governors during the
Calendar Period immediately prior to the 10 calendar days preceding the 15th
day of March, June, September or December, as the case may be, occurring
prior to the commencement of the dividend period for which the dividend rate
on the shares of the Series C Stock is
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being determined. If the Board of Governors does not publish such a weekly
per annum Twenty Year Average Yield during any such Calendar Period, then
the Twenty Year Constant Maturity Rate for such dividend period shall be the
arithmetic average of the two most recent weekly per annum Twenty Year
Average Yields (or the one weekly per annum Twenty Year Average Yield, if
only one such yield shall be published during the relevant Calendar Period),
as published weekly during such Calendar Period by any Federal Reserve Bank
or by any U.S. Government department or agency selected by the corporation.
If a per annum Twenty Year Average Yield shall not be published by the Board
of Governors or by any Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, then the Twenty Year
Constant Maturity Rate for such dividend period shall be the arithmetic
average of the two most recent weekly per annum average yields to maturity
(or the one weekly per annum average yield to maturity, if only one such
yield shall be published during the relevant Calendar Period) for all of the
actively traded marketable U.S. Treasury fixed interest rate securities
(other than Special Securities) then having maturities of not less than 18
nor more than 22 years, as published during such Calendar Period by the
Board of Governors or, if the Board of Governors shall not publish such
yields, by any Federal Reserve Bank or by any U.S. Government department or
agency selected by the corporation. If the corporation determines in good
faith that for any reason the corporation cannot determine the Twenty Year
Constant Maturity Rate for any dividend period as provided above in this
paragraph, then the Twenty Year Constant Maturity Rate for such dividend
period shall be the arithmetic average of the per annum average yields to
maturity based upon the closing bids during Calendar Period for each of the
issues of actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) with a final maturity date not
less than 18 nor more than 22 years from the date of each such quotation, as
chosen and quoted daily for each business day in New York City (or less
frequently if daily quotations shall not be generally available) to the
corporation by at least three recognized dealers of national reputation in
U.S. Government securities selected by the corporation.
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2. NUMBER OF SHARES AND DESIGNATION. 775,390 shares of Preferred Stock are
hereby constituted as a series of Preferred Stock, liquidation preference $100
per share, and designated as Adjustable Rate Cumulative Preferred Stock, Series
C. No additional shares of Preferred Stock may be issued as Series C Stock.
3. PREFERENCES. The preferences of each share of the Series C Stock with
respect to dividend payments or to distributions or payments upon Liquidation
will be in every respect on a parity with the preferences of every other share
of Preferred Stock and of every other class of the capital stock of the
corporation (other than Common Stock), from time to time outstanding, which
other shares of the Preferred Stock and which other classes of capital stock are
not made senior or junior to the Series C Stock as to dividend payments or to
distributions or payments upon Liquidation.
4. LIQUIDATION. Upon Liquidation, the holders of the then outstanding Series
C Stock shall be entitled, before any distribution or payment is made upon any
of the Junior Liquidation Stock, to be paid in cash an amount equal to $100 per
share of Series C Stock so held by them plus all accrued and unpaid dividends
thereon (whether or not earned or declared) to the date fixed for such payment.
If upon Liquidation, the amounts payable with respect to shares of Series C
Stock and to any other shares of the capital stock of the corporation ranking as
to any such distribution on a parity with the Series C Stock are not paid in
full, the holders of shares of the Series C Stock and of such other shares shall
share ratably in any such distribution of assets of the corporation in
proportion to the full respective preferential amounts to which they are
entitled.
Notice of Liquidation, stating the date when and the place where the amount
payable on Liquidation will be paid, shall be sent by the Clerk of the
corporation by first class mail, postage prepaid, at least thirty (30) but no
more than sixty (60) days prior to the date fixed for such liquidation payment,
to the holders of the shares of the Series C Stock, at their respective
addresses appearing on the books of the corporation. Any notice which is mailed
in the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the holder receives such notice,
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and failure duly to give such notice by mail to any holder of shares of Series C
Stock, or any defect in such notice, shall not affect the validity of the
proceedings for the making of liquidation payments on any other shares of the
Series C Stock or of any other series or class of the capital stock of the
corporation. If such notice shall have been duly mailed and if, on or before the
date fixed for liquidation payments designated in such notice, the funds
necessary for such liquidation payments shall have been provided by the
corporation in accordance with the provisions of the following sentence, then
notwithstanding that any certificate of shares of Series C Stock shall not have
been delivered for cancellation, the shares represented thereby shall no longer
be deemed outstanding on and after the date such funds shall have been so
provided, the dividends thereon shall cease to accrue from and after the date
fixed for such liquidation payments so designated, and all rights with respect
to the shares of the Series C Stock shall terminate forthwith after such
liquidation payment date, excepting only the right of the holder to receive the
liquidation price thereof of $100 per share plus unpaid dividends accrued to
such liquidation payment date but without interest thereon. The corporation's
obligation to provide funds for liquidation payments shall be deemed fulfilled
if, on or before the liquidation payment date, the corporation shall deposit
with a bank or trust company (which may be an affiliate of the corporation),
having a capital and surplus of at least $50,000,000, funds necessary for such
liquidation payments, in trust, with irrevocable instructions that such funds be
applied to such liquidation payments. Any interest accrued on such funds shall
be paid to the corporation from time to time. Any funds so deposited and
unclaimed at the end of five years from such liquidation payment date shall be
released or repaid to the corporation, after which the holder or holders of
shares of Series C Stock shall look only to the corporation for payment of
liquidation payments.
5. DIVIDENDS.
(a) Dividend Rate. Dividends on each share of the Series C Stock shall be
payable (i) at a quarterly rate of 7.70% per annum for the period ended
December 15, 1985, and (ii) for each quarterly dividend period commencing on
or after December 16, 1985, at a rate computed by multiplying $100
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by the Applicable Rate (as defined herein) for such period and multiplying the
result by the fraction of a year represented by such period, based upon a year
of 365 or 366 days, as the case may be.
(b) Payment of Dividends. Dividends on each share of the Series C Stock
shall be fully cumulative and shall accrue whether or not earned, without
interest, from the date of issuance of each share, and shall be payable in
arrears on the 15th day of March, June, September and December in each year in
which such shares are outstanding out of funds legally available for the
payment of dividends, when, as and if declared by the Board of Directors.
In the event that there shall be outstanding shares of any other series of the
Preferred Stock or of any other class of the capital stock of the corporation
ranking on a parity as to dividends with shares of the Series C Stock, the
corporation, in making any dividend payment on account of arrears on shares of
the Series C Stock or such other series of the Preferred Stock or such other
class of capital stock, shall make payment ratably upon all outstanding shares
of the Series C Stock, such other series of the Preferred Stock and such other
class of capital stock in proportion to the respective amounts of dividends in
arrears upon all such outstanding shares of the Series C Stock, such other
series of the Preferred Stock and such other class of capital stock to the
date of such dividend payment.
So long as any shares of the Series C Stock are outstanding, the corporation
shall not (i) declare or pay or set apart for payment any dividend or other
distribution (other than dividends or distributions payable in shares of
Junior Stock) for any period upon any Junior Stock or any stock of the
corporation ranking on a parity with the Series C Stock as to dividends or
upon Liquidation or (ii) redeem, purchase or otherwise acquire for any
consideration any shares of Junior Stock or any capital stock of the
corporation ranking on a parity with the Series C Stock as to dividends or
upon Liquidation, unless, in either case, all dividends payable to holders of
shares of the Series C Stock and of any stock of the corporation ranking on a
parity therewith as to dividends for its current dividend period and all past
dividend
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periods have been paid (or are contemporaneously being paid), or a sum
sufficient for the payment thereof has been irrevocably set aside in trust for
the holders of all such shares; except that, notwithstanding clause (i) of
this paragraph 5(b), the corporation may pay dividends on the shares of the
Series C Stock and shares of stock of the corporation ranking on a parity
therewith as to dividends ratably in accordance with the sums which would be
payable on such shares if all dividends, including accumulations, if any, were
declared and paid in full.
6. REDEMPTION.
(a) Redemption Price. Shares of the Series C Stock shall not be redeemable
on or prior to November 14, 1990. After November 14, 1990 and in accordance
with this paragraph 6, the shares of the Series C Stock shall be redeemable at
any time or from time to time, in whole or in part, at the option of the
corporation by vote of its Board of Directors; provided, however, that any
partial redemption, in the opinion of an investment banking firm of national
reputation selected by the corporation, shall not adversely affect the
marketability of those shares of Series C Stock not redeemed. The redemption
price shall be $103.00 per share if shares are redeemed on or prior to
November 14, 1995 and $100 per share if shares are redeemed thereafter, plus
in each case an amount equal to all unpaid dividends, whether or not earned or
declared, accrued to the date fixed for redemption.
(b) Redemption Procedure. Notice of any proposed redemption of all or any of
the shares of the Series C Stock under this paragraph 6 shall be sent by the
Clerk of the corporation by first class mail, postage prepaid, at least thirty
(30) but not more than sixty (60) days prior to the date fixed for such
redemption, to the holders of the shares of the Series C Stock to be redeemed,
at their respective addresses appearing on the books of the corporation. Any
notice which is mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the holder receives such
notice, and failure duly to give such notice by mail to any holder of shares
of Series C Stock designated for redemption, or any defect in such notice,
shall not affect the validity of the proceedings for the redemption of any
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other shares of the Series C Stock. If such notice of redemption shall have
been duly mailed and if, on or before the date fixed for redemption designated
in such notice, the funds necessary for the redemption shall have been
provided by the corporation in accordance with the provisions of the following
sentence, then, notwithstanding that any certificate of shares of Series C
Stock so called for redemption shall not have been delivered for cancellation,
the shares represented thereby shall no longer be deemed outstanding on and
after the date such funds shall have been so provided, the dividends thereon
shall cease to accrue from and after the date of redemption so designated, and
all rights with respect to the shares of the Series C Stock so called for
redemption shall terminate forthwith after such redemption date, excepting
only the right of each holder to receive the redemption price thereof plus
unpaid dividends accrued to such redemption date but without interest thereon.
The corporation's obligation to provide funds for redemption shall be deemed
fulfilled if, on or before the redemption date, the corporation shall deposit
with a bank or trust company (which may be an affiliate of the corporation),
having a capital and surplus of at least $50,000,000, funds necessary for such
redemption, in trust, with irrevocable instructions that such funds be applied
to the redemption of the shares of Series C Stock so called for redemption.
Any interest accrued on such funds shall be paid to the corporation from time
to time. Any funds so deposited and unclaimed at the end of five years from
such redemption date shall be released or repaid to the corporation, after
which the holder or holders of shares of Series C Stock so called for
redemption shall look only to the corporation for payment of the redemption
price.
(c) Pro Rata Redemption. If any proposed redemption of shares of the Series C
Stock shall be less than all then outstanding shares of Series C Stock, such
redemption shall be made on a pro rata basis, as nearly as possible, among all
holders of shares of the Series C Stock outstanding at the time of redemption
in the same proportion that each such holder's then respective holding of such
shares shall bear to the aggregate number of such shares then outstanding.
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(d) Dividend Arrearages. Notwithstanding the foregoing provisions of this
paragraph 6, if any dividends on shares of the Series C Stock are in arrears,
no other shares of the Preferred Stock shall be redeemed, and the corporation
shall not purchase or otherwise acquire any shares of the Preferred Stock,
unless all outstanding shares of the Series C Stock are simultaneously
redeemed, and the corporation shall not purchase or otherwise acquire any
shares of the Series C Stock; provided, however, that the foregoing shall not
prevent the purchase or acquisition of shares of the Series C Stock pursuant
to a purchase or exchange offer made on the same terms to holders of all
outstanding shares of the Series C Stock.
7. VOTING RIGHTS.
(a) General. The holders of shares of Series C Stock shall not, by virtue
of their ownership thereof, be entitled to vote upon any matter except as
otherwise provided in the Articles of Organization or by law. Whenever the
holders of any shares of the Series C Stock shall be entitled to vote upon any
matter, each outstanding share of the Series C Stock entitled to vote on such
matter shall be entitled to one (1) vote.
(b) Two-Thirds Approval. So long as any shares of the Series C Stock are
outstanding, the corporation shall not, without first obtaining the consent,
given in writing or in person or by proxy or at a meeting called for the
purpose, of the holders of at least two-thirds (2/3rds) of the outstanding
shares of the Series C Stock:
(i) authorize or create any other class of capital stock (or series
thereof), the shares of which rank prior to shares of Preferred Stock in
respect of dividend payments or distributions or payments upon Liquidation;
or authorize, create or issue any bonds, notes, debentures, obligations,
stock or other securities by their terms convertible into or evidencing a
right to purchase shares of stock of any other class of capital stock (or
series thereof) the shares of which rank prior to the shares of Preferred
Stock in respect of dividend payments or distributions or payments upon
Liquidation;
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(ii) authorize or create any other series of Preferred Stock, the shares of
which rank prior to shares of Series C Stock in respect of dividend payments
or distributions or payments upon Liquidation; or authorize, create or issue
any bonds, notes, debentures, obligations, stock or other securities by
their terms convertible into or evidencing a right to purchase shares of any
other series of Preferred Stock which rank prior to the shares of Series C
Stock in respect of dividend payments or distributions or payments upon
Liquidation;
(iii) reclassify any shares of any class of capital stock into a class
ranking prior to the Preferred Stock in respect of dividend payments or
distributions or payments upon Liquidation; reclassify any shares of
Preferred Stock into a series which ranks prior to Series C Stock in respect
of dividend payments or distributions or payments upon Liquidation; or
reclassify any shares of Junior Stock into Series C Stock; or
(iv) authorize any amendment to the Articles of Organization which would
adversely affect the rights of the holders of the Series C Stock. For the
purposes of this subclause (iv), the term "adversely affects" shall have the
same meaning as it has in Section 77 of Chapter 156B of the Massachusetts
General Laws, as in effect on February 10, 1984.
(c) Special Voting Rights. Notwithstanding the foregoing, in the event that,
at any time after the date of original issue of the shares of the Series C
Stock, an amount equal to the full accrued dividends for six (6) or more
quarterly dividend periods, whether or not consecutive, shall not have been
paid or declared and a sum sufficient for the payment thereof irrevocably set
aside in trust for the holders of all of such shares, the Board of Directors
of the corporation shall promptly take all necessary actions to increase the
authorized number of directors of the corporation by one (1) and the holders
of the shares of the Series C Stock then outstanding shall be entitled (by
series, voting as a single class) to elect one (1) person director to the
Board of Directors of the corporation (such right to elect one (1) director
being
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hereinafter sometimes referred to as the "special voting rights"), each
outstanding share having such right being entitled for such purpose to one
vote; provided, however, that at such time as the arrearage in payment of
dividends which gave rise to the exercise of the special voting rights has
been cured with regard to the Series C Stock by waiver or payment of all
accrued dividends, the right of the holders of such shares so to vote as
provided in this paragraph 7(c) shall cease (subject to renewal from time to
time upon the same terms and conditions) and the term of office of the person
who is at that time a director elected by such holders shall terminate and the
number of directors of the corporation shall be automatically reduced by one
(1).
(d) Special Voting Rights; Procedure. At any time after the special voting
rights shall have become vested in the holders of the shares of the Series C
Stock as provided in paragraph 7(c), the Clerk of the corporation, as promptly
as possible but in any event within twenty (20) days after receipt of the
written request of the holders of 10% of the shares of the Series C Stock then
outstanding, addressed to the corporation at its principal office, shall call
a special meeting of the holders of the shares of the Series C Stock for the
purpose of electing such additional director, such meeting to be held at any
place as provided by the By-Laws of the corporation for meetings of the
corporation's stockholders, and upon not less than ten (10) nor more than
twenty (20) days notice. If such meeting shall not be so called within twenty
(20) days after receipt of the request by the Clerk of the corporation, then
the holders of 10% of the shares of the Series C Stock then outstanding may,
by written notice to the Clerk of the corporation, designate any person to
call such meeting, and the person so designated may call such meeting, at any
such place as provided above and upon not less than ten (10) nor more than
twenty (20) days notice and for that purpose shall have access to the
stockholder record books of the corporation. No such special meeting of the
holders of the shares of the Series C Stock and no adjournment thereof shall
be held on a date later than thirty (30) days before the annual meeting of
stockholders of the corporation. At any meeting so called or at any annual
meeting held at any time when the special voting rights are in effect, the
holders of a majority of the
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shares of the Series C Stock then outstanding, present in person or by proxy,
shall be sufficient to constitute a quorum for the election of such additional
director, and such additional director, together with any and all other
directors who are then members of the Board of Directors, shall constitute the
duly elected directors of the corporation.
(e) Vacancy in Office of Director Elected by Holders of Series C Stock. With
respect to a vacancy arising in the directorship referred to in paragraph 7(c)
at any time when the special voting rights are in effect pursuant to paragraph
7(c), upon the written request of the holders of 10% of the shares of the
Series C Stock then outstanding, addressed to the corporation at its principal
office, the Clerk of the corporation shall give notice of a special meeting of
holders of the shares of the Series C Stock of the election of a director to
fill such vacancy caused by the death, resignation or other inability to serve
as a director elected by such holders, to be held not less than ten (10) nor
more than twenty (20) days following receipt by the Clerk of the corporation
of such written request. So long as special voting rights are in effect
pursuant to paragraph 7(c), any director who shall have been so elected by the
holders of the Series C Stock may be removed at any time, either with or
without cause, only by the affirmative vote of the holders of the shares at
the time entitled to cast a majority of the votes entitled to be cast for the
election of such director at a special meeting of such holders called for that
purpose, and any vacancy thereby created may be filled by the vote of such
holders.
8. STATUS OF REDEEMED SHARES OF SERIES C STOCK. All shares of the Series C
Stock which have been redeemed by the corporation pursuant to paragraph 6
shall have, after such redemption, the status of authorized but unissued
shares of Preferred Stock without designation of series and may be reissued
but not as shares of Series C Stock.
(F) Preferred Stock, Series D
1. DESIGNATION AND AMOUNT. The shares of such series shall be designated as
"Junior Participating Preferred Stock,
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Series D" and the number of shares constituting such series shall be 200,000.
2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any shares of
any series of preferred stock ranking prior and superior to the shares of
Junior Participating Preferred Stock, Series D with respect to dividends, the
holders of shares of Junior Participating Preferred Stock, Series D shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash
on the 15th day of March, June, September and December in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Junior Participating Preferred
Stock, Series D, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $3.10 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in kind) of
all noncash dividends or other distributions other than a dividend payable in
shares of common stock, par value $2.25 per share, of the corporation (the
"Common Stock") or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock, since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share
or fraction of a share of Junior Participating Preferred Stock, Series D. In
the event the corporation shall at any time after June 28, 1990 ( the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each
such case the amount to which holders of shares of Junior Participating
Preferred Stock, Series D were entitled immediately prior to such event under
clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock
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outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The corporation shall declare a dividend or distribution on the Junior
Participating Preferred Stock, Series D as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of $3.10 per share
on the Junior Participating Preferred Stock, Series D shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares of
Junior Participating Preferred Stock, Series D from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Junior
Participating Preferred Stock, Series D, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the
date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Junior Participating Preferred Stock, Series D
entitled to receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends shall begin to accrue
and be cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares of
Junior Participating Preferred Stock, Series D in an amount less than the
total amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Junior Participating Preferred Stock,
Series D entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be
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no more than 30 days prior to the date fixed for the payment thereof.
3. VOTING RIGHTS. The holders of shares of Junior Participating Preferred
Stock, Series D shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Junior Participating Preferred Stock, Series D shall entitle the
holder thereof to 1,000 votes on all matters submitted to a vote of the
stockholders of the corporation. In the event the corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the number of votes per share to which holders
of shares of Junior Participating Preferred Stock, Series D were entitled
immediately prior to such event shall be adjusted by multiplying such number
by a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided herein or by law, the holders of shares of
Junior Participating Preferred Stock, Series D and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a
vote of stockholders of the corporation.
(C)(i) If at any time dividends on any Junior Participating Preferred
Stock, Series D shall be in arrears in an amount equal to the full accrued
dividends for six (6) or more quarterly dividends periods, whether or not
consecutive, shall not have been paid or declared and a sum sufficient for the
payment thereof irrevocably set aside in trust for the holders of all of such
shares, the Board of Directors of the corporation shall promptly take all
necessary actions to increase the authorized number of directors of the
corporation by one (1) and the holders of the shares of the Junior
Participating Preferred Stock, Series D then outstanding shall be
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entitled (by series, voting as a single class) to elect one (1) person
director to the Board of Directors of the corporation (such right to elect one
(1) director being hereinafter sometimes referred to as the "special voting
rights"), each outstanding share having such right being entitled for such
purpose to one vote; provided, however, that at such time as the arrearage in
payment of dividends which gave rise to the exercise of the special voting
rights has been cured with regard to the Junior Participating Preferred Stock,
Series D by waiver or payment of all accrued dividends, the right of the
holders of such shares so to vote as provided in this paragraph (C)(i) of this
Section 3 shall cease (subject to renewal from time to time upon the same
terms and conditions) and the term of office of the person who is at that time
a director elected by such holders shall terminate and the number of directors
of the corporation shall be automatically reduced by one (1).
(ii) At any time after the special voting rights shall have become vested in
the holders of the shares of the Junior Participating Preferred Stock, Series
D as provided in paragraph (C)(i) of this Section 3, the Clerk of the
corporation, as promptly as possible but in any event within twenty (20) days
after receipt of the written request of the holders of 10% of the shares of
the Junior Participating Preferred Stock, Series D then outstanding, addressed
to the corporation at its principal office, shall call a special meeting of
the holders of the shares of the Junior Participating Preferred Stock, Series
D for the purpose of electing such additional director, such meeting to be
held at any place as provided by the Bylaws of the corporation for meetings of
the corporation's stockholders, and upon not less then ten (10) nor more than
twenty (20) days notice. If such meeting shall not be so called within twenty
(20) days after receipt of the request by the Clerk of the corporation, then
the holders of 10% of the shares of the Junior Participating Preferred Stock,
Series D then outstanding may, by written notice to the Clerk of the
corporation, designate any person to call such meeting, and the person so
designated may call such meeting, at any such place as provided above and upon
not less then ten (10) nor more than twenty (20) days notice and for that
purpose shall have access to the stockholder record books of the corporation.
No such special meeting
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of the holders of the shares of the Junior Participating Preferred Stock,
Series D and no adjournment thereof shall be held on a date later than thirty
(30) days before the annual meeting of stockholders of the corporation. At any
meeting so called or at any annual meeting held at any time when the special
voting rights are in effect, the holders of a majority of the shares of the
Junior Participating Preferred Stock, Series D then outstanding, present in
person or by proxy, shall be sufficient to constitute a quorum for the
election of such additional director, and such additional director, together
with any and all other directors who are then members of the Board of
Directors, shall constitute the duly elected directors of the corporation.
(C)(iii) With respect to a vacancy arising in the directorship referred to
in paragraph (C)(i) of this Section 3 at any time when the special voting
rights are in effect pursuant to paragraph (C)(i) of this Section 3, upon the
written request of the holders of 10% of the shares of the Junior
Participating Preferred Stock, Series D then outstanding, addressed to the
corporation at its principal office, the Clerk of the corporation shall give
notice of a special meeting of holders of the shares of the Junior
Participating Preferred Stock, Series D of the election of a director to fill
such vacancy caused by death, resignation or other inability to serve as a
director elected by such holders, to be held not less than ten (10) nor more
than twenty (20) days following receipt by the Clerk of the corporation of
such written request. So long as special voting rights are in effect pursuant
to paragraph (i) of this Section 3(c), any director who shall have been so
elected by the holders of the Junior Participating Preferred Stock, Series D
may be removed at any time, either with or without cause, only by the
affirmative vote of the holders of the shares at the time entitled to cast a
majority of the votes entitled to be cast for the election of such director at
a special meeting of such holders called for that purpose, and any vacancy
thereby created may be filled by the vote of such holders.
(D) Except as set forth herein, holders of Junior Participating Preferred
Stock, Series D shall have no special voting rights and their consent shall
not be
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required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions payable
on the Junior Participating Preferred Stock, Series D as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Junior Participating
Preferred Stock, Series D outstanding shall have been paid in full, the
corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Junior Participating Preferred Stock,
Series D;
(ii) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Junior Participating
Preferred Stock, Series D, except dividends paid ratably on the Junior
Participating Preferred Stock, Series D and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of
any stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Junior Participating Preferred Stock,
Series D, provided that the corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Junior Participating
Preferred Stock, Series D;
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(iv) purchase or otherwise acquire for consideration any shares of Junior
Participating Preferred Stock, Series D, or any shares of stock ranking on a
parity with the Junior Participating Preferred Stock, Series D, except
pursuant to Section 8 or in accordance with a purchase offer made in writing
or by publication (as determined by the Board of Directors) to all holders
of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, shall determine
in good faith will result in fair and equitable treatment among the
respective series or classes.
The corporation shall not permit any subsidiary of the corporation to purchase
or otherwise acquire for consideration any shares of stock of the corporation
unless the corporation could, under paragraph (A) of this Section 4, purchase
or otherwise acquire such shares at such time and in such manner.
5. REACQUIRED SHARES. Any shares of Junior Participating Preferred Stock,
Series D purchased or otherwise acquired by the corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding up
of the corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Junior Participating Preferred Stock, Series D unless,
prior thereto, the holders of shares of Junior Participating Preferred Stock,
Series D shall have received $1,000.00 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series D
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Liquidation Preference"). Following the payment of the full amount of the
Series D Liquidation Preference, no additional distributions shall be made to
the holders of shares of Junior Participating Preferred Stock, Series D
unless, prior thereto, the holders of shares of Common Stock shall have
received an amount per share (the "Common Adjustment") equal to the quotient
obtained by dividing (i) the Series D Liquidation Preference by (ii) 1,000 (as
appropriately adjusted as set forth in subparagraph (C) below to reflect such
events as stock splits, stock dividends and recapitalizations with respect to
the Common Stock) (such number in clause (ii) immediately above being referred
to as the "Adjustment Number"). Following the payment of the full amount of
the Series D Liquidation Preference and the Common Adjustment in respect of
all outstanding shares of Junior Participating Preferred Stock, Series D and
Common Stock, respectively, holders of Junior Participating Preferred Stock,
Series D and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to one (1) with respect to such Junior Participating
Preferred Stock, Series D and Common Stock, on a per share basis,
respectively.
(B) In the event, however, that there are not sufficient assets available to
permit payment in full of the Series D Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if any, which
rank on a parity with the Junior Participating Preferred Stock, Series D, then
such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences. In
the event, however, that there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(C) In the event the corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each
such case the Adjustment Number in effect immediately prior to such event
shall be adjusted
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by multiplying such Adjustment Number by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
7. CONSOLIDATION, MERGER, ETC. In case the corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
or any other property, then in any such case the shares of Junior Participating
Preferred Stock, Series D shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1000 times the aggregate amount of stock,
securities, cash or any other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is changed or exchanged. In
the event the corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Junior Participating Preferred Stock, Series D shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
8. REDEMPTION. The outstanding shares of Junior Participating Preferred
Stock, Series D may be redeemed at the option of the Board of Directors as a
whole, but not in part, at any time, or from time to time, at a cash price per
share equal to 100 percent of (i) the product of the Adjustment Number times the
Average Market Value (as such term is hereinafter defined) of the Common Stock,
plus (ii) all dividends which on the redemption date have accrued on the shares
to be redeemed and have not been paid, or declared and a sum sufficient for the
payment thereof set apart, without interest. The "Average Market Value" is the
average of the closing sale prices of the Common Stock
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during the 30 day period immediately preceding the date before the redemption
date on the Composite Tape for New York Stock Exchange Listed Stocks, or, if
such stock is not quoted on the Composite Tape, on the New York Stock Exchange,
or, if such stock is not listed on such Exchange, on the principal United States
securities exchange registered under the Securities Exchange Act of 1934, as
amended, on which such stock is listed, or, if such stock is not listed on any
such exchange, the average of the closing sale prices with respect to a share of
Common Stock during such 30 day period, as quoted on the National Association of
Securities Dealers, Inc. Automated Quotations System or any system then in use,
or if no such quotations are available, the fair market value of the Common
Stock as determined by the Board of Directors in good faith.
9. RANKING. The Junior Participating Preferred Stock, Series D shall rank
junior to all other series of the corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
10. AMENDMENT. At such time as shares of Junior Participating Preferred Stock,
Series D are outstanding, the Articles of Organization of the corporation shall
not be further amended in any manner which would materially alter or change the
powers, preferences or special rights of the Junior Participating Preferred
Stock, Series D so as to affect them adversely without the affirmative vote of
the holders of two-thirds or more of the outstanding shares of Junior
Participating Preferred Stock, Series D, voting separately as a class.
11. FRACTIONAL SHARES. Junior Participating Preferred Stock, Series D may be
issued in fractions of a share which shall entitle the holder, in proportion to
such holders fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Junior Participating Preferred Stock, Series D.
12. CANCELLATION. Any shares of the Junior Participating Preferred Stock,
Series D redeemed, exchanged, or purchased or otherwise acquired by the
corporation in any manner whatsoever shall be retired and canceled promptly
after the
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acquisition thereof; all such shares shall upon their cancellation become
authorized but unissued shares of preferred stock.
(G) Preferred Stock, Series E
1. DEFINITIONS OF CERTAIN EXPRESSIONS USED IN THIS PARAGRAPH. As used in this
Article 4, the following capitalized words and expressions have the respective
meanings set out below:
"Articles of Organization" means the Articles of Organization of the
corporation as amended and in effect from time to time, including the amendment
thereof effected pursuant to this paragraph.
"Common Stock" means the capital stock of the corporation so designated
and authorized from time to time and being stock which is junior to all series
of the Preferred Stock in respect of dividend payments and of distribution or
payments upon Liquidation.
"corporation" means Bank of Boston Corporation and includes any successor
corporation by merger, consolidation or otherwise if the stockholders of the
former continue as stockholders of the continuing or combined corporation.
"Junior Dividend Stock" means (i) the Common Stock, (ii) any series of the
Preferred Stock which is specifically made junior to the Series E Stock,
including the corporation's Junior Participating Preferred Stock, Series D and
(iii) any class of capital stock of the corporation which is specifically made
junior to the Preferred Stock, in respect of payments of dividends.
"Junior Liquidation Stock" means (i) the Common Stock, (ii) any series of
the Preferred Stock which is specifically made junior to the Series E Stock,
including the corporation's Junior Participating Preferred Stock, Series D and
(iii) any class of capital stock of the corporation which is specifically made
junior to the Preferred Stock, in respect of distributions or payments upon
Liquidation.
"Junior Stock" means the Common Stock, the Junior Dividend Stock and the
Junior Liquidation Stock.
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"Liquidation" means the voluntary or involuntary liquidation, distribution
or sale of assets, dissolution or winding up of the corporation, but shall not
include (i) the merger or consolidation of the corporation with another
corporation pursuant to any statute which provides in effect that the
stockholders of the former shall continue as stockholders of the continuing or
combined corporation and (ii) the acquisition by the corporation of assets or
stock of another corporation.
"Preferred Stock" means the authorized class of the capital stock of the
corporation so designated of which there are currently 10,000,000 shares
authorized.
"Series E Stock" means the series of Preferred Stock created by this
paragraph.
2. NUMBER OF SHARES AND DESIGNATION. 920,000 shares of Preferred Stock are
hereby constituted as a series of Preferred Stock, liquidation preference $250
per share, and designated as 8.60% Cumulative Preferred Stock, Series E. No
additional shares of Preferred Stock may be issued as Series E Stock.
3. PREFERENCES. The preferences of each share of the Series E Stock with
respect to dividend payments or to distributions or payments upon Liquidation
will be in every respect on a parity with the preferences of every other share
of Preferred Stock and of every other class of the capital stock of the
corporation (other than Common Stock), from time to time outstanding, which
other shares of the Preferred Stock and which other classes of capital stock are
not made senior or junior to the Series E Stock as to dividend payments or to
distributions or payments upon Liquidation.
4. LIQUIDATION. Upon Liquidation, the holders of the then outstanding Series
E Stock shall be entitled, before any distribution or payment is made upon any
of the Junior Liquidation Stock, to be paid in cash an amount equal to $250 per
share of Series E Stock so held by them plus all accrued and unpaid dividends
thereon (whether or not earned or declared) to the date fixed for such payment.
If upon Liquidation, the amounts payable with respect to shares of
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Series E Stock and to any other shares of the capital stock of the corporation
ranking as to any such distribution on a parity with the Series E Stock are not
paid in full, the holders of shares of the Series E Stock and of such other
shares shall share ratably in any such distribution of assets of the corporation
in proportion to the full respective preferential amounts to which they are
entitled.
Notice of Liquidation, stating the date when and the place where the amount
payable on Liquidation will be paid, shall be sent by the Clerk of the
corporation by first class mail, postage prepaid, at least thirty (30) but no
more than sixty (60) days prior to the date fixed for such liquidation payment,
to the holders of the shares of the Series E Stock, at their respective
addresses appearing on the books of the corporation. Any notice which is mailed
in the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the holder receives such notice, and failure duly to give
such notice by mail to any holder of shares of Series E Stock, or any defect in
such notice, shall not affect the validity of the proceedings for the making of
liquidation payments on any other shares of the Series E Stock or of any other
series or class of the capital stock of the corporation. If such notice shall
have been duly mailed and if, on or before the date fixed for liquidation
payments designated in such notice, the funds necessary for such liquidation
payments shall have been provided by the corporation in accordance with the
provisions of the following sentence, then, notwithstanding that any certificate
of shares of Series E Stock shall not have been delivered for cancellation, the
shares represented thereby shall no longer be deemed outstanding on and after
the date such funds shall have been so provided, the dividends thereon shall
cease to accrue from and after the date fixed for such liquidation payments so
designated, and all rights with respect to the shares of the Series E Stock
shall terminate forthwith after such liquidation payment date, excepting only
the right of the holder to receive the liquidation price thereof of $250 per
share plus unpaid dividends accrued to such liquidation payment date but without
interest thereon. The corporation's obligation to provide funds for liquidation
payments shall be deemed fulfilled if, on or before the liquidation payment
date, the corporation shall deposit with a bank or trust company (which may be
an affiliate of the corporation), having a
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capital and surplus of at least $50,000,000, funds necessary for such
liquidation payments, in trust, with irrevocable instructions that such funds be
applied to such liquidation payments. Any interest accrued on such funds shall
be paid to the corporation from time to time. Any funds so deposited and
unclaimed at the end of five years from such liquidation payment date shall be
released or repaid to the corporation, after which the holder or holders of
shares of Series E Stock shall look only to the corporation for payment of
liquidation payments.
5. DIVIDENDS.
(a) Dividend Rate. Dividends on each share of the Series E Stock shall be
payable quarterly based on an annual rate of 8.60% multiplied by $250.
Dividends payable on the Series E Stock for any period less than a full dividend
period shall be computed on the basis of a 360-day year consisting of twelve 30-
day months.
(b) Payment of Dividends. Dividends on each share of the Series E Stock
shall be fully cumulative and shall accrue whether or not earned, without
interest, from the date of issuance of each share, and shall be payable in
arrears on the 15th day of March, June, September and December in each year,
commencing on December 15, 1992, in which such shares are outstanding out of
funds legally available for the payment of dividends, when, as and if declared
by the Board of Directors.
In the event that there shall be outstanding shares of any other series of
the Preferred Stock or of any other class of the capital stock of the
corporation ranking on a parity as to dividends with shares of the Series E
Stock, the corporation, in making any dividend payment on account of arrears on
shares of the Series E Stock or such other series of the Preferred Stock or such
other class of capital stock, shall make payment ratably upon all outstanding
shares of the Series E Stock, such other series of the Preferred Stock and such
other class of capital stock in proportion to the respective amounts of
dividends in arrears upon all such outstanding shares of the Series E Stock,
such other series of the Preferred Stock and such other class of capital stock
to the date of such dividend payment.
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So long as any shares of the Series E Stock are outstanding, the
corporation shall not (i) declare or pay or set apart for payment any dividend
or other distribution (other than dividends or distributions payable in shares
of Junior Stock) for any period upon any Junior Stock or any stock of the
corporation ranking on a parity with the Series E Stock as to dividends or upon
Liquidation or (ii) redeem, purchase or otherwise acquire for any consideration
any shares of Junior Stock or any capital stock of the corporation ranking on a
parity with the Series E Stock as to dividends or upon Liquidation, unless, in
either case, all dividends payable to holders of shares of the Series E Stock
and of any stock of the corporation ranking on a parity therewith as to
dividends for its current dividend period and all past dividend periods have
been paid (or are contemporaneously being paid), or a sum sufficient for the
payment thereof has been irrevocably set aside in trust for the holders of all
such shares; except that, notwithstanding clause (i) of this paragraph 5(b), the
corporation may pay dividends on the shares of the Series E Stock and shares of
stock of the corporation ranking on a parity therewith as to dividends ratably
in accordance with the sums which would be payable on such shares if all
dividends, including accumulations, if any, were declared and paid in full.
6. REDEMPTION.
(a) Redemption Price. Shares of the Series E Stock shall not be
redeemable prior to September 15, 1997. On and after such date, and in
accordance with this paragraph 6, the shares of the Series E Stock shall be
redeemable at any time or from time to time, in whole or in part, at the option
of the corporation by vote of its Board of Directors, with the prior approval of
the Board of Governors of the Federal Reserve System (if such approval is
required at the time of redemption). The redemption price shall be $250 per
share plus an amount equal to all unpaid dividends, whether or not earned or
declared, accrued to the date fixed for redemption.
(b) Redemption Procedure. Notice of any proposed redemption of all or any
of the shares of the Series E Stock under this paragraph 6 shall be sent by the
Clerk of the corporation by first class mail, postage prepaid, at least thirty
(30) but not more than sixty (60) days prior to the
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date fixed for such redemption, to the holders of the shares of the Series E
Stock to be redeemed, at their respective addresses appearing on the books of
the corporation. Any notice which is mailed in the manner herein provided shall
be conclusively presumed to have been duly given, whether or not the holder
receives such notice, and failure duly to give such notice by mail to any holder
of shares of Series E Stock designated for redemption, or any defect in such
notice, shall not affect the validity of the proceedings for the redemption of
any other shares of the Series E Stock. If such notice of redemption shall have
been duly mailed and if, on or before the date fixed for redemption designated
in such notice, the funds necessary for the redemption shall have been provided
by the corporation in accordance with the provisions of the following sentence,
then, notwithstanding that any certificate of shares of Series E Stock so called
for redemption shall not have been delivered for cancellation, the shares
represented thereby shall no longer be deemed outstanding on and after the date
such funds shall have been so provided, the dividends thereon shall cease to
accrue from and after the date of redemption so designated, and all rights with
respect to the shares of the Series E Stock so called for redemption shall
terminate forthwith after such redemption date, excepting only the right of each
holder to receive the redemption price thereof plus unpaid dividends accrued to
such redemption date but without interest thereon. The corporation's obligation
to provide funds for redemption shall be deemed fulfilled if, on or before the
redemption date, the corporation shall deposit with a bank or trust company
(which may be an affiliate of the corporation), having a capital and surplus of
at least $50,000,000, funds necessary for such redemption, in trust, with
irrevocable instructions that such funds be applied to the redemption of the
shares of Series E Stock so called for redemption. Any interest accrued on such
funds shall be paid to the corporation from time to time. Any funds so deposited
and unclaimed at the end of five years from such redemption date shall be
released or repaid to the corporation, after which the holder or holders of
shares of Series E Stock so called for redemption shall look only to the
corporation for payment of the redemption price.
(c) Pro Rata Redemption. If any proposed redemption of shares of the
Series E Stock shall be less than all then outstanding shares of Series E Stock,
such redemption shall
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be made on a pro rata basis, as nearly as possible, among all holders of shares
of the Series E Stock outstanding at the time of redemption in the same
proportion that each such holder's then respective holding of such shares shall
bear to the aggregate number of such shares then outstanding.
(d) Dividend Arrearages. Notwithstanding the foregoing provisions of this
paragraph 6, if any dividends on shares of the Series E Stock are in arrears, no
other shares of the Preferred Stock shall be redeemed, and the corporation shall
not purchase or otherwise acquire any shares of the Preferred Stock, unless all
outstanding shares of the Series E Stock are simultaneously redeemed in
accordance with the foregoing provisions of this paragraph 6, and the
corporation shall not purchase or otherwise acquire any shares of the Series E
Stock; provided, however, that the foregoing shall not prevent the purchase or
acquisition of shares of the Series E Stock pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding shares of the Series
E Stock.
7. VOTING RIGHTS.
(a) General. The holders of shares of Series E Stock shall not, by virtue
of their ownership thereof, be entitled to vote upon any matter except as
otherwise provided in the Articles of Organization or by law. Whenever the
holders of any shares of the Series E Stock shall be entitled to vote upon any
matter, each outstanding share of the Series E Stock entitled to vote on such
matter shall be entitled to one (1) vote.
(b) Two-Thirds Approval. So long as any shares of the Series E Stock are
outstanding, the corporation shall not, without first obtaining the consent,
given in writing or in person or by proxy or at a meeting called for the
purpose, of the holders of at least two-thirds (2/3rds) of the outstanding
shares of the Series E Stock:
(i) authorize or create any other class of capital stock (or series
thereof), the shares of which rank prior to shares of Preferred Stock in
respect of dividend payments or distributions or payments upon
Liquidation; or authorize, create or issue any bonds, notes, debentures,
obligations, stock or
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other securities by their terms convertible into or evidencing a right
to purchase shares of stock of any other class of capital stock (or
series thereof) the shares of which rank prior to the shares of
Preferred Stock in respect of dividend payments or distributions or
payments upon Liquidation;
(ii) authorize or create any other series of Preferred Stock, the shares
of which rank prior to shares of Series E Stock in respect of dividend
payments or distributions or payments upon Liquidation; or authorize,
create or issue any bonds, notes, debentures, obligations, stock or
other securities by their terms convertible into or evidencing a right
to purchase shares of any other series of Preferred Stock which rank
prior to the shares of Series E Stock in respect of dividend payments or
distributions or payments upon Liquidation ;
(iii) reclassify any shares of any class of capital stock into a class
ranking prior to the Preferred Stock in respect of dividend payments or
distributions or payments upon Liquidation; reclassify any shares of
Preferred Stock into a series which ranks prior to Series E Stock in
respect of dividend payments or distributions or payments upon
Liquidation; or reclassify any shares of Junior Stock into Series E
Stock; or
(iv) authorize any amendment to the Articles of Organization which
would adversely affect the rights of the holders of the Series E Stock.
For the purposes of this subparagraph (iv), the term "adversely affects"
shall have the same meaning as it has in Section 77 of Chapter 156B of
the Massachusetts General Laws, as in effect on August 6, 1992.
(c) Special Voting Rights. Notwithstanding the foregoing, in the event
that, at any time after the date of original issue of the shares of the Series E
Stock, an amount equal to the full accrued dividends for six (6) or more
quarterly dividend periods, whether or not consecutive,
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shall not have been paid or declared and a sum sufficient for the payment
thereof irrevocably set aside in trust for the holders of all of such shares,
the Board of Directors of the corporation shall promptly take all necessary
actions to increase the authorized number of directors of the corporation by one
(1), and the holders of the shares of the Series E Stock then outstanding shall
be entitled (by series, voting as a single class) to elect one (1) person
director to the Board of Directors of the corporation (such right to elect one
(1) director being hereinafter sometimes referred to as the "special voting
rights"), each outstanding share having such right being entitled for such
purpose to one vote; provided, however, that at such time as the arrearage in
payment of dividends which gave rise to the exercise of the special voting
rights has been cured with regard to the Series E Stock by waiver or payment of
all accrued dividends, the right of the holders of such shares so to vote as
provided in this paragraph 7(c) shall cease (subject to renewal from time to
time upon the same terms and conditions), and the term of office of the person
who is at that time a director elected by such holders shall terminate and the
number of directors of the corporation shall be automatically reduced by one
(1).
(d) Special Voting Rights; Procedure. At any time after the special voting
rights shall have become vested in the holders of the shares of the Series E
Stock as provided in paragraph 7(c), the Clerk of the corporation, as promptly
as possible but in any event within twenty (20) days after receipt of the
written request of the holders of 10% of the shares of the Series E Stock then
outstanding, addressed to the corporation at its principal office, shall call a
special meeting of the holders of the shares of the Series E Stock for the
purpose of electing such additional director, such meeting to be held at any
place as provided by the By-Laws of the corporation for meetings of the
corporation's stockholders, and upon not less than ten (10) nor more than twenty
(20) days notice. If such meeting shall not be so called within twenty (20)
days after receipt of the request by the Clerk of the corporation, then the
holders of 10% of the shares of the Series E Stock then outstanding may, by
written notice to the Clerk of the corporation, designate any person to call
such meeting, and the person so designated may call such meeting, at any such
place as provided above and upon not less than ten (10) nor more than
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twenty (20) days notice and for that purpose shall have access to the
stockholder record books of the corporation. No such special meeting of the
holders of the shares of the Series E Stock and no adjournment thereof shall be
held on a date later than thirty (30) days before the annual meeting of
stockholders of the corporation. At any meeting so called or at any annual
meeting held at any time when the special voting rights are in effect, the
holders of a majority of the shares of the Series E Stock then outstanding,
present in person or by proxy, shall be sufficient to constitute a quorum for
the election of such additional director, and such additional director, together
with any and all other directors who are then members of the Board of Directors,
shall constitute the duly elected directors of the corporation.
(e) Vacancy in Office of Director Elected by Holders of Series E Stock.
With respect to a vacancy arising in the directorship referred to in paragraph
7(c) at any time when the special voting rights are in effect pursuant to
paragraph 7(c), upon the written request of the holders of 10% of the shares of
the Series E Stock then outstanding, addressed to the corporation at its
principal office, the Clerk of the corporation shall give notice of a special
meeting of holders of the shares of the Series E Stock of the election of a
director to fill such vacancy caused by the death, resignation or other
inability to serve as a director elected by such holders, to be held not less
than ten (10) nor more than twenty (20) days following receipt by the Clerk of
the corporation of such written request. So long as special voting rights are in
effect pursuant to paragraph 7(c), any director who shall have been so elected
by the holders of the Series E Stock may be removed at any time, either with or
without cause, only by the affirmative vote of the holders of the shares at the
time entitled to cast a majority of the votes entitled to be cast for the
election of such director at a special meeting of such holders called for that
purpose, and any vacancy thereby created may be filled by the vote of such
holders.
8. STATUS OF REDEEMED SHARES OF SERIES E STOCK. All shares of the Series E
Stock which have been redeemed by the corporation pursuant to paragraph 6 shall
have, after such redemption, the status of authorized but unissued shares of
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Preferred Stock without designation of series and may be reissued but not as
shares of Series E Stock.
(H) Preferred Stock, Series F
1. DEFINITIONS OF CERTAIN EXPRESSIONS USED IN THIS PARAGRAPH. As used in this
Section 4, the following capitalized words and expressions have the respective
meanings set out below:
"Articles of Organization" mean the Articles of Organization of the
corporation as amended and in effect from time to time, including the
amendment thereof effected pursuant to this paragraph.
"Common Stock" means the capital stock of the corporation so designated and
authorized from time to time and being stock which is junior to all series of
the Preferred Stock in respect of dividend payments and of distributions or
payments upon Liquidation.
"corporation" means Bank of Boston Corporation and includes any successor
corporation by merger, consolidation or otherwise if the stockholders of the
former continue as stockholders of the continuing or combined corporation.
"Junior Dividend Stock" means (i) the Common Stock, (ii) any series of the
Preferred Stock which is specifically made junior to the Series F Stock,
including the corporation's Junior Participating Preferred Stock, Series D and
(iii) any class of capital stock of the corporation which is specifically made
junior to the Preferred Stock, in respect of payments of dividends.
"Junior Liquidation Stock" means (i) the Common Stock, (ii) any series of the
Preferred Stock which is specifically made junior to the Series F Stock,
including the corporation's Junior Participating Preferred Stock, Series D and
(iii) any class of capital stock of the corporation which is specifically made
junior to the Preferred Stock, in respect of distributions or payments upon
Liquidation.
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"Junior Stock" means the Common Stock, the Junior Dividend Stock and the
Junior Liquidation Stock.
"Liquidation" means the voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding up of the corporation, but shall not
include (i) the merger or consolidation of the corporation with another
corporation pursuant to any statute which provides in effect that the
stockholders of the former shall continue as stockholders of the continuing or
combined corporation and (ii) the acquisition by the corporation of assets or
stock of another corporation.
"Preferred Stock" means the authorized class of the capital stock of the
corporation so designated of which there are currently 10,000,000 shares
authorized.
"Series F Stock" means the series of Preferred Stock created by this
paragraph.
2. NUMBER OF SHARES AND DESIGNATION. 280,000 shares of Preferred Stock are
hereby constituted as a series of Preferred Stock, liquidation preference $250
per share, and designated as 7 7/8% Cumulative Preferred Stock, Series F. No
additional shares of Preferred Stock may be issued as Series F Stock.
3. PREFERENCES. The preferences of each share of the Series F Stock with
respect to dividend payments or to distributions or payments upon Liquidation
will be in every respect on a parity with the preferences of every other share
of Preferred Stock and of every other class of the capital stock of the
corporation (other than Common Stock), from time to time outstanding, which
other shares of the Preferred Stock and which other classes of capital stock are
not made senior or junior to the Series F Stock as to dividend payments or to
distributions or payments upon Liquidation.
4. LIQUIDATION. Upon Liquidation, the holders of the then outstanding Series F
Stock shall be entitled, before any distribution or payment is made upon any of
the Junior Liquidation Stock, to be paid in cash an amount equal to $250 per
share of Series F Stock so held by them plus all accrued and unpaid dividends
thereon (whether or not earned
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or declared) to the date fixed for such payment. If upon Liquidation, the
amounts payable with respect to shares of Series F Stock and to any other shares
of the capital stock of the corporation ranking as to any such distribution on a
parity with the Series F Stock are not paid in full, the holders of shares of
the Series F Stock and of such other shares shall share ratably in any such
distribution of assets of the corporation in proportion to the full respective
preferential amounts to which they are entitled.
Notice of Liquidation, stating the date when and the place where the amount
payable on Liquidation will be paid, shall be sent by the Clerk of the
corporation by first class mail, postage prepaid, at least thirty (30) but no
more than sixty (60) days prior to the date fixed for such liquidation payment,
to the holders of the shares of the Series F Stock, at their respective
addresses appearing on the books of the corporation. Any notice which is mailed
in the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the holder receives such notice, and failure duly to give
such notice by mail to any holder of shares of Series F Stock, or any defect in
such notice, shall not affect the validity of the proceedings for the making of
liquidation payments on any other shares of the Series F Stock or of any other
series or class of the capital stock of the corporation. If such notice shall
have been duly mailed and if, on or before the date fixed for liquidation
payments designated in such notice, the funds necessary for such liquidation
payments shall have been provided by the corporation in accordance with the
provisions of the following sentence, then, notwithstanding that any certificate
of shares of Series F Stock shall not have been delivered for cancellation, the
shares represented thereby shall no longer be deemed outstanding on and after
the date such funds shall have been so provided, the dividends thereon shall
cease to accrue from and after the date fixed for such liquidation payments so
designated, and all rights with respect to the shares of the Series F Stock
shall terminate forthwith after such liquidation payment date, excepting only
the right of the holder to receive the liquidation price thereof of $250 per
share plus unpaid dividends accrued to such liquidation payment date but without
interest thereon. The corporation's obligation to provide funds for liquidation
payments shall be deemed fulfilled if, on or before the liquidation payment
date, the
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corporation shall deposit with a bank or trust company (which may be an
affiliate of the corporation), having a capital and surplus of at least
$50,000,000, funds necessary for such liquidation payments, in trust, with
irrevocable instructions that such funds be applied to such liquidation
payments.
Any interest accrued on such funds shall be paid to the corporation from
time to time. Any funds so deposited and unclaimed at the end of five years from
such liquidation payment date shall be released or repaid to the corporation,
after which the holder or holders of shares of Series F Stock shall look only to
the corporation for payment of liquidation payments.
5. DIVIDENDS.
(a) Dividend Rate. Dividends on each share of the Series F Stock shall be
payable quarterly based on an annual rate of 7 7/8% multiplied by $250.
Dividends payable on the Series F Stock shall be computed (i) for any period
other than a full dividend period, on the basis of a 360-day year consisting
of twelve 30-day months and (ii) for each full dividend period, by dividing
the annual dividend rate by four.
(b) Payment of Dividends. Dividends on each share of the Series F Stock
shall be fully cumulative and shall accrue whether or not earned, without
interest, from the date of issuance of each share, and shall be payable in
arrears on the 15th day of March, June, September and December in each year,
commencing on September 15, 1993, in which such shares are outstanding out of
funds legally available for the payment of dividends, when, as and if declared
by the Board of Directors.
In the event that there shall be outstanding shares of any other series of the
Preferred Stock or of any other class of the capital stock of the corporation
ranking on a parity as to dividends with shares of the Series F Stock, the
corporation, in making any dividend payment on account of arrears on shares of
the Series F Stock or such other series of the Preferred Stock or such other
class of capital stock, shall make payment ratably upon all outstanding shares
of the Series F Stock, such other
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series of the Preferred Stock and such other class of capital stock in
proportion to the respective amounts of dividends in arrears upon all such
outstanding shares of the Series F Stock, such other series of the Preferred
Stock and such other class of capital stock to the date of such dividend
payment.
So long as any shares of the Series F Stock are outstanding, the corporation
shall not (i) declare or pay or set apart for payment any dividend or other
distribution (other than dividends or distributions payable in shares of
Junior Stock) for any period upon any Junior Stock or any stock of the
corporation ranking on a parity with the Series F Stock as to dividends or
upon Liquidation or (ii) redeem, purchase or otherwise acquire for any
consideration any shares of Junior Stock or any capital stock of the
corporation ranking on a parity with the Series F Stock as to dividends or
upon Liquidation, unless, in either case, all dividends payable to holders of
shares of the Series F Stock and of any stock of the corporation ranking on a
parity therewith as to dividends for its current dividend period and all past
dividend periods have been paid (or are contemporaneously being paid), or a
sum sufficient for the payment thereof has been irrevocably set aside in trust
for the holders of all such shares; except that, notwithstanding clause (i) of
this paragraph 5(b), the corporation may pay dividends on the shares of the
Series F Stock and shares of stock of the corporation ranking on a parity
therewith as to dividends ratably in accordance with the sums which would be
payable on such shares if all dividends, including accumulations, if any, were
declared and paid in full.
6. REDEMPTION.
(a) Redemption Price. Shares of the Series F Stock shall not be redeemable
prior to July 15, 1998. On and after such date, and in accordance with this
paragraph 6, the shares of the Series F Stock shall be redeemable at any time
or from time to time, in whole or in part, at the option of the corporation by
vote of its Board of Directors, with the prior approval of the Board of
Governors of the Federal Reserve System (if such approval is required at the
time of redemption). The redemption price shall be $250 per share plus an
amount equal to all
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unpaid dividends, whether or not earned or declared, accrued to the date
fixed for redemption.
(b) Redemption Procedure. Notice of any proposed redemption of all or any of
the shares of the Series F Stock under this paragraph 6 shall be sent by the
Clerk of the corporation by first class mail, postage prepaid, at least thirty
(30) but not more than sixty (60) days prior to the date fixed for such
redemption, to the holders of the shares of the Series F Stock to be redeemed,
at their respective addresses appearing on the books of the corporation. Any
notice which is mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the holder receives such
notice, and failure duly to give such notice by mail to any holder of shares
of Series F Stock designated for redemption, or any defect in such notice,
shall not affect the validity of the proceedings for the redemption of any
other shares of the Series F Stock. If such notice of redemption shall have
been duly mailed and if, on or before the date fixed for redemption designated
in such notice, the funds necessary for the redemption shall have been
provided by the corporation in accordance with the provisions of the following
sentence, then, notwithstanding that any certificate of shares of Series F
Stock so called for redemption shall not have been delivered for cancellation,
the shares represented thereby shall no longer be deemed outstanding on and
after the date such funds shall have been so provided, the dividends thereon
shall cease to accrue from and after the date of redemption so designated, and
all rights with respect to the shares of the Series F Stock so called for
redemption shall terminate forthwith after such redemption date, excepting
only the right of each holder to receive the redemption price thereof plus
unpaid dividends accrued to such redemption date but without interest thereon.
The corporation's obligation to provide funds for redemption shall be deemed
fulfilled if, on or before the redemption date, the corporation shall deposit
with a bank or trust company (which may be an affiliate of the corporation),
having a capital and surplus of at least $50,000,000, funds necessary for such
redemption, in trust, with irrevocable instructions that such funds be applied
to the redemption of the shares of Series F Stock so called for
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redemption. Any interest accrued on such funds shall be paid to the
corporation from time to time.
Any funds so deposited and unclaimed at the end of five years from such
redemption date shall be released or repaid to the corporation, after which
the holder or holders of shares of Series F Stock so called for redemption
shall look only to the corporation for payment of the redemption price.
(c) Pro Rata Redemption. If any proposed redemption of shares of the Series F
Stock shall be less than all then outstanding shares of Series F Stock, such
redemption shall be made on a pro rata basis, as nearly as possible, among all
holders of shares of the Series F Stock outstanding at the time of redemption
in the same proportion that each such holder's then respective holding of such
shares shall bear to the aggregate number of such shares then outstanding.
(d) Dividend Arrearages. Notwithstanding the foregoing provisions of this
paragraph 6, if any dividends on shares of the Series F Stock are in arrears,
no other shares of the Preferred Stock shall be redeemed, and the corporation
shall not purchase or otherwise acquire any shares of the Preferred Stock,
unless all outstanding shares of the Series F Stock are simultaneously
redeemed in accordance with the foregoing provisions of this paragraph 6, and
the corporation shall not purchase or otherwise acquire any shares of the
Series F Stock; provided, however, that the foregoing shall not prevent the
purchase or acquisition of shares of the Series F Stock pursuant to a purchase
or exchange offer made on the same terms to holders of all outstanding shares
of the Series F Stock.
7. VOTING RIGHTS.
(a) General. The holders of shares of Series F Stock shall not, by virtue of
their ownership thereof, be entitled to vote upon any matter except as
otherwise provided in the Articles of Organization or by law. Whenever the
holders of any shares of the Series F Stock shall be entitled to vote upon any
matter, each outstanding share of the Series F Stock entitled to vote on such
matter shall be entitled to one (1) vote.
76
<PAGE>
(b) Two-Thirds Approval. So long as any shares of the Series F Stock are
outstanding, the corporation shall not, without first obtaining the consent,
given in writing or in person or by proxy or at a meeting called for the
purpose, of the holders of at least two-thirds (2/3rds) of the outstanding
shares of the Series F Stock:
(i) authorize or create any other class of capital stock (or series
thereof), the shares of which rank prior to shares of Preferred Stock in
respect of dividend payments or distributions or payments upon Liquidation;
or authorize, create or issue any bonds, notes, debentures, obligations,
stock or other securities by their terms convertible into or evidencing a
right to purchase shares of stock of any other class of capital stock (or
series thereof) the shares of which rank prior to the shares of Preferred
Stock in respect of dividend payments or distributions or payments upon
Liquidation;
(ii) authorize or create any other series of Preferred Stock, the shares of
which rank prior to shares of Series F Stock in respect of dividend payments
or distributions or payments upon Liquidation; or authorize, create or issue
any bonds, notes, debentures, obligations, stock or other securities by
their terms convertible into or evidencing a right to purchase shares of any
other series of Preferred Stock which rank prior to the shares of Series F
Stock in respect of dividend payments or distributions or payments upon
Liquidation;
(iii) reclassify any shares of any class of capital stock into a class
ranking prior to the Preferred Stock in respect of dividend payments or
distributions or payments upon Liquidation; reclassify any shares of
Preferred Stock into a series which ranks prior to Series F Stock in respect
of dividend payments or distributions or payments upon Liquidation; or
reclassify any shares of Junior Stock into Series F Stock; or
(iv) authorize any amendment to the Articles of Organization which would
adversely affect the rights of the holders of the Series F Stock. For the
purposes of
77
<PAGE>
this subparagraph (iv), the term "adversely affects" shall have the same
meaning as it has in Section 77 of Chapter 156B of the Massachusetts General
Laws, as in effect on June 24, 1993.
(c) Special Voting Rights. Notwithstanding the foregoing, in the event that,
at any time after the date of original issue of the shares of the Series F
Stock, an amount equal to the full accrued dividends for six (6) or more
quarterly dividend periods, whether or not consecutive, shall not have been
paid or declared and a sum sufficient for the payment thereof irrevocably set
aside in trust for the holders of all of such shares, the Board of Directors
of the corporation shall promptly take all necessary actions to increase the
authorized number of directors of the corporation by one (1), and the holders
of the shares of the Series F Stock then outstanding shall be entitled (by
series, voting as a single class) to elect one (1) person director to the
Board of Directors of the corporation (such right to elect one (1) director
being hereinafter sometimes referred to as the "special voting rights"), each
outstanding share having such right being entitled for such purpose to one
vote; provided, however, that at such time as the arrearage in payment of
dividends which gave rise to the exercise of the special voting rights has
been cured with regard to the Series F Stock by waiver or payment of all
accrued dividends, the right of the holders of such shares so to vote as
provided in this paragraph 7(c) shall cease (subject to renewal from time to
time upon the same terms and conditions), and the term of office of the person
who is at that time a director elected by such holders shall terminate and the
number of directors of the corporation shall be automatically reduced by one
(1).
(d) Special Voting Rights; Procedure. At any time after the special voting
rights shall have become vested in the holders of the shares of the Series F
Stock as provided in paragraph 7(c), the Clerk of the corporation, as promptly
as possible but in any event within twenty (20) days after receipt of the
written request of the holders of 10% of the shares of the Series F Stock then
outstanding, addressed to the corporation at its principal office, shall call
a special meeting of the holders of the shares of the Series F Stock for the
purpose of electing such
78
<PAGE>
additional director, such meeting to be held at any place as provided by the
By-Laws of the corporation for meetings of the corporation's stockholders, and
upon not less than ten (10) nor more than twenty (20) days notice. If such
meeting shall not be so called within twenty (20) days after receipt of the
request by the Clerk of the corporation, then the holders of 10% of the shares
of the Series F Stock then outstanding may, by written notice to the Clerk of
the corporation, designate any person to call such meeting, and the person so
designated may call such meeting, at any such place as provided above and upon
not less than ten (10) nor more than twenty (20) days notice and for that
purpose shall have access to the stockholder record books of the corporation.
No such special meeting of the holders of the shares of the Series F Stock and
no adjournment thereof shall be held on a date later than thirty (30) days
before the annual meeting of stockholders of the corporation. At any meeting
so called or at any annual meeting held at any time when the special voting
rights are in effect, the holders of a majority of the shares of the Series F
Stock then outstanding, present in person or by proxy, shall be sufficient to
constitute a quorum for the election of such additional director, and such
additional director, together with any and all other directors who are then
members of the Board of Directors, shall constitute the duly elected directors
of the corporation.
(e) Vacancy in Office of Director Elected by Holders of Series F Stock. With
respect to a vacancy arising in the directorship referred to in paragraph 7(c)
at any time when the special voting rights are in effect pursuant to paragraph
7(c), upon the written request of the holders of 10% of the shares of the
Series F Stock then outstanding, addressed to the corporation at its principal
office, the Clerk of the corporation shall give notice of a special meeting of
holders of the shares of the Series F Stock of the election of a director to
fill such vacancy caused by the death, resignation or other inability to serve
as a director elected by such holders, to be held not less than ten (10) nor
more than twenty (20) days following receipt by the Clerk of the corporation
of such written request. So long as special voting rights are in effect
pursuant to paragraph 7(c), any director who shall have been so elected by the
holders of the Series F Stock may be
79
<PAGE>
removed at any time, either with or without cause, only by the affirmative
vote of the holders of the shares at the time entitled to cast a majority of
the votes entitled to be cast for the election of such director at a special
meeting of such holders called for that purpose, and any vacancy thereby
created may be filled by the vote of such holders.
8. STATUS OF REDEEMED SHARES OF SERIES F STOCK. All shares of the Series F
Stock which have been redeemed by the corporation pursuant to paragraph 6 shall
have, after such redemption, the status of authorized but unissued shares of
Preferred Stock without designation of series and may be reissued but not as
shares of Series F Stock.
ARTICLE 5
The restrictions, if any, imposed by these Articles of Organization upon the
transfer of shares of stock of any class are as follows: None.
ARTICLE 6
(A) The Directors may amend, add to or repeal the By-Laws in whole or in part
except with respect to any provision thereof which, by law or the By-Laws
requires action of the stockholders.
(B) Meetings of the stockholders may be held anywhere in the United States.
(C) The corporation may be a partner in any business enterprise which the
corporation would have the power to conduct by itself.
(D) No director shall be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
notwithstanding any provision of law imposing such liability; provided, however,
that this provision shall not eliminate the liability of a director, to the
extent that such liability is provided by applicable law, (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve
80
<PAGE>
intentional misconduct or a knowing violation of law, (iii) under Section 61 or
62 (or successor provisions) of Chapter 156B of the Massachusetts General Laws
or (iv) for any transaction from which the director derived an improper personal
benefit. This provision shall not eliminate the liability of a director for any
act or omission occurring prior to the date upon which this provision becomes
effective. No amendment to or repeal of this provision shall apply to or have
any effect on the liability or alleged liability of any director for or with
respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
81
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
WILLIAM F. GALVIN, Secretary
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
ARTICLE OF AMENDMENT FEDERAL IDENTIFICATION
General Laws, Chapter 156B, Section 72 No. 04-2471221
We Charles K. Gifford President, and
Gary A. Spiess Clerk, of
Bank of Boston Corporation
- --------------------------------------------------------------------------------
(EXACT Name of Corporation)
located at: 100 Federal Street, Boston, Massachusetts 02110
-------------------------------------------------------------------
(MASSACHUSETTS Address of Corporation)
do hereby certify that these ARTICLES OF AMENDMENT affecting Articles Numbered:
3
- -----
- --------------------------------------------------------------------------------
(Number those articles 1,2,3,4,5, and/or 6 being amended hereby)
of the Articles of Organization were duly adopted at a meeting held on April 25
--------
1996 by vote of :
- ---
Common Stock
88,527,374 Shares of Par Value $2.25 per share out of 110,507,016 shares
- ------------ ------------------------- -----------
type, class & series, (if any)
outstanding,
____________ Shares of _________________________ out of ________ shares
type, class & series, (if any)
outstanding,
____________ shares of _________________________ out of _________ shares
type, class & series, (if any)
outstanding,
being at least a majority of each type, class or series outstanding and entitled
to vote thereon:
VOTED: That the Restated Articles of Organization of the Corporation be amended
by increasing and changing the authorized shares of Common Stock from
200,000,000 shares, par value $2.25 per share to 300,000,000 shares, par
value $1.50 per share.
<PAGE>
To CHANGE the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE STOCKS
- ---------------------------------
TYPE NUMBER OF SHARES
- ---------------------------------
<S> <C>
COMMON:
- ---------------------------------
PREFERRED: 10,000,000*
- ---------------------------------
</TABLE>
<TABLE>
<CAPTION>
WITH PAR VALUE STOCKS
- --------------------------------------------
TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------
<S> <C> <C>
COMMON: 200,000,000 $2.25
- --------------------------------------------
PREFERRED:
- --------------------------------------------
</TABLE>
CHANGE the total authorized to:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE STOCKS
- ---------------------------------
TYPE NUMBER OF SHARES
- ---------------------------------
<S> <C>
COMMON:
- ---------------------------------
PREFERRED: 10,000,000*
- ---------------------------------
</TABLE>
<TABLE>
<CAPTION>
WITH PAR VALUE STOCKS
- --------------------------------------------
TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------
<S> <C> <C>
COMMON: 300,000,000 $1.50
- --------------------------------------------
PREFERRED:
- --------------------------------------------
</TABLE>
*Of the 10,000,000 shares of Preferred Stock, the following series have been
authorized: 1,045,712 shares of Adjustable Rate Cumulative Preferred Stock,
Series A, (ii) 1,576,068 shares of Adjustable Rate Cumulative Preferred Stock,
Series B, (iii) 775,390 shares of Adjustable Rate Cumulative Preferred Stock,
Series C, (iv) 200,000 shares of Junior Participating Preferred Stock, Series
D, (v) 920,000 shares of 8.60% Cumulative Preferred Stock, Series E and (vi)
280,000 shares of 7 7/8% Cumulative Preferred Stock, Series F.
<PAGE>
The foregoing amendment will become effective when these articles of amendment
are filed in accordance with Chapter 156B, Section 6 The General Laws unless
these articles specify, in accordance with the vote adopting the amendment, a
later effective date not more than thirty days after such filing, in which event
the amendment will become effective on such later date. EFFECTIVE
DATE:_____________________
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereunto signed
our names this 26th day of April in the year 1996.
/s/ CHARLES K. GIFFORD President
- -----------------------------------------------------------
Charles K. Gifford
/s/ GARY S. SPIESS Clerk
- -----------------------------------------------------------
Gary A. Spiess
<PAGE>
EXHIBIT 11
BANK OF BOSTON CORPORATION
Computation of Earnings Per Common Share
<TABLE>
<CAPTION>
Quarters Ended
March 31
EARNINGS (in millions) 1996 1995
-------- ---- ----
<S> <C> <C>
1. Net income $ 117 $ 125
2. Less: Preferred dividends 9 9
------- -------
3. Net income applicable to primary and fully diluted
earnings per common share $ 108 $ 116
======= =======
SHARES (in thousands)
------
4. Weighted average number of common shares outstanding 111,034 107,278
5. Incremental shares from assumed exercise
of dilutive stock options as of the beginning
of the period using the treasury stock method 1,830 970
6. Incremental shares from assumed conversion
of debentures at beginning of period 3,572
------- -------
7. Adjusted number of common shares 112,864 111,820
======= =======
PER SHARE CALCULATION
---------------------
8. Primary net income per common share $ .97 $ 1.08
(Item 3/Item 4)
9. Fully diluted net income per common share $ .95 $ 1.04
(Item 3/Item 7)
</TABLE>
<PAGE>
BANK OF BOSTON CORPORATION EXHIBIT 12(a)
COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
(Excluding Interest on Deposits)
The Corporation's ratios of earnings to fixed charges (excluding interest on
deposits) for the three months ended March 31, 1996 and 1995 and for the five
years ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31, Years Ended December 31,
(dollars in millions)
1996 1995 1995 1994 1993 1992 1991
---- ---- ----- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) $ 117 $ 125 $ 541 $ 435 $ 299 $ 279 $ (113)
Extraordinary items, net of tax 7 (73) (8)
Cumulative effect of changes
in accounting principles,
net of tax (24)
Income tax expense (benefit) 88 121 444 349 215 153 (58)
---- ---- ----- ----- ---- ---- ----
Pretax earnings (loss) $ 205 $ 246 $ 985 $ 791 $ 490 $ 359 $ (179)
==== ==== ===== ===== ==== ==== ====
Fixed charges:
Portion of rental expense
(net of sublease
rental income) which
approximates the
interest factor 7 8 29 27 27 28 30
Interest on borrowed funds 245 245 1,021 998 378 345 362
---- ---- ----- ------ ---- ---- ----
Total fixed charges 252 253 1,050 1,025 405 373 392
---- ---- ----- ------ ---- ---- ----
Earnings (for ratio calculation) $ 457 $ 499 $ 2,035 $ 1,816 $ 895 $ 732 $ 213
==== ==== ===== ====== ====== ==== ====
Total fixed charges $ 252 $ 253 $ 1,050 $ 1,025 $ 405 $ 373 $ 392
==== ==== ===== ===== ==== ==== ====
Ratio of earnings to fixed
charges 1.81 1.97 1.94 1.77 2.21 1.96 .54
==== ==== ===== ===== ==== ==== ====
</TABLE>
For purposes of computing the consolidated ratio of earnings to fixed charges
"earnings" represent income (loss) before extraordinary items and cumulative
effect of changes in accounting principles plus applicable income taxes and
fixed charges. "Fixed charges" include gross interest expense (excluding
interest on deposits) and the proportion deemed representative of the interest
factor of rent expense, net of income from subleases. For the year ended
December 31, 1991, earnings were insufficient to cover fixed charges. Additional
earnings necessary for the year ended December 31, 1991 to bring the ratio of
earnings to fixed charges to a one-to-one basis are $179 million.
<PAGE>
BANK OF BOSTON CORPORATION EXHIBIT 12(b)
COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
(Including Interest on Deposits)
The Corporation's ratios of earnings to fixed charges (including interest on
deposits) for the three months ended March 31, 1996 and 1995 and for the five
years ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31, Years Ended December 31,
(dollars in millions)
1996 1995 1995 1994 1993 1992 1991
---- ---- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>>
Net income (loss) $ 117 $ 125 $ 541 $ 435 $ 299 $ 279 $ (113)
Extraordinary items, net of tax 7 (73) (8)
Cumulative effect of changes
in accounting principles,
net of tax (24)
Income tax expense (benefit) 88 121 444 349 215 153 (58)
---- ---- ----- ----- ----- ----- -----
Pretax earnings (loss) $ 205 $ 246 $ 985 $ 791 $ 490 $ 359 $ (179)
==== ==== ===== ===== ===== ===== =====
Fixed charges:
Portion of rental expense
(net of sublease
rental income) which
approximates the
interest factor 7 8 29 27 27 28 30
Interest on borrowed funds 245 245 1,021 998 378 345 362
Interest on deposits 356 362 1,557 1,148 1,016 1,407 1,808
---- ---- ----- ----- ----- ----- -----
Total fixed charges 608 615 2,607 2,173 1,421 1,780 2,200
---- ---- ----- ----- ----- ----- -----
Earnings (for ratio calculation) $ 813 $ 861 $ 3,592 $ 2,964 $ 1,911 $ 2,139 $ 2,021
==== ==== ===== ===== ===== ===== =====
Total fixed charges $ 608 $ 615 $ 2,607 $ 2,173 $ 1,421 $ 1,780 $ 2,200
==== ==== ===== ===== ===== ===== =====
Ratio of earnings to fixed
charges 1.34 1.40 1.38 1.36 1.34 1.20 .92
==== ==== ===== ===== ===== ===== =====
</TABLE>
For purposes of computing the consolidated ratio of earnings to fixed charges
"earnings" represent income (loss) before extraordinary items and cumulative
effect of changes in accounting principles plus applicable income taxes and
fixed charges. "Fixed charges" include gross interest expense (including
interest on deposits) and the proportion deemed representative of the interest
factor of rent expense, net of income from subleases. For the year ended
December 31, 1991, earnings were insufficient to cover fixed charges. Additional
earnings necessary for the year ended December 31, 1991 to bring the ratio of
earnings to fixed charges to a one-to-one basis are $179 million.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANIAL INFORMATION EXTRACTED FROM THE QUARTERLY
REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,208
<INT-BEARING-DEPOSITS> 1,425
<FED-FUNDS-SOLD> 1,426
<TRADING-ASSETS> 1,302
<INVESTMENTS-HELD-FOR-SALE> 5,064
<INVESTMENTS-CARRYING> 647
<INVESTMENTS-MARKET> 639
<LOANS> 31,402
<ALLOWANCE> (732)
<TOTAL-ASSETS> 46,457
<DEPOSITS> 31,235
<SHORT-TERM> 5,073
<LIABILITIES-OTHER> 1,811
<LONG-TERM> 2,499
0
508
<COMMON> 253
<OTHER-SE> 2,950
<TOTAL-LIABILITIES-AND-EQUITY> 46,457
<INTEREST-LOAN> 810
<INTEREST-INVEST> 103
<INTEREST-OTHER> 122
<INTEREST-TOTAL> 1,035
<INTEREST-DEPOSIT> 356
<INTEREST-EXPENSE> 601
<INTEREST-INCOME-NET> 434
<LOAN-LOSSES> 50
<SECURITIES-GAINS> 13
<EXPENSE-OTHER> 111
<INCOME-PRETAX> 205
<INCOME-PRE-EXTRAORDINARY> 117
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 117
<EPS-PRIMARY> .97
<EPS-DILUTED> .95
<YIELD-ACTUAL> 4.21
<LOANS-NON> 323
<LOANS-PAST> 9
<LOANS-TROUBLED> 17
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 736
<CHARGE-OFFS> (58)
<RECOVERIES> 15
<ALLOWANCE-CLOSE> 732
<ALLOWANCE-DOMESTIC> 397
<ALLOWANCE-FOREIGN> 191
<ALLOWANCE-UNALLOCATED> 144
</TABLE>
