<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1997
REGISTRATION NO. 333-333-42247
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FLEET FINANCIAL GROUP, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
RHODE ISLAND 6711 05-0341324
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
--------------------------
ONE FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
617-346-4000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
WILLIAM C. MUTTERPERL, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
FLEET FINANCIAL GROUP, INC.
One Federal Street
Boston, Massachusetts 02110
617-346-4000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
LAURA N. WILKINSON, ESQ. CRAIG M. WASSERMAN, ESQ.
EDWARDS & ANGELL WACHTELL, LIPTON,
2700 Hospital Trust Tower ROSEN & KATZ
Providence, Rhode Island 02903 51 West 52nd Street
New York, New York 10019
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS
REGISTRATION STATEMENT AND ALL OTHER CONDITIONS PRECEDENT TO THE MERGER OF THE
QUICK & REILLY GROUP, INC. WITH AND INTO A SUBSIDIARY OF REGISTRANT HAVE BEEN
SATISFIED OR WAIVED AS DESCRIBED IN THE ENCLOSED PROXY STATEMENT-PROSPECTUS.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE QUICK & REILLY GROUP, INC.
230 SOUTH COUNTY ROAD
PALM BEACH, FL 33480
December 15, 1997
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of The
Quick & Reilly Group, Inc. ("Quick & Reilly"), to be held on January 23, 1998 at
10:00 a.m., local time, at Governors Club of the Palm Beaches, 777 South Flagler
Drive, West Palm Beach, Florida.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Merger, dated as of
September 16, 1997, as amended as of December 12, 1997 (the "Merger Agreement"),
by and among Quick & Reilly, Fleet Financial Group, Inc. ("Fleet") and FFG
Acquisition Corp., a wholly-owned subsidiary of Fleet ("Merger Subsidiary"),
pursuant to which Quick & Reilly will be merged with and into Merger Subsidiary
(the "Merger"). A copy of the Merger Agreement is attached hereto as Exhibit A
to this Proxy Statement-Prospectus.
At the effective time of the Merger, each share of Quick & Reilly common
stock will be converted into the right to receive 0.578 shares of Fleet common
stock.
Gleacher Natwest Inc. and Goldman, Sachs & Co., Quick & Reilly's financial
advisors, have delivered to the Board of Directors their written opinions that
the exchange ratio in the Merger is fair, from a financial point of view, to
Quick & Reilly's stockholders.
Enclosed are a Notice of Special Meeting of Stockholders and a Proxy
Statement-Prospectus, which describes the Merger and the background to the
transaction. You are urged to read all of these materials carefully. The Board
of Directors has fixed the close of business on December 12, 1997 as the record
date for the Special Meeting. Accordingly, only stockholders of record on that
date are entitled to notice of, and to vote at, the Special Meeting or any
adjournments or postponements thereof.
THE BOARD OF DIRECTORS OF QUICK & REILLY UNANIMOUSLY HAS APPROVED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF
APPROVING AND ADOPTING THE MERGER AGREEMENT AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
Sincerely,
[SIGNATURE]
LESLIE C. QUICK, JR.
<PAGE>
THE QUICK & REILLY GROUP, INC.
230 SOUTH COUNTY ROAD
PALM BEACH, FL 33480
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
JANUARY 23, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of The Quick &
Reilly Group, Inc., a Delaware corporation, will be held at Governors Club of
the Palm Beaches, 777 South Flagler Drive, West Palm Beach, Florida, on Friday,
January 23, 1998, at 10:00 a.m., local time, for the following purposes:
1. Approving the Agreement and Plan of Merger, dated as of September 16,
1997, as amended as of December 12, 1997, by and among The Quick & Reilly
Group, Inc., Fleet Financial Group, Inc. and FFG Acquisition Corp.; and
2. Transacting such other business as may properly come before the
meeting or any adjournment thereof.
Pursuant to the By-laws, the Board of Directors has fixed the close of
business on December 12, 1997 as the record date for the determination of
stockholders entitled to notice of and to vote at the Special Meeting. The list
of stockholders entitled to vote at the Special Meeting and any adjournment or
postponement thereof will be available for inspection by any stockholder at the
offices of The Quick & Reilly Group, Inc., 230 South County Road, Palm Beach,
Florida 33480, for the ten days prior to January 23, 1998, during normal
business hours, for any purpose germane to such meeting.
THE QUICK & REILLY GROUP, INC.
ARLENE B. FRYER
Secretary
December 15, 1997
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT
YOU PLAN TO BE PRESENT AT THE SPECIAL MEETING, PLEASE FILL IN, SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH DOES NOT REQUIRE
POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
<TABLE>
<S> <C>
FLEET FINANCIAL GROUP, INC. THE QUICK & REILLY GROUP, INC.
ONE FEDERAL STREET 230 SOUTH COUNTY ROAD
BOSTON, MA 02110 PALM BEACH, FL 33480
</TABLE>
PROXY STATEMENT-PROSPECTUS
SPECIAL MEETING OF STOCKHOLDERS
JANUARY 23, 1998
This Proxy Statement-Prospectus is being furnished in connection with the
solicitation of proxies by the Board of Directors (the "Quick & Reilly Board")
of The Quick & Reilly Group, Inc. ("Quick & Reilly") to be used at a Special
Meeting of Stockholders to be held on January 23, 1998 (the "Special Meeting").
At the Special Meeting, holders of the common stock, par value $.10 per share,
of Quick & Reilly (the "Quick & Reilly Common Stock") will consider and vote
upon a proposal to approve and adopt an Agreement and Plan of Merger dated as of
September 16, 1997, as amended as of December 12, 1997 (the "Merger Agreement"),
by and among Fleet Financial Group, Inc. ("Fleet"), Quick & Reilly and FFG
Acquisition Corp., a wholly-owned subsidiary of Fleet ("Merger Subsidiary"),
providing for the merger of Quick & Reilly with and into Merger Subsidiary (the
"Merger"). A copy of the Merger Agreement is attached hereto as Exhibit A and is
incorporated herein by reference.
Fleet has filed a Registration Statement on Form S-4 under the Securities
Act of 1933, as amended (the "Securities Act"), with the Securities and Exchange
Commission (the "Commission") covering a maximum of 23,047,970 shares of Fleet
common stock, par value $.01 per share, including the associated preferred share
purchase rights ("Fleet Common Stock"), representing shares to be issued in
connection with the Merger. This Proxy Statement-Prospectus also constitutes the
Prospectus of Fleet filed as a part of such Registration Statement.
At the effective time of the Merger, each share of Quick & Reilly Common
Stock will be converted into the right to receive 0.578 shares of Fleet Common
Stock.
(CONTINUED ON NEXT PAGE)
THE SHARES OF FLEET COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY OF
FLEET AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND, THE SAVINGS
ASSOCIATION INSURANCE FUND OR ANY OTHER FEDERAL
OR STATE GOVERNMENT AGENCY.
THE SHARES OF FLEET COMMON STOCK OFFERED HEREBY HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Proxy Statement-Prospectus and the form of proxy are first being mailed
on or about December 17, 1997.
<PAGE>
(CONTINUED FROM PRIOR PAGE)
This Proxy Statement-Prospectus does not cover any resales of Fleet Common
Stock received by stockholders of Quick & Reilly upon consummation of the
Merger, and no person is authorized to make use of this Proxy
Statement-Prospectus in connection with any such resale.
All information contained in this Proxy Statement-Prospectus with respect to
Fleet has been supplied by Fleet and all information with respect to Quick &
Reilly has been supplied by Quick & Reilly.
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS PROXY
STATEMENT-PROSPECTUS. THE PROPOSED MERGER IS A COMPLEX TRANSACTION. STOCKHOLDERS
ARE STRONGLY URGED TO READ AND CONSIDER CAREFULLY THIS PROXY
STATEMENT-PROSPECTUS IN ITS ENTIRETY.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE HEREIN
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY FLEET OR QUICK & REILLY. THIS DOCUMENT DOES
NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF THE SHARES OF FLEET COMMON STOCK
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE AFFAIRS OF FLEET OR QUICK & REILLY SINCE THE DATE
HEREOF.
The date of this Proxy Statement-Prospectus is December 15, 1997.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
AVAILABLE INFORMATION...................................................................................... 5
INFORMATION INCORPORATED BY REFERENCE...................................................................... 5
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS................................................. 6
SUMMARY OF PROXY STATEMENT-PROSPECTUS...................................................................... 7
The Parties................................................................................................ 7
Recent Transactions........................................................................................ 7
Quick & Reilly Special Meeting............................................................................. 7
Terms of the Merger........................................................................................ 9
Recommendation of the Quick & Reilly Board of Directors and Reasons for the Merger......................... 9
Fairness Opinions of Financial Advisors.................................................................... 10
Support Agreements......................................................................................... 10
Conditions to the Consummation of the Merger............................................................... 10
Board of Directors, Management and Operations Following the Merger......................................... 11
Regulatory Approvals....................................................................................... 11
Certain Federal Income Tax Consequences.................................................................... 11
Accounting Treatment....................................................................................... 12
Termination of the Merger Agreement........................................................................ 12
Waiver and Amendment....................................................................................... 12
Stock Option Agreement..................................................................................... 12
Interests of Certain Persons in the Merger................................................................. 13
Appraisal Rights........................................................................................... 13
Certain Differences in the Rights of Stockholders.......................................................... 13
Comparative Stock Prices and Dividends; Pro Forma Equivalent Market Value Per Share........................ 13
SELECTED HISTORICAL AND PRO FORMA PER SHARE DATA........................................................... 15
SELECTED CONSOLIDATED FINANCIAL DATA....................................................................... 17
Fleet Financial Group, Inc................................................................................. 17
The Quick & Reilly Group, Inc.............................................................................. 19
FLEET FINANCIAL GROUP, INC................................................................................. 20
THE QUICK & REILLY GROUP, INC.............................................................................. 20
RECENT TRANSACTIONS........................................................................................ 20
Acquisitions............................................................................................... 20
Offering of Fleet Common Stock............................................................................. 21
QUICK & REILLY SPECIAL MEETING............................................................................. 21
General.................................................................................................... 21
Matters to be Considered................................................................................... 21
Proxies.................................................................................................... 21
Solicitation of Proxies.................................................................................... 22
Record Date and Voting Rights.............................................................................. 22
Recommendation of Quick & Reilly Board..................................................................... 23
THE MERGER................................................................................................. 24
General.................................................................................................... 24
Background of the Merger................................................................................... 24
Reasons for the Merger..................................................................................... 25
Fairness Opinions of Financial Advisors.................................................................... 28
Structure of the Merger.................................................................................... 32
Merger Consideration; Treatment of Quick & Reilly Stock Options............................................ 32
Exchange of Certificates; Fractional Shares................................................................ 33
Effective Time............................................................................................. 34
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Representations and Warranties............................................................................. 34
Conduct of Business Pending the Merger and Other Agreements................................................ 35
Support Agreements......................................................................................... 38
Conditions to the Consummation of the Merger............................................................... 38
Regulatory Approvals Required for the Merger............................................................... 40
Certain Federal Income Tax Consequences.................................................................... 42
Accounting Treatment....................................................................................... 43
Termination of the Merger Agreement........................................................................ 44
Waiver and Amendment of the Merger Agreement............................................................... 44
Stock Option Agreement..................................................................................... 44
Employee Benefits and Plans................................................................................ 48
Stock Exchange Listing..................................................................................... 49
Expenses................................................................................................... 49
Dividends.................................................................................................. 49
Resales of Fleet Common Stock Received in the Merger....................................................... 49
Fleet Dividend Reinvestment and Stock Purchase Plan........................................................ 50
Appraisal Rights........................................................................................... 50
BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER......................................... 51
INTERESTS OF CERTAIN PERSONS IN THE MERGER................................................................. 51
CERTAIN REGULATORY CONSIDERATIONS.......................................................................... 52
Fleet...................................................................................................... 52
Quick & Reilly............................................................................................. 56
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS................................................ 57
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS....................................... 64
DESCRIPTION OF FLEET CAPITAL STOCK......................................................................... 65
General.................................................................................................... 65
Fleet Common Stock......................................................................................... 65
Preferred Stock............................................................................................ 68
SELECTED PROVISIONS IN THE ARTICLES OF FLEET............................................................... 73
Business Combinations with Related Persons................................................................. 73
Directors.................................................................................................. 73
COMPARISON OF STOCKHOLDERS' RIGHTS......................................................................... 74
General.................................................................................................... 74
Voting Rights.............................................................................................. 74
Special Meetings; Corporate Action Without a Meeting....................................................... 76
Dividends.................................................................................................. 77
Appraisal Rights........................................................................................... 77
Provisions Relating to Directors........................................................................... 78
Derivative Suits........................................................................................... 80
State Anti-Takeover Statutes............................................................................... 80
COMPARATIVE COMMON STOCK PRICES AND DIVIDENDS.............................................................. 82
EXPERTS.................................................................................................... 83
LEGAL OPINIONS............................................................................................. 83
EXHIBITS
A. Agreement and Plan of Merger, as amended................................................................ A-1
B. Stock Option Agreement.................................................................................. B-1
C. Opinion of Gleacher NatWest Inc......................................................................... C-1
D. Opinion of Goldman, Sachs & Co.......................................................................... D-1
</TABLE>
4
<PAGE>
AVAILABLE INFORMATION
Each of Fleet and Quick & Reilly is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Proxy statements, reports and other information
concerning either Fleet or Quick & Reilly can be inspected and copied at the
Commission's office at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and the Commission's Regional Offices in New York (Suite
1300, Seven World Trade Center, New York, New York 10048) and Chicago
(Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661), and copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates or by accessing the Commission's World Wide Web Site
at http://www.sec.gov. Fleet Common Stock and Quick & Reilly Common Stock are
each listed on the New York Stock Exchange, Inc. ("NYSE"). Reports, proxy
materials and other information concerning Fleet and Quick & Reilly also may be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
This Proxy Statement-Prospectus does not contain all the information set forth
in the Registration Statement and Exhibits thereto which Fleet or Quick & Reilly
has filed with the Commission under the Securities Act, which may be obtained
from the Public Reference Section of the Commission at its principal office at
450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the prescribed
fees, and to which reference is hereby made.
INFORMATION INCORPORATED BY REFERENCE
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS,
OTHER THAN EXHIBITS THERETO, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT-PROSPECTUS IS
DELIVERED UPON WRITTEN OR ORAL REQUEST TO THE FOLLOWING:
<TABLE>
<CAPTION>
FLEET DOCUMENTS QUICK & REILLY DOCUMENTS
- -------------------------------------------- --------------------------------------------
<S> <C>
Investor Relations Department The Quick & Reilly Group, Inc.
Fleet Financial Group, Inc. 230 South County Road
One Federal Street Palm Beach, Florida 33480
Boston, Massachusetts 02110 Attn: Thomas C. Quick
(617) 346-4000 (561) 655-8000
</TABLE>
IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, A REQUEST MUST BE
RECEIVED NO LATER THAN JANUARY 15, 1998. SUCH DOCUMENTS WILL BE SENT BY FIRST
CLASS MAIL WITHIN ONE BUSINESS DAY OF THE RECEIPT OF THE REQUEST.
The following Fleet documents are incorporated by reference herein:
(1) Annual Report on Form 10-K for the year ended December 31, 1996;
(2) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997 and September 30, 1997;
(3) Current Reports on Form 8-K dated January 15, 1997, February 4,
1997, April 16, 1997, July 16, 1997, October 15, 1997, November 10, 1997 and
December 10, 1997;
(4) The description of the Fleet Common Stock contained in a
Registration Statement filed by Industrial National Corporation (predecessor
to Fleet) on Form 8-B dated May 29, 1970, and any amendment or report filed
for the purpose of updating such description; and
5
<PAGE>
(5) The description of the Preferred Share Purchase Rights contained in
Fleet's Registration Statement on Form 8-A dated November 29, 1990, and any
amendment or report filed for the purpose of updating such description.
Such incorporation by reference shall not be deemed to specifically
incorporate by reference the information referred to in Item 402(a)(8) of
Regulation S-K.
The following Quick & Reilly documents are incorporated by reference herein:
(1) Quick & Reilly's Annual Report on Form 10-K for the year ended
February 28, 1997;
(2) Quick & Reilly's Quarterly Reports on Form 10-Q for the quarters
ended May 30, 1997 and August 29, 1997;
(3) Quick & Reilly's Current Report on Form 8-K dated September 16,
1997; and
(4) The description of the Quick & Reilly Common Stock set forth in
Quick & Reilly's Registration Statement on Form 8-A dated June 7, 1983.
Such incorporation by reference shall not be deemed to specifically
incorporate by reference the information referred to in Item 402(a)(8) of
Regulation S-K.
All documents filed with the Commission by Fleet and Quick & Reilly pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Proxy Statement-Prospectus and prior to the date of the Special Meeting
are incorporated herein by reference and such documents shall be deemed to be a
part hereof from the date of filing of such documents. Any statement contained
in this Proxy Statement-Prospectus or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement-Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Proxy
Statement-Prospectus.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements contained in or incorporated by reference in this Proxy
Statement-Prospectus may be considered "forward-looking statements" as defined
in the Private Securities Litigation Reform Act of 1995. These statements relate
to the cost savings, revenue enhancements and increased client base that are
expected to be realized from the Merger. See "THE MERGER--Reasons for the
Merger". Actual results may differ materially from those projected as a result
of certain risks and uncertainties, including but not limited to (i) expected
cost savings from the Merger cannot fully be realized or realized within the
expected timeframe; (ii) revenues following the Merger are lower than expected;
(iii) competitive pressures among financial institutions increase significantly;
(iv) costs or difficulties related to the integration of the businesses of Fleet
and Quick & Reilly are greater than expected; (v) general economic conditions,
either nationally or in the states in which the combined company will be doing
business, are less favorable than expected; (vi) legislation or regulatory
changes adversely affect the businesses in which the combined company would be
engaged; (vii) those factors discussed in "CERTAIN REGULATORY CONSIDERATIONS";
and (viii) other risks and uncertainties detailed from time to time in the
filings of Fleet with the Commission.
6
<PAGE>
SUMMARY OF PROXY STATEMENT-PROSPECTUS
The following is a summary, which is necessarily incomplete, of certain
information contained elsewhere in this Proxy Statement-Prospectus or in
documents incorporated herein by reference. Reference is made to, and this
Summary is qualified in its entirety by, the more detailed information contained
herein, the Exhibits to the Registration Statement and the documents
incorporated by reference herein. Each stockholder is urged to read the Proxy
Statement-Prospectus and the Exhibits to the Registration Statement in their
entirety and with care.
THE PARTIES
FLEET FINANCIAL GROUP, INC.
Fleet is a diversified financial services company organized under the laws
of the State of Rhode Island. At September 30, 1997, Fleet was the 12th largest
bank holding company in the United States, with total assets of $83.6 billion,
total deposits of $62.9 billion and stockholders' equity of $7.2 billion.
Fleet is engaged in a general consumer and commercial banking and investment
management business throughout the states of Connecticut, Massachusetts, New
Jersey, New York, Rhode Island, Maine, New Hampshire and Florida through its
five banking subsidiaries, and also provides, through its nonbanking
subsidiaries, a variety of financial services, including mortgage banking,
asset-based lending, consumer finance, real estate financing, securities
brokerage services, capital markets services and investment banking, investment
advice and management, data processing and student loan servicing.
The principal office of Fleet is located at One Federal Street, Boston,
Massachusetts 02110, telephone number (617) 346-4000.
THE QUICK & REILLY GROUP, INC.
Quick & Reilly is a holding company for four principal, wholly-owned
operating subsidiaries: Quick & Reilly, Inc., a New York corporation ("Q&R
Inc."), U.S. Clearing Corp., a New York corporation ("U.S. Clearing"), JJC
Specialist Corp., a New York corporation ("JJC"), and Nash, Weiss & Co., a
Delaware corporation ("Nash Weiss"). Quick & Reilly was originally incorporated
in New York on June 25, 1981 and was subsequently reincorporated in Delaware in
1987.
Q&R Inc. is a NYSE member organization performing discount brokerage
services for individual retail customers. U.S. Clearing is a securities clearing
operation which clears all securities transactions for Q&R Inc.'s customer
accounts and other correspondent brokerage firms. JJC is one of the largest
specialist firms on the floor of the NYSE, making a market in the equity
securities of NYSE-listed companies. Nash Weiss is a brokerage firm which acts
as a market maker in over-the-counter securities.
The principal office of Quick & Reilly is located at 230 South County Road,
Palm Beach, Florida 33480, telephone number (561) 655-8000.
RECENT TRANSACTIONS
In recent months, Fleet has consummated and has agreed to make two
acquisitions in addition to the Merger. Fleet also recently consummated an
underwritten public offering of 10,750,000 shares of Fleet Common Stock. See
"RECENT TRANSACTIONS".
QUICK & REILLY SPECIAL MEETING
GENERAL
This Proxy Statement-Prospectus is first being mailed to the stockholders of
Quick & Reilly (the "Quick & Reilly Stockholders") on or about December 17,
1997, and is accompanied by the notice of the Special Meeting and a form of
proxy that is solicited by the Quick & Reilly Board for use at the Special
Meeting to be held on January 23, 1998, at 10:00 a.m., local time, at Governors
Club of the Palm Beaches, 777 South Flagler Drive, West Palm Beach, Florida, and
at any adjournments or postponements thereof. See "QUICK & REILLY SPECIAL
MEETING".
7
<PAGE>
MATTERS TO BE CONSIDERED
At the Special Meeting, Quick & Reilly Stockholders will be asked to
consider and vote upon (i) the Merger Agreement and the transactions
contemplated thereby, and (ii) such other matters as may properly be submitted
to a vote at the Special Meeting. Quick & Reilly Stockholders may also be asked
to vote upon a proposal to adjourn or postpone the Special Meeting, which
adjournment or postponement could be used for the purpose, among others, of
allowing additional time for the soliciting of additional votes to approve the
Merger Agreement. See "QUICK & REILLY SPECIAL MEETING--Matters to be
Considered".
PROXIES
The accompanying form of proxy is for use at the Special Meeting if a Quick
& Reilly Stockholder will be unable to attend in person. The proxy may be
revoked by the Quick & Reilly Stockholder at any time before it is exercised, by
submitting to the Secretary of Quick & Reilly written notice of revocation, a
properly executed proxy of a later date or by attending the Special Meeting and
electing to vote in person. All shares represented by valid proxies received
pursuant to this solicitation and not revoked before they are exercised will be
voted in the manner specified therein. If no specification is made, the proxies
will be voted in favor of approval of the Merger Agreement and the transactions
contemplated thereby. See "QUICK & REILLY SPECIAL MEETING--Proxies".
SOLICITATION OF PROXIES
The entire cost of soliciting the proxies from the Quick & Reilly
Stockholders will be borne by Quick & Reilly; PROVIDED, HOWEVER, that Fleet and
Quick & Reilly have each agreed to pay one-half of the printing and mailing
costs of this Proxy Statement-Prospectus and related materials. See "QUICK &
REILLY SPECIAL MEETING--Solicitation of Proxies".
RECORD DATE AND VOTING RIGHTS
The Quick & Reilly Board has fixed December 12, 1997 as the record date (the
"Record Date") for determination of holders of Quick & Reilly Common Stock
entitled to notice of and to vote at the Special Meeting. Accordingly, only
holders of shares of Quick & Reilly Common Stock of record at the close of
business on the Record Date will be entitled to notice of and to vote at the
Special Meeting. At the close of business on the Record Date, there were
38,634,379 shares of Quick & Reilly Common Stock outstanding held by
approximately 815 holders of record. The presence, in person or by proxy, of
shares of Quick & Reilly Common Stock representing a majority of the total
voting power of such shares outstanding and entitled to vote on the Record Date
is necessary to constitute a quorum at the Special Meeting.
Each share of Quick & Reilly Common Stock entitles its holder to one vote.
The affirmative vote of a majority of the outstanding shares of Quick & Reilly
Common Stock is required to approve and adopt the Merger Agreement and the
transactions contemplated thereby.
As of the Record Date, directors and executive officers of Quick & Reilly
beneficially owned 13,953,241 shares of Quick & Reilly Common Stock,
representing 35.3% of Quick & Reilly Common Stock entitled to vote at the
Special Meeting. Certain directors, executive officers and other stockholders of
Quick & Reilly have entered into agreements pursuant to which they have agreed
to vote all the shares of Quick & Reilly Common Stock beneficially owned by them
for approval of the Merger Agreement and the transactions contemplated thereby
("Support Agreements"). See "THE MERGER--Support Agreements." In addition, as of
the Record Date, the banking and trust subsidiaries of Fleet, as fiduciaries,
custodians or agents, held a total of 66,089 shares of Quick & Reilly Common
Stock, representing less than one percent of the shares of Quick & Reilly Common
Stock, under trust agreements and other instruments and agreements. These
entities maintained sole or shared voting power with respect to 39,891 of such
shares of Quick & Reilly Common Stock. As of the Record Date, directors and
executive officers of Fleet did not beneficially own any shares of Quick &
Reilly Common Stock.
See "QUICK & REILLY SPECIAL MEETING--Record Date and Voting Rights."
8
<PAGE>
TERMS OF THE MERGER
The Merger will become effective on the date (the "Effective Date") and time
(the "Effective Time") as set forth in the certificate of merger which will be
filed with the Secretary of State of the State of Delaware.
At the Effective Time, Quick & Reilly will be merged with and into Merger
Subsidiary, with Merger Subsidiary as the surviving corporation in the Merger.
In connection with the Merger (i) each then outstanding share of Quick & Reilly
Common Stock (other than Quick & Reilly Common Stock held by Quick & Reilly or
any of its subsidiaries or by Fleet or any of its subsidiaries, in each case,
other than in a fiduciary (including custodial or agency) capacity or as a
result of debts previously contracted) will be converted into the right to
receive 0.578 shares of Fleet Common Stock (the "Exchange Ratio"). Quick &
Reilly's obligation to consummate the Merger is not conditioned upon Fleet
Common Stock continuing to trade at any specified minimum price during any
period prior to the Effective Time. Because the Exchange Ratio is fixed and
because the market price of Fleet Common Stock is subject to fluctuation, the
value of the shares of Fleet Common Stock that holders of Quick & Reilly Common
Stock will receive in the Merger may increase or decrease prior to and following
the Merger. Immediately following the Merger, current stockholders of Fleet and
Quick & Reilly will own approximately 92.1% and 7.9%, respectively, of the then
outstanding Fleet Common Stock.
No fractional shares of Fleet Common Stock will be issued in the Merger;
instead, Fleet shall pay to each holder of Quick & Reilly Common Stock who would
otherwise be entitled to a fractional share of Fleet Common Stock (after taking
into account all certificates delivered by such holder) an amount in cash
(without interest) determined by multiplying such fraction by the average of the
closing sale prices of Fleet Common Stock, as reported by the NYSE, for the five
NYSE trading days immediately preceding the Effective Date.
Each stock option to acquire Quick & Reilly Common Stock granted under the
Quick & Reilly compensation and benefit plans (the "Quick & Reilly Compensation
and Benefit Plans") which is outstanding and unexercised immediately prior to
the Effective Time will be converted automatically at the Effective Time into an
option to purchase Fleet Common Stock and will continue to be governed by the
same terms and conditions as were applicable to such stock option under the
applicable Quick & Reilly Compensation and Benefit Plan. The number of shares of
Fleet Common Stock subject to, and the exercise price of, such options will be
adjusted as provided in the Merger Agreement to give effect to the Exchange
Ratio.
See "THE MERGER--Structure of the Merger", "--Merger Consideration;
Treatment of Quick & Reilly Stock Options", "--Exchange of Certificates;
Fractional Shares", and "--Effective Time" and "INTERESTS OF CERTAIN PERSONS IN
THE MERGER".
RECOMMENDATION OF THE QUICK & REILLY BOARD OF DIRECTORS
AND REASONS FOR THE MERGER
THE QUICK & REILLY BOARD UNANIMOUSLY HAS APPROVED AND ADOPTED THE MERGER
AGREEMENT. THE QUICK & REILLY BOARD UNANIMOUSLY RECOMMENDS APPROVAL AND ADOPTION
BY ITS STOCKHOLDERS OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
The Quick & Reilly Board believes that the terms of the Merger Agreement are
fair to and in the best interests of Quick & Reilly and its stockholders. In the
course of reaching its decision to approve the Merger Agreement, the Quick &
Reilly Board consulted with its legal advisors regarding the legal terms of the
Merger Agreement and the Quick & Reilly Board's obligations in consideration
thereof, and with its financial advisors, Gleacher NatWest Inc. ("Gleacher
NatWest") and Goldman, Sachs & Co. ("Goldman"), regarding the financial terms of
the Merger Agreement and the fairness to the holders of Quick & Reilly Common
Stock, from a financial point of view, of the Exchange Ratio.
9
<PAGE>
See "QUICK & REILLY SPECIAL MEETING--Recommendation of Quick & Reilly
Board", "THE MERGER--Background of the Merger", "--Reasons for the Merger" and
"--Fairness Opinions of Financial Advisors".
FAIRNESS OPINIONS OF FINANCIAL ADVISORS
Gleacher NatWest and Goldman, Quick & Reilly's financial advisors, rendered
their oral opinions on September 16, 1997 to the Quick & Reilly Board to the
effect that, as of the date of such opinions, the Exchange Ratio was fair from a
financial point of view to the holders of Quick & Reilly Common Stock. Each of
Gleacher NatWest and Goldman has confirmed its September 16, 1997 opinion, based
upon the matters and subject to the limitations set forth in each such opinion,
by delivery of its written opinion to the Quick & Reilly Board, dated the date
of this Proxy Statement-Prospectus, stating that, as of the date hereof and
based on the matters, and subject to the limitations, set forth in each such
opinion, the proposed Exchange Ratio pursuant to the Merger Agreement is fair
from a financial point of view to the holders of the Quick & Reilly Common
Stock.
The written opinions of the financial advisors which are attached hereto as
Exhibits C and D should be read in their entirety with respect to the
assumptions made, matters considered and limits on the reviews undertaken by
Gleacher NatWest and Goldman in rendering their respective opinions. Quick &
Reilly has agreed to pay fees to Gleacher NatWest and Goldman, a portion of
which are contingent upon consummation of the Merger. See "THE MERGER--Fairness
Opinions of Financial Advisors" for a further description of the opinions of
Gleacher NatWest and Goldman and of the fees payable to Gleacher NatWest and
Goldman by Quick & Reilly.
See "QUICK & REILLY SPECIAL MEETING--Recommendation of Quick & Reilly
Board", "THE MERGER--Background of the Merger", "--Reasons for the Merger",
"--Fairness Opinions of Financial Advisors" and Exhibits C and D to this Proxy
Statement-Prospectus.
SUPPORT AGREEMENTS
Concurrently with the execution of the Merger Agreement, certain directors,
executive officers and other stockholders ("Supporting Stockholders"), who, as
of September 16, 1997, beneficially owned in the aggregate approximately 40% of
the outstanding shares of Quick & Reilly Common Stock, executed individual
support agreements with Fleet (the "Support Agreements") pursuant to which each
Supporting Stockholder agreed, among other things, that: (i) all of the shares
of Quick & Reilly Common Stock over which such Supporting Stockholder had voting
power or control as of the date of the Special Meeting will be voted by the
Supporting Stockholder to approve the Merger Agreement; and (ii) the Supporting
Stockholder will not, directly or indirectly, solicit or encourage (including by
way of furnishing information), or take any other action to facilitate, any
inquiries or the making of any proposal which constitutes, or may reasonably be
expected to lead to, any takeover proposal with respect to Quick & Reilly or
Fleet. Each Support Agreement terminates upon termination of the Merger
Agreement in accordance with its terms. See "THE MERGER--Support Agreements".
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to certain conditions, including the
approval of the Merger Agreement by the affirmative vote of the holders of a
majority of the shares of Quick & Reilly Common Stock outstanding and entitled
to vote thereon; the effectiveness of the Registration Statement of which this
Proxy Statement-Prospectus forms a part; approval of the Merger by certain
federal and state regulatory authorities and self-regulatory organizations;
receipt by Fleet and Quick & Reilly of opinions of counsel as to the tax-free
nature of the Merger for federal income tax purposes (except for cash in lieu of
fractional share interests); receipt by Fleet and Quick & Reilly of a letter
from KPMG Peat Marwick LLP that the Merger will qualify for pooling of interests
accounting treatment; the listing, subject to official notice of issuance, on
the NYSE of the Fleet Common Stock to be issued in the Merger; and certain other
10
<PAGE>
customary closing conditions. There can be no assurance as to when and if such
conditions will be satisfied (or, where permissible, waived) or that the Merger
will be consummated.
See "THE MERGER--Conditions to the Consummation of the Merger" and
"--Regulatory Approvals Required for the Merger".
BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
Following the Merger, Fleet intends to combine the operations of and,
subject to required regulatory approvals, to merge, liquidate or combine certain
operations of certain of its subsidiaries with the former subsidiaries of Quick
& Reilly. The receipt of such required regulatory approvals is not a condition
to, nor required for, consummation of the Merger. As of the date of this Proxy
Statement-Prospectus, no final determination with respect to such matters had
been made.
See "BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER" and
"INTERESTS OF CERTAIN PERSONS IN THE MERGER".
REGULATORY APPROVALS
The Merger is subject to the approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). In addition, the Merger
may be subject to the approval of or notice to regulatory authorities in states
or other jurisdictions (collectively, the "State Authorities"). Further, the
Merger is subject to the approval of the NYSE and the National Association of
Securities Dealers, Inc. ("NASD"), and may require the approval of, or notice
to, other federal, state and foreign securities regulatory agencies and
self-regulatory organizations (collectively, the "Securities Regulatory
Authorities").
Fleet and Quick & Reilly have filed, or promptly will file, all required
applications for regulatory review and approval or notice with the Federal
Reserve Board, Securities Regulatory Authorities and various State Authorities
in connection with the Merger. There can be no assurances that such approvals
will be obtained or, if obtained, as to the date of any such approvals.
See "THE MERGER--Conditions to the Consummation of the Merger" and
"--Regulatory Approvals Required for the Merger".
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The parties' respective obligations to effect the Merger are conditioned on
delivery of an opinion, in the case of Fleet, from Edwards & Angell, counsel to
Fleet, and, in the case of Quick & Reilly, from Wachtell, Lipton, Rosen & Katz,
special counsel to Quick & Reilly, each dated as of the Effective Date, based
upon certain customary representations and assumptions set forth therein, to the
effect that for federal income tax purposes, the Merger constitutes a
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and, in the case of the opinion from Wachtell,
Lipton, Rosen & Katz, that no gain or loss will be recognized by stockholders of
Quick & Reilly who receive shares of Fleet Common Stock in exchange for shares
of Quick & Reilly Common Stock, except with respect to cash received in lieu of
fractional share interests.
In the opinion of Edwards & Angell and Wachtell, Lipton, Rosen & Katz, the
material federal income tax results of the Merger under currently applicable law
will be as follows: (i) the Merger will constitute a reorganization within the
meaning of Section 368 of the Code, and (ii) no gain or loss will be recognized
by stockholders of Quick & Reilly who receive Fleet Common Stock in exchange for
Quick & Reilly Common Stock, except with respect to cash received in lieu of
fractional share interests. Opinions of Edwards & Angell and Wachtell, Lipton,
Rosen & Katz have been filed as Exhibits to the Registration Statement of which
this Proxy Statement-Prospectus forms a part.
Each Quick & Reilly Stockholder should consult his or her own tax advisor as
to the tax consequences of the Merger to him or her under federal, state, local
or any other applicable law.
See "THE MERGER--Certain Federal Income Tax Consequences".
11
<PAGE>
ACCOUNTING TREATMENT
The Merger is intended to be accounted for as a pooling of interests under
generally accepted accounting principles ("GAAP"). It is a condition to
consummation of the Merger that Fleet and Quick & Reilly receive an opinion from
KPMG Peat Marwick LLP that the Merger will be accounted for as a pooling of
interests.
See "THE MERGER--Conditions to the Consummation of the Merger" and
"--Accounting Treatment".
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time (i) by the mutual written consent of Fleet and Quick & Reilly, if the Board
of Directors of each so determines by majority vote of the members of its entire
Board of Directors; (ii) by Fleet or Quick & Reilly, if its Board of Directors
so determines by vote of a majority of the members of its entire Board of
Directors, in the event of a breach by the other party of any representation,
warranty, covenant, agreement or condition contained in the Merger Agreement,
which breach cannot be or has not been cured within 30 days after the giving of
written notice to the breaching party of such breach; (iii) by Quick & Reilly or
Fleet, if its Board of Directors so determines by vote of a majority of the
members of its entire Board of Directors, in the event that the Merger is not
consummated by June 30, 1998, except to the extent that the failure of the
Merger then to be consummated arises out of or results from the failure of the
party seeking to terminate the Merger Agreement to perform or observe the
covenants and agreements of such party set forth in the Merger Agreement; or
(iv) by Fleet or Quick & Reilly, if its Board of Directors so determines by a
vote of a majority of the members of its entire Board of Directors, in the event
(a) the approval of any governmental authority required for consummation of the
Merger and the other transactions contemplated by the Merger Agreement has been
denied by final nonappealable action of such governmental authority or any
governmental authority of competent jurisdiction has issued a final
nonappealable injunction permanently enjoining or otherwise prohibiting the
consummation of the transactions contemplated by the Merger Agreement, or (b) if
the requisite stockholder approval of Quick & Reilly has not been obtained.
See "THE MERGER--Termination of the Merger Agreement" and "--Stock Option
Agreement".
WAIVER AND AMENDMENT
Prior to the Effective Time, any provision of the Merger Agreement may be
(i) waived by the party benefited by the provision, or (ii) amended or modified
at any time, by an agreement in writing among Quick & Reilly, Fleet and Merger
Subsidiary provided such amendment or modification is executed in the same
manner as the Merger Agreement, except that, after approval by Quick & Reilly
Stockholders, the Merger Agreement may not be amended without further approval
of Quick & Reilly Stockholders if it would violate the Delaware General
Corporation Law ("Delaware Law") or reduce the consideration to be received by
Quick & Reilly Stockholders in the Merger. Such extension or waiver or failure
to insist on strict compliance with an obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
See "THE MERGER--Waiver and Amendment of the Merger Agreement".
STOCK OPTION AGREEMENT
As an inducement to Fleet to enter into the Merger Agreement, Quick & Reilly
and Fleet entered into the Stock Option Agreement, dated September 16, 1997 (the
"Stock Option Agreement"), pursuant to which Quick & Reilly granted Fleet an
option to purchase from Quick & Reilly 7,688,241 shares of Quick & Reilly Common
Stock (subject to adjustment, but in no event to exceed 19.9% of the then
outstanding Quick & Reilly Common Stock), at a price of $35.04 per share (the
"Option"). Fleet may exercise the Option only upon the occurrence of certain
events (none of which has occurred as of the date hereof). At the request of the
holder of the Option, under certain circumstances, Quick & Reilly will
12
<PAGE>
repurchase for a formula price the Option and any shares of Quick & Reilly
Common Stock purchased upon the exercise of the Option and beneficially owned by
such holder at that time.
The Stock Option Agreement is intended to increase the likelihood that the
Merger will be consummated in accordance with the terms set forth in the Merger
Agreement. Consequently, certain aspects of the Stock Option Agreement may have
the effect of discouraging persons who might now or prior to the Effective Time
be interested in acquiring all of or a significant interest in Quick & Reilly
from considering or proposing such an acquisition, even if such persons were
prepared to offer to pay consideration to Quick & Reilly Stockholders which had
a higher current market price than the shares of Fleet Common Stock to be
received for each share of Quick & Reilly Common Stock pursuant to the Merger
Agreement.
See "THE MERGER--Stock Option Agreement" and Exhibit B to this Proxy
Statement-Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Quick & Reilly's management and the Quick & Reilly Board
may be deemed to have certain interests in the Merger that are in addition to,
and may be in conflict with, their interests as stockholders of Quick & Reilly
generally. Certain executive officers and directors of Quick & Reilly will be
executive officers and directors of Merger Subsidiary and its subsidiaries
following the Merger. Fleet also has agreed to take certain actions regarding
the existing employment and severance arrangements of certain directors and
executive officers of Quick & Reilly and to indemnify the Quick & Reilly
directors and officers following the Merger.
The Quick & Reilly Board was aware of these interests and considered them,
among other matters, in approving the Merger Agreement and the transactions
contemplated thereby.
See "INTERESTS OF CERTAIN PERSONS IN THE MERGER" and "BOARD OF DIRECTORS,
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER".
APPRAISAL RIGHTS
Holders of Quick & Reilly Common Stock do not have any appraisal rights
under Delaware Law in connection with the Merger.
See "THE MERGER--Appraisal Rights".
CERTAIN DIFFERENCES IN THE RIGHTS OF STOCKHOLDERS
The rights of Quick & Reilly Stockholders are currently governed by Delaware
Law, the Quick & Reilly Restated Certificate of Incorporation (the "Quick &
Reilly Certificate") and Quick & Reilly's by-laws (the "Quick & Reilly
By-laws"). Upon consummation of the Merger, Quick & Reilly Stockholders who
receive Fleet Common Stock in the Merger will become stockholders of Fleet, and
their rights will be governed by the Rhode Island Business Corporation Act
("Rhode Island Law"), the Restated Articles of Incorporation of Fleet, as
amended (the "Fleet Articles"), and Fleet's by-laws (the "Fleet By-laws").
See "COMPARISON OF STOCKHOLDERS' RIGHTS".
COMPARATIVE STOCK PRICES AND DIVIDENDS; PRO FORMA EQUIVALENT MARKET VALUE PER
SHARE
FLEET. Fleet Common Stock is listed on the NYSE under the symbol FLT. The
following table sets forth the high and low sales prices for Fleet Common Stock
as reported on the NYSE Composite Tape,
13
<PAGE>
and the cash dividends declared, for the calendar periods indicated, as well as
certain pro forma data per share of Quick & Reilly Common Stock, assuming
consummation of the Merger.
<TABLE>
<CAPTION>
QUICK &
REILLY
PRICE CASH PRO FORMA
-------------------- DIVIDENDS EQUIVALENT
CALENDAR YEAR HIGH LOW DECLARED DIVIDENDS(1)
- ------------------------------------------------------------------ --------- --------- ----------- -------------
<S> <C> <C> <C> <C>
1995.............................................................. $ 43.000 $ 30.875 $ 1.630 $ 0.942
1996.............................................................. 55.875 38.500 1.740 1.006
1997 (through December 12, 1997).................................. 75.063 49.625 1.840 1.064
</TABLE>
- ------------------------
(1) Represents dividends declared for Fleet Common Stock multiplied by the
Exchange Ratio of 0.578.
QUICK & REILLY. Quick & Reilly Common Stock is listed on the NYSE under the
symbol BQR. The following table sets forth the high and low sales prices for
Quick & Reilly Common Stock as reported on the NYSE Composite Tape, and the cash
dividends declared, for the fiscal periods indicated.
<TABLE>
<CAPTION>
PRICE CASH
-------------------- DIVIDENDS
FISCAL YEAR ENDED THE LAST DAY OF FEBRUARY HIGH LOW DECLARED
- ---------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
1996.............................................................................. $ 20.500 $ 9.875 $ 0.235
1997.............................................................................. 26.750 15.875 0.280
1998 (through December 12, 1997).................................................. 42.875 19.875 0.180
</TABLE>
The following table sets forth the closing sales price of Fleet Common Stock
and Quick & Reilly Common Stock and the equivalent per share price of Quick &
Reilly Common Stock, assuming consummation of the Merger, on September 15, 1997
(the last business day prior to the public announcement of the proposed Merger)
and December 12, 1997 (the latest practicable trading day before the printing of
this Proxy Statement-Prospectus).
<TABLE>
<CAPTION>
CLOSING SALES PRICE
------------------------------ PRO FORMA
FLEET QUICK & REILLY EQUIVALENT
COMMON STOCK COMMON STOCK PER SHARE(1)
-------------- -------------- ------------
<S> <C> <C> <C>
Market value per share:
September 15, 1997.............................................. $ 67.500 $ 38.938 $ 39.015
December 12, 1997............................................... 73.875 42.250 42.700
</TABLE>
- ------------------------
(1) Equivalent market value per share of Quick & Reilly Common Stock represents
the closing sales price of Fleet Common Stock on the NYSE on each specified
date, multiplied by the Exchange Ratio of 0.578.
Quick & Reilly Stockholders are advised to obtain current market quotations
for Fleet Common Stock and Quick & Reilly Common Stock. No assurance can be
given as to the market price of Fleet Common Stock or Quick & Reilly Common
Stock at the Effective Time, or the Fleet Common Stock after the Effective Time.
Because the Exchange Ratio is fixed and because the market price of the Fleet
Common Stock is subject to fluctuation, the value of the shares of Fleet Common
Stock that Quick & Reilly Stockholders will receive in the Merger may increase
or decrease prior to and following the Merger.
See "THE MERGER--Merger Consideration; Treatment of Quick & Reilly Stock
Options" and "COMPARATIVE COMMON STOCK PRICES AND DIVIDENDS".
14
<PAGE>
SELECTED HISTORICAL AND PRO FORMA PER SHARE DATA
The unaudited information set forth below reflects certain comparative per
common share data related to income, cash dividends declared and book value (i)
on a historical basis for each of Fleet and Quick & Reilly, (ii) on a pro forma
combined basis per share of Fleet Common Stock assuming consummation of the
Merger, and (iii) on an equivalent pro forma combined basis per share of Quick &
Reilly Common Stock assuming consummation of the Merger. It is anticipated that
the Merger will be consummated in the first quarter of 1998.
The information shown below should be read in conjunction with the
consolidated historical financial statements of Fleet and Quick & Reilly,
including the respective notes thereto, which are incorporated by reference in
this Proxy Statement-Prospectus. The pro forma data is presented for comparative
purposes only and is not necessarily indicative of the combined financial
position or results of operations which would have been realized had the
acquisitions been consummated during the periods or as of the dates for which
the pro forma data is presented. The presentation of the information shown below
reflects Fleet's fiscal year end of December 31 and Quick & Reilly's fiscal year
end of the last day of February. Quick & Reilly results for the three months
ended the last day of February 1997 and 1996 have been included in both the
historical and pro forma equivalent data for both the fiscal years ended the
last day of February 1997 and 1996 and the nine months ended August 29, 1997 and
August 30, 1996.
See "INFORMATION INCORPORATED BY REFERENCE", "UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS" AND "NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS".
<TABLE>
<CAPTION>
NINE MONTHS ENDED
<S> <C> <C> <C> <C> <C>
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------ -------------------------------
<CAPTION>
1997 1996 1996 1995 1994
----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
FLEET COMMON STOCK:
Income per share from continuing operations:
Primary:
Historical.......................................... $ 3.49 $ 2.91 $ 3.97 $ 1.57 $ 3.09
Fleet/Quick & Reilly Pro Forma(1)................... 3.40 2.91 3.95 1.70 3.00
Fully Diluted:
Historical.......................................... 3.48 2.91 3.95 1.57 3.09
Fleet/Quick & Reilly Pro Forma(1)................... 3.39 2.91 3.93 1.69 3.00
Cash dividends declared per share:
Historical.......................................... 1.35 1.29 1.74 1.63 1.40
Fleet/Quick & Reilly Pro Forma(2)................... 1.35 1.29 1.74 1.63 1.40
Book Value per share at period end:
Historical.......................................... 25.42 23.90 24.66 22.71 20.68
Fleet/Quick & Reilly Pro Forma(1)................... 26.42 23.25 24.08 22.03 19.87
<CAPTION>
YEAR ENDED LAST DAY
NINE MONTHS ENDED OF FEBRUARY
------------------------ -------------------------------
AUGUST 29, AUGUST 30,
1997 1996 1997 1996 1995
----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
QUICK & REILLY COMMON STOCK:
Income per share from continuing operations:
Primary:
Historical.......................................... $ 1.70 $ 1.75 $ 2.17 $ 1.85 $ 1.11
Fleet/Quick & Reilly Pro Forma Equivalent(3)........ 1.96 1.68 2.28 .98 1.73
Fully Diluted:
Historical.......................................... 1.70 1.75 2.17 1.85 1.11
Fleet/Quick & Reilly Pro Forma Equivalent(3)........ 1.96 1.68 2.27 .98 1.73
Cash dividends declared per share:
Historical.......................................... .25 .20 .28 .23 .19
Fleet/Quick & Reilly Pro Forma Equivalent(2)........ .78 .75 1.01 .94 .81
Book value per share at period end:
Historical.......................................... 11.09 8.97 9.90 8.00 6.34
Fleet/Quick & Reilly Pro Forma Equivalent(3)........ 15.27 13.44 13.91 12.73 11.48
</TABLE>
15
<PAGE>
- --------------------------
(1) Fleet/Quick & Reilly Pro Forma shares reflect Fleet's historical common
shares outstanding and Fleet's historical primary and fully diluted
equivalent shares, adjusted for the reissuance of 10,750,000 treasury shares
and the exchange of shares of Fleet Common Stock in connection with the
Merger at an Exchange Ratio of 0.578 shares of Fleet Common Stock for each
share of Quick & Reilly Common Stock.
(2) The Fleet/Quick & Reilly Pro Forma dividends per share represent Fleet's
historical dividends per share and the Fleet/Quick & Reilly Pro Forma
Equivalent dividends per share represent Fleet's historical dividends per
share multiplied by the Exchange Ratio of 0.578.
(3) Fleet/Quick & Reilly Pro Forma Equivalent share amounts are calculated by
multiplying the Fleet/Quick & Reilly Pro Forma per share amounts by the
Exchange Ratio of 0.578.
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
FLEET FINANCIAL GROUP, INC.
The following unaudited consolidated summary sets forth selected financial
data for Fleet and its subsidiaries for the nine months ended September 30, 1997
and 1996 and for each of the years in the five-year period ending December 31,
1996. The following summary should be read in conjunction with the financial
information incorporated herein by reference to other documents. See
"INFORMATION INCORPORATED BY REFERENCE". The summary for the nine months ended
September 30, 1997 and 1996 is based on unaudited financial statements which
include all adjustments that, in the opinion of management of Fleet, are
necessary for a fair presentation of the results of the respective interim
periods. The results of operations for the nine months ended September 30, 1997
are not necessarily indicative of the results expected for 1997 or any other
interim period. Certain amounts in prior periods have been reclassified to
conform to current-year presentation.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------------------- ----------------------------------------------------------
1997 1996 1996 1995 1994
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<CAPTION>
<S> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY
OF OPERATIONS:
Interest income
(fully taxable
equivalent)....... $ 4,393 $ 4,379 $ 5,878 $ 6,069 $ 5,260
Interest expense.... 1,649 1,850 2,439 3,005 2,161
Net interest
income............ 2,744 2,529 3,439 3,064 3,099
Provision for credit
losses............ 233 148 213 101 65
Net interest income
after provision
for credit
losses............ 2,511 2,381 3,226 2,963 3,034
Noninterest
income............ 1,730 1,484 2,013 1,665 1,468
Noninterest
expense........... 2,584 2,416 3,272 3,550 3,070
Net income.......... 968 836 1,139 (610a) 849
EARNINGS PER COMMON
SHARE:
Fully diluted....... $ 3.48 $ 2.91 $ 3.95 $ 1.57(a) $ 3.09
Weighted average
fully diluted
shares
outstanding....... 264,022,822 269,259,878 270,393,996 265,886,363 264,828,469
Book value per
common share...... $ 25.42 $ 23.90 $ 24.66 $ 22.71 $ 20.68
Cash dividends
declared per
common share...... 1.35 1.29 1.74 1.63 1.40
Common dividend
payout ratios..... 37.3% 43.3% 42.8% 90.4% 36.8%
RATIO OF EARNINGS TO
FIXED CHARGES:
Excluding interest
on deposits....... 4.60x 3.41x 3.62x 1.78x 2.33x
Including interest
on deposits....... 1.97 1.75 1.78 1.34 1.62
RATIO OF EARNINGS TO
FIXED CHARGES AND
DIVIDENDS ON PREFERRED
STOCK:
Excluding interest
on deposits....... 4.04 3.11 3.26 1.74 2.27
Including interest
on deposits....... 1.92 1.72 1.74 1.33 1.61
CONSOLIDATED BALANCE
SHEET--
AVERAGE BALANCES:
Total Assets........ $ 82,092 $ 82,220 $ 83,124 $ 82,727 $ 79,561
Securities held to
maturity(c)....... 1,138 980 1,045 7,736 8,787
Securities available
for sale(c)....... 7,395 10,836 10,287 12,779 16,923
Loans and leases,
net of unearned
income............ 58,593 55,004 56,074 51,043 44,102
Interest-bearing
deposits.......... 47,703 46,489 47,334 43,120 40,113
Short-term
borrowings........ 4,433 6,497 5,844 14,046 15,355
Long-term
debt/subordinated
notes and
debentures........ 4,698 5,669 5,486 6,581 5,383
Dual Convertible
Preferred Stock... -- -- -- -- --
Stockholders'
equity............ 7,115 6,905 7,021 6,545 5,782
CONSOLIDATED RATIOS:
Net interest margin
(fully taxable
equivalent)....... 5.21% 4.75% 4.81% 4.12% 4.30%
Return on average
assets............ 1.58 1.36 1.37 (.74a) 1.07
Return on average
common stockhold-
ers' equity....... 19.65(d) 17.34(d) 17.43(d) 9.32(a)(d) 15.66(d)
Average
stockholders'
equity to average
assets............ 8.67 8.40 8.45 7.91 7.27
Tier 1 risk-based
capital ratio..... 7.13 7.06 7.67 7.61 9.14
Total risk-based
capital ratio..... 10.79 10.82 11.36 11.29 12.92
Period-end reserve
for credit losses
to period-end
loans and leases,
net of unearned
income............ 2.42% 2.58% 2.53% 2.56% 3.25%
Net charge-offs to
average loans and
leases, net of
unearned income... .65 .60 .66 .59 .54
Period-end
nonperforming
assets to
period-end loans
and leases, net of
unearned income,
and other real
estate owned...... (.81e) 1.26(e) 1.23(e) (.97e) 1.65
<CAPTION>
1993 1992
---------------- ----------------
<S> <C> <C>
<S> <C> <C>
CONSOLIDATED SUMMARY
OF OPERATIONS:
Interest income
(fully taxable
equivalent)....... $ 5,086 $ 5,318
Interest expense.... 1,917 2,337
Net interest
income............ 3,169 2,981
Provision for credit
losses............ 327 728
Net interest income
after provision
for credit
losses............ 2,842 2,253
Noninterest
income............ 1,636 1,784
Noninterest
expense........... 3,332 3,366
Net income.......... (817b) (366b)
EARNINGS PER COMMON
SHARE:
Fully diluted....... $ 3.03(b) $ 1.40(b)
Weighted average
fully diluted
shares
outstanding....... 257,373,073 237,116,784
Book value per
common share...... $ 21.76 $ 17.65
Cash dividends
declared per
common share...... 1.025 .825
Common dividend
payout ratios..... 24.6% 31.5%
RATIO OF EARNINGS TO
FIXED CHARGES:
Excluding interest
on deposits....... 2.36x 1.90x
Including interest
on deposits....... 1.56 1.26
RATIO OF EARNINGS TO
FIXED CHARGES AND
DIVIDENDS ON PREFERRED
STOCK:
Excluding interest
on deposits....... 2.27 1.82
Including interest
on deposits....... 1.54 1.25
CONSOLIDATED BALANCE
SHEET--
AVERAGE BALANCES:
Total Assets........ $ 75,286 $ 71,633
Securities held to
maturity(c)....... 7,735 4,300
Securities available
for sale(c)....... 14,140 14,061
Loans and leases,
net of unearned
income............ 43,283 43,029
Interest-bearing
deposits.......... 39,766 42,031
Short-term
borrowings........ 12,807 8,848
Long-term
debt/subordinated
notes and
debentures........ 5,039 4,116
Dual Convertible
Preferred Stock... -- 283
Stockholders'
equity............ 5,311 4,118
CONSOLIDATED RATIOS:
Net interest margin
(fully taxable
equivalent)....... 4.63% 4.57%
Return on average
assets............ 1.09(b) (.51b)
Return on average
common stockhold-
ers' equity....... 17.11(b) 9.12(b)
Average
stockholders'
equity to average
assets............ 7.05 6.14
Tier 1 risk-based
capital ratio..... 10.44 9.89
Total risk-based
capital ratio..... 14.89 14.61
Period-end reserve
for credit losses
to period-end
loans and leases,
net of unearned
income............ 3.82% 4.43%
Net charge-offs to
average loans and
leases, net of
unearned income... 1.35 2.15
Period-end
nonperforming
assets to
period-end loans
and leases, net of
unearned income,
and other real
estate owned...... 2.35 4.53
</TABLE>
17
<PAGE>
- ------------------------
(a) Includes impact of the loss on assets held for sale or accelerated
disposition ($175 million pre-tax) and merger-related charges ($490 million
pre-tax) recorded in 1995. Excluding these special charges, return on
average common stockholders' equity and return on average assets would have
been 16.29% and 1.26%, respectively, while net income and earnings per share
would have been $1,039 million and $3.77, respectively.
(b) Includes impact of cumulative effect of change in accounting method of $53
million in 1993 and extraordinary credit of $18 million in 1992.
(c) For a discussion of Fleet's reclassification in 1992 of its "securities held
to maturity" to "securities available for sale", see Fleet's Current Report
on Form 8-K dated October 21, 1992. Effective January 1, 1994, Fleet adopted
FASB Statement No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." The standard requires that securities available for sale
be reported at fair value, with unrealized gains or losses reflected as a
separate component of stockholders' equity. In connection with the adoption
of FASB Statement No. 115, Fleet transferred securities netting to $345
million from the held to maturity portfolio to the available for sale
portfolio. During the fourth quarter of 1995, Fleet reclassified
substantially all of its securities held to maturity to securities available
for sale as the FASB permitted a one-time opportunity for institutions to
reassess the appropriateness of the designations of all securities.
(d) Fleet's return on average common stockholders' equity includes the average
unrealized gains and losses on securities available for sale. Excluding the
impact of FASB Statement No. 115, Fleet's return on average common
stockholders' equity would have been 19.72%, 17.29%, 17.42%, 9.25% and
15.35%, respectively, for the nine months ended September 30, 1997 and 1996
and the years ended December 31, 1996, 1995 and 1994.
(e) Excludes $172 million, $287 million, $265 million and $317 million of
nonperforming assets reclassified to held for sale or accelerated
disposition at September 30, 1997, September 30, 1996, December 31, 1996 and
December 31, 1995, respectively. Including such amounts, the ratios would
have been 1.10%, 1.74%, 1.68% and 1.58% at September 30, 1997, September 30,
1996, December 31, 1996 and December 31, 1995, respectively.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
THE QUICK & REILLY GROUP, INC.
The following unaudited consolidated summary sets forth selected financial
data for Quick & Reilly and its subsidiaries for the six months ended August 29,
1997 and August 30, 1996 and for each of the years in the five-year period ended
the last day of February 1997. The following summary should be read in
conjunction with the financial information incorporated herein by reference to
other documents. See "INFORMATION INCORPORATED BY REFERENCE". The summary for
the six months ended August 29, 1997 and August 30, 1996 is based on unaudited
financial statements which include all adjustments that, in the opinion of
management of Quick & Reilly, are necessary for a fair presentation of the
results of the respective interim periods. The results of operations for the six
months ended August 30, 1997 are not necessarily indicative of the results
expected for the fiscal year ending February 28, 1998 or any other interim
period. Certain amounts in prior periods have been reclassified to conform to
current-year presentation.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------- YEAR ENDED THE LAST DAY OF FEBRUARY
AUGUST 29, AUGUST 30, ----------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
CONSOLIDATED SUMMARY OF OPERATIONS:
Net interest income............... $ 35 $ 29 $ 59 $ 54 $ 46 $ 29 $ 23
Commission and clearance income... 134 122 247 206 146 157 132
Trading income.................... 53 31 59 53 32 31 13
Other non-interest income......... 3 7 14 12 8 9 4
Non-interest expense.............. 183 149 297 256 191 184 143
Net income........................ 42 40 82 69 41 42 29
EARNINGS PER COMMON SHARE:
Fully diluted..................... $ 1.09 $ 1.07 $ 2.17 $ 1.85 $ 1.11 $ 1.12 $ 0.78
Weighted average fully diluted
shares outstanding.............. 38,588,149 37,765,348 37,764,962 37,477,765 37,483,185 37,826,031 36,825,117
Book value per common share....... $ 11.09 $ 8.97 $ 9.90 $ 8.00 $ 6.34 $ 5.44 $ 4.50
Cash dividends declared per common
share........................... 0.12 0.10 0.28 0.23 0.19 0.17 0.13
Common dividend payout ratios..... 11.00% 9.35% 12.90% 12.75% 17.39% 14.58% 15.99%
CONSOLIDATED BALANCE SHEET:
Cash and Cash Equivalents......... $ 86 $ 107 $ 89 $ 133 $ 41 $ 42 $ 46
Receivable from Brokers, Dealers
and Clearing Organizations...... 2,772 1,875 2,618 1,927 1,606 1,611 703
Receivable From Customers......... 1,376 1,014 1,182 1,223 801 731 542
Securities Owned--At Market
Value........................... 184 153 161 156 106 65 56
Other Assets...................... 112 86 82 84 28 28 30
Total Assets...................... 4,530 3,235 4,132 3,523 2,582 2,477 1,377
Short-term borrowings............. 50 28 59 82 43 85 74
Payable to Brokers, Dealers and
Clearing Organizations.......... 3,415 2,351 3,080 2,341 1,821 1,759 806
Payable to Customers.............. 512 408 508 681 410 376 279
Other Liabilities................. 124 109 111 117 71 52 49
Total Liabilities................. 4,101 2,896 3,758 3,221 2,345 2,272 1,208
Shareholders' equity.............. 429 339 374 302 237 205 169
Total Liabilities and
shareholders' equity............ 4,530 3,235 4,132 3,523 2,582 2,477 1,377
Return on average common
shareholders' equity............ 21.00% 25.20% 24.20% 25.80% 18.80% 22.70% 18.60%
</TABLE>
19
<PAGE>
FLEET FINANCIAL GROUP, INC.
Fleet is a diversified financial services company organized under the laws
of the State of Rhode Island. At September 30, 1997, Fleet was the 12th largest
bank holding company in the United States, with total assets of $83.6 billion,
total deposits of $62.9 billion and stockholders' equity of $7.2 billion.
Fleet is engaged in a general consumer and commercial banking and investment
management business throughout the states of Connecticut, Massachusetts, New
Jersey, New York, Rhode Island, Maine, New Hampshire and Florida through its
five banking subsidiaries, and also provides, through its nonbanking
subsidiaries, a variety of financial services, including mortgage banking,
asset-based lending, consumer finance, real estate financing, securities
brokerage services, capital markets services and investment banking, investment
advice and management, data processing and student loan servicing.
The principal office of Fleet is located at One Federal Street, Boston,
Massachusetts 02110, telephone number (617) 346-4000.
THE QUICK & REILLY GROUP, INC.
Quick & Reilly is a holding company for four principal, wholly-owned
operating subsidiaries: Q&R Inc., U.S. Clearing, JJC and Nash Weiss. Quick &
Reilly was originally incorporated in New York on June 25, 1981 and was
subsequently reincorporated in Delaware in 1987.
Q&R Inc. is a NYSE member organization performing discount brokerage
services for individual retail customers. U.S. Clearing is a securities clearing
operation which clears all securities transactions for Q&R Inc.'s customer
accounts and other correspondent brokerage firms. JJC is one of the largest
specialist firms on the floor of the NYSE, making a market in the equity
securities of NYSE-listed companies. Nash Weiss is a brokerage firm which acts
as a market maker in over-the-counter securities.
The principal office of Quick & Reilly is located at 230 South County Road,
Palm Beach, Florida 33480, telephone number (561) 655-8000.
RECENT TRANSACTIONS
ACQUISITIONS
Consistent with Fleet's strategy to combine the strengths of a leading
regional bank with the national distribution capabilities of a diversified
financial services company, Fleet has consummated and has agreed to make two
acquisitions in addition to the Merger which will expand its investment advisory
and credit card business lines, as well as the number and geographic diversity
of its customer base. Upon consumation of these acquisitions and the Merger,
customers served by Fleet are expected to increase from approximately 6.2
million to approximately 13.2 million and revenue from outside New England is
expected to increase to over 50% of Fleet's total revenue.
COLUMBIA MANAGEMENT COMPANY. On December 10, 1997, Fleet consummated its
acquisition of Columbia Management Company ("Columbia"), a Portland,
Oregon-based asset manager with 1996 revenues of $96 million and assets under
management of $20.9 billion as of November 30, 1997, including a family of
no-load mutual funds. The premium paid for the purchase of Columbia was $400
million. The agreement stipulates potential earnout and management retention
incentives to be paid over six years. The acquisition of Columbia increases
Fleet's investment advisory assets under management by 40% and broadens its
institutional product and mutual fund offerings and both retail and
institutional national client base. Columbia will be managed as an independent
business unit of Fleet, with senior members of Columbia's management committed
to remain with Columbia after the closing. Fleet accounted for this acquisition
under the purchase method of accounting.
ADVANTA CORPORATION. On October 28, 1997, Fleet agreed to acquire the
credit card operations of Advanta Corporation ("Advanta") for a premium of
approximately $500 million, with an aggregate
20
<PAGE>
potential $100 million earnout to be paid over five years. Advanta's credit card
operations, which earned $30 million in the third quarter of 1997, will add
approximately $11.5 billion in managed credit card receivables. Following
consummation of this transaction and the combination of Fleet's credit card
operations with those of Advanta's, Fleet believes that it will be among the top
ten issuers of credit cards in the United States, with approximately $14 billion
in managed receivables and over 8 million customers.
The acquisition of Advanta's credit card operations will allow Fleet to
compete on a larger scale in a competitive environment of credit card business
consolidations in order to retain and grow Fleet's customer base. Fleet believes
that this acquisition will enhance Fleet's credit card operations by providing
the opportunity to combine Fleet's risk management practices with Advanta's
state of the art database technology, direct marketing, and product testing
capabilities in the credit card business.
The transaction, to be accounted for under the purchase method of
accounting, is expected to close in the first quarter of 1998.
OFFERING OF FLEET COMMON STOCK
On December 10, 1997, Fleet consummated an underwritten public offering of
10,750,000 shares of Fleet Common Stock at a price to the public of $70.375
share. The net proceeds to Fleet, after deducting underwriting discounts and
commissions and estimated offering expenses, were approximately $740 million.
Fleet intends to use approximately $500 million of the net proceeds in
connection with the acquisition of the credit card operations of Advanta and the
remaining net proceeds for general corporate purposes, principally to extend
credit to, or fund investments in, its subsidiaries.
QUICK & REILLY SPECIAL MEETING
GENERAL
This Proxy Statement-Prospectus is first being mailed to Quick & Reilly
Stockholders on or about December 17, 1997, and is accompanied by the notice of
the Special Meeting and a form of proxy that is solicited by the Quick & Reilly
Board for use at the Special Meeting to be held on January 23, 1998, at 10:00
a.m., local time, at Governors Club of the Palm Beaches, 777 South Flagler
Drive, West Palm Beach, Florida, and at any adjournments or postponements
thereof.
MATTERS TO BE CONSIDERED
At the Special Meeting, Quick & Reilly Stockholders will be asked to
consider and vote upon (i) the Merger Agreement and the transactions
contemplated thereby, and (ii) such other matters as may properly be submitted
to a vote at the Special Meeting. Quick & Reilly Stockholders may also be asked
to vote upon a proposal to adjourn or postpone the Special Meeting, which
adjournment or postponement could be used for the purpose, among others, of
allowing additional time for the soliciting of additional votes to approve the
Merger Agreement.
PROXIES
The accompanying form of proxy is for use at the Special Meeting if a Quick
& Reilly Stockholder will be unable to attend in person. The proxy may be
revoked by a Quick & Reilly Stockholder at any time before it is exercised, by
submitting to the Secretary of Quick & Reilly written notice of revocation, a
properly executed proxy of a later date or by attending the Special Meeting and
electing to vote in person. Written notices of revocation and other
communications with respect to the revocation of Quick & Reilly proxies should
be addressed to The Quick & Reilly Group, Inc., 230 South County Road, Palm
Beach, Florida 33480, Attention: Secretary. All shares represented by valid
proxies received pursuant to this solicitation and not revoked before they are
exercised will be voted in the manner specified therein. If no specification is
made, the proxies will be voted in favor of approval of the Merger Agreement and
the
21
<PAGE>
transactions contemplated thereby. The Quick & Reilly Board is unaware of any
other matters that may be presented for action at the Special Meeting. If other
matters do properly come before the Special Meeting, however, it is intended
that shares represented by proxies in the accompanying form will be voted or not
voted by the persons named in the proxies in their discretion, PROVIDED that no
proxy that is voted against approval and adoption of the Merger Agreement will
be voted in favor of any adjournment or postponement of the Special Meeting for
the purpose of soliciting additional proxies.
SOLICITATION OF PROXIES
The entire cost of soliciting the proxies from Quick & Reilly Stockholders
will be borne by Quick & Reilly; PROVIDED, HOWEVER, that Fleet and Quick &
Reilly have each agreed to pay one-half of the printing and mailing costs of
this Proxy Statement-Prospectus and related materials. In addition to the
solicitation of the proxies by mail, Quick & Reilly will request banks, brokers
and other record holders to send proxies and proxy material to the beneficial
owners of the stock and secure their voting instructions, if necessary. Quick &
Reilly will reimburse such record holders for their reasonable expenses in so
doing. Quick & Reilly has also made arrangements with Corporate Investor
Communications to assist it in soliciting proxies from banks, brokers and
nominees and has agreed to pay approximately $5,000, plus expenses, for such
services. If necessary, Quick & Reilly may also use several of its regular
employees, who will not be specially compensated, to solicit proxies from
stockholders, either personally or by telephone, telegram, facsimile, special
delivery letter, express mail or other means of communication.
RECORD DATE AND VOTING RIGHTS
Pursuant to the provisions of Delaware Law and the Quick & Reilly By-laws,
December 12, 1997 has been fixed as the Record Date for determination of holders
of Quick & Reilly Common Stock entitled to notice of and to vote at the Special
Meeting. Accordingly, only holders of shares of Quick & Reilly Common Stock of
record at the close of business on the Record Date will be entitled to notice of
and to vote at the Special Meeting. At the close of business on the Record Date,
there were 38,634,379 shares of Quick & Reilly Common Stock outstanding held by
approximately 815 holders of record. The presence, in person or by proxy, of
shares of Quick & Reilly Common Stock representing a majority of the total
voting power of such shares outstanding and entitled to vote on the Record Date
is necessary to constitute a quorum at the Special Meeting. Shares of Quick &
Reilly Common Stock present in person at the Special Meeting but not voting, and
shares of Quick & Reilly Common Stock for which Quick & Reilly has received
proxies but with respect to which holders of such shares have abstained, will be
counted as present at the Special Meeting for purposes of determining the
presence or absence of a quorum for the transaction of business. Brokers who
hold shares of Quick & Reilly Common Stock in nominee or "street" name for
customers who are the beneficial owners of such shares are prohibited from
giving a proxy to vote shares held for such customers with respect to the
matters to be considered and voted upon at the Special Meeting without specific
instructions from such customers. Shares represented by proxies returned by a
broker holding such shares in "street" name will be counted for purposes of
determining whether a quorum exists, even if such shares are not voted in
matters where discretionary voting by the broker is not allowed ("broker
non-votes").
Each share of Quick & Reilly Common Stock entitles its holder to one vote.
The affirmative vote of a majority of the outstanding shares of Quick & Reilly
Common Stock is required to approve and adopt the Merger Agreement and the
transactions contemplated thereby.
BECAUSE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT REQUIRES THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF QUICK
& REILLY COMMON STOCK, ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME
EFFECT AS NEGATIVE VOTES. ACCORDINGLY, THE QUICK & REILLY BOARD URGES THE
HOLDERS OF QUICK & REILLY COMMON STOCK TO COMPLETE,
22
<PAGE>
DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED,
POSTAGE-PAID ENVELOPE.
As of the Record Date, directors and executive officers of Quick & Reilly
beneficially owned 13,953,241 shares of Quick & Reilly Common Stock,
representing 35.3% of the Quick & Reilly Common Stock entitled to vote at the
Special Meeting. Certain directors, executive officers and other stockholders of
Quick & Reilly have entered into Support Agreements pursuant to which they have
agreed to vote the shares of Quick & Reilly Common Stock beneficially owned by
them for approval of the Merger Agreement and the transactions contemplated
thereby. See "THE MERGER--Support Agreements." In addition, as of the Record
Date, the banking and trust subsidiaries of Fleet, as fiduciaries, custodians or
agents, held a total of 66,089 shares of Quick & Reilly Common Stock,
representing less than one percent of the shares of Quick & Reilly Common Stock,
under trust agreements and other instruments and agreements. These entities
maintained sole or shared voting power with respect to 39,891 of such shares of
Quick & Reilly Common Stock. As of the Record Date, directors and executive
officers of Fleet did not beneficially own any shares of Quick & Reilly Common
Stock.
Additional information with respect to beneficial ownership of Quick &
Reilly Common Stock by persons and entities owning more than 5% of such stock
and more detailed information with respect to beneficial ownership of Quick &
Reilly Common Stock by directors and executive officers of Quick & Reilly is
incorporated by reference to Quick & Reilly's Annual Report on Form 10-K for the
fiscal year ended February 28, 1997. See "INFORMATION INCORPORATED BY
REFERENCE."
RECOMMENDATION OF QUICK & REILLY BOARD
The Quick & Reilly Board unanimously has approved and adopted the Merger
Agreement and the transactions contemplated thereby. The Quick & Reilly Board
believes that the Merger Agreement is in the best interests of Quick & Reilly
and Quick & Reilly Stockholders and recommends that Quick & Reilly Stockholders
vote "FOR" the approval and adoption of the Merger Agreement. See "THE MERGER--
Reasons for the Merger".
23
<PAGE>
THE MERGER
GENERAL
The Board of Directors of Fleet (the "Fleet Board") and the Quick & Reilly
Board have approved the Merger Agreement, which provides for the Merger of Quick
& Reilly into Merger Subsidiary at the Effective Time, with Merger Subsidiary as
the surviving corporation in the Merger. With certain limited exceptions
described below, each share of Quick & Reilly Common Stock outstanding at the
Effective Time shall be converted into the right to receive 0.578 shares of
Fleet Common Stock. Shares of Fleet Common Stock issued and outstanding
immediately prior to the Effective Time will remain issued and outstanding after
the Merger.
The Quick & Reilly Board unanimously has approved and adopted the Merger
Agreement and the transactions contemplated thereby. The Quick & Reilly Board
believes that the Merger Agreement is in the best interests of Quick & Reilly
and Quick & Reilly Stockholders and recommends that Quick & Reilly Stockholders
vote "FOR" the approval and adoption of the Merger Agreement.
This section of the Proxy Statement-Prospectus describes certain aspects of
the proposed Merger, including the principal provisions of the Merger Agreement
and the Stock Option Agreement. Copies of the Merger Agreement and the Stock
Option Agreement are attached to this Proxy Statement-Prospectus as Exhibits A
and B, respectively. All Quick & Reilly Stockholders are urged to read each of
these agreements in its entirety.
BACKGROUND OF THE MERGER
Founded as Q&R Inc. by Leslie C. Quick, Jr., in 1974, Quick & Reilly has
become one of the leading discount brokers in the United States. It has a very
well known brand name and also has a leading presence in all of its lines of
business which, in addition to discount brokerage services, include clearing
operations, NASDAQ market-making and an NYSE specialist organization.
Significant, ongoing changes have been occurring recently in the financial
services industry. In particular, there has been a trend of increasing
consolidation between commercial banking firms, such as Fleet, and other
financial services providers, including brokerage firms and asset management
firms. The rapid pace of consolidation has been spurred by a number of factors,
including regulatory changes in the United States and the increasingly global
financial services arena, where economies of scale and access to high levels of
capital have become of prime importance. Another concept affecting the financial
services industry is that of "one-stop shopping," or obtaining all or the
majority of financial services (i.e., lending, equity powers and asset
management) from a single provider.
Quick & Reilly's management recognized that these trends are changing the
terms and conditions upon which it would be required to compete in the future.
As a result, from time to time over the past few years, Quick & Reilly
management has considered potential combination partners. Quick & Reilly also
from time to time has been approached by various firms in the financial services
industry regarding a potential combination. Quick & Reilly management did not,
however, find any of the potential partners to be suitable. During the spring of
1997, Quick & Reilly was once again approached, on an unsolicited basis, by a
number of firms interested in mutually advantageous business opportunities. Over
this same period, as merger and acquisition activity in the financial services
industry, as well as the size and scope of announced transactions, increased
markedly, it became apparent to Quick & Reilly's management that increased size
and capital levels were becoming necessary to compete in the global financial
services arena and to be successful going forward.
On June 24, 1997 and July 10, 1997, Quick & Reilly engaged the investment
banking firms of Gleacher NatWest and Goldman (the "Advisors"), respectively,
and authorized them to solicit indications of interest from potential acquirors
of Quick & Reilly. The Advisors contacted a broad array of potentially
interested parties, each of which entered into a confidentiality agreement with
Quick & Reilly. An offering
24
<PAGE>
memorandum was prepared describing the business of Quick & Reilly and its
prospects and was distributed to various parties that indicated an interest in
acquiring Quick & Reilly on terms that the Advisors believed might be acceptable
to Quick & Reilly (the "Offering Memorandum"). On August 11, 1997, the Advisors
received preliminary indications of interest from parties who had reviewed the
Offering Memorandum (the "Interested Parties"). Beginning on August 20, 1997 and
continuing until September 6, 1997, each of the Interested Parties was invited
to conduct due diligence on Quick & Reilly and to meet its management. Following
the due diligence period, the Interested Parties were invited to submit bids on
September 15, 1997 of the price per share at which they were willing to acquire
Quick & Reilly, and also were furnished with a draft of the Merger Agreement and
related documents.
On September 15, 1997, the Fleet Board met to authorize submission of a
definitive bid to Quick & Reilly. The Fleet Board also authorized the officers
of Fleet to enter into definitive agreements for the acquisition of Quick &
Reilly. On September 15, 1997, Fleet submitted a bid to acquire Quick & Reilly
and also provided markups of Quick & Reilly's proposed Merger Agreement and
related agreements indicating Fleet's requested changes to those agreements.
After submission of the bid, the senior management and representatives of Quick
& Reilly and Fleet negotiated the issues that remained open under the Merger
Agreement, the Stock Option Agreement, the Support Agreements and the Employment
Agreements (as hereinafter defined).
On September 16, 1997, the Quick & Reilly Board reviewed and discussed
Fleet's bid. The Quick & Reilly Board reviewed the terms of the Merger
Agreement, the Stock Option Agreement, the Support Agreements and the Employment
Agreements. The Advisors reviewed the process of soliciting indications of
interest and the ensuing negotiations. The Advisors then rendered their oral
opinions to the effect that, as of the date of such opinions, based on the
matters and subject to the limitations set forth in such opinions, the Exchange
Ratio was fair from a financial point of view to Quick & Reilly Stockholders.
Quick & Reilly's legal advisors reviewed the terms of the Merger Agreement, the
Stock Option Agreement, the Support Agreements and the Employment Agreements and
the relevant legal considerations with the Quick & Reilly Board. After due
consideration of these matters, which are more specifically described under
"--Recommendation of the Quick & Reilly Board" and "--Reasons for the Merger,"
the Quick & Reilly Board determined that Fleet's bid and the Merger were in the
best interests of Quick & Reilly and Quick & Reilly Stockholders and voted
unanimously to accept Fleet's bid. Following review and discussion at the
meeting, the Quick & Reilly Board unanimously approved the Merger Agreement, the
Stock Option Agreement, the Support Agreements and the Employment Agreements.
Thereafter on September 16, 1997, the Merger Agreement, the Stock Option
Agreement, the Support Agreements and the Employment Agreements were executed
and delivered by the parties thereto. Prior to the opening of trading on the
morning of September 17, 1997, Quick & Reilly and Fleet issued a joint press
release announcing the execution of the Merger Agreement and the related
agreements.
REASONS FOR THE MERGER
FLEET.
Fleet believes that the consummation of the Merger presents an opportunity
to create a combined company with the ability to provide its clients with a full
range of financial services, including traditional consumer banking, trust
services, discount brokerage services and mutual fund sales.
In reaching its conclusion to approve the Merger Agreement and the related
agreements and the transactions contemplated thereby, the Fleet Board consulted
with Fleet management, as well as with its financial and legal advisors, and
considered a variety of factors, including the following:
FULL-SERVICE FINANCIAL SERVICES COMPANY. Fleet believes that the Merger
will position Fleet as a full-service financial services company, with expanded
national distribution channels for its consumer banking, trust services,
discount brokerage services and sales of its mutual fund and annuity products.
The Merger will allow Fleet to expand its retail customer base, while providing
its existing customer base with additional investment and securities products.
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INDUSTRY TRENDS. The Fleet Board considered the ongoing trend toward
consolidation in the banking and securities industries which has increased the
importance of being able to provide "one-stop shopping" to financial services
clients. The Fleet Board believed that the combined company would have a
sufficiently broad scope of product offerings and scale of operations to compete
effectively in this environment.
OPPORTUNITIES FOR REVENUE ENHANCEMENT. The Fleet Board considered the
likelihood that the combined company would generate significant additions to
revenue by providing existing clients of the two companies with an expanded
range of services and as a result would enhance the ability of the combined
company to attract new clients. The Fleet Board also noted the enhanced capital
strength of the combined company and the fact that Quick & Reilly's established
industry expertise provides strong positioning in key growth sectors. Fleet also
believes that the Merger will allow it to leverage product development and
technology over a broader base of capital resources.
QUICK & REILLY.
THE QUICK & REILLY BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE
BEST INTERESTS OF, QUICK & REILLY AND QUICK & REILLY STOCKHOLDERS. THE QUICK &
REILLY BOARD UNANIMOUSLY RECOMMENDS THAT QUICK & REILLY STOCKHOLDERS VOTE FOR
THE APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
The Quick & Reilly Board believes that the consummation of the Merger
presents an opportunity to create a combined firm with the ability to provide
its clients with a full range of financial services, including traditional
consumer banking, trust services, discount brokerage services and mutual fund
sales.
In reaching its conclusion to approve the Merger Agreement, the Support
Agreements and the Stock Option Agreement and the transactions contemplated
thereby, the Quick & Reilly Board consulted with Quick & Reilly management, as
well as with the Advisors and its legal advisors, and considered a variety of
factors, including the following:
CONSIDERATION TO STOCKHOLDERS. The Quick & Reilly Board considered the form
and amount of consideration to be received by Quick & Reilly Stockholders in the
Merger and the advice by Quick & Reilly's legal advisors that, for federal
income tax purposes, Quick & Reilly Stockholders generally would not recognize
taxable gain or loss in the Merger. See "--Merger Consideration; Treatment of
Quick & Reilly Stock Options" and "--Certain Federal Income Tax Consequences."
STRATEGIC ALTERNATIVES AVAILABLE TO QUICK & REILLY. Based upon their review
of such possible strategic growth opportunities as an independent company, the
Quick & Reilly Board believed that Quick & Reilly Stockholders would benefit
more from the potential business combination with Fleet than from continued
ownership in an independent company.
FULL RANGE OF FINANCIAL SERVICES. The Quick & Reilly Board considered the
effectiveness of the Merger in improving the competitive position of Quick &
Reilly by providing it with additional distribution outlets and an enhanced
level of capital. The Quick & Reilly Board considered the competitive advantage
that the combined company would have as a result of its ability to offer a full
range of financial services, including traditional consumer banking products,
trust services, discount brokerage services and mutual fund sales. The Quick &
Reilly Board believed that the Merger would enable Quick & Reilly to offer a
wider array of services to its existing customers and would create an
exceptional organization ideally positioned to serve their clients.
COMPLEMENTARY SKILLS AND STRENGTHS. The Quick & Reilly Board considered the
complementary skills and strengths of the two companies, particularly Fleet's
strong capital levels and core banking business and Quick & Reilly's leading
discount brokerage business. The Quick & Reilly Board also considered the
companies' similar cultures. The Quick & Reilly Board noted that the combined
firm would have substantially increased distribution capabilities and an
expanded client base because it would have access
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to the clients of both Quick & Reilly and Fleet. The Quick & Reilly Board also
noted that the Merger would create synergies by combining the clearing
operations of Fleet and Quick & Reilly, whereby Quick & Reilly would conduct
clearing operations for Fleet Securities.
INDUSTRY TRENDS. The Quick & Reilly Board considered the ongoing trend
toward globalization and consolidation in the banking and securities industries
which has increased the importance of being able to provide "one-stop shopping"
to financial services clients. The Quick & Reilly Board noted that to serve
their individual clients better than their competitors and to maximize
stockholder value, financial services firms must have a leading market position
in their businesses, balanced earnings streams, broad-based customer access,
size and scale. The Quick & Reilly Board believed that the combined company
would have a sufficiently broad scope of product offerings and scale of
operations to compete effectively in this global environment.
OPPORTUNITIES FOR REVENUE ENHANCEMENT AND COST SAVINGS. The Quick & Reilly
Board considered the likelihood that the combined company would generate
significant additions to revenue by providing existing clients of the two firms
with an expanded range of financial services and as a result would enhance the
ability of the combined company to attract new clients. The Quick & Reilly Board
also noted the enhanced capital strength of the combined company and the fact
that the increasingly high cost of vital technology could be borne better by the
combined company and would be spread over a larger client base.
RETENTION OF KEY PERSONNEL. The Quick & Reilly Board considered the
proposed retention program (the "Retention Program") and Employment Agreements
with senior officers and other key members of the management of Quick & Reilly
and their likely effectiveness in retaining key personnel of Quick & Reilly
following the Merger. The Quick & Reilly Board also noted that one director of
Quick & Reilly would join the Fleet Board following the Merger. See "BOARD OF
DIRECTORS, MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER" and "INTERESTS OF
CERTAIN PERSONS IN THE MERGER."
ADVICE OF FINANCIAL ADVISORS. The Quick & Reilly Board considered the
presentation made by its Advisors and their oral opinions (subsequently
confirmed in writing as of the date hereof), as investment bankers, to the
effect that as of September 16, 1997, based upon the matters and subject to the
limitations set forth in such opinions, the Exchange Ratio was fair to Quick &
Reilly Stockholders from a financial point of view. See "--Fairness Opinions of
Financial Advisors."
TERMS OF THE MERGER AGREEMENT. The Quick & Reilly Board considered the
structure of the Merger and the terms of the Merger Agreement, the Support
Agreements and the Stock Option Agreement, including the parties'
representations, warranties, covenants and agreements, and the conditions to
their respective obligations set forth in the Merger Agreement.
REGULATORY APPROVALS. The Quick & Reilly Board considered the likelihood of
the Merger being approved by the appropriate regulatory authorities,
particularly in light of the recent actions by banking regulators that have the
effect of easing the approval process for business combinations between
commercial banks and brokerage firms. See "--Regulatory Approvals Required for
the Merger."
The foregoing discussion of the information and factors considered by the
Quick & Reilly Board is not intended to be exhaustive, but is believed to
include all material factors considered by the Quick & Reilly Board. In reaching
its determination to approve and recommend the Merger, the Quick & Reilly Board
did not assign any relative or specific weights to the foregoing factors, and
individual directors may have given differing weights to different factors. The
Quick & Reilly Board is unanimous in its recommendation that Quick & Reilly
Stockholders vote for approval of the Merger and the Merger Agreement.
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FAIRNESS OPINIONS OF FINANCIAL ADVISORS
Gleacher NatWest and Goldman were retained by Quick & Reilly to act as its
financial advisors in connection with a possible merger or sale of Quick &
Reilly. At a meeting of the Quick & Reilly Board held on September 16, 1997, the
Advisors made a presentation on certain financial aspects of the Merger and
delivered to the Quick & Reilly Board their oral opinions to the effect that, as
of the date of such opinion, based on the matters and subject to the limitations
set forth in such opinions, the Exchange Ratio was fair from a financial point
of view to Quick & Reilly Stockholders. Each of the Advisors has confirmed its
September 16, 1997, opinion by delivery of its written opinion to the Quick &
Reilly Board, dated the date of this Proxy Statement-Prospectus, stating that,
as of the date hereof and based on the matters and subject to the limitations
set forth in such opinions, the Exchange Ratio pursuant to the Merger Agreement
is fair from a financial point of view to Quick & Reilly Stockholders (the
"Advisors' Opinions"). The Advisors have consented to the inclusion of the
Advisors' Opinions in this Proxy Statement-Prospectus.
THE FULL TEXT OF EACH OF THE ADVISORS' OPINIONS, DATED THE DATE OF THIS
PROXY STATEMENT-PROSPECTUS, WHICH SET FORTH THE ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN, ARE ATTACHED AS EXHIBITS C AND D
TO THIS PROXY STATEMENT-PROSPECTUS AND ARE INCORPORATED HEREIN BY REFERENCE. THE
ADVISORS' OPINIONS ARE DIRECTED TO THE QUICK & REILLY BOARD, ADDRESS ONLY THE
FAIRNESS OF THE EXCHANGE RATIO TO THE QUICK & REILLY STOCKHOLDERS FROM A
FINANCIAL POINT OF VIEW AND DO NOT CONSTITUTE A RECOMMENDATION TO ANY QUICK &
REILLY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE SPECIAL
MEETING. THE ADVISORS' OPINIONS WERE RENDERED TO THE QUICK & REILLY BOARD FOR
ITS CONSIDERATION IN DETERMINING WHETHER TO APPROVE THE MERGER AGREEMENT. THE
DESCRIPTION OF THE ADVISORS' OPINIONS SET FORTH HEREIN IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SAID EXHIBITS C AND D. THE ADVISORS' OPINIONS ARE
SUBSTANTIALLY IDENTICAL TO THE OPINIONS DELIVERED ORALLY TO THE QUICK & REILLY
BOARD ON SEPTEMBER 16, 1997. QUICK & REILLY STOCKHOLDERS ARE URGED TO READ EACH
OF THE ADVISORS' OPINIONS IN ITS ENTIRETY.
Each of the Advisors is a nationally recognized investment banking firm and
was selected by Quick & Reilly based on the firm's reputation and experience in
investment banking in general, its recognized expertise in the valuation of
banking businesses and because of its familiarity with, and prior work for,
Quick & Reilly. The Advisors, as part of their investment banking business, are
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes.
In connection with rendering their opinions dated September 16, 1997 and the
date hereof, the Advisors, among other things: (i) reviewed the Merger
Agreement, the Stock Option Agreement and the Support Agreements; (ii) reviewed
the Annual Reports to Stockholders and Annual Reports on Form 10-K of Quick &
Reilly and Fleet for the five fiscal years ended February 28, 1997 and December
31, 1996, respectively; (iii) reviewed certain interim reports to stockholders
and Quarterly Reports on Form 10-Q of Quick & Reilly and Fleet; (iv) reviewed
certain other communications from Quick & Reilly and Fleet to their respective
stockholders; (v) reviewed certain internal financial analyses and forecasts for
Quick & Reilly and Fleet prepared by their respective managements; (vi) held
discussions with members of senior management of Quick & Reilly and Fleet
regarding the strategic rationale for, and the potential benefits of, the
transaction contemplated by the Merger Agreement, and the past and current
business operations, financial condition and future prospects of their
respective companies; (vii) reviewed the reported price and trading activity for
the Quick & Reilly Common Stock and Fleet Common Stock; (viii) compared
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certain financial and stock market information for Quick & Reilly and Fleet with
similar information for certain other companies, the securities of which are
publicly traded; (ix) reviewed the financial terms of certain recent business
combinations in the broker-dealer industry; (x) reviewed the Registration
Statement of which this Proxy Statement-Prospectus is a part; and (xi) performed
such other studies and analyses as the Advisors deemed appropriate.
In connection with rendering the Advisors' Opinions, as set forth therein,
the Advisors relied, without independent verification, upon the accuracy and
completeness of all the financial and other information reviewed by them and
assumed such accuracy and completeness for purposes of such opinions. The
Advisors assumed further, with Quick & Reilly's consent, that obtaining any
necessary regulatory or third-party approvals for the transactions contemplated
by the Merger Agreement will not have an adverse impact on Fleet. The Advisors
assumed, with Quick & Reilly's consent, that the transaction will be accounted
for as a pooling of interests under GAAP.
The following is a summary of the material financial analyses presented by
the Advisors to the Quick & Reilly Board in connection with providing their
opinions to the Quick & Reilly Board on September 16, 1997, and does not purport
to be a complete description of the analyses performed by the Advisors. The
Advisors used substantially the same types of financial analyses in preparing
their written opinions dated as of the date of this Proxy Statement-Prospectus
as they used in providing their oral opinions on September 16, 1997. The
Advisors did not make, and were not provided with, an independent evaluation or
appraisal of the assets of Quick & Reilly and Fleet. The Advisors' Opinions are
based on market, economic and other conditions as they existed and could be
evaluated as of the date of the Advisors' Opinions.
SUMMARY OF TERMS OF PROPOSED TRANSACTION. The Advisors reviewed the terms
of the proposed Merger, including the form of consideration offered, the
expected method of accounting, the Exchange Ratio, the closing price of Fleet
Common Stock as of September 15, 1997, and the resulting notional price per
share of Fleet Common Stock to be received by Quick & Reilly Stockholders
pursuant to the proposed Merger. The proposed form of consideration offered in
connection with the Merger was Fleet Common Stock. The proposed method of
accounting for the Merger was the pooling of interests method. The notional
price per share of Fleet Common Stock to be received by Quick & Reilly
Stockholders for the Merger was $39, determined by multiplying the Exchange
Ratio by the closing price of the Fleet Common Stock on September 15, 1997 (the
"Notional Price"). The Notional Price therefore was necessarily dependent on the
closing price of the Fleet Common Stock at a specific time.
In addition to reviewing the Notional Price resulting from the Merger, the
analyses described indicated values resulting from the Merger expressed as
multiples of Quick & Reilly's earnings for the 12 months ended February 28,
1997, and of estimates of Quick & Reilly's fiscal 1998 earnings, as well as
multiples of various measures of Quick & Reilly book value. In performing these
analyses, the Advisors used actual results for Quick & Reilly for the past 12
months and earnings estimates prepared by Quick & Reilly management. Under these
analyses, the Notional Price reflected (i) a multiple of 18.8 times Quick &
Reilly earnings for the 12 months ended February 28, 1997, (ii) a multiple of
19.5 times Quick & Reilly's earnings for the latest 12 months ended May 30,
1997, and (iii) a multiple of 16.3 times the estimate of Quick & Reilly fiscal
1998 earnings. The Notional Price also reflected a multiple of 3.78 times Quick
& Reilly's stated book value.
SELECTED COMPANY ANALYSIS--QUICK & REILLY. Based on publicly available
information and earnings estimates published by Institutional Brokers Estimate
System ("IBES"), a data service that monitors and publishes compilations of
earnings estimates by selected research analysts regarding companies of interest
to institutional investors, the Advisors reviewed and compared actual and
estimated selected financial, operating and stock market information and
financial ratios of Quick & Reilly and a group of six national and discount
brokers consisting of Charles Schwab Corporation; Bear Stearns & Co.; Donaldson,
Lufkin & Jenrette, Inc.; Merrill Lynch, Pierce, Fenner & Smith Incorporated;
Morgan Stanley, Dean Witter, Discover & Co.; and Paine Webber Group (the
"National Brokers") and a group of five selected regional
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brokerage firms consisting of A.G. Edwards Inc.; Interra Financial Group Inc.;
Interstate/Johnson Lane Inc.; Legg Mason Wood Walker & Co., Inc.; and Raymond
James Financial Inc. (the "Regional Brokers"). The information and ratios
reviewed included, among other things, equity market capitalization, total
assets (excluding matched book assets), percent of 52-week high,
price-to-earnings ratios, IBES five-year estimated growth rate, asset-to-equity
ratios, price-to-book value per share ratios, return on average common equity
and dividend yield.
The Advisors noted for the Quick & Reilly Board that, among other things:
(i) Quick & Reilly had a return on average common equity (calculated in each
case for Quick & Reilly, the National Brokers and the Regional Brokers based on
net income), for the latest 12 months ending May 30, 1997, of 21.7%, as compared
with a median return on common equity for the National Brokers and the Regional
Brokers for the latest 12 months ending June 30, 1997, of 22.7% and 17.9%,
respectively; and (ii) the Notional Price in the Merger represented a ratio of
market price-to-book value, as of May 30, 1997, of 3.78 times, as compared with
a median ratio of market price-to-book value for the National Brokers and the
Regional Brokers, as of June 30, 1997, of 2.3 times and 2.0 times (in each case
based on closing market prices as of September 15, 1997); and (iii) the Notional
Price represented a price-to-earnings ratio for the 12 months ending May 30,
1997 of 19.5 times, as compared with a price-to-earnings ratio for the National
Brokers and the Regional Brokers for the 12 months ending June 30, 1997, of 12.9
times and 12.4 times, respectively.
SELECTED TRANSACTION ANALYSIS. The Advisors reviewed certain information
relating to nine selected recent acquisitions in the securities industry
announced since April 1996 and prior to September 1, 1997 in which the aggregate
consideration paid was in excess of $500 million (the "Selected Acquisitions").
The Selected Acquisitions were: Toronto-Dominion Bank/Waterhouse Investor
Services, Inc.; Dean Witter, Discover & Co./Morgan, Stanley Group, Inc.; Bankers
Trust New York Corporation/Alex. Brown Incorporated; Swiss Bank Corp./Dillon,
Read & Co.; BankAmerica Corporation/Robertson, Stephens & Co.; NationsBank
Corporation/Montgomery Securities; CIBC Wood Gundy/Oppenheimer Group; First
Union Corporation/Wheat First Butcher Singer, Inc.; and ING Barings Group/Furman
Selz LLC. This analysis indicated that the median multiples of per share
consideration paid to tangible book value per share and to the latest 12-month
earnings per share for the Selected Acquisitions were 3.70 times and 13.9 times,
respectively, compared to a multiple of price to GAAP book value per share of
Quick & Reilly of 3.78 times and a multiple of price to Quick & Reilly's
earnings per share for the 12-month period ended May 31, 1997 of 19.5 times. The
highest multiple of per share consideration paid to tangible GAAP book value per
share for the Selected Acquisitions was 10.62 times, the lowest multiple was
1.54 times and the mean was 3.35 times (excluding Montgomery Securities). The
highest multiple of per share consideration to the latest 12-month earnings per
share for the Selected Acquisitions was 19.3 times, the lowest was 10.5 times
and the mean was 14.3 times.
SELECTED COMPANY ANALYSIS--FLEET. Based on publicly available information
and IBES earnings estimates, the Advisors reviewed and compared actual and
estimated selected financial, operating and stock market information and
financial ratios of Fleet and a group of 10 other banking organizations
consisting of Mellon Bank Corporation; BankBoston Corporation; National City
Corporation; CoreStates Financial Corp.; Wachovia Corporation; PNC Bank
Corporation; The Bank of New York; First Union Corporation; Banc One
Corporation; and The Chase Manhattan Corporation (the "Selected Banks"). Such
information and ratios included, among other things, equity market
capitalization, percent of 52-week high, price-to-earnings ratios, price-to-cash
earnings per share, IBES long-term growth estimates, price-to-book value per
share ratios, price-to-tangible book value per share ratios, dividend yields and
dividend payout ratios. The information and ratios also included return on
average assets, return on average equity, total common equity to total assets,
Tier 1 capital ratios, fee income ratios, efficiency ratios, ratio of
non-performing assets to loans plus other real estate owned ("OREO"), and the
ratio of reserves to non-performing assets.
The Advisors noted for the Quick & Reilly Board that, among other things:
(i) Fleet had a price-to-earnings ratio based on fiscal 1997 estimates, of 14.2
times, as compared with a median, high, low and
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mean price-to-earnings ratio for the Selected Banks based on fiscal 1997
estimates, of 16.4 times, 18.4 times, 13.2 times and 15.9 times, respectively;
(ii) Fleet had price-to-cash earnings per share ratio based on fiscal 1997
estimates, of 12.6 times, as compared with a median, high, low and mean
price-to-cash earnings per share ratio for the Selected Banks based on fiscal
1997 estimates, of 15.4 times, 17.5 times, 11.9 times and 14.9 times,
respectively; (iii) Fleet had a ratio of market price-to-book value, as of June
30, 1997, of 2.7, as compared with a median, high, low and mean ratio of market
price-to-book value for the Selected Banks, as of June 30, 1997, of 3.1 times,
4.1 times, 2.4 times and 3.2 times, respectively (in each case based on closing
market prices as of September 15, 1997); (iv) Fleet had a ratio of market
price-to-tangible book value, as of June 30, 1997, of 3.6, as compared with a
median, high, low and mean ratio of market price-to-tangible book value for the
Selected Banks, as of June 30, 1997, of 3.4 times, 5.8 times, 2.9 times and 3.8
times, respectively (in each case based on closing market prices as of September
15, 1997); and (v) Fleet's dividend payout ratio was 38% as compared to a
median, high, low and mean dividend payout ratio of 41%, 48%, 31% and 41%,
respectively, for the Selected Banks.
OTHER ANALYSES. The Advisors also reviewed, among other things, selected
investment research reports on, and earnings estimates for, Quick & Reilly and
Fleet and analyzed available information regarding the ownership of Quick &
Reilly Common Stock and Fleet Common Stock. The Advisors compared the daily and
weekly indexed stock price for Fleet Common Stock over the past two and one-half
years against the performance of a group of peer bank stocks and against the
Standard & Poor's 500 Index.
The summary set forth above described the material analyses that the
Advisors performed and presented to the Quick & Reilly Board on September 16,
1997, and does not purport to be a complete description of such analyses. The
preparation of a fairness opinion is a complex process and is not necessarily
susceptible to partial analysis or a summary description.
The Advisors believe that their analyses must be considered as a whole and
that selecting portions of its analyses without considering all factors and
analyses would create an incomplete view of the analyses and processes
underlying its opinion. In their analyses, the Advisors relied upon numerous
assumptions made by Quick & Reilly and Fleet with respect to industry
performance, general business and economic conditions, and other matters, many
of which are beyond the control of Quick & Reilly or Fleet. Analyses based upon
forecasts of future results are not necessarily indicative of actual values,
which may be significantly more or less favorable than suggested by such
analyses. No company or transaction used as a comparison in the analyses is
identical to Quick & Reilly or Fleet or to the Merger. Additionally, estimates
of the value of businesses do not purport to be appraisals or necessarily
reflective of the prices at which businesses actually may be sold. Because such
estimates are inherently subject to uncertainty, none of the Quick & Reilly
Board, the Advisors nor any other person assumes responsibility for the accuracy
of such estimates. The Advisors' analyses were prepared solely for purposes of
their opinions rendered September 16, 1997 and the date of this Proxy
Statement-Prospectus provided to the Quick & Reilly Board regarding the fairness
of the Exchange Ratio pursuant to the Merger to holders of Quick & Reilly Common
Stock, and do not purport to be appraisals or necessarily reflect the prices at
which Quick & Reilly or its securities actually may be sold.
Pursuant to an engagement letter dated June 24, 1997, Quick & Reilly has
agreed to pay Gleacher NatWest (i) a retainer of $150,000, which has already
been paid and will be credited against any transaction fee, and (ii) a
transaction fee equal to 0.45% of the equity value of Fleet Common Stock
received in the Merger, which is payable upon consummation of the Merger.
Pursuant to an engagement letter dated July 10, 1997, Quick & Reilly has agreed
to pay Goldman a transaction fee of 0.35% of the equity value of Fleet Common
Stock received in the Merger up to $877 million, and 0.59% of the equity value
of such Fleet Common Stock in excess of $877 million, which is payable upon
consummation of the Merger. Quick and Reilly also has agreed to reimburse the
Advisors for all reasonable out-of-pocket expenses incurred in connection with
the services provided by the Advisors, and to indemnify and hold harmless the
Advisors and certain related parties against certain liabilities under United
States federal securities laws, in
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connection with their engagement. The Advisors also have provided certain
investment banking and advisory services to Quick & Reilly from time to time,
including acting as financial advisors for Quick & Reilly in connection with the
Merger Agreement, for which they have received, and will receive, customary
compensation. In addition, the Advisors have provided, and may provide in the
future, certain investment banking services to Fleet, for which they have
received, and will receive, customary compensation.
The Advisors have advised Quick & Reilly that, in the ordinary course of
their business as full-service securities firms, the Advisors may, subject to
certain restrictions, actively trade the equity and/or debt securities and/or
derivative securities of Quick & Reilly and/or of Fleet for their own account or
for the accounts of their customers, and, accordingly, may at any time hold a
long or short position in such securities.
STRUCTURE OF THE MERGER
Upon the terms and subject to the conditions of the Merger Agreement and in
accordance with Delaware Law, at the Effective Time, Quick & Reilly will merge
with and into Merger Subsidiary, Merger Subsidiary will be the surviving
corporation in the Merger, the separate corporate existence of Quick & Reilly
will terminate, and Merger Subsidiary's name will be changed to Quick &
Reilly/Fleet Securities, Inc. Except for the name change described above, the
existing certificate of incorporation of Merger Subsidiary, as in effect
immediately prior to the Effective Time, will be the certificate of
incorporation of the surviving corporation and the by-laws of Merger Subsidiary,
as in effect immediately prior to the Effective Time, will be the by-laws of the
surviving corporation.
MERGER CONSIDERATION; TREATMENT OF QUICK & REILLY STOCK OPTIONS
At the Effective Time of the Merger, each share of Quick & Reilly Common
Stock outstanding (other than Quick & Reilly Common Stock held by Quick & Reilly
or any of its subsidiaries or by Fleet or any of its subsidiaries, in each case,
other than in a fiduciary (including custodial or agency) capacity, or as a
result of debts previously contracted ("Treasury Stock")), will, by virtue of
the Merger, automatically and without any action on the part of the holder
thereof, become and be converted into the right to receive 0.578 shares of Fleet
Common Stock. Quick & Reilly's obligation to consummate the Merger is not
conditioned upon Fleet Common Stock continuing to trade at any specified minimum
price during any period prior to the Effective Time. Because the Exchange Ratio
is fixed and because the market price of Fleet Common Stock is subject to
fluctuation, the value of the shares of Fleet Common Stock that holders of Quick
& Reilly Common Stock will receive in the Merger may increase or decrease prior
to and following the Merger.
Each outstanding share of Quick & Reilly Common Stock held as Treasury Stock
immediately prior to the Effective Time will be cancelled and retired at the
Effective Time, and no Fleet Common Stock or other consideration will be
delivered in exchange therefor. All shares of Fleet Common Stock that are owned
by Quick & Reilly or any of its subsidiaries (other than Treasury Stock) will
become treasury stock of Fleet.
Shares of Fleet capital stock (including Fleet Common Stock) issued and
outstanding immediately prior to the Effective Time will remain issued and
outstanding and be unaffected by the Merger, and holders of such stock will not
be required to exchange the certificates representing such stock or take any
other action by reason of the consummation of the Merger.
Shares of Merger Subsidiary capital stock issued and outstanding immediately
prior to the Effective Time will remain issued and outstanding and unaffected by
the Merger.
Each stock option to acquire Quick & Reilly Common Stock granted under the
Quick & Reilly Compensation and Benefit Plans which is outstanding and
unexercised immediately prior to the Effective Time will be converted
automatically at the Effective Time into an option to purchase Fleet Common
Stock and will continue to be governed by the same terms and conditions as were
applicable to such option
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under the applicable Quick & Reilly Compensation and Benefit Plans. The number
of shares of Fleet Common Stock subject to the Fleet option shall be equal to
the product of the number of shares of Quick & Reilly Common Stock subject to
the Quick & Reilly option and the Exchange Ratio, rounded down to the nearest
share, and the exercise price per share of Fleet Common Stock subject to the
Fleet option will be equal to the exercise price per share of Quick & Reilly
Common Stock under the Quick & Reilly option divided by the Exchange Ratio,
rounded up to the nearest cent.
EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
QUICK & REILLY. As promptly as practicable after the Effective Date, Fleet
shall send or cause to be sent to each former holder of record of Quick & Reilly
Common Stock immediately prior to the Effective Time transmittal materials for
use in exchanging such stockholder's certificates formerly representing Quick &
Reilly Common Stock (the "Old Certificates") for Fleet Common Stock. Fleet shall
cause the certificates representing Fleet Common Stock (the "New Certificates")
and/or any check in respect of any fractional share interests or dividends or
distributions which such stockholder shall be entitled to receive to be
delivered to such stockholder upon delivery to First Chicago Trust Company, as
exchange agent (the "Exchange Agent"), of Old Certificates representing such
Quick & Reilly Common Stock (or indemnity reasonably satisfactory to Fleet and
the Exchange Agent, if any of such certificates are lost, stolen or destroyed)
owned by such stockholder, together with a properly completed letter of
transmittal, duly executed. No interest will be paid on any such cash to be paid
in lieu of fractional share interests or in respect of dividends or
distributions which any such stockholder shall be entitled to receive upon such
delivery.
QUICK & REILLY STOCK CERTIFICATES SHOULD NOT BE RETURNED WITH THE ENCLOSED
PROXY AND SHOULD NOT BE FORWARDED TO THE EXCHANGE AGENT UNLESS AND UNTIL THE
QUICK & REILLY STOCKHOLDER RECEIVES A LETTER OF TRANSMITTAL FOLLOWING THE
EFFECTIVE TIME.
After the Effective Time, there will be no transfers on the stock transfer
books of Quick & Reilly of the shares of Quick & Reilly Common Stock which were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such shares are presented for transfer
to the Exchange Agent, they will be cancelled and exchanged for certificates
representing shares of Fleet Common Stock and cash in lieu of fractional shares,
if any.
No dividends or other distributions with respect to Fleet Common Stock with
a record date occurring after the Effective Time shall be paid to the holder of
any unsurrendered Old Certificate representing Quick & Reilly Common Stock
converted in the Merger into the right to receive Fleet Common Stock until the
holder thereof shall be entitled to receive New Certificates in exchange
therefor in accordance with the procedures described above. After becoming so
entitled, the record holder thereof shall be entitled to receive any such
dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to the Fleet Common Stock such
holder had the right to receive upon surrender of the Old Certificate.
No fractional shares of Fleet Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger;
instead, Fleet shall pay to each holder of Quick & Reilly Common Stock who would
otherwise be entitled to a fractional share of Fleet Common Stock (after taking
into account all certificates delivered by such holder) an amount in cash
(without interest) determined by multiplying such fraction by the average of the
closing sale prices of Fleet Common Stock, as reported by the NYSE, for the five
NYSE trading days immediately preceding the Effective Date.
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Any portion of the Fleet Common Stock and cash in lieu of fractional shares
that remains unclaimed by the stockholders of Quick & Reilly for 12 months after
the Effective Time shall be paid to Fleet. Any stockholders of Quick & Reilly
who have not properly turned in their Old Certificates shall thereafter look
only to Fleet for payment of the shares of Fleet Common Stock and cash in lieu
of any fractional shares, if any, and any unpaid dividends and distributions on
the Fleet Common Stock deliverable in respect of each share of Quick & Reilly
Common Stock such stockholder holds, without any interest thereon.
Notwithstanding the foregoing, none of the Exchange Agent, Fleet and Quick &
Reilly will be liable to any former holder of Quick & Reilly Common Stock for
any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
For a description of the differences between the rights of the holders of
Fleet Common Stock and Quick & Reilly Common Stock, see "COMPARISON OF
STOCKHOLDERS' RIGHTS". For a description of the Fleet Common Stock, see
"DESCRIPTION OF FLEET CAPITAL STOCK--Fleet Common Stock".
EFFECTIVE TIME
The Effective Time will be as set forth in the Certificate of Merger (the
"Certificate of Merger") which will be filed with the Secretary of State of the
State of Delaware on the Effective Date of the Merger. The Effective Date will
occur on or before (i) the fifth business day to occur after the last of the
conditions set forth in the Merger Agreement shall have been satisfied or waived
in accordance with the terms of the Merger Agreement, or (ii) such other date to
which the parties may agree in writing. Fleet and Quick & Reilly each anticipate
that the Merger will be consummated during the first quarter of 1998. However,
the consummation of the Merger could be delayed as a result of delays in
obtaining the necessary governmental and regulatory approvals. There can be no
assurances whether or when such approvals will be obtained or that the Merger
will be consummated. If the Merger is not effected on or before June 30, 1998,
the Merger Agreement may be terminated by either Fleet or Quick & Reilly, except
to the extent that the failure of the Merger then to be consummated arises out
of or results from the failure of the party seeking to terminate the Merger
Agreement to perform or observe the covenants and agreements of such party set
forth therein. See "--Conditions to the Consummation of the Merger" and
"--Regulatory Approvals Required for the Merger".
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains representations and warranties of Quick &
Reilly as to, among other things: (i) the corporate organization and existence
of Quick & Reilly and its subsidiaries; (ii) the capitalization of Quick &
Reilly and its subsidiaries; (iii) corporate power and authority of Quick &
Reilly; (iv) the compliance of the Merger Agreement with (a) the charter and
by-laws of Quick & Reilly, (b) applicable law, and (c) certain material
agreements of Quick & Reilly; (v) governmental and third party approvals; (vi)
the timely filing of required regulatory reports of Quick & Reilly; (vii)
financial statements and filings with the Commission; (viii) the absence of
certain changes in Quick & Reilly's business since February 28, 1997; (ix) the
absence of material legal proceedings; (x) the filing and accuracy of tax
returns; (xi) employee benefit plans and related matters; (xii) compliance with
applicable law; (xiii) the absence of material defaults under certain contracts;
(xiv) the broker-dealer registrations of Quick & Reilly and its subsidiaries;
(xv) title to investment securities; (xvi) labor and environmental matters;
(xvii) its risk management instruments; (xix) insurance policies; (xx) the
inapplicability to the Merger of the Delaware takeover law; and (xxi) pooling of
interests accounting treatment.
The Merger Agreement contains representations and warranties of Fleet and
Merger Subsidiary as to, among other things: (i) the corporate organization and
existence of Fleet and its subsidiaries; (ii) the capitalization of Fleet and
its subsidiaries; (iii) the corporate power and authority of Fleet; (iv) the
compliance of the Merger Agreement with (a) the charter and by-laws of Fleet,
and (b) applicable law; (v) government and third party approvals; (vi) financial
statements and filings with the Commission;
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(vii) the absence of certain changes in Fleet's business since December 31,
1996; (viii) the absence of material legal proceedings; (ix) the filing and
accuracy of Fleet's tax returns; (x) Fleet's compliance with applicable law;
(xi) agreements between Fleet and regulatory agencies; and (xii) pooling of
interests accounting treatment.
CONDUCT OF BUSINESS PENDING THE MERGER AND OTHER AGREEMENTS
Upon the terms and subject to the conditions of the Merger Agreement, each
of Fleet and Quick & Reilly has agreed to use its reasonable best efforts in
good faith to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or desirable, or advisable under applicable
laws, so as to permit consummation of the Merger as promptly as practicable and
otherwise to enable consummation of the transactions contemplated hereby, and to
cooperate fully with the other party to that end.
Fleet and Quick & Reilly also agreed to cooperate and use their respective
reasonable best efforts to prepare all documentation, to effect all filings and
to obtain all permits, consents, approvals and authorizations of all third
parties and governmental authorities necessary to consummate the transactions
contemplated by the Merger Agreement.
Fleet and Quick & Reilly have each agreed upon request to furnish to the
other party all information concerning themselves and their subsidiaries,
directors, officers and stockholders and such other matters as may be necessary
or advisable in connection with the Merger and to give the other party access to
all of its properties, books, contracts, commitments and records and to furnish
information concerning its businesses, properties and personnel, subject to the
restrictions set forth in the Merger Agreement. Fleet also agreed to use its
reasonable best efforts to cause the shares of Fleet Common Stock to be issued
in the Merger to be approved for listing on the NYSE prior to the Effective
Date, subject to official notice of issuance.
In addition, except as expressly contemplated by the Merger Agreement or
specified in a schedule thereto or as contemplated by the Stock Option
Agreement, Quick & Reilly has agreed that, without the prior written consent of
Fleet, it will not, and will cause each of its subsidiaries not to, among other
things:
(i) (a) Conduct the business of Quick & Reilly and its subsidiaries other
than in the ordinary and usual course; (b) fail to use reasonable best efforts
to preserve intact their business organizations and assets and maintain their
rights, franchises and existing relations with customers, suppliers, employees
and business associates; and (c) take any action reasonably likely to have an
adverse affect upon Quick & Reilly's ability to perform any of its material
obligations under the Merger Agreement or to adversely affect or delay the
ability of Fleet or Fleet Securities to obtain any necessary approvals of any
regulatory agency or governmental body required for the transaction contemplated
by the Merger Agreement.
(ii) Except as previously disclosed and outstanding on the date of the
Merger Agreement, (a) issue, sell or otherwise permit to become outstanding
(including pursuant to any stock split, stock dividend, recapitalization or
similar transaction or pursuant to any Compensation and Benefit Plan qualified
under Section 401(k) of the Code to the extent such Compensation and Benefit
Plan offers Quick & Reilly Common Stock as an investment option), or authorize
the creation of, any capital stock, including any additional Quick & Reilly
Common Stock or any securities or obligations convertible into or exercisable or
exchangeable for, or the giving of any right to subscribe for or acquire, or any
options, calls or commitments relating to, or any stock appreciation right or
other instrument the value of which is determined, in whole or in part, by
reference to the market price or value of, shares of capital stock ("Rights");
(b) enter into any agreement, understanding or arrangement with respect to the
voting of its capital stock; (c) enter into any agreement with respect to the
foregoing; or (d) permit any additional Quick & Reilly Common Stock to become
subject to new grants of employee or director stock options, other Rights or
similar stock-based employee rights.
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(iii) (a) Make, declare, pay or set aside for payment any dividend (other
than (1) quarterly cash dividends on Quick & Reilly Common Stock in an amount
not to exceed $0.06 per share with record and payment dates consistent with past
practice and (2) dividends from wholly-owned subsidiaries of Quick & Reilly to
Quick & Reilly or another wholly-owned subsidiary of Quick & Reilly) on or in
respect of, or declare or make any distribution on, any Quick & Reilly Common
Stock; or (b) directly or indirectly, adjust, split, combine, redeem,
reclassify, purchase or otherwise acquire, any shares of its capital stock.
(iv) (a) Enter into or amend or renew any material employment, consulting,
severance or similar agreements or arrangements with any director, officer or
employee of Quick & Reilly or its subsidiaries, or (b) grant any salary or wage
increase or increase any employee benefit (including incentive or bonus
payments), except, in the case of (b),(1) normal individual increases in
compensation to employees in the ordinary course of business consistent with
past practice, (2) other changes that are required by applicable law, (3) to
satisfy previously disclosed contractual obligations existing as of the date of
the Merger Agreement, or (4) employment arrangements for, or grants of awards
to, newly hired employees consistent with past practice.
(v) Enter into, establish, adopt or amend (except as may be required by
applicable law or to satisfy previously disclosed contractual obligations
existing as of the date of the Merger Agreement) any pension, retirement, stock
option, stock purchase, savings, profit sharing, deferred compensation,
consulting, bonus, group insurance or other employee benefit, incentive or
welfare contract, plan or arrangement, or any trust agreement (or similar
arrangement) related thereto, in respect of any director, officer or employee of
Quick & Reilly or its subsidiaries, or take any action to accelerate the vesting
or exercisability of stock options, restricted stock or other compensation or
benefits, or increase the compensation or benefits, payable thereunder.
(vi) Except as previously disclosed, sell, transfer, mortgage, encumber or
otherwise dispose of or discontinue any of its material assets (including any
capital stock of its subsidiaries), business or properties except in the
ordinary course of business consistent with past practice and in a transaction
that individually or in the aggregate with all such other dispositions or
discontinuances is not material to it and its subsidiaries taken as a whole.
(vii) Except as previously disclosed, acquire (other than by way of
foreclosures or acquisitions of control in a BONA FIDE fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in each case, in the
ordinary and usual course of business consistent with past practice) all or any
portion of, the assets, business or properties of any other entity, or make any
material investment in, whether by purchase of stock or securities of, or
contributions to capital, loans or advances or the transfer of property to, any
other person, except in the ordinary course of business consistent with past
practice and in a transaction that individually or in the aggregate with all
such other acquisitions and investments is not material to it and its
subsidiaries taken as a whole.
(viii) Amend the Quick & Reilly Certificate, the Quick & Reilly By-laws or
the certificate of incorporation or by-laws (or similar governing documents) of
any of Quick & Reilly's significant subsidiaries.
(ix) Implement or adopt any change in its accounting principles, practices
or methods, other than as may be required by GAAP, as concurred with by Arthur
Andersen LLP, its independent accountants, or change any of its methods of
reporting income and deductions for federal income tax purposes from those
employed in the preparation of the federal income tax returns of Quick & Reilly
for the taxable years ended February 28, 1997 and February 29, 1996, except as
required by changes in law or regulation.
(x) Except in the ordinary course of business consistent with past practice,
enter into or terminate any material contract or amend or modify in any material
respect or extend any of its existing material contracts.
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(xi) Settle any material claim, action or proceeding, except for any
material claim, action or proceeding involving solely money damages in an
amount, individually or in the aggregate for all such settlements, that is not
material to Quick & Reilly and its subsidiaries, taken as a whole.
(xii) (a) Take any action that would, or is reasonably likely to, prevent or
impede the Merger from qualifying as a reorganization within the meaning of
Section 368 of the Code or for pooling of interests accounting treatment; or
(b) take any action that is intended or is reasonably likely to result in
(1) any of its representations and warranties set forth in the Merger Agreement
being or becoming untrue at any time at or prior to the Effective Time, (2) any
of the conditions to the Merger not being satisfied, or (3) a material violation
of any provision described herein except, in each case, as may be required by
applicable law or regulation.
(xiii) Except as required by applicable law or regulation, (a) implement or
adopt any change in its risk management policies, procedures or practices,
which, individually or in the aggregate with all such other changes, would be
material; (b) fail to use commercially reasonable means to avoid any material
increase in its aggregate exposure to risk from the general United States
securities markets; or (c) materially restructure or materially change its
investment securities portfolio, through purchases, sales or otherwise, or the
manner in which the portfolio is classified or reported.
(xiv) Other than in the ordinary course of business consistent with past
practice, (a) incur any indebtedness for borrowed money (other than short-term
indebtedness incurred to refinance existing short-term indebtedness, and
indebtedness of Quick & Reilly or any of its subsidiaries to Quick & Reilly or
any of its subsidiaries, and indebtedness under existing lines of credit), (b)
assume, guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other person; (c) make any loan or advance; or (d)
incur any capital expenditures, obligations or liabilities.
(xv) Agree or commit to do any of the foregoing.
In addition, Quick & Reilly agreed that it would not, and would cause its
subsidiaries and Quick & Reilly and its subsidiaries' officers, directors,
agents, advisors and affiliates not to, solicit or encourage inquiries or
proposals with respect to, or engage in any negotiations concerning, or provide
any confidential information to, or have any discussions with, any person
relating to any acquisition proposal. Quick & Reilly agreed to promptly advise
Fleet following the receipt by Quick & Reilly of any acquisition proposal and
the substance thereof, and to advise Fleet of any developments with respect to
such acquisition proposal immediately upon the occurrence thereof.
In addition, except as expressly contemplated by the Merger Agreement,
without the prior written consent of Quick & Reilly, Fleet agreed that it would
not, and would cause each of its subsidiaries not to:
(i) Make, declare, pay or set aside for payment any extraordinary dividend;
provided, however, the foregoing shall not apply to (a) increases in the
quarterly dividend rate payable on Fleet Common Stock in the ordinary course of
business consistent with past practices, or (b) any dividend paid in the
ordinary course of business by any subsidiary.
(ii) (a) Take any action that would, or is reasonably likely to, prevent or
impede the Merger from qualifying as a reorganization within the meaning of
Section 368 of the Code or for pooling of interests accounting treatment; or (b)
take any action that is intended or is reasonably likely to result in (1) any of
its representations and warranties set forth in the Merger Agreement being or
becoming untrue at any time at or prior to the Effective Time, (2) any of the
conditions to the Merger not being satisfied, or (3) a material violation of any
provision of the Merger Agreement except, in each case, as may be required by
applicable law or regulation; provided, however, that such agreements shall not
limit the ability of Fleet to exercise its rights under the Stock Option
Agreement.
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SUPPORT AGREEMENTS
Concurrently with the execution of the Merger Agreement, the Supporting
Stockholders, who, as of September 16, 1997, beneficially owned in the aggregate
approximately 40% of the outstanding shares of Quick & Reilly Common Stock,
executed individual Support Agreements with Fleet pursuant to which each
Supporting Stockholder agreed, among other things, that: (i) all of the shares
of Quick & Reilly Common Stock over which such Supporting Stockholder had voting
power or control as of the date of the Special Meeting will be voted by the
Supporting Stockholder to approve the Merger Agreement; and (ii) the Supporting
Stockholder will not, directly or indirectly solicit or encourage (including by
way of furnishing information), or take any other action to facilitate, any
inquiries or the making of any proposal which constitutes, or may reasonably be
expected to lead to, any takeover proposal with respect to Quick & Reilly or
Fleet. Each Support Agreement terminates upon termination of the Merger
Agreement in accordance with its terms.
Each Supporting Stockholder and the approximate number of shares of Quick &
Reilly Common Stock over which such Supporting Stockholder had voting power or
control as of September 16, 1997 are as follows: Leslie C. Quick, Jr. (6,469,072
shares); Leslie C. Quick III (1,317,250 shares); Thomas C. Quick (1,231,804
shares); Peter Quick (1,047,291 shares); Christopher C. Quick (988,417 shares);
Pascal J. Mercurio (35,437 shares); Richard G. Broderick (7,263 shares); Richard
G. Broderick and Charles A. Quick as Trustees for the Leslie C. Quick, Jr. Trust
UAB 3/1/78 (2,299,374 shares); Trustee for Leslie C. Quick III Descendents'
Trust (372,093 shares); Trustee for Peter Quick Descendents' Trust (372,093
shares); Trustee for Christopher Quick Descendents' Trust (372,093 shares);
Trustee for Nancy Quick Gibson Descendents' Trust (372,093 shares); Trustee for
Mary Quick Pedersen Descendents' Trust (372,093 shares); Trustee for Patricia
Quick Descendents' Trust (372,093 shares); Patricia Quick (137,860 shares);
Arlene B. Fryer (92,561 shares); Mary Quick Pedersen (73,342 shares); Thomas E.
Christman (59,827 shares); and Nancy Quick Gibson (50,899 shares).
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Each party's obligation to effect the Merger is subject to the fulfillment
or written waiver by Fleet or Quick & Reilly prior to the Effective Time of each
of the following conditions:
(i) The Merger Agreement and the Merger shall have been duly adopted by
the requisite vote of the Quick & Reilly Stockholders.
(ii) All regulatory approvals required to consummate the transactions
contemplated by the Merger Agreement (the "Requisite Regulatory Approvals")
shall have been obtained and shall remain in full force and effect, all
statutory waiting periods in respect thereof shall have expired and no such
approvals shall contain any conditions or restrictions which would
reasonably be expected to result in a material adverse effect on Fleet or
Quick & Reilly.
(iii) No governmental authority of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and prohibits or materially
restricts or makes illegal consummation of the transactions contemplated by
the Merger Agreement.
(iv) No stop order suspending the effectiveness of the Registration
Statement of which this Proxy Statement-Prospectus forms a part shall have
been issued and no proceedings for that purpose shall have been initiated or
threatened by the Commission.
(v) All permits and other authorizations under United States or state
securities laws necessary to consummate the transactions contemplated by the
Merger Agreement and to issue Fleet Common Stock to be issued in the Merger
shall have been received and be in full force and effect and no such
approvals shall contain any conditions or restrictions which would
reasonably be expected to result in a material adverse effect on Fleet,
Quick & Reilly, Merger Subsidiary or any of their subsidiaries.
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(vi) Fleet Common Stock to be issued in the Merger shall have been
approved for listing on the NYSE, subject to official notice of issuance.
(vii) The parties shall have received a letter from KPMG Peat Marwick LLP
in form and substance satisfactory to Fleet to the effect that the Merger
will qualify for pooling of interests accounting treatment. Such accountants
shall have received a letter from Arthur Andersen LLP, Quick & Reilly's
accountants, to the effect that all conditions necessary to qualify for
pooling of interests accounting treatment to the extent such conditions
pertain to Quick & Reilly have been satisfied.
(viii) The Retention Program shall have been established.
The obligation of Quick & Reilly to consummate the Merger is also subject to
the fulfillment or written waiver by Quick & Reilly prior to the Effective Time
of each of the following conditions:
(i) The representations and warranties of Fleet set forth in the Merger
Agreement shall be true and correct as of the date of the Merger Agreement
and as of the Effective Date as though made on and as of the Effective Date
(except that representations and warranties that by their terms speak as of
the date of the Merger Agreement or some other date shall be true and
correct as of such date), and Quick & Reilly shall have received a
certificate, dated the Effective Date, signed on behalf of Fleet by any Vice
Chairman of Fleet, to such effect.
(ii) Fleet shall have performed in all material respects all obligations
required to be performed by it under the Merger Agreement at or prior to the
Effective Date, and Quick & Reilly shall have received a certificate, dated
the Effective Date, signed on behalf of Fleet by any Vice Chairman of Fleet,
to such effect.
(iii) (a) Quick & Reilly shall have received an opinion of Wachtell,
Lipton, Rosen & Katz, special counsel to Quick & Reilly, dated the Effective
Date, to the effect that, on the basis of facts, representation and
assumptions set forth in such opinion, (1) the Merger constitutes a
reorganization within the meaning of Section 368 of the Code, and (2) no
gain or loss will be recognized by stockholders of Quick & Reilly who
receive Fleet Common Stock in exchange for Quick & Reilly Common Stock,
except with respect to cash received in lieu of fractional share interests.
In rendering its opinion, Wachtell, Lipton, Rosen & Katz may require and
rely upon representations contained in letters from Quick & Reilly, Fleet,
Fleet Securities and stockholders of Quick & Reilly.
(b) Quick & Reilly shall have received an opinion of Edwards & Angell,
counsel to Fleet and Merger Subsidiary, dated the Effective Date, to the
effect that (1) each of Fleet and Merger Subsidiary is duly organized,
validly existing and in good standing under the laws of the state of its
jurisdiction of incorporation, with the corporate power and authority to
carry on its business as it is now being conducted and to execute, deliver
and perform its obligations under the Merger Agreement and to consummate the
transactions contemplated thereby; (2) the Merger Agreement and the
transactions contemplated thereby have been duly authorized by all necessary
corporate action of each of Fleet and Merger Subsidiary; and (3) all
consents or approvals of, or filing or registrations with, any governmental
authority or with any third party required to be made or obtained by Fleet
or Merger Subsidiary in connection with the execution, delivery or
performance by Fleet or Merger Subsidiary of the Merger Agreement or to
consummate the Merger have been obtained or made, and all applicable waiting
periods have expired.
The obligation of Fleet and Merger Subsidiary to consummate the Merger is
also subject to the fulfillment or written waiver by Fleet prior to the
Effective Time of each of the following conditions:
(i) The representations and warranties of Quick & Reilly set forth in
the Merger Agreement shall be true and correct as of the date of the Merger
Agreement and as of the Effective Date as though made on and as of the
Effective Date (except that representations and warranties that by their
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terms speak as of the date of the Merger Agreement or some other date shall
be true and correct as of such date) and Fleet shall have received a
certificate, dated the Effective Date, signed on behalf of Quick & Reilly by
the Chief Executive Officer and the Chief Financial Officer of Quick &
Reilly, to such effect.
(ii) Quick & Reilly shall have performed in all material respects all
obligations required to be performed by it under the Merger Agreement at or
prior to the Effective Time, and Fleet shall have received a certificate,
dated the Effective Date, signed on behalf of Quick & Reilly by the Chief
Executive Officer and the Chief Financial Officer of Quick & Reilly, to such
effect.
(iii) Messrs. Leslie C. Quick, Jr., Leslie C. Quick III, Thomas C. Quick,
Peter Quick, Christopher C. Quick and Pascal J. Mercurio shall have (a)
entered into an employment agreement, (collectively the "Employment
Agreements"), and (b) not engaged in conduct constituting "cause" for
termination thereunder as of the Effective Date; and the Employment
Agreements entered into with such individuals shall remain in effect (in
each case, other than as a consequence of death or disability).
(iv) (a) Fleet shall have received an opinion of Edwards & Angell,
counsel to Fleet, dated the Effective Date, to the effect that, on the basis
of facts, representations and assumptions set forth in such opinion, the
Merger constitutes a reorganization under Section 368 of the Code. In
rendering its opinion, Edwards & Angell may require and rely upon
representations contained in letters from Quick & Reilly, Fleet, Merger
Subsidiary and stockholders of Quick & Reilly.
(b) Fleet shall have received an opinion of counsel to Quick & Reilly,
which counsel shall be reasonably satisfactory to Fleet, dated the Effective
Date, to the effect that (1) each of Quick & Reilly and its significant
subsidiaries is duly organized, validly existing and in good standing under
the laws of the state of its jurisdiction of incorporation, with the
corporate power and authority to carry on its business as it is now being
conducted and, with respect to Quick & Reilly, to execute, deliver and
perform its obligations under the Merger Agreement and to consummate the
transactions contemplated thereby; (2) the Merger Agreement and the
transactions contemplated thereby have been duly authorized by all necessary
corporate action of Quick & Reilly and its stockholders; and (3) all
consents or approvals of, or filings or registrations with, any governmental
authority or with any third party required to be made or obtained by Quick &
Reilly or any of its subsidiaries in connection with the execution, delivery
or performance by Quick & Reilly of the Merger Agreement or to consummate
the Merger have been obtained or made, and all applicable waiting periods
have expired.
(v) Since the date of the Merger Agreement, no event has occurred or
fact or circumstance arisen that, individually or taken together with all
other facts, circumstances and events, has had a material adverse effect
with respect to Quick & Reilly and its subsidiaries, taken as a whole.
No assurance can be provided as to if or when the Requisite Regulatory
Approvals necessary to consummate the Merger will be obtained or whether all of
the other conditions precedent to the Merger will be satisfied or waived by the
party permitted to do so. If the Merger is not effected on or before June 30,
1998, the Merger Agreement may be terminated by either Fleet or Quick & Reilly,
except to the extent that the failure of the Merger then to be consummated
arises out of or results from the failure of the party seeking to terminate the
Merger Agreement to perform or observe covenants and agreements of such party
set forth therein.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
Fleet and Quick & Reilly have agreed to use their reasonable best efforts to
obtain the Requisite Regulatory Approvals, which include approval from the
Federal Reserve Board, NYSE and NASD, and may include approvals from other
Securities Regulatory Authorities and various State Authorities. The Merger
cannot proceed in the absence of the Requisite Regulatory Approvals. There can
be no assurance
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that such Requisite Regulatory Approvals will be obtained, and, if obtained,
there can be no assurance as to the date of any such approvals or the absence of
any litigation challenging such approvals.
Fleet and Quick & Reilly are not aware of any other governmental approvals
or actions that are required prior to the parties' consummation of the Merger
other than those described below. It is presently contemplated that if any such
additional governmental or regulatory approvals or actions are required, such
approvals or actions will be sought. There can be no assurance, however, that
any such additional approvals or actions will be obtained.
FEDERAL RESERVE BOARD. The Merger is subject to prior approval by the
Federal Reserve Board under the Bank Holding Company Act of 1956, as amended
(the "BHCA"). With respect to the Merger, Fleet, as an acquiring bank holding
company, is required to file a notice with the Federal Reserve Board which
describes the proposed Merger and the proposed activities of the combined
entity, the effect of the proposal on competition among entities that engage in
such activities, the identity of the parties involved in the transaction,
including subsidiaries of the parties, a description of the public benefits
which may be expected from the proposal, a description of the terms of the
transaction, the sources of funds for the transaction and other financial and
managerial information. The information included in the notice and other
requests for information will allow the Federal Reserve Board, when considering
approval of the Merger, to take into consideration the financial and managerial
resources and prospects of the existing and combined institutions and the
benefits which may be expected from the Merger. The Federal Reserve Board will,
among other things, evaluate the adequacy of the capital levels of the acquiring
bank holding company both before and following the proposed transaction.
The Federal Reserve Board may deny a request for approval of an acquisition
by a bank holding company if it determines that the transaction would result in
a monopoly or be in furtherance of any combination or conspiracy to monopolize
or to attempt to monopolize a given business activity in any part of the United
States, or if its effect in any section of the country would be substantially to
lessen competition or to tend to create a monopoly, or if it would in any other
manner result in a restraint of trade, unless the Federal Reserve Board finds
that the anticompetitive effects of a transaction are clearly outweighed by the
probable effects of the transaction in providing benefits to the public.
Applicable federal law provides for the publication of notice and public
comment on notice applications filed with the Federal Reserve Board. The Merger
may not be consummated until after Federal Reserve Board approval is obtained.
Fleet's right to exercise the Option is also subject to the prior approval
of the Federal Reserve Board, to the extent that its exercise would result in
Fleet owning more than 5% of the outstanding shares of Quick & Reilly Common
Stock. In considering whether to approve Fleet's right to exercise the Option,
including Fleet's right to purchase more than 5% of the outstanding shares of
Quick & Reilly's Common Stock, the Federal Reserve Board would generally apply
the same statutory criteria it would apply to its consideration of approval of
the Merger.
STATE BANKING REGULATORS. Fleet expects that many of the requirements
associated with the applications of state banking regulators will be satisfied
by providing to such state banking regulators copies of the applications and
notices filed by Fleet with the Federal Reserve Board. Such state banking
regulators have indicated they will accept such copies in satisfaction of such
state filing requirements.
OTHER REQUISITE APPROVALS AND CONSENTS. The Merger is subject to the
approval of the NYSE and the NASD, and may require the approval of or notice to
other Securities Regulatory Authorities.
STATUS OF REGULATORY APPROVALS AND OTHER INFORMATION. The Merger is
conditioned upon the receipt of all Requisite Regulatory Approvals, including
the approvals of the Federal Reserve Board, Securities Regulatory Authorities
and various State Authorities. There can be no assurance that any governmental
agency will approve or take any other required action with respect to the
Merger, and, if approvals are
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received or action is taken, there can be no assurance as to the date of such
approvals or action, that such approvals or action will not be conditioned upon
matters that would cause the parties to abandon the Merger or that no action
will be brought challenging such approvals or action or, if such a challenge is
made, the result thereof. Fleet has filed its notice with the Federal Reserve
Board, and a copy of such notice has been filed with the United States
Department of Justice and the Federal Trade Commission. Fleet will be filing
applications with the NASD and the NYSE promptly after the date of this Proxy
Statement-Prospectus.
Fleet and Quick & Reilly are not aware of any governmental approvals or
actions that may be required for consummation of the Merger other than as
described above. Should any other approval or action be required, Fleet and
Quick & Reilly currently contemplate that such approval or action would be
sought.
THE MERGER CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVALS. THERE CAN BE NO ASSURANCE THAT SUCH REGULATORY APPROVALS WILL BE
OBTAINED OR, IF OBTAINED, AS TO THE DATES OF ANY SUCH REQUISITE REGULATORY
APPROVALS. THERE ALSO CAN BE NO ASSURANCE THAT SUCH APPROVALS WILL NOT CONTAIN A
CONDITION OR REQUIREMENT WHICH CAUSES SUCH APPROVALS TO FAIL TO SATISFY THE
CONDITIONS SET FORTH IN THE MERGER AGREEMENT OR WHICH OTHERWISE CAUSES THE
PARTIES TO TERMINATE THE MERGER AGREEMENT. SEE "--CONDITIONS TO THE CONSUMMATION
OF THE MERGER."
See "--Effective Time" and "--Conditions to the Consummation of the Merger".
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL. The following is a summary description of the material federal
income tax consequences of the Merger. This summary is not a complete
description of all of the consequences of the Merger and, in particular, may not
address federal income tax considerations that may affect the treatment of a
stockholder which, at the Effective Time, already owns some Fleet capital stock,
is not a U.S. person, is a tax-exempt entity or an individual who acquired Quick
& Reilly Common Stock pursuant to an employee stock option, or exercises some
form of control over Quick & Reilly. In addition, no information is provided
herein with respect to the tax consequences of the Merger under applicable
foreign, state or local laws. Consequently, each Quick & Reilly Stockholder is
advised to consult a tax advisor as to the specific tax consequences of the
transaction to that stockholder. The following discussion is based on the Code,
as in effect on the date of this Proxy Statement-Prospectus, without
consideration of the particular facts or circumstances of any holder of Quick &
Reilly Common Stock.
THE MERGER. The parties' respective obligations to effect the Merger are
conditioned on delivery of an opinion to Fleet from Edwards & Angell, its
counsel, and an opinion to Quick & Reilly from Wachtell, Lipton, Rosen & Katz,
its special counsel, each dated as of the Effective Date, based upon certain
customary representations and assumptions set forth therein, to the effect that
for federal income tax purposes the Merger constitutes a reorganization within
the meaning of Section 368 of the Code and, in the case of the opinion from
Wachtell, Lipton, Rosen & Katz, that no gain or loss will be recognized by
stockholders of Quick & Reilly who receive shares of Fleet Common Stock in
exchange for shares of Quick & Reilly Common Stock, except with respect to cash
received in lieu of fractional share interests.
In the opinion of Edwards & Angell and Wachtell, Lipton, Rosen & Katz, the
material federal income tax consequences of the Merger under currently
applicable law will be:
(i) No gain or loss will be recognized by Fleet or by Quick & Reilly as a
result of the Merger;
(ii) No gain or loss will be recognized by Quick & Reilly Stockholders upon
their exchange of Quick & Reilly Common Stock for Fleet Common Stock, except
that a Quick & Reilly Stockholder who receives cash proceeds in lieu of a
fractional share interest in Fleet Common Stock will recognize gain or loss
equal to the difference between such proceeds and the tax basis allocated to the
fractional share interest and
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such gain or loss will constitute capital gain or loss if such stockholder's
Quick & Reilly Common Stock with respect to which gain or loss is recognized is
held as a capital asset at the Effective Time;
(iii) The tax basis of the Fleet Common Stock (including any fractional
share interest) received by a Quick & Reilly Stockholder who exchanges his or
her Quick & Reilly Common Stock for Fleet Common Stock will be the same as such
stockholder's tax basis in the Quick & Reilly Common Stock surrendered in
exchange therefor; and
(iv) The holding period of the Fleet Common Stock (including any fractional
share interest) received by a Quick & Reilly Stockholder will include the period
during which the Quick & Reilly Common Stock surrendered in exchange therefor
was held (provided that such Quick & Reilly Common Stock was held by such Quick
& Reilly Stockholder as a capital asset at the Effective Time).
Opinions of Edwards & Angell and Wachtell, Lipton, Rosen & Katz have been filed
as Exhibits to the Registration Statement of which this Proxy
Statement-Prospectus forms a part.
INFORMATION REPORTING AND BACKUP WITHHOLDING. Payments in respect of Quick
& Reilly Common Stock may be subject to information reporting to the Internal
Revenue Service and to a 31% backup withholding tax. Backup withholding will not
apply, however, to a payment to a Quick & Reilly Stockholder or other payee if
such stockholder or payee completes and signs the substitute Form W-9 that will
be included as part of the letter of transmittal or otherwise proves to Fleet
and the Exchange Agent that it is exempt from backup withholding.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling of
interests transaction under GAAP. Under such method of accounting, holders of
Quick & Reilly Common Stock will be deemed to have combined their existing
voting common stock interest with that of holders of Fleet Common Stock by
exchanging their shares for shares of Fleet Common Stock. Accordingly, the book
value of the assets, liabilities and stockholders' equity of Quick & Reilly, as
reported on its consolidated balance sheet, will be carried over to the
consolidated balance sheet of Fleet and no goodwill will be created. Fleet will
be able to include in its consolidated income the consolidated income of Quick &
Reilly for the entire fiscal year in which the Merger occurs; however, certain
expenses incurred to effect the Merger must be treated by Fleet as current
charges against income rather than adjustments to its balance sheet. In order
for the Merger to qualify for pooling of interests accounting treatment, among
other criteria, substantially all (90% or more) of the outstanding Quick &
Reilly Common Stock must be exchanged for Fleet Common Stock.
The unaudited pro forma financial information contained in this Proxy
Statement-Prospectus has been prepared using the pooling of interests accounting
method to account for the Merger. See "UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS."
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TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement provides that the Merger Agreement may be terminated,
and the Merger may be abandoned: (i) at any time prior to the Effective Time, by
the mutual written consent of Fleet and Quick & Reilly, if the Board of
Directors of each so determines by vote of the majority of the members of its
entire Board of Directors; (ii) at any time prior to the Effective Time, by
Fleet or Quick & Reilly, if its Board of Directors so determines by vote of a
majority of the members of its entire Board of Directors, in the event of a
breach by the other party of any representation, warranty, covenant, agreement
or conditions contained in the Merger Agreement, which breach cannot be or has
not been cured within 30 days after the giving of written notice to the
breaching party of such breach; (iii) at any time prior to the Effective Time,
by Fleet or Quick & Reilly, if its Board of Directors so determines by vote of a
majority of the members of its entire Board of Directors, in the event that the
Merger is not consummated by June 30, 1998, except to the extent that the
failure of the Merger then to be consummated arises out of or results from the
failure of the party seeking to terminate the Merger Agreement to perform or
observe the covenants and agreements of such party set forth in the Merger
Agreement; (iv) by Quick & Reilly or Fleet, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board of
Directors, in the event (a) the approval of any governmental authority required
for consummation of the Merger and the other transactions contemplated by the
Merger Agreement has been denied by final nonappealable action of such
governmental authority or any governmental authority of competent jurisdiction
has issued a final nonappealable injunction permanently enjoining or otherwise
prohibiting the consummation of the transactions contemplated by the Merger
Agreement, or (b) if the requisite stockholder approval of Quick & Reilly has
not been obtained.
WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
Prior to the Effective Time, any provision of the Merger Agreement may be
(i) waived by the party benefited by the provision, or (ii) amended or modified
at any time, by an agreement in writing among Quick & Reilly, Fleet and Merger
Subsidiary, provided such amendment or modification is executed in the same
manner as the Merger Agreement, except that, after approval by Quick & Reilly
Stockholders, the Merger Agreement may not be amended without further approval
of Quick & Reilly Stockholders if it would violate Delaware Law or reduce the
consideration to be received by Quick & Reilly Stockholders in the Merger. Such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
STOCK OPTION AGREEMENT
Concurrently with the execution of the Merger Agreement, Quick & Reilly
executed and delivered the Stock Option Agreement, pursuant to which Quick &
Reilly granted to Fleet the Option. The Stock Option Agreement is attached to
this Proxy Statement-Prospectus as Exhibit B and is incorporated herein by
reference. Quick & Reilly approved and entered into the Stock Option Agreement
to induce Fleet to enter into the Merger Agreement. The Stock Option Agreement
is intended to increase the likelihood that the Merger will be consummated in
accordance with the terms of the Merger Agreement. Consequently, certain aspects
of the Stock Option Agreement may have the effect of discouraging persons who
might now or prior to the Effective Time be interested in acquiring all of or a
significant interest in Quick & Reilly from considering or proposing such an
acquisition, even if such persons were prepared to offer to pay consideration to
Quick & Reilly Stockholders which had a higher current market price than the
shares of Fleet Common Stock to be received pursuant to the Merger Agreement.
The Stock Option Agreement provides for the purchase by Fleet of 7,688,241
shares (the "Option Shares") of Quick & Reilly Common Stock at an exercise price
of $35.04 per share (the "Option Price"), payable in cash. The Option Shares, if
issued pursuant to the Stock Option Agreement, shall in no event
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exceed 19.9% of the Quick & Reilly Common Stock issued and outstanding without
giving effect to the issuance of any Quick & Reilly Common Stock subject to the
Option.
The number of Option Shares will be increased to the extent that additional
shares of Quick & Reilly Common Stock are issued or otherwise become
outstanding, such that, after such issuance, the number of Option Shares will
continue to equal 19.9% of the Quick & Reilly Common Stock then issued and
outstanding without giving effect to the issuance of any Quick & Reilly Common
Stock subject to such Option. In the event of any change in, or distributions in
respect of, the shares of Quick & Reilly Common Stock by reason of a stock
dividend, split-up, merger, recapitalization, combination, subdivision,
conversion, exchange of shares, distribution on or in respect of such Quick &
Reilly Common Stock or similar transaction, the type and number of Option Shares
purchasable upon exercise of the Option, and the applicable option price will
also be adjusted in such a manner as shall fully preserve the economic benefits
of the Option.
The Stock Option Agreement provides that Fleet or any other holder or
holders of the Option (as used in this section, collectively, the "Holder") may
exercise the Option, in whole or in part, subject to regulatory approval, if
both an Initial Triggering Event (as defined below) and a Subsequent Triggering
Event (as defined below) shall have occurred prior to the occurrence of an
Exercise Termination Event (as defined below); provided that the Holder shall
have sent to Quick & Reilly written notice of such exercise within 90 days
following such Subsequent Triggering Event (subject to extension as provided in
the Stock Option Agreement). The terms Initial Triggering Event and Subsequent
Triggering Event generally relate to attempts by one or more third parties to
acquire a significant interest in Quick & Reilly. Any exercise of the Option
will be deemed to occur on the date such notice is sent.
For purposes of the Stock Option Agreement:
(a) The term "Initial Triggering Event" means the occurrence of any of
the following events or transactions after September 16, 1997: (i) Quick &
Reilly or any of its subsidiaries, without Fleet's prior written consent,
shall have entered into an agreement to engage in, or the Quick & Reilly
Board accepts, or recommends stockholder approval of, an Acquisition
Transaction (as defined below) with any person or group (other than as
contemplated by the Merger Agreement); (ii) Quick & Reilly or any of its
subsidiaries, without Fleet's prior written consent, shall have authorized,
recommended, proposed or publicly announced its intention to authorize,
recommend or propose, to engage in an Acquisition Transaction with any
person or group (other than as contemplated by the Merger Agreement) or the
Quick & Reilly Board shall have publicly withdrawn or modified, or publicly
announced its intention to withdraw or modify, in any manner adverse to
Fleet, its recommendation that its stockholders approve the Merger
Agreement; (iii) any person, other than Fleet or any subsidiary of Fleet,
acting in a fiduciary capacity in the ordinary course of business, acquires
beneficial ownership or the right to acquire beneficial ownership of 10% or
more of the outstanding shares of the Quick & Reilly Common Stock; (iv) any
person other than Fleet or any subsidiary of Fleet shall have made a bona
fide proposal to Quick & Reilly or its stockholders by public announcement
or written communication that shall be or becomes the subject of public
disclosure to engage in an Acquisition Transaction; (v) Quick & Reilly
breaches any covenant or obligation in the Merger Agreement after any
person, other than Fleet or any of its subsidiaries, has proposed an
Acquisition Transaction, and such breach (A) would entitle Fleet to
terminate the Merger Agreement, and (B) is not remedied prior to the date of
Fleet's notice to Quick & Reilly of the exercise of the Option; or (vi) any
person other than Fleet or any subsidiary of Fleet, other than in connection
with a transaction to which Fleet has given its prior written consent, shall
have filed an application or notice with the Federal Reserve Board, or other
federal or state bank regulatory authority, which application or notice has
been accepted for processing, for approval to engage in an Acquisition
Transaction.
(b) The term "Acquisition Transaction" means (i) a merger or
consolidation, or any similar transaction with Quick & Reilly or any of its
Significant Subsidiaries (as defined in Rule 1-02 of
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Regulation S-X of the Commission); (ii) a purchase, lease or other
acquisition of all or substantially all of the assets of Quick & Reilly or
any of its Significant Subsidiaries; (iii) a purchase or other acquisition
of securities representing 10% or more of the voting power of Quick & Reilly
or any of its Significant Subsidiaries; or (iv) any substantially similar
transaction; provided, however, that in no event shall any (i) merger,
consolidation or similar transaction involving Quick & Reilly or any
Significant Subsidiary in which the voting securities of Quick & Reilly
outstanding immediately prior thereto continue to represent (by either
remaining outstanding or being converted into the voting securities of the
surviving entity of any such transaction) at least 65% of the combined
voting power of the voting securities of Quick & Reilly or the surviving
entity outstanding immediately after the consummation of such merger,
consolidation or similar transaction, or (ii) merger, consolidation,
purchase or similar transaction involving only Quick & Reilly and one or
more of its subsidiaries or involving only any two or more of such
subsidiaries, be deemed to be an Acquisition Transaction, provided any such
transaction is not entered into in violation of the terms of the Merger
Agreement.
(c) The term "Subsequent Triggering Event" means the occurrence of
either of the following events or transactions after September 16, 1997: (i)
the acquisition by any person of beneficial ownership of 20% or more of the
then outstanding shares of Quick & Reilly Common Stock; or (ii) the
occurrence of the Initial Triggering Event described above in clause (a)(i),
except that the percentage referred to in subclause (iii) of the definition
of "Acquisition Transaction" set forth in clause (b) shall be 20%.
The Option will expire upon the occurrence of an "Exercise Termination
Event", defined as: (i) the Effective Time; (ii) termination of the Merger
Agreement in accordance with the provisions thereof if such termination occurs
prior to the occurrence of an Initial Triggering Event, except in the case of
the termination of the Merger Agreement by Fleet as a result of an uncured
material breach by Quick & Reilly of any of its representations, warranties,
covenants or agreements unless the breach by Quick & Reilly is non-volitional;
or (iii) 12 months after the termination of the Merger Agreement if such
termination occurs after the occurrence of an Initial Triggering Event or is a
termination by Fleet due to a material, volitional breach by Quick & Reilly of
the Merger Agreement (provided that if an Initial Triggering Event continues or
occurs beyond such termination of the Merger Agreement and prior to the passage
of such 12-month period, the Option will terminate 12 months from the expiration
of the last Initial Triggering Event to expire, but in no event more than 18
months after such termination of the Merger Agreement).
As of the date of this Proxy Statement-Prospectus, to the best knowledge of
Fleet and Quick & Reilly, no Initial Triggering Event or Subsequent Triggering
Event has occurred.
Immediately prior to the occurrence of a Repurchase Event (as defined
below), (i) following a request of the Holder, delivered prior to an Exercise
Termination Event, Quick & Reilly (or any successor thereto) shall repurchase
the Option from the Holder at a price (the "Option Repurchase Price") equal to
the amount by which (A) the market/offer price (as defined below) exceeds (B)
the Option Price, multiplied by the number of shares for which the Option may
then be exercised, and (ii) at the request of the owner of Option Shares from
time to time (the "Owner"), delivered within 90 days of such occurrence (or such
later period as provided in Section 10 of the Stock Option Agreement), Quick &
Reilly shall repurchase such number of the Option Shares from the Owner as the
Owner shall designate at a price (the "Option Share Repurchase Price") equal to
the market/offer price multiplied by the number of Option Shares so designated.
The term "market/offer price" shall mean the highest of (i) the price per
share of Quick & Reilly Common Stock at which a tender offer or exchange offer
therefor has been made, (ii) the price per share of Quick & Reilly Common Stock
to be paid by any third party pursuant to an agreement with Quick & Reilly,
(iii) the highest closing price for shares of Quick & Reilly Common Stock within
the six-month period immediately preceding the date the Holder gives notice of
the required repurchase of the Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the
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event of a sale of all or a substantial portion of Quick & Reilly's assets, the
sum of the price paid in such sale for such assets and the current market value
of the remaining assets of Quick & Reilly as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as the
case may be, divided by the number of shares of Quick & Reilly Common Stock
outstanding at the time of such sale. In determining the market/offer price, the
value of consideration other than cash shall be determined by a nationally
recognized investment banking firm selected by the Holder or Owner, as the case
may be. To the extent that Quick & Reilly is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Quick
& Reilly shall immediately so notify the Holder and/or the Owner and thereafter
deliver or cause to be delivered, from time to time, to the Holder and/or the
Owner, as appropriate, the portion of the Option Repurchase Price and the Option
Share Repurchase Price, respectively, that it is no longer prohibited from
delivering, within five business days after the date on which Quick & Reilly is
no longer so prohibited; provided, however, that if Quick & Reilly at any time
after delivery of a notice of repurchase as described in this paragraph is
prohibited under applicable law or regulation from delivering to the Holder
and/or the Owner, as appropriate, the Option Repurchase Price and the Option
Share Repurchase Price, respectively, in full, the Holder or Owner may revoke
its notice of repurchase of the Option or the Option Shares either in whole or
to the extent of the prohibition, whereupon, in the latter case, Quick & Reilly
shall promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price or the Option Share Repurchase Price that
Quick & Reilly is not prohibited from delivering, and (ii) deliver, as
appropriate, either (a) to the Holder, a new Stock Option Agreement evidencing
the right of the Holder to purchase that number of shares of Quick & Reilly
Common Stock obtained by multiplying the number of shares of Quick & Reilly
Common Stock for which the surrendered Stock Option Agreement was exercisable at
the time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Option Repurchase Price less the portion thereof theretofore
delivered to the Holder and the denominator of which is the Option Repurchase
Price, or (b) to the Owner, a certificate for the Option Shares it is then so
prohibited from repurchasing.
A "Repurchase Event" is deemed to have occurred (i) upon the consummation of
an Acquisition Transaction, or (ii) upon the acquisition by any person of the
beneficial ownership of 50% or more of the then outstanding Quick & Reilly
Common Stock, provided that a Subsequent Triggering Event shall have occurred
prior to an Exercise Termination Event.
In the event that prior to an Exercise Termination Event, Quick & Reilly
enters into any agreement (i) to consolidate with or merge into any person,
other than Fleet or one of its subsidiaries, such that Quick & Reilly is not the
continuing or surviving corporation of such consolidation or merger; (ii) to
permit any person, other than Fleet or one of its subsidiaries, to merge into
Quick & Reilly and Quick & Reilly is the continuing or surviving corporation,
but, in connection with such consolidation or merger, the outstanding shares of
Quick & Reilly Common Stock are changed into or exchanged for stock or other
securities of any other person or cash or any other property or the then
outstanding shares of Quick & Reilly Common Stock after such merger shall
represent less than 50% of the outstanding voting shares and voting share
equivalents of the merged corporation; or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Fleet or any of
its subsidiaries, then, and in each such case, the agreement governing such
transaction must provide that, upon consummation of such transaction and upon
terms and conditions set forth in the Stock Option Agreement, the Option will be
converted into, or exchanged for, an option having substantially the same terms
as the Option (the "Substitute Option") to purchase securities, at the election
of the Holder, of either the acquiring corporation or any person that controls
the acquiring corporation. At the request of the Holder of the Substitute
Option, the issuer of the Substitute Option shall repurchase it at a price, and
subject to such other terms and conditions, as set forth in the Stock Option
Agreement.
Within 90 days after the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Date (subject to extension as provided
in the Stock Option Agreement), Fleet may request Quick & Reilly to prepare,
file and keep current with respect to the Option Shares, a registration
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statement with the Commission. Quick & Reilly is required to use its reasonable
best efforts to cause such registration statement to become effective and then
to remain effective for 180 days or such shorter time as may be reasonably
necessary to effect such sales or other disposition of Option Shares. Fleet has
the right to demand two such registrations.
Neither Quick & Reilly nor Fleet may assign any of its rights and
obligations under the Stock Option Agreement or the Option to any other person
without the express written consent of the other party, except that if a
Subsequent Triggering Event occurs prior to an Exercise Termination Event,
Fleet, subject to the terms of the Stock Option Agreement, may assign in whole
or in part its rights and obligations thereunder, within 90 days (subject to
extension as provided in the Stock Option Agreement) of such Subsequent
Triggering Event; provided that until the date 15 days after the date on which
the Federal Reserve Board approves an application by Fleet to acquire the Option
Shares, Fleet may not assign its rights under the Option except in (i) a widely
dispersed public distribution, (ii) a private placement in which no one party
acquires the right to purchase in excess of 2% of the voting shares of Quick &
Reilly, (iii) an assignment to a single party for the purpose of conducting a
widely dispersed public distribution on Fleet's behalf, or (iv) any other manner
approved by the Federal Reserve Board.
EMPLOYEE BENEFITS AND PLANS
The Merger Agreement provides that, for a period of two years from and after
the Effective Time, unless otherwise mutually determined by Fleet or Merger
Subsidiary and the senior management of Merger Subsidiary, in their reasonable
discretion and in accordance with applicable law, the benefits to be provided to
employees of Quick & Reilly as of the Effective Time (other than those employees
who are parties to the Employment Agreements) ("Covered Employees") shall be the
benefit plans and programs as were provided by Quick and Reilly to the Covered
Employees immediately before the Effective Time, including, without limitation,
Quick & Reilly's retirement trust pension and profit-sharing plans, and to the
extent consistent with applicable law, shall honor all employee benefit
obligations to current and former employees of Quick & Reilly under such plans
for such two-year period. Notwithstanding the foregoing, in the event that
during the two years following the Effective Time, Fleet or Merger Subsidiary,
in consultation with the senior management of Merger Subsidiary, determines that
the Covered Employees shall participate or be required to participate in Fleet's
employee benefit plans and programs, then in no event shall the benefit plans
and programs provided to Covered Employees during such two-year period be less
favorable to the Covered Employees in the aggregate than the benefits provided
to the Covered Employees immediately before the Effective Time. Fleet shall
cause each employee benefit plan, program or arrangement maintained or
contributed to by Fleet, in which the Covered Employees shall be eligible to
participate, to treat the prior service with Quick & Reilly of each Covered
Employee as service rendered to Fleet for purposes of all eligibility periods
and vesting thereunder (but not for purposes of benefit accruals). Fleet shall
cause any and all pre-existing condition limitations and eligibility waiting
periods under any health plans to be waived with respect to Covered Employees
and their eligible dependents who, immediately prior to the date of conversion
from Quick & Reilly's health plans, participated in a health plan.
Fleet also agreed to establish a Retention Program with a retention pool
consisting of $15 million in cash to be distributed to senior managers of Quick
& Reilly. Pursuant to the terms of the Retention Program, each manager will be
entitled to receive a retention payment out of half of such pool in an amount to
be determined in each of calendar years 1998, 1999 and 2000, provided that the
senior manager is employed on December 31 of such year. An additional amount to
be determined will be payable out of the remaining half of such pool with
respect to the calendar years 1998, 1999 and 2000, provided that Quick & Reilly
achieves certain preestablished pre-tax income goals.
In addition, following the Effective Time, Fleet has agreed to continue to
pay quarterly bonuses to Quick & Reilly's employees based on Quick & Reilly's
quarterly pre-tax profits, if any, in accordance with Quick & Reilly's practice
prior to the Effective Time.
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STOCK EXCHANGE LISTING
Fleet agreed to use its reasonable best efforts to list, prior to the
Effective Date, on the NYSE, subject to official notice of issuance, Fleet
Common Stock to be issued to the holders of Quick & Reilly Common Stock in the
Merger. It is a condition to the consummation of the Merger that such shares of
Fleet Common Stock be approved for listing on the NYSE, subject to official
notice of issuance.
EXPENSES
The Merger Agreement provides that each of Fleet and Quick & Reilly will
bear all expenses incurred by it in connection with the Merger Agreement and the
transactions contemplated thereby, except that printing and mailing expenses and
Commission fees shall be shared equally between Fleet and Quick & Reilly.
DIVIDENDS
The Merger Agreement provides that Fleet and Quick & Reilly will coordinate
the declaration and payment of dividends in respect of Fleet Common Stock and
Quick & Reilly Common Stock and the record dates and payment dates relating
thereto, so that holders of Fleet Common Stock or Quick & Reilly Common Stock
shall not receive two dividends, or fail to receive one dividend, for any
quarter with respect to their shares of Fleet Common Stock and/or Quick & Reilly
Common Stock and any shares of Fleet Common Stock any such holder receives in
exchange therefor in the Merger.
RESALES OF FLEET COMMON STOCK RECEIVED IN THE MERGER
The Fleet Common Stock issued pursuant to the Merger will be freely
transferable under the Securities Act, except for shares issued to any Quick &
Reilly stockholder who may be deemed to be an affiliate of Fleet for purposes of
Rule 144 promulgated under the Securities Act ("Rule 144") or an affiliate of
Quick & Reilly for purposes of Rule 145 promulgated under the Securities Act
("Rule 145") (each, an "Affiliate"). Affiliates will include persons (generally
executive officers, directors and ten percent stockholders) who control, are
controlled by, or are under common control with (i) Fleet or Quick & Reilly at
the time of the Special Meeting, or (ii) Fleet at or after the Effective Time.
Rules 144 and 145 will restrict the sale of Fleet Common Stock received in
the Merger by Affiliates and certain of their family members and related
interests. Generally speaking, during the one year following the Effective Time,
those persons who are Affiliates of Quick & Reilly at the time of the Special
Meeting, provided they are not Affiliates of Fleet at or following the Effective
Time, may publicly resell any Fleet Common Stock received by them in the Merger,
subject to certain limitations as to, among other things, the amount of Fleet
Common Stock sold by them in any three-month period and the manner of sale.
After the one-year period, such Affiliates may resell their shares without such
restrictions so long as there is adequate current public information with
respect to Fleet as required by Rule 144, and after two years, may resell their
shares without restriction. Persons who become Affiliates of Fleet prior to, at
or after the Effective Time may publicly resell the Fleet Common Stock received
by them in the Merger subject to similar limitations and subject to certain
filing requirements specified in Rule 144.
The ability of Affiliates to resell shares of Fleet Common Stock received in
the Merger under Rule 144 or 145 as summarized herein generally will be subject
to Fleet's having satisfied its Exchange Act reporting requirements for
specified periods prior to the time of sale. Affiliates also would be permitted
to resell Fleet Common Stock received in the Merger pursuant to an effective
registration statement under the Securities Act or another available exemption
from the Securities Act registration requirements.
This Proxy Statement-Prospectus does not cover any resales of Fleet Common
Stock received by persons who may be deemed to be Affiliates of Fleet or Quick &
Reilly in the Merger.
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Commission guidelines regarding qualifying for the pooling of interests
method of accounting also limit sales of shares of the acquiring and acquired
company by affiliates of either company in a business combination. Commission
guidelines indicate further that the pooling of interests method of accounting
will generally not be challenged on the basis of sales by affiliates of the
acquiring or acquired company if they do not dispose of any of the shares of the
corporation they own or shares of a corporation they receive in connection with
a merger during the period beginning 30 days before the merger and ending when
financial results covering at least 30 days of post-merger operations of the
combined entity have been published.
Quick & Reilly has agreed in the Merger Agreement to use its reasonable best
efforts to cause each person who is an Affiliate of Quick & Reilly (for purposes
of Rule 145 and for purposes of qualifying the Merger for pooling of interests
accounting treatment) to execute and deliver to Fleet a written agreement
intended to ensure compliance with the Securities Act and preserve the ability
to treat the Merger as a pooling of interests.
Fleet has agreed in the Merger Agreement to use its reasonable best efforts
to publish no later than 90 days after the end of the first month after the
Effective Time in which there are at least 30 days of post-Merger combined
operations (which month may be the month in which the Effective Time occurs),
combined sales and net income figures as contemplated by and in accordance with
the terms of the Commission's Accounting Series Release No. 135.
FLEET DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
Fleet has an automatic Dividend Reinvestment and Stock Purchase Plan (the
"Plan"). The Plan provides, in substance, for those stockholders who elect to
participate, that dividends on Fleet Common Stock and optional cash payments of
not less than $10 per month, up to a maximum of $10,000 for each quarter, will
be invested in shares of Fleet Common Stock. The purchase price for Fleet Common
Stock purchased both with reinvested cash dividends and with optional cash
payments is 100% of the market price. In each case, the Plan provides for the
payment by Fleet of any brokerage commissions or service charges with respect to
such purchases. The Plan also provides that Fleet may change the discount
amounts for dividends and optional cash payments, and the maximum optional cash
payment amount at any time in its sole discretion. After the Effective Time,
Quick & Reilly Stockholders who receive Fleet Common Stock in the Merger will
have the right to participate in the Plan.
APPRAISAL RIGHTS
HOLDERS OF QUICK & REILLY COMMON STOCK DO NOT HAVE ANY APPRAISAL RIGHTS
UNDER DELAWARE LAW IN CONNECTION WITH THE MERGER.
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BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
Fleet has agreed to cause one member of the Quick & Reilly Board on the date
of the Merger Agreement (selected by Fleet after consultation with Quick &
Reilly), who is still a member of the Quick & Reilly Board immediately prior to
the Effective Time and willing and eligible to serve (the "Quick & Reilly Board
Designee"), to be elected or appointed as a director of the Fleet Board as
promptly as practicable after the Effective Time. Thomas C. Quick has been
chosen as the Quick & Reilly Board Designee.
The directors and officers of Merger Subsidiary immediately after the Merger
shall be the directors and officers of Merger Subsidiary immediately prior to
the Effective Time, until such time as their successors shall be duly elected
and qualified. The operations of the business conducted by Quick & Reilly prior
to the Effective Time will be conducted through separate subsidiaries of Merger
Subsidiary after the Effective Time. Fleet has agreed, through the Employment
Agreements, that the six top executive officers of Quick & Reilly and its
subsidiaries, and certain other key employees, will continue to serve in their
current capacities following the Merger. Subject to applicable legal and
regulatory limitations, the Quick & Reilly business will be operated
autonomously and be headquartered in Palm Beach, Florida.
Aggregate and individual compensation levels for employees operating the
Quick & Reilly business will be determined by an executive management committee
of Merger Subsidiary, consisting initially of the members of the Executive
Management Committee of Quick & Reilly immediately prior to the Effective Time
and two representatives to be named by Fleet.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Quick & Reilly's management who participated in the
negotiation of the terms of the Merger Agreement and the transactions
contemplated thereby, including the Merger, have interests in the Merger that
are in addition to, and may be in conflict with, their interests as holders of
Quick & Reilly Common Stock generally. Certain executive officers of Quick &
Reilly and its subsidiaries will continue to serve in such capacities after the
Effective Time. Quick & Reilly has also entered into the Employment Agreements
with certain executive officers of Quick & Reilly, which agreements will become
effective at the Effective Time. In addition, Fleet has agreed to indemnify
certain executive officers and directors of Quick & Reilly after the Effective
Time. The Quick & Reilly Board was aware of these interests and considered them,
among other matters, in approving the Merger Agreement and the transactions
contemplated thereby.
EMPLOYMENT AGREEMENTS. Pursuant to the Merger Agreement, Quick & Reilly
entered into the Employment Agreements with Leslie C. Quick, Jr., Leslie C.
Quick III, Thomas C. Quick, Peter Quick, Christopher C. Quick and Pascal J.
Mercurio. Each Employment Agreement is for a term of five years commencing at
the Effective Time (the "Employment Period"). During the Employment Period, the
executives will receive an annual base salary of $650,000 in the case of Leslie
C. Quick, Jr., and $350,000 in the case of each of the other five executives,
and for the calendar years 1998 and 1999, the Employment Agreements provide for
minimum bonuses of $1,850,000 in the case of Leslie C. Quick, Jr., and
$1,400,000 in the case of each of the other five executives. Pursuant to the
terms of each Employment Agreement, each executive will be entitled to receive a
retention payment of $694,450 in each of calendar years 1998, 1999 and 2000,
provided that the executive is employed on December 31 of such year. An
additional $694,450 will be payable with respect to the calendar years ending
1998, 1999 and 2000, provided that the Quick & Reilly business achieves certain
preestablished pre-tax income goals. The amounts set forth above would also be
payable in the event of an executive's death, Disability (as defined in the
Employment Agreements), termination without Cause (as defined in the Employment
Agreements) or termination by the executive for Good Reason (as defined in the
Employment Agreements). The Employment Agreements also provide that each
executive will be entitled to receive special incentive bonuses from a
$40,000,000 incentive bonus pool, in an aggregate amount to be determined by the
Chairman of Quick &
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Reilly. Such incentive bonuses will be payable based on Quick & Reilly's
achievement of certain preestablished pre-tax income goals with respect to each
of three three-year performance periods. The incentive bonus payments will not
be payable with respect to a performance period unless a minimum pre-tax income
goal is achieved and will be pro-rated or paid in full to the extent such
minimum goal is exceeded. The Employment Agreements provide for Quick & Reilly
to sell each executive a seat on the NYSE for $1,000,000, which the executive
will lease back to Quick & Reilly for $160,000 per year. Each Employment
Agreement contains restrictive covenants, which prohibit the executive from
disclosing confidential information and from competing with Quick & Reilly or
soliciting its employees during the Employment Period and for one year following
termination of the executive's employment for any reason other than termination
without Cause.
In the event that any amounts payable to the executive upon termination of
employment by Quick & Reilly without Cause or by the executive for Good Reason,
or in connection with Quick & Reilly's decision to accelerate the payment of the
incentive bonuses, would subject him to the excise tax under Section 4999 of the
Code, Quick & Reilly will make a payment to the executive such that after the
payment of all income and excise taxes, the executive will be in the same
after-tax position as if no excise tax under Section 4999 had been imposed.
INDEMNIFICATION. The Merger Agreement provides that, following the
Effective Date and for a period of six years thereafter, Fleet shall indemnify,
defend and hold harmless the present directors and officers of Quick & Reilly
and its subsidiaries against all costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by the Merger
Agreement) to the fullest extent that Quick & Reilly is permitted to indemnify
(and advance expenses to) its directors and officers under Delaware Law, the
Quick & Reilly Certificate and the Quick & Reilly By-laws as in effect on the
date hereof.
CERTAIN REGULATORY CONSIDERATIONS
FLEET
GENERAL
Fleet is a bank holding company subject to regulation by the Federal Reserve
Board and the Office of Thrift Supervision. Fleet's state-chartered banks are
members of the Federal Reserve System subject to regulation by the Federal
Reserve Board and bank regulators in their respective states. Fleet's national
banks are subject to regulation and supervision by the Office of the Comptroller
of the Currency (the "OCC"). Each of Fleet's subsidiary banks' deposits are
insured by the Federal Deposit Insurance Corporation (the "FDIC") and are
therefore subject to FDIC supervision and regulation. Fleet is also subject to
the reporting and other requirements of the Exchange Act.
PAYMENT OF DIVIDENDS
Fleet is a legal entity separate and distinct from its subsidiaries. The
ability of holders of debt and equity securities of Fleet, including the holders
of the Fleet Common Stock to be issued to Quick & Reilly Stockholders in the
Merger, to benefit from the distribution of assets of any subsidiary upon the
liquidation or reorganization of such subsidiary is subordinate to prior claims
of creditors of the subsidiary (including depositors in the case of banking
subsidiaries) except to the extent that a claim of Fleet as a creditor may be
recognized.
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There are various statutory and regulatory limitations on the extent to
which banking subsidiaries of Fleet can finance or otherwise transfer funds to
Fleet or its nonbanking subsidiaries, whether in the form of loans, extensions
of credit, investments or asset purchases. Such transfers by any subsidiary bank
to Fleet or any nonbanking subsidiary are limited in amount to 10% of the bank's
capital and surplus and, with respect to Fleet and all such nonbanking
subsidiaries, to an aggregate of 20% of each such bank's capital and surplus.
Furthermore, loans and extensions of credit are required to be secured in
specified amounts and are required to be on terms and conditions consistent with
safe and sound banking practices.
In addition, there are regulatory limitations on the payment of dividends
directly or indirectly to Fleet from its banking subsidiaries. Under applicable
banking statutes, at September 30, 1997, Fleet's banking subsidiaries could have
declared additional dividends of approximately $128 million. Federal and state
regulatory agencies also have the authority to limit further Fleet's banking
subsidiaries' payment of dividends based on other factors, such as the
maintenance of adequate capital for such subsidiary bank.
Under the policy of the Federal Reserve Board, Fleet is expected to act as a
source of financial strength to each of its subsidiary banks and to commit
resources to support such subsidiary bank in circumstances where it might not do
so absent such policy. In addition, any subordinated loans by Fleet to any of
its subsidiary banks would also be subordinate in right of payment to deposits
and obligations to general creditors of such subsidiary bank. Further, the Crime
Control Act of 1990 amended the federal bankruptcy laws to provide that in the
event of the bankruptcy of Fleet, any commitment by Fleet to its regulators to
maintain the capital of a banking subsidiary will be assumed by the bankruptcy
trustee and entitled to a priority of payment.
LEGISLATION AND RELATED MATTERS
GENERAL. In addition to extensive existing government regulation, federal
and state statutes and regulations are subject to changes that may have
significant impact on the way in which banks may conduct business. The
likelihood and potential effects of any such changes cannot be predicted.
Legislation enacted in recent years has substantially increased the level of
competition among commercial banks, thrift institutions and non-banking
institutions, including insurance companies, brokerage firms, mutual fund
companies, investment banks, finance companies and major retailers. In addition,
the existence of banking legislation such as the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA") and the Federal Deposit
Insurance Corporation Improvement Act of 1991 (the "FDICIA") have affected the
banking industry by, among other things, broadening the regulatory powers of the
federal banking agencies in a number of areas. The following summary is
qualified in its entirety by the text of the relevant statutes and regulations.
FIRREA. As a result of the enactment of FIRREA on August 9, 1989, any or
all of Fleet's subsidiary banks can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989, in
connection with (a) the default of any other of Fleet's subsidiary banks, or (b)
any assistance provided by the FDIC to any other of Fleet's subsidiary banks in
danger of default. "Default" is defined generally as the appointment of a
conservator or receiver, and "in danger of default" is defined generally as the
existence of certain conditions indicating that a "default" is likely to occur
without regulatory assistance.
FDICIA. The FDICIA provides for, among other things, increased funding for
the Bank Insurance Fund (the "BIF") of the FDIC and expanded regulation of
depository institutions and their affiliates, including parent holding
companies. A summary of certain provisions of FDICIA and its implementing
regulations is provided below.
Prompt Corrective Action. The FDICIA provides the federal banking agencies
with broad powers to take prompt corrective action to resolve problems of
insured depository institutions, depending upon a particular institution's level
of capital. The FDICIA establishes five tiers of capital measurement for
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regulatory purposes ranging from "well-capitalized" to "critically
undercapitalized." A depository institution may be deemed to be in a
capitalization category that is lower than is indicated by its actual capital
position under certain circumstances. At September 30, 1997, each of Fleet's
subsidiary depository institutions was classified as "well-capitalized" under
the prompt corrective action regulations described above.
Brokered Deposits. Under the FDICIA, a depository institution that is
well-capitalized may accept brokered deposits. A depository institution that is
adequately capitalized may accept brokered deposits only if it obtains a waiver
from the FDIC, and may not offer interest rates on deposits "significantly
higher" than the prevailing rate in its market. An undercapitalized depository
institution may not accept brokered deposits. In Fleet's opinion, these
limitations do not have a material effect on Fleet.
Safety and Soundness Standards. The FDICIA, as amended, directs each federal
banking agency to prescribe safety and soundness standards for depository
institutions relating to internal controls, information systems, internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset
growth, compensation, asset-quality, earnings and stock valuation. Final
interagency regulations to implement these new safety and soundness standards
were adopted by the federal banking agencies. As of October 1, 1996, standards
for asset quality and earnings have been incorporated into the Interagency
Guidelines Establishing Standards for Safety and Soundness. The three standards
for Safety and Soundness established by the guidelines are (1) operational and
managerial; (2) compensation; and (3) asset quality, earnings and stock
valuation. The ultimate cumulative effect of these standards cannot currently be
forecast.
The FDICIA also contains a variety of other provisions that may affect
Fleet's operations, including new reporting requirements, regulatory standards
for real estate lending, "truth in savings" provisions, and the requirement that
a depository institution give 90 days' prior notice to customers and regulatory
authorities before closing any branch.
CAPITAL GUIDELINES. Under the Federal Reserve Board's capital guidelines,
the minimum ratio of total capital to risk-adjusted assets (including certain
off-balance sheet items, such as standby letters of credit) is 8%. At least half
of the total capital is to be comprised of common equity, retained earnings,
minority interests in the equity accounts of consolidated subsidiaries and a
limited amount of cumulative and noncumulative perpetual preferred stock, less
deductible intangibles ("Tier 1 capital"). The remainder may consist of
perpetual debt, mandatory convertible debt securities, a limited amount of
subordinated debt, other preferred stock and a limited amount of loan loss
reserves ("Tier 2 capital"). In addition, the Federal Reserve Board requires a
leverage ratio (Tier 1 capital to average quarterly assets, net of goodwill) of
3% for bank holding companies that meet certain specified criteria, including
that they have the highest regulatory rating. The rule indicates that the
minimum leverage ratio should be 1% to 2% higher for holding companies
undertaking major expansion programs or that do not have the highest regulatory
rating. Fleet's banking subsidiaries are subject to similar capital requirements
except that preferred stock must be noncumulative to qualify as Tier 1 capital.
The federal banking agencies continue to consider capital requirements
applicable to banking organizations. Effective September 1, 1995, the federal
banking agencies adopted amendments to their risk-based capital regulations to
provide for the consideration of interest rate risk in the determination of a
bank's minimum capital requirements. The amendments require that banks
effectively measure and monitor their interest rate risk and that they maintain
capital adequate for that risk. Under the amendments, banks with excess interest
rate risk would be required to maintain additional capital beyond that generally
required. In addition, effective January 17, 1995, the federal banking agencies
adopted amendments to their risk-based capital standards to provide for the
concentration of credit risk and certain risks arising from nontraditional
activities, as well as a bank's ability to manage these risks, as important
factors in assessing a bank's overall capital adequacy. Effective January 1,
1997, with compliance required by January 1, 1998, national banks with
significant exposure to market risk must maintain adequate capital to
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support that exposure. The OCC may apply this provision to any national bank if
the OCC deems it appropriate for safe and sound practices.
As of September 30, 1997, Fleet's capital ratios on a historical basis
exceeded all minimum regulatory capital requirements.
Under federal banking laws, failure to meet the minimum regulatory capital
requirements could subject a banking institution to a variety of enforcement
remedies available to federal regulatory authorities, including the termination
of deposit insurance by the FDIC and seizure of the institution.
INTERSTATE BANKING AND BRANCHING LEGISLATION. On September 29, 1994,
President Clinton signed the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Act") into law. The Interstate Act
facilitates the interstate expansion and consolidation of banking organizations
by permitting (i) beginning one year after enactment of the legislation, bank
holding companies that are adequately capitalized and managed to acquire banks
located in states outside their home states regardless of whether such
acquisitions are authorized under the law of the host state, (ii) the interstate
merger of banks after June 1, 1997, subject to the right of individual states to
"opt in" or "opt out" of this authority prior to such date, (iii) banks to
establish new branches on an interstate basis provided that such action is
specifically authorized by the law of the host state, (iv) foreign banks to
establish, with approval of the appropriate regulators in the United States,
branches outside their home states to the same extent that national or state
banks located in such state would be authorized to do so, and (v) beginning
September 29, 1995, banks to receive deposits, renew time deposits, close loans,
service loans and receive payments on loans and other obligations as agent for
any bank or thrift affiliate, whether the affiliate is located in the same or
different state. In 1996, Fleet merged its banking subsidiaries in Connecticut,
Massachusetts and Rhode Island, and has recently filed applications to merge the
resulting bank with one of its banking subsidiaries in New York in order to
increase convenience to its customers in those states and to achieve cost
savings.
DEPOSIT INSURANCE ASSESSMENTS
The deposits of each of Fleet's subsidiary banks are insured up to
regulatory limits by the FDIC and, accordingly, are subject to deposit insurance
assessments to maintain the BIF administered by the FDIC. The FDIC has adopted
regulations establishing a permanent risk-related deposit insurance assessment
system. Under this system, the FDIC places each insured bank in one of nine risk
categories based on (a) the bank's capitalization, and (b) supervisory
evaluations provided to the FDIC by the institution's primary federal regulator.
Each insured bank's insurance assessment rate is then determined by the risk
category in which it is classified by the FDIC. On November 14, 1995, the FDIC
voted to decrease premiums effective January 1, 1995. The decrease lowered the
rate of deposit insurance premiums by $.04 per $100 of deposits for banks in
each risk assessment category. As a result, banks in the highest capital and
supervisory evaluation categories have an assessment rate of $0.00, and pay only
the minimum assessment of $2,000 per year for deposit insurance. Banks in the
lowest capital and supervisory evaluation categories are subject to a rate of
$0.27 per $100 of deposits. The FDIC has indicated that it is maintaining the
decreased rate schedule for assessments paid to the BIF through the end of 1997.
This will be reviewed on a semi-annual basis. There is no guarantee that the
rate of deposit insurance premiums will not increase in the future.
These assessment rates also reflect the amount the FDIC has determined is
necessary to maintain the reserve ratio of BIF of 1.25% of total insured bank
deposits. The FDIC has announced that this reserve ratio was achieved during
1995. However, due primarily to the fact that the reserve ratio of the FDIC's
Savings Association Insurance Fund ("SAIF") is not projected to reach the
required level of 1.25% for several years, the FDIC has made a proposal to
Congress to (1) capitalize the SAIF through a special up-front cash assessment
on SAIF deposits; (2) spread the responsibility for payment to the Financing
Corporation created under Title III of the Competitive Equality Banking Act of
1987 proportionally over all FDIC-insured institutions; and (3) as soon as
practicable, merge the BIF and the SAIF. In May, 1997,
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the FDIC announced that the BIF had a reserve ratio of 1.34% at the end of 1996.
The FDIC projects the reserve ratio to be within a range of 1.29 to 1.42 by the
end of 1997. On May 6, 1997, the FDIC's Board of Directors voted to retain the
existing assessment rate schedule applicable to members of the SAIF for the
second half of 1997.
Fleet's subsidiary banks do not hold significant amounts of deposits insured
by the SAIF.
GLASS-STEAGALL ACT. Section 20 of the Glass-Steagall Act prohibits
affiliations between banks that are members of the Federal Reserve System and
any firm "engaged principally" in the issue, flotation, underwriting, public
sale or distribution of securities. The Federal Reserve Board has taken the
position that a firm is not "engaged principally" in such ineligible activities
if its revenues from such activities do not exceed 25 percent of its total gross
revenues over any two-year period. After the merger of certain subsidiaries of
Quick & Reilly with Fleet Securities, the revenues derived from the ineligible
securities activities currently conducted by both Fleet Securities and Quick &
Reilly will be subject to this limitation. Fleet believes that such revenues
will not exceed the Federal Reserve Board's limitation. If such revenues were to
exceed the limitation, Fleet Securities would be required either to increase its
revenues from permissible activities or restrict ineligible activities in order
to reduce the revenues derived therefrom.
QUICK & REILLY
Quick & Reilly's primary subsidiaries are subject to various federal and
state laws and rules of self-regulatory organizations which specifically
regulate their activities. The primary purpose of these requirements is to
enhance the protection of customer assets. Under certain circumstances, these
rules may limit the ability of Quick & Reilly to make withdrawals of capital
from such primary subsidiaries. These laws and regulatory requirements generally
subject these subsidiaries to standards of solvency with respect to capital
requirements, financial reporting requirements, approval of qualifications of
personnel engaged in various aspects of their business, record keeping and
business practices, the handling of customer funds resulting from securities
transactions and the extension of credit to customers on margin transactions.
Infractions of these rules and regulations may result in suspension of
individual employees and/or their supervisors, termination of employees,
limitations on certain aspects of the subsidiary's business, as well as censures
and fines, or even proceedings of a civil or criminal nature which could result
in a temporary or permanent suspension of a part or all of the primary
subsidiaries' activities.
As registered broker-dealers and member firms of the NYSE, Quick & Reilly's
primary subsidiaries are subject to certain capital rules of both the Commission
and the NYSE. These rules require Quick & Reilly and its subsidiaries to
maintain levels of net capital, as defined, and may require a member to reduce
its business or prohibit a member from expanding its business and declaring
dividends as its net capital approaches specified levels. As of February 28,
1997, and February 29, 1996, Quick & Reilly's primary subsidiaries (other than
Nash Weiss, which was acquired effective March 1, 1997) had net capital, in the
aggregate, of $238,966,000 and $196,501,000, respectively, which exceeded
aggregate minimum net capital requirements by $179,139,000 and $139,726,000,
respectively. While Quick & Reilly's primary subsidiaries' aggregate equity
capital is includable in net capital, $99,460,000 is not available for payment
of cash dividends and advances to Quick & Reilly.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Balance Sheet as of
September 30, 1997, and the Unaudited Pro Forma Condensed Combined Statements of
Income for the nine months ended September 30, 1997 and 1996 and for the years
ended December 31, 1996, 1995 and 1994, give effect to the Merger, accounted for
as a pooling of interests, as if the Merger had occurred on January 1 in each
such year.
The pro forma information is based on the historical consolidated financial
statements of Fleet and its subsidiaries under the assumptions set forth in the
accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial
Statements. The September 30, 1997 pro forma balance sheet includes the Fleet
historical balance sheet data as of September 30, 1997 and the Quick & Reilly
historical balance sheet data as of August 29, 1997. The pro forma income
statements for the nine months ended September 30, 1997 and 1996 and the years
ended December 31, 1996, 1995 and 1994 include the Fleet historical income
statement data for the time periods specified and the Quick & Reilly historical
income statement data for the nine months ended August 29, 1997 and August 30,
1996 and for each of the years in the three-year period ended the last day of
February 1997. The Quick & Reilly results for the three months ended the last
day of February 1997 and 1996 have been included in the Unaudited Pro Forma
Condensed Combined Statements of Income for both the fiscal years ended the last
day of February 1997 and 1996 and the nine months ended August 29, 1997 and
August 30, 1996.
The information shown below should be read in conjunction with the
consolidated historical financial statements of Fleet and Quick & Reilly,
including the respective notes thereto, which are incorporated by reference in
this Proxy Statement-Prospectus and the unaudited pro forma combined per share
financial information, including the notes thereto, which appear elsewhere in
this Proxy Statement-Prospectus. The pro forma data is presented for comparative
purposes only and is not necessarily indicative of the combined financial
position or results of operations which would have been realized had the Merger
been consummated during the periods or as of the dates for which the pro forma
data is presented.
Pro forma per share amounts for the combined Fleet and Quick & Reilly entity
are based on the Exchange Ratio of 0.578 shares of Fleet Common Stock for each
share of Quick & Reilly Common Stock.
See "INFORMATION INCORPORATED BY REFERENCE", "SELECTED HISTORICAL AND PRO
FORMA PER SHARE DATA" and "SELECTED CONSOLIDATED FINANCIAL DATA."
57
<PAGE>
FLEET FINANCIAL GROUP, INC. AND THE QUICK AND REILLY GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1997 (A)
<TABLE>
<CAPTION>
FLEET /
QUICK & REILLY
QUICK & PRO FORMA PRO FORMA
FLEET REILLY ADJUSTMENTS(E) COMBINED
--------- ----------- --------------- --------------
<S> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
ASSETS:
Cash, due from banks and interest-bearing deposits............ $ 5,192 $ 86 $ -- $ 5,278
Receivable from brokers, dealers, clearing organizations and
brokerage customers......................................... -- 4,148 -- 4,148
Federal funds sold and securities purchased under agreements
to resell................................................... 1,371 -- -- 1,371
Securities.................................................... 8,770 185 -- 8,955
Loans and leases.............................................. 59,264 -- -- 59,264
Reserve for credit losses..................................... (1,432) -- -- (1,432)
Mortgage servicing rights..................................... 1,800 -- -- 1,800
Mortgages held for resale..................................... 1,396 -- -- 1,396
Premises and equipment........................................ 1,252 20 -- 1,272
Intangible assets............................................. 1,704 59 -- 1,763
Other assets.................................................. 4,258 32 -- 4,290
--------- ----------- ----- -------
Total assets.................................................. $ 83,575 $ 4,530 $ -- $ 88,105
--------- ----------- ----- -------
--------- ----------- ----- -------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Demand...................................................... $ 15,821 $ -- $ -- $ 15,821
Regular savings, NOW, money market.......................... 27,569 -- -- 27,569
Time........................................................ 19,517 -- -- 19,517
--------- ----------- ----- -------
Total deposits................................................ 62,907 -- -- 62,907
--------- ----------- ----- -------
Payable to brokers, dealers, clearing organizations and
brokerage customers......................................... -- 3,927 -- 3,927
Federal funds purchased and securities sold under agreements
to repurchase............................................... 2,575 -- -- 2,575
Other short-term borrowings................................... 3,949 50 (740) 3,259
Accrued expenses and other liabilities........................ 2,498 124 -- 2,622
Long-term debt................................................ 4,459 -- -- 4,459
--------- ----------- ----- -------
Total liabilities............................................. 76,388 4,101 (740) 79,749
--------- ----------- ----- -------
Stockholders' equity:
Preferred equity............................................ 835 -- -- 835
Common equity (b)........................................... 6,352 429 740 7,521
--------- ----------- ----- -------
Total stockholders' equity.................................... 7,187 429 740 8,356
--------- ----------- ----- -------
Total liabilities and stockholders' equity.................... $ 83,575 $ 4,530 $ -- $ 88,105
--------- ----------- ----- -------
--------- ----------- ----- -------
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS".
58
<PAGE>
FLEET FINANCIAL GROUP, INC. AND THE QUICK & REILLY GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (A)
<TABLE>
<CAPTION>
FLEET /
QUICK & REILLY
QUICK & PRO FORMA PRO FORMA
FLEET REILLY ADJUSTMENTS(E) COMBINED
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Net interest income................................ $ 2,716 $ 51 $ 17 $ 2,784
Provision for credit losses........................ 233 -- -- 233
-------------- ------------- -------------- --------------
Net interest income after provision for credit
losses........................................... 2,483 51 17 2,551
-------------- ------------- -------------- --------------
Service charges, fees and commissions.............. 475 -- -- 475
Mortgage banking revenue........................... 260 -- -- 260
Investment services revenue........................ 310 -- -- 310
Brokerage revenue.................................. 18 201 -- 219
Venture capital revenue............................ 57 -- -- 57
Student loan servicing fees........................ 76 -- -- 76
Trading revenue.................................... 18 70 -- 88
Securities gains................................... 22 -- -- 22
Other noninterest income........................... 494 7 -- 501
-------------- ------------- -------------- --------------
Total noninterest income....................... 1,730 278 -- 2,008
-------------- ------------- -------------- --------------
Employee compensation and benefits................. 1,215 115 -- 1,330
Occupancy.......................................... 212 8 -- 220
Equipment.......................................... 207 30 -- 237
Intangible asset amortization...................... 120 4 -- 124
Legal and other professional....................... 82 5 -- 87
Marketing.......................................... 69 9 -- 78
Other noninterest expense.......................... 679 48 -- 727
-------------- ------------- -------------- --------------
Total noninterest expense...................... 2,584 219 -- 2,803
-------------- ------------- -------------- --------------
Income before income taxes......................... 1,629 110 17 1,756
Applicable income taxes............................ 661 45 7 713
-------------- ------------- -------------- --------------
Net income......................................... $ 968 $ 65 $ 10 $ 1,043
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
Net income applicable to common shares: (c)........ $ 919 $ 65 $ 10 $ 994
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
Weighted average common shares outstanding:(d)(e)
Primary.......................................... 263,295,090 38,315,202 7,138,093 292,579,370
Fully Diluted.................................... 264,022,822 38,315,202 7,138,093 293,307,102
Earnings per share: (e)
Primary.......................................... $ 3.49 $ 1.70 -- $ 3.40
Fully Diluted.................................... 3.48 1.70 -- 3.39
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS".
59
<PAGE>
FLEET FINANCIAL GROUP, INC. AND THE QUICK & REILLY GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (A)
<TABLE>
<CAPTION>
FLEET /
QUICK & REILLY
QUICK & PRO FORMA
FLEET REILLY COMBINED
------------- ------------ --------------
<S> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE
DATA)
Net interest income................................................ $ 2,503 $ 44 $ 2,547
Provision for credit losses........................................ 148 -- 148
------------- ------------ --------------
Net interest income after provision for credit losses.............. 2,355 44 2,399
------------- ------------ --------------
Service charges, fees and commissions.............................. 391 -- 391
Mortgage banking revenue........................................... 264 -- 264
Investment services revenue........................................ 274 -- 274
Brokerage revenue.................................................. 17 185 202
Venture capital revenue............................................ 94 -- 94
Student loan servicing fees........................................ 67 -- 67
Trading revenue.................................................... 13 52 65
Securities gains................................................... 38 -- 38
Other noninterest income........................................... 326 10 336
------------- ------------ --------------
Total noninterest income....................................... 1,484 247 1,731
------------- ------------ --------------
Employee compensation and benefits................................. 1,184 95 1,279
Occupancy.......................................................... 210 6 216
Equipment.......................................................... 196 24 220
Intangible asset amortization...................................... 96 3 99
Legal and other professional....................................... 92 4 96
Marketing.......................................................... 72 9 81
Other noninterest expense.......................................... 566 41 607
------------- ------------ --------------
Total noninterest expense...................................... 2,416 182 2,598
------------- ------------ --------------
Income before income taxes......................................... 1,423 109 1,532
Applicable income taxes............................................ 587 43 630
------------- ------------ --------------
Net income......................................................... $ 836 $ 66 $ 902
------------- ------------ --------------
------------- ------------ --------------
Net income applicable to common shares: (c)........................ $ 783 $ 66 $ 849
------------- ------------ --------------
------------- ------------ --------------
Weighted average common shares outstanding: (d)
Primary.......................................................... 268,656,037 37,716,375 290,456,102
Fully Diluted.................................................... 269,259,878 37,716,375 291,059,943
Earnings per share:
Primary.......................................................... $ 2.91 $ 1.75 $ 2.91
Fully Diluted.................................................... 2.91 1.75 2.91
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS".
60
<PAGE>
FLEET FINANCIAL GROUP, INC. AND THE QUICK & REILLY GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996 (A)
<TABLE>
<CAPTION>
FLEET /
QUICK & REILLY
QUICK & PRO FORMA
FLEET REILLY COMBINED
------------- ------------ --------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Net interest income.................................................. $ 3,403 $ 59 $ 3,462
Provision for credit losses.......................................... 213 -- 213
------------- ------------ --------------
Net interest income after provision for credit losses................ 3,190 59 3,249
------------- ------------ --------------
Service charges, fees and commissions................................ 592 -- 592
Mortgage banking revenue............................................. 372 -- 372
Investment services revenue.......................................... 372 -- 372
Brokerage revenue.................................................... 22 247 269
Venture capital revenue.............................................. 106 -- 106
Student loan servicing fees.......................................... 98 -- 98
Trading revenue...................................................... 55 59 114
Securities gains..................................................... 43 -- 43
Other noninterest income............................................. 353 14 367
------------- ------------ --------------
Total noninterest income....................................... 2,013 320 2,333
------------- ------------ --------------
Employee compensation and benefits................................... 1,607 127 1,734
Occupancy............................................................ 284 9 293
Equipment............................................................ 266 34 300
Intangible asset amortization........................................ 135 5 140
Legal and other professional......................................... 131 5 136
Marketing............................................................ 97 8 105
Other noninterest expense............................................ 752 52 804
------------- ------------ --------------
Total noninterest expense...................................... 3,272 240 3,512
------------- ------------ --------------
Income before income taxes........................................... 1,931 139 2,070
Applicable income taxes.............................................. 792 57 849
------------- ------------ --------------
Net income........................................................... $ 1,139 $ 82 $ 1,221
------------- ------------ --------------
------------- ------------ --------------
Net income applicable to common shares: (c).......................... $ 1,067 $ 82 $ 1,149
------------- ------------ --------------
------------- ------------ --------------
Weighted average common shares outstanding: (d)
Primary............................................................ 268,919,344 37,764,962 290,747,492
Fully Diluted...................................................... 270,393,996 37,764,962 292,222,144
Earnings per share:
Primary............................................................ $ 3.97 $ 2.17 $ 3.95
Fully Diluted...................................................... 3.95 2.17 3.93
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS".
61
<PAGE>
FLEET FINANCIAL GROUP, INC. AND THE QUICK & REILLY GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995 (A)
<TABLE>
<CAPTION>
FLEET /
QUICK & REILLY
QUICK & PRO FORMA
FLEET REILLY COMBINED
-------------- ------------- --------------
<S> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Net interest income.............................................. $ 3,020 $ 54 $ 3,074
Provision for credit losses...................................... 101 -- 101
-------------- ------------- --------------
Net interest income after provision for credit losses............ 2,919 54 2,973
-------------- ------------- --------------
Service charges, fees and commissions............................ 486 -- 486
Mortgage banking revenue......................................... 321 -- 321
Investment services revenue...................................... 322 -- 322
Brokerage revenue................................................ 19 206 225
Venture capital revenue.......................................... 36 -- 36
Student loan servicing fees...................................... 72 -- 72
Trading revenue.................................................. 39 53 92
Securities gains................................................. 32 -- 32
Other noninterest income......................................... 338 12 350
-------------- ------------- --------------
Total noninterest income................................... 1,665 271 1,936
-------------- ------------- --------------
Employee compensation and benefits............................... 1,448 106 1,554
Occupancy........................................................ 250 7 257
Equipment........................................................ 209 25 234
Intangible asset amortization.................................... 105 3 108
Legal and other professional..................................... 102 3 105
Marketing........................................................ 93 8 101
Merger and restructuring related charges......................... 490 -- 490
Loss on assets held for sale or accelerated disposition.......... 175 -- 175
Other noninterest expense........................................ 678 51 729
-------------- ------------- --------------
Total noninterest expense.................................. 3,550 203 3,753
-------------- ------------- --------------
Income before income taxes....................................... 1,034 122 1,156
Applicable income taxes.......................................... 424 53 477
-------------- ------------- --------------
Net income....................................................... $ 610 $ 69 $ 679
-------------- ------------- --------------
-------------- ------------- --------------
Net income applicable to common shares: (c)...................... $ 416 $ 69 $ 486
-------------- ------------- --------------
-------------- ------------- --------------
Weighted average common shares outstanding: (d)
Primary........................................................ 264,796,217 37,477,765 286,458,365
Fully Diluted.................................................. 265,886,363 37,477,765 287,548,511
Earnings per share:
Primary........................................................ $ 1.57 $ 1.85 $ 1.70
Fully Diluted.................................................. 1.57 1.85 1.69
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS".
62
<PAGE>
FLEET FINANCIAL GROUP, INC. AND THE QUICK & REILLY GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994 (A)
<TABLE>
<CAPTION>
FLEET /
QUICK & REILLY
QUICK & PRO FORMA
FLEET REILLY COMBINED
------------- ------------ --------------
<S> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE
DATA)
Net interest income.................................................. $ 3,047 $ 46 $ 3,093
Provision for credit losses.......................................... 65 -- 65
------------- ------------ --------------
Net interest income after provision for credit losses................ 2,982 46 3,028
------------- ------------ --------------
Service charges, fees and commissions................................ 441 -- 441
Mortgage banking revenue............................................. 301 -- 301
Investment services revenue.......................................... 294 -- 294
Brokerage revenue.................................................... 16 146 162
Venture capital revenue.............................................. 6 -- 6
Student loan servicing fees.......................................... 54 -- 54
Trading revenue...................................................... 32 32 64
Securities losses.................................................... (1) -- (1)
Other noninterest income............................................. 325 8 333
------------- ------------ --------------
Total noninterest income......................................... 1,468 186 1,654
------------- ------------ --------------
Employee compensation and benefits................................... 1,428 83 1,511
Occupancy............................................................ 265 6 271
Equipment............................................................ 188 18 206
Intangible asset amortization........................................ 65 2 67
Legal and other professional......................................... 95 3 98
Marketing............................................................ 84 5 89
Merger and restructuring related charges............................. 185 -- 185
Other noninterest expense............................................ 760 35 795
------------- ------------ --------------
Total noninterest expense........................................ 3,070 152 3,222
------------- ------------ --------------
Income before income taxes........................................... 1,380 80 1,460
Applicable income taxes.............................................. 531 39 570
------------- ------------ --------------
Net income........................................................... $ 849 $ 41 $ 890
------------- ------------ --------------
------------- ------------ --------------
Net income applicable to common shares: (c).......................... $ 818 $ 41 $ 859
------------- ------------ --------------
------------- ------------ --------------
Weighted average common shares outstanding: (d)
Primary............................................................ 264,828,469 37,483,185 286,493,750
Fully Diluted...................................................... 264,828,469 37,483,185 286,493,750
Earnings per share:
Primary............................................................ $ 3.09 $ 1.11 $ 3.00
Fully Diluted...................................................... 3.09 1.11 3.00
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS".
63
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(a) The pro forma information presented is not necessarily indicative of the
results of operations or the combined financial position that would have
resulted had the Merger been consummated at the beginning of the periods
indicated, nor is it necessarily indicative of the results of operations in
future periods or the future financial position of the combined entity. It is
anticipated that the Merger will be consummated in the first quarter of 1998.
Under generally accepted accounting principles, the assets and liabilities
of Quick & Reilly will be combined with those of Fleet at book value. In
addition, the Statements of Income of Quick & Reilly will be combined with the
Statements of Income of Fleet as of the earliest period presented. Certain
reclassifications have been included in the Unaudited Pro Forma Condensed
Combined Balance Sheet and Unaudited Pro Forma Condensed Combined Statements of
Income to conform to Fleet's presentation.
(b) The Merger is expected to be accounted for as a pooling of interests,
through the exchange of 22,330,671 shares of Fleet Common Stock (using the
Exchange Ratio of 0.578) for the 38,634,379 shares of Quick & Reilly Common
Stock outstanding at August 29, 1997.
(c) The Fleet/Quick & Reilly Pro Forma net income applicable to common
shares reflects the sum of the Fleet net income applicable to common shares and
the Quick & Reilly net income applicable to common shares and pro forma
adjustments.
(d) The Fleet/Quick & Reilly Pro Forma weighted average shares outstanding
for the periods presented reflect the Fleet and Quick & Reilly weighted average
shares outstanding, assuming the conversion of outstanding Quick & Reilly Common
Stock into Fleet Common Stock using the Exchange Ratio of 0.578 and the
additional shares which were required to be reissued as a result of the Merger
(see note (e)).
(e) Fleet had approximately 13.4 million shares of Common Stock in treasury
at September 30, 1997, substantially all of which were repurchased during 1997.
Fleet reissued 10,750,000 of such treasury shares on December 10, 1997 in order
to permit the Merger to be accounted for as a pooling of interests under
generally accepted accounting principles. In addition, the Fleet Board has
rescinded its prior authority granted in January 1997 to repurchase up to 20
million shares of its Common Stock, effective immediately prior to consummation
of the Merger. The pro forma information includes an adjustment to reflect the
reissuance of the 10,750,000 shares at $70.38 per share and the deduction of the
underwriting discount and issuance costs. The effect on average shares
outstanding has been calculated based on the original dates of repurchase.
Furthermore, the proceeds from the reissuance are assumed to have been used to
pay down other short-term borrowings with an assumed rate of 5.50% and has been
calculated based on the original dates of repurchase.
64
<PAGE>
DESCRIPTION OF FLEET CAPITAL STOCK
GENERAL
The Fleet Articles currently authorize the issuance of 600,000,000 shares of
Fleet Common Stock and 16,000,000 shares of Preferred Stock, $1.00 par value
(the "Preferred Stock"), issuable in one or more series from time to time by
action of the Fleet Board.
At September 30, 1997, 249,872,588 shares of Fleet Common Stock were
outstanding. On December 10, 1997, Fleet consummated an underwritten public
offering of 10,750,000 shares of Fleet Common Stock. See "RECENT
TRANSACTIONS--Offering of Fleet Common Stock". In addition, as of September 30,
1997, Fleet had outstanding five series of Preferred Stock as follows: (i)
500,000 shares of 9.35% Cumulative Preferred Stock (the "9.35% Preferred"),
having a liquidation value of $250 per share, plus accrued and unpaid dividends,
were designated and 500,000 were outstanding, (ii) 1,265,000 shares of Series V
7.25% Perpetual Preferred Stock (the "Series V Preferred"), having a liquidation
value of $250 per share, plus accrued and unpaid dividends, were designated and
765,010 were issued and outstanding, (iii) 690,000 shares of Series VI 6.75%
Perpetual Preferred Stock (the "Series VI Preferred"), having a liquidation
value of $250 per share, plus accrued and unpaid dividends, were designated and
600,000 were issued and outstanding, (iv) 805,000 shares of Series VII
Fixed/Adjustable Rate Cumulative Preferred Stock (the "Series VII Preferred"),
having a liquidation value of $250 per share, plus accrued and unpaid dividends,
were designated and 700,000 were issued and outstanding, and (v) 200,000 shares
of Series VIII Fixed/Adjustable Rate Noncumulative Preferred Stock (the "Series
VIII Preferred"), having a liquidation value of $250 per share, plus accrued and
unpaid dividends, were designated and 200,000 were issued and outstanding. In
addition, as of December 31, 1995, the Fleet Board had established a series of
3,000,000 shares of Cumulative Participating Junior Preferred Stock (the "Junior
Preferred Stock") issuable upon exercise of the preferred share purchase rights
described below, of which no shares were issued and outstanding as of such date.
Each such outstanding series and class is described below under "--Preferred
Stock".
The following summary does not purport to be complete and is subject in all
respects to the applicable provisions of Rhode Island Law and the Fleet Articles
and Fleet By-laws.
FLEET COMMON STOCK
GENERAL
Holders of the Fleet Common Stock are entitled to receive dividends when, as
and if declared by the Fleet Board out of any funds legally available therefor,
and are entitled upon liquidation, after claims of creditors and preferences of
the Preferred Stock, and any other class or series of preferred stock at the
time outstanding, to receive pro rata the net assets of Fleet. Dividends are
paid on the Fleet Common Stock only if all dividends on the outstanding series
of Preferred Stock, and any other class or series of preferred stock at the time
outstanding, for the then current period and, in the case of cumulative
Preferred Stock, all prior periods, have been paid or provided for.
The Preferred Stock and any other class of preferred stock have, or upon
issuance will have, preference over the Fleet Common Stock with respect to the
payment of dividends and the distribution of assets in the event of liquidation
or dissolution of Fleet and such other preferences as may be fixed by the Fleet
Board.
The holders of Fleet Common Stock are entitled to one vote for each share
held and are vested with all of the voting power except as the Fleet Board has
provided with respect to outstanding preferred stock or may provide, in the
future, with respect to Preferred Stock or any other class or series of
preferred stock which it may hereafter authorize. See "--Preferred Stock".
Shares of Fleet Common Stock are not redeemable and have no subscription,
conversion or preemptive rights.
The affirmative vote of not less than 80% of Fleet's outstanding voting
stock, voting separately as a class, is required for certain Business
Combinations (as hereinafter defined) between Fleet and/or its
65
<PAGE>
subsidiaries and persons owning 10% or more of its voting stock. See "SELECTED
PROVISIONS IN THE ARTICLES OF FLEET--Business Combinations with Related
Persons".
Fleet Common Stock is listed on the NYSE. The outstanding shares of Fleet
Common Stock are, and the shares to be issued to holders of Quick & Reilly
Common Stock upon consummation of the Merger will be, validly issued, fully paid
and non-assessable and the holders thereof are not, and will not be, subject to
any liability as stockholders.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is First Chicago Trust
Company of New York.
RESTRICTIONS ON OWNERSHIP
The BHCA requires any "bank holding company", as such term is defined
therein, to obtain the approval of the Federal Reserve Board prior to the
acquisition of 5% or more of Fleet Common Stock. Any person other than a bank
holding company is required to obtain prior approval of the Federal Reserve
Board to acquire 10% or more of Fleet Common Stock under the Change in Bank
Control Act (the "CBCA"). Any holder of 25% or more of Fleet Common Stock (or a
holder of 5% or more if such holder otherwise exercises a "controlling
influence" over Fleet) is subject to regulation as a bank holding company under
the BHCA.
PREFERRED SHARE PURCHASE RIGHTS
On November 21, 1990, the Fleet Board declared a dividend of one Preferred
Share Purchase Right (a "Fleet Right") for each outstanding share of Fleet
Common Stock. The dividend was paid on December 4, 1990 to the shareholders of
record on that date. Each Fleet Right, when exercisable, will entitle the
registered holder to purchase from Fleet one one-hundredth of a share of Junior
Preferred Stock at an exercise price of $50 per one one-hundredth of a share of
Junior Preferred Stock (the "Purchase Price"), subject to certain adjustments.
Until the Distribution Date (as hereinafter defined), Fleet will issue one Fleet
Right with each share of Fleet Common Stock. The following summary does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all of the provisions of the Rights Agreement dated as of November
21, 1990 between Fleet and the Rights Agent, a copy of which was filed as an
exhibit to the Registration Statement on Form 8-A filed with the Commission on
December 4, 1990, as amended by a First Amendment to Rights Agreement dated
March 28, 1991 and a Second Amendment to Rights Agreement dated July 12, 1991,
copies of which were filed as exhibits to Fleet's Amendment to Application or
Report on Form 8 dated September 6, 1991 and a Third Amendment to Rights
Agreement dated February 20, 1995, a copy of which was filed as an exhibit to
Fleet's Form 8-A/A dated March 17, 1995 (as amended, the "Rights Agreement").
The Fleet Rights are not represented by separate certificates and are not
exercisable or transferable apart from the Fleet Common Stock until the earlier
to occur of (i) the tenth day after a public announcement by Fleet that (a) a
person or group of affiliated or associated persons has acquired, or obtained
the right to acquire, beneficial ownership (as defined in the Rights Agreement)
of 10% or more (or, in the case of an institutional investor, acting in the
ordinary course of business and not with the purpose of changing or influencing
control of Fleet (a "Qualifying Investor"), 15% or more) of the outstanding
shares of Fleet Common Stock, (b) any person or group of affiliated or
associated persons, which beneficially owned 10% or more (or, in the case of a
Qualifying Investor, 15% or more) of the outstanding shares on the Distribution
Date, or which acquired beneficial ownership of 10% or more (or, in the case of
a Qualifying Investor, 15% or more) of the outstanding shares as a result of any
repurchase of shares by Fleet, thereafter acquired beneficial ownership of
additional shares constituting 1% or more of the outstanding shares, or (c) any
person who was a Qualifying Investor owning 10% or more of the outstanding
shares of Fleet Common Stock ceased to qualify as a Qualifying Investor and
thereafter acquired beneficial ownership of additional shares constituting 1% or
more of the outstanding shares (any
66
<PAGE>
person described in clause (a), (b) or (c) being an "Acquiring Person"); and
(ii) the tenth day (or such later day as may be determined by action of the
Fleet Board prior to such time as any person becomes an Acquiring Person) after
the date of the commencement of a tender or exchange offer by any person (other
than Fleet) to acquire (when added to any shares as to which such person is the
beneficial owner immediately prior to such commencement) beneficial ownership of
10% or more of the issued and outstanding shares of Fleet Common Stock (the
earlier of such dates being called the "Distribution Date"). On March 28, 1991
and July 12, 1991, the Rights Agreement was amended to change the definition of
an "Acquiring Person" (i) to permit the sale of Fleet's Dual Convertible
Preferred Stock and issuance of rights to purchase Fleet Common Stock to the
partnerships which purchased such stock, and (ii) to permit the Fleet Board to
determine that a person who would otherwise be an "Acquiring Person" had become
such inadvertently and therefore allow divestiture of a sufficient number of
shares to avoid such designation. The Rights Agreement was further amended on
February 20, 1995 to amend the definition of "Acquiring Person" to permit the
execution and delivery by Fleet of the merger agreement with Shawmut and the
option agreement in connection therewith without Shawmut becoming an Acquiring
Person under the Rights Agreement.
The Fleet Rights will first become exercisable on the Distribution Date and
could then begin trading separately from the Fleet Common Stock. The Fleet
Rights will expire on November 21, 2000 (the "Final Expiration Date"), unless
the Final Expiration Date is extended or unless the Fleet Rights are earlier
redeemed by Fleet.
In the event any person becomes an Acquiring Person, the Fleet Rights would
give holders (other than such Acquiring Person and its transferees) the right to
buy, for the Purchase Price, Fleet Common Stock (or, under certain
circumstances, cash, property or other debt or equity securities ("Common Stock
equivalents")) with a market value of twice the Purchase Price. In addition, at
any time after any person becomes an Acquiring Person, the Fleet Board may, at
its option and in lieu of any transaction described in the preceding sentence,
exchange the outstanding and exercisable Fleet Rights (other than Fleet Rights
held by such Acquiring Person and its transferees) for shares of Fleet Common
Stock or Common Stock equivalents at an exchange ratio of one share of Fleet
Common Stock per Fleet Right, subject to certain adjustments.
In any merger or consolidation involving Fleet after the Fleet Rights become
exercisable, each Fleet Right will be converted into the right to purchase, for
the Purchase Price, common stock of the surviving corporation (which may be
Fleet) with a market value of twice the Purchase Price. The Fleet Board may
amend the Rights Agreement or redeem the Fleet Rights for $.01 each at any time
until there is an Acquiring Person. Thereafter, the Fleet Board can amend the
Rights Agreement only to eliminate ambiguities or to provide additional benefits
to the holders of the Fleet Rights (other than the Acquiring Person).
Until a Fleet Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of Fleet, including, without limitation, the right to
vote or to receive dividends.
The Purchase Price payable, and the number of shares of Junior Preferred
Stock or other securities or property issuable, upon exercise of the Fleet
Rights, and the number of outstanding Fleet Rights, are subject to customary
antidilution adjustments.
The Fleet Rights have certain "anti-takeover" effects. The Fleet Rights may
cause substantial dilution to a person or group that attempts to acquire Fleet
on terms not approved by the Fleet Board, except pursuant to an offer
conditioned on a substantial number of Fleet Rights being acquired. The Fleet
Rights should not interfere with any merger or other business combination
approved by the Fleet Board prior to the time that there is an Acquiring Person
(at which time holders of the Fleet Rights become entitled to exercise their
Fleet Rights for shares of Fleet Common Stock at one-half the market price),
since until such time the Fleet Rights generally may be redeemed by the Fleet
Board at $.01 per Fleet Right.
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PREFERRED STOCK
GENERAL
The Preferred Stock is issuable in series, with such relative rights,
preferences and limitations of each series (including dividend rights, dividend
rate, liquidation preference, voting rights, conversion rights and terms of
redemption (including sinking fund provisions), redemption price or prices and
the number of shares constituting any series) as may be fixed by the Fleet
Board.
The following summary of the outstanding series of Preferred Stock does not
purport to be complete and is subject in all respects to the applicable
provisions of Rhode Island Law, the Fleet Articles and Fleet By-laws.
9.35% PREFERRED. Dividends on the outstanding 9.35% Preferred are
cumulative and are payable quarterly at the rate of 9.35% per annum. So long as
any shares of the 9.35% Preferred are outstanding, Fleet may not redeem,
repurchase or otherwise acquire any shares of the Fleet Common Stock or any
other class of Fleet stock ranking junior to or on a parity with the 9.35%
Preferred either as to dividends or upon liquidation unless full cumulative
dividends on all outstanding shares of 9.35% Preferred are paid for all past
dividend payment periods. Further, if any dividends on the 9.35% Preferred are
in arrears, Fleet may not redeem, purchase or otherwise acquire any shares of
the 9.35% Preferred unless all outstanding shares of such class are
simultaneously redeemed, purchased or otherwise acquired, except pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
shares of the 9.35% Preferred.
Except as indicated below or except as expressly required by applicable law,
the holders of the 9.35% Preferred are not entitled to vote. If the equivalent
of six quarterly dividends payable on any of the 9.35% Preferred are in default,
the number of directors of Fleet will be increased by two and the holders of all
outstanding classes and series of Fleet preferred stock, voting as a single
class without regard to series, will be entitled to elect two additional
directors until all accrued dividends have been paid. In addition, the vote of
the holders of two-thirds of the 9.35% Preferred, voting as a separate class, is
required in order to amend or alter the Fleet Articles in a manner which would
adversely affect the preferences, rights, powers or privileges of the 9.35%
Preferred; and the vote of two-thirds of the 9.35% Preferred, and all of the
classes and series of Fleet preferred stock ranking on a parity, either as to
dividends or upon liquidation, with the 9.35% Preferred, voting together as a
single class, is required in order to reclassify stock of Fleet into stock
ranking prior, either as to dividends or upon liquidation, to the 9.35%
Preferred, or to authorize the creation or issuance of stock, or of a security
convertible into or evidencing a right to purchase stock, ranking prior, either
as to dividends or upon liquidation, to the 9.35% Preferred.
In the event of any liquidation, dissolution or winding up of Fleet, the
holders of the 9.35% Preferred are entitled to receive $250 per share, plus
accrued and unpaid dividends, if any.
The 9.35% Preferred is redeemable on at least 30 but not more than 60 days'
notice, at the option of Fleet, as a whole or in part, at any time on and after
January 15, 2000 at a redemption price equal to $250 per share, plus accrued and
unpaid dividends, if any.
SERIES V PREFERRED. In the event of the dissolution, liquidation or winding
up of Fleet, holders of shares of the outstanding Series V Preferred are
entitled to receive a distribution of $250 per share, plus accrued and unpaid
dividends, if any.
The holders of Series V Preferred are entitled to receive dividends at the
rate of 7.25% per annum computed on the basis of the issue price thereof of $250
per share, payable quarterly, before any dividend shall be declared or paid upon
the Fleet Common Stock or the Junior Preferred Stock. The dividends on Series V
Preferred are cumulative. The Series V Preferred is redeemable, in whole or in
part, at Fleet's option, on and after April 15, 2001, at $250 per share, plus
accrued and unpaid dividends, if any. So long as any shares of the Series V
Preferred are outstanding, Fleet may not redeem, repurchase or otherwise acquire
any shares of the Fleet Common Stock or any other class of Fleet preferred stock
ranking junior to or on a parity with the Series V Preferred either as to
dividends or upon liquidation unless full cumulative
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dividends on all outstanding shares of Series V Preferred are paid for all past
dividend payment periods. Further, if any dividends on the Series V Preferred
are in arrears, Fleet may not redeem, purchase or otherwise acquire any shares
of the Series V Preferred unless all outstanding shares of such class are
simultaneously redeemed, purchased or otherwise acquired, except pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
shares of the Series V Preferred.
Except as indicated below or except as expressly required by applicable law,
the holders of the Series V Preferred are not entitled to vote. If the
equivalent of six quarterly dividends payable on the Series V Preferred or any
other class or series of preferred stock (other than any other class of
preferred stock expressly entitled to elect additional directors by a separate
and distinct vote) are in default, the number of directors of Fleet will be
increased by two (without duplication of any increase made pursuant to the terms
of any other series of preferred stock of Fleet), and the holders of the Series
V Preferred, voting as a single class with the holders of shares of any one or
more other series of Preferred Stock (other than any other class of preferred
stock expressly entitled to elect additional directors by a separate and
distinct vote) and any other class of Fleet preferred stock ranking on a parity
with the Series V Preferred either as to dividends or distribution of assets and
upon which like voting rights have been conferred and are exercisable, will be
entitled to elect two directors to fill each of the two newly-created
directorships. Such right shall continue until full cumulative dividends for all
past dividend periods on all shares of preferred stock of Fleet (other than any
other class of preferred stock expressly entitled to elect additional directors
by a separate and distinct vote), including any shares of the Series V
Preferred, have been paid or declared and set apart for payment. Any such
elected directors shall serve until Fleet's next annual meeting of stockholders
(notwithstanding that prior to the end of such term the dividend default shall
cease to exist) or until their respective successors shall be elected and
qualify.
The affirmative vote or consent of the holders of at least 66 2/3% of the
outstanding shares of the Series V Preferred is required for any amendment of
the Fleet Articles (or any certificate supplemental thereto) which will
adversely affect the powers, preferences, privileges or rights of the Series V
Preferred. The affirmative vote or consent of the holders of at least 66 2/3% of
the outstanding shares of the Series V Preferred and any other series of
preferred stock ranking on a parity with the Series V Preferred either as to
dividends or upon liquidation, voting as a single class without regard to
series, is required to issue, authorize or increase the authorized amount of, or
issue or authorize any obligation or security convertible into or evidencing a
right to purchase, any additional class or series of stock ranking prior to the
Series V Preferred as to dividends or upon liquidation, or to reclassify any
authorized stock of Fleet into such prior shares.
SERIES VI PREFERRED. In the event of the dissolution, liquidation or
winding up of Fleet, holders of shares of the outstanding Series VI Preferred
are entitled to receive a distribution of $250 per share, plus accrued and
unpaid dividends, if any.
The holders of Series VI Preferred are entitled to receive dividends at the
rate of 6.75% per annum computed on the basis of the issue price thereof of $250
per share, payable quarterly, before any dividend shall be declared or paid upon
the Fleet Common Stock or the Junior Preferred Stock. The dividends on Series VI
Preferred are cumulative. The amount of dividends payable in respect of the
Series VI Preferred will be adjusted in the event of certain amendments to the
Code in respect of the dividends received deduction. The Series VI Preferred is
redeemable, in whole or in part, at Fleet's option, on and after April 15, 2006,
at $250 per share, plus accrued and unpaid dividends, if any. The Series VI
Preferred may also be redeemed prior to April 15, 2006, in whole, at the option
of Fleet, in the event of certain amendments to the Code in respect of the
dividends received deduction. So long as any shares of the Series VI Preferred
are outstanding, Fleet may not redeem, repurchase or otherwise acquire any
shares of the Fleet Common Stock or any other class of Fleet preferred stock
ranking junior to or on a parity with the Series VI Preferred either as to
dividends or upon liquidation unless full cumulative dividends on all
outstanding shares of Series VI Preferred are paid for all past dividend payment
periods. Further, if any dividends on the Series VI Preferred are in arrears,
Fleet may not redeem, purchase or otherwise acquire any shares of the Series VI
Preferred unless all outstanding shares of such class are simultaneously
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redeemed, purchased or otherwise acquired, except pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
the Series VI Preferred.
Except as indicated below or except as expressly required by applicable law,
the holders of the Series VI Preferred are not entitled to vote. If the
equivalent of six quarterly dividends payable on the Series VI Preferred or any
other class or series of preferred stock (other than any other class of
preferred stock expressly entitled to elect additional directors by a separate
and distinct vote) are in default, the number of directors of Fleet will be
increased by two (without duplication of any increase made pursuant to the terms
of any other series of preferred stock of Fleet), and the holders of the Series
VI Preferred, voting as a single class with the holders of shares of any one or
more other series of Preferred Stock (other than any other class of preferred
stock expressly entitled to elect additional directors by a separate and
distinct vote) and any other class of Fleet preferred stock ranking on a parity
with the Series VI Preferred either as to dividends or distribution of assets
and upon which like voting rights have been conferred and are exercisable, will
be entitled to elect two directors to fill each of the two newly-created
directorships. Such right shall continue until full cumulative dividends for all
past dividend periods on all shares of preferred stock of Fleet (other than any
other class of preferred stock expressly entitled to elect additional directors
by a separate and distinct vote), including any shares of the Series VI
Preferred, have been paid or declared and set apart for payment. Any such
elected directors shall serve until Fleet's next annual meeting of stockholders
(notwithstanding that prior to the end of such term the dividend default shall
cease to exist) or until their respective successors shall be elected and
qualify.
The affirmative vote or consent of the holders of at least 66 2/3% of the
outstanding shares of the Series VI Preferred is required for any amendment of
the Fleet Articles (or any certificate supplemental thereto) which will
adversely affect the powers, preferences, privileges or rights of the Series VI
Preferred. The affirmative vote or consent of the holders of at least 66 2/3% of
the outstanding shares of the Series VI Preferred and any other series of
preferred stock ranking on a parity with the Series VI Preferred either as to
dividends or upon liquidation, voting as a single class without regard to
series, is required to issue, authorize or increase the authorized amount of, or
issue or authorize any obligation or security convertible into or evidencing a
right to purchase, any additional class or series of stock ranking prior to the
Series VI Preferred as to dividends or upon liquidation, or to reclassify any
authorized stock of Fleet into such prior shares.
SERIES VII PREFERRED. In the event of the dissolution, liquidation or
winding up of Fleet, holders of shares of the outstanding Series VII Preferred
are entitled to receive a distribution of $250 per share, plus accrued and
unpaid dividends, if any.
Through April 1, 2006, the holders of Series VII Preferred are entitled to
receive dividends at the rate of 6.60% per annum computed on the basis of the
issue price thereof of $250 per share, payable quarterly, before any dividend
shall be declared or paid upon the Fleet Common Stock or the Junior Preferred
Stock. Thereafter the dividend rate on the Series VII Preferred will be a rate
per annum equal to .50% plus the highest of the Treasury Bill Rate, the Ten Year
Constant Maturity Rate and the Thirty Year Constant Maturity Rate, each as
defined in the Certificate of Designation establishing the Series VII Preferred.
The Applicable Rate per annum for any dividend period beginning on or after
April 1, 2006 will not be less than 7.0% nor greater than 13.0%. The dividends
on Series VII Preferred are cumulative. The amount of dividends payable in
respect of the Series VII Preferred will be adjusted on the event of certain
amendments to the Code in respect of the dividends received deduction. The
Series VII Preferred is redeemable, in whole or in part, at Fleet's option, on
and after April 1, 2006, at $250 per share, plus accrued and unpaid dividends,
if any. The Series VII Preferred may also be redeemed prior to April 1, 2006, in
whole, at the option of Fleet, in the event of certain amendments to the Code in
respect of the dividends received deduction. So long as any shares of the Series
VII Preferred are outstanding, Fleet may not redeem, repurchase or otherwise
acquire any shares of the Fleet Common Stock or any other class of Fleet
preferred stock ranking junior to or on a parity with the Series VII Preferred
either as to dividends or upon liquidation unless full cumulative dividends on
all outstanding shares of Series VII Preferred are paid for all past dividend
payment periods. Further, if any dividends on the Series VII Preferred are in
arrears,
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Fleet may not redeem, purchase or otherwise acquire any shares of the Series VII
Preferred unless all outstanding shares of such class are simultaneously
redeemed, purchased or otherwise acquired, except pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
the Series VII Preferred.
Except as indicated below or except as expressly required by applicable law,
the holders of the Series VII Preferred are not entitled to vote. If the
equivalent of six quarterly dividends payable on the Series VII Preferred or any
other class or series of preferred stock (other than any other class of
preferred stock expresssly entitled to elect additional directors by a separate
and distinct vote) are in default, the number of directors of Fleet will be
increased by two (without duplication of any increase made pursuant to the terms
of any other series of preferred stock of Fleet), and the holders of the Series
VII Preferred, voting as a single class with the holders of shares of any one or
more other series of Preferred Stock (other than any other class of preferred
stock expressly entitled to elect additional directors by a separate and
distinct vote) and any other class of Fleet preferred stock ranking on a parity
with the Series VII Preferred either as to dividends or distribution of assets
and upon which like voting rights have been conferred and are exercisable, will
be entitled to elect two directors to fill each of the two newly-created
directorships. Such right shall continue until full cumulative dividends for all
past dividend periods on all shares of preferred stock of Fleet (other than any
other class of preferred stock expressly entitled to elect additional directors
by a separate and distinct vote), including any shares of the Series VII
Preferred, have been paid or declared and set apart for payment. Any such
elected directors shall serve until Fleet's next annual meeting of stockholders
(notwithstanding that prior to the end of such term the dividend default shall
cease to exist) or until their respective successors shall be elected and
qualify.
The affirmative vote or consent of the holders of at least 66 2/3% of the
outstanding shares of the Series VII Preferred is required for any amendment of
the Fleet Articles (or any certificate supplemental thereto) which will
adversely affect the powers, preferences, privileges or rights of the Series VII
Preferred. The affirmative vote or consent of the holders of at least 66 2/3% of
the outstanding shares of the Series VII Preferred and any other series of
preferred stock ranking on a parity with the Series VII Preferred either as to
dividends or upon liquidation, voting as a single class without regard to
series, is required to issue, authorize or increase the authorized amount of, or
issue or authorize any obligation or security convertible into or evidencing a
right to purchase, any additional class or series of stock ranking prior to the
Series VII Preferred as to dividends or upon liquidation, or to reclassify any
authorized stock of Fleet into such prior shares.
SERIES VIII PREFERRED. In the event of the dissolution, liquidation or
winding up of Fleet, holders of shares of the outstanding Series VIII Preferred
are entitled to receive a distribution of $250 per share, plus accrued and
unpaid dividends (whether or not earned or declared) for the then current
dividend period (without accumulation of accrued and unpaid dividends for prior
dividend periods), if any.
Through October 1, 2001, the holders of Series VIII Preferred are entitled
to receive dividends at the rate of 6.59% per annum computed on the basis of the
issue price thereof of $250 per share, payable quarterly, before any dividend
shall be declared or paid upon the Fleet Common Stock or the Junior Preferred
Stock. Thereafter the dividend rate on the Series VIII Preferred will be a rate
per annum equal to .45% plus the highest of the Treasury Bill Rate, the Ten Year
Constant Maturity Rate and the Thirty Year Constant Maturity Rate, each as
defined in the Certificate of Designations establishing the Series VIII
Preferred. The Applicable Rate per annum for any dividend period beginning on or
after October 1, 2001 will not be less than 7.0% nor greater than 13.0%. The
dividends on Series VIII Preferred are noncumulative. The amount of dividends
payable in respect of the Series VIII Preferred will be adjusted in the event of
certain amendments to the Code in respect of the dividends received deduction.
The Series VIII Preferred is redeemable, in whole or in part, at Fleet's option
on and after October 1, 2001, at $250 per share, plus accrued and unpaid
dividends for the then current dividend period (without accumulation of accrued
and unpaid dividends for prior dividend periods), if any. The Series VIII
Preferred may also be redeemed prior to October 1, 2001, in whole, at the option
of Fleet, in the event of certain amendments to the Code in respect of the
dividends received deduction. So long as any shares of the Series VIII Preferred
are outstanding, Fleet may not redeem, repurchase or otherwise acquire any
shares of the Fleet Common
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Stock or any other class of Fleet preferred stock ranking junior to or on a
parity with the Series VIII Preferred either as to dividends or upon liquidation
unless full dividends on all outstanding shares of Series VIII Preferred are
paid for the then current dividend period. Further, if dividends on the Series
VIII Preferred have not been paid for the then current dividend period, Fleet
may not redeem, purchase or otherwise acquire any shares of the Series VIII
Preferred unless all outstanding shares of such class are simultaneously
redeemed, purchased or otherwise acquired, except pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
the Series VIII Preferred.
Except as indicated below or except as expressly required by applicable law,
the holders of the Series VIII Preferred are not entitled to vote. If the
equivalent of six quarterly dividends payable on the Series VIII Preferred or
any other class or series of preferred stock (other than any other class of
preferred stock expressly entitled to elect additional directors by a separate
and distinct vote) are in default, the number of directors of Fleet will be
increased by two (without duplication of any increase made pursuant to the terms
of any other series of preferred stock of Fleet), and the holders of the Series
VIII Preferred, voting as a single class with the holders of shares of any one
or more other series of Preferred Stock (other than any other class of preferred
stock expressly entitled to elect additional directors by a separate and
distinct vote) and any other class of Fleet preferred stock ranking on a parity
with the Series VIII Preferred either as to dividends or distribution of assets
and upon which like voting rights have been conferred and are exercisable, will
be entitled to elect two directors to fill each of the two newly-created
directorships. Such right of the holders of Series VIII Preferred shall continue
until dividends on the Series VIII Preferred have been paid or declared and set
apart for payment regularly for at least one year. Any such elected directors
shall serve until Fleet's next annual meeting of stockholders (notwithstanding
that prior to the end of such term the dividend default shall cease to exist) or
until their successors shall be elected and qualify.
The affirmative vote or consent of the holders of at least 66 2/3% of the
outstanding shares of the Series VIII Preferred is required for any amendment of
the Fleet Articles (or any certificate supplemental thereto) which will
adversely affect the powers, preferences, privileges or rights of the Series
VIII Preferred. The affirmative vote or consent of the holders of at least
66 2/3% of the outstanding shares of the Series VIII Preferred and any other
series of preferred stock ranking on a parity with the Series VIII Preferred
either as to dividends or upon liquidation, voting as a single class without
regard to series, is required to issue, authorize or increase the authorized
amount of, or issue or authorize any obligation or security convertible into or
evidencing a right to purchase, any additional class or series of stock ranking
prior to the Series VIII Preferred as to dividends or upon liquidation, or to
reclassify any authorized stock of Fleet into such prior shares.
JUNIOR PREFERRED STOCK. As of the date of this Prospectus, there were
3,000,000 shares of Junior Preferred Stock reserved for issuance upon the
exercise of the Fleet Rights. See "--Fleet Common Stock--Preferred Share
Purchase Rights". Shares of Junior Preferred Stock purchasable upon exercise of
the Fleet Rights will rank junior to the Preferred Stock and will not be
redeemable. Each share of Junior Preferred Stock will, subject to the rights of
such senior securities of Fleet, be entitled to a preferential cumulative
quarterly dividend payment equal to the greater of $1.00 per share or, subject
to certain adjustments, 100 times the dividend declared per share of Fleet
Common Stock. Upon the liquidation, dissolution or winding up of Fleet, the
holders of the Junior Preferred Stock will, subject to the rights of such senior
securities, be entitled to a preferential liquidation payment equal to the
greater of $1.00 per share, plus all accrued and unpaid dividends, or 100 times
the amount received per share of Fleet Common Stock. Finally, in the event of
any merger, consolidation or other transaction in which shares of Fleet Common
Stock are exchanged, each share of Junior Preferred Stock will, subject to the
rights of such senior securities, be entitled to receive 100 times the amount
received per share of Fleet Common Stock. Each share of Junior Preferred Stock
will have 100 votes, voting together with the Fleet Common Stock. The rights of
the Junior Preferred Stock are protected by customary antidilution provisions.
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SELECTED PROVISIONS IN THE ARTICLES OF FLEET
BUSINESS COMBINATIONS WITH RELATED PERSONS
The Fleet Articles require that neither Fleet nor any of its subsidiaries
may engage in a Business Combination with a Related Person (each as hereinafter
defined) unless such Business Combination (i) was approved by an 80% vote of the
Fleet Board prior to the time the Related Person became such; (ii) is approved
by a vote of 80% of the Continuing Directors (as hereinafter defined) and a
majority of the entire Fleet Board and certain conditions as to price and
procedure are complied with; or (iii) is approved by a vote of 80% of Fleet's
outstanding shares of Fleet capital stock entitled to vote generally in the
election of directors, voting as a single class. Under the Fleet Articles, a
"Business Combination" includes any merger or consolidation of Fleet or any of
its subsidiaries into or with a Related Person or any of its affiliates or
associates; any sale, exchange, lease, transfer or other disposition to or with
a Related Person of all, substantially all or any Substantial Part (defined as
assets having a value of more than 5% of the total consolidated assets of Fleet)
of the assets of Fleet or any of its subsidiaries; any purchase, exchange, lease
or other acquisition by Fleet or any of its subsidiaries of all or any
Substantial Part of the assets or business of a Related Person or any of its
affiliates or associates; any reclassification of securities, recapitalization
or other transaction which has the effect, directly or indirectly, of increasing
the proportionate amount of voting shares of Fleet or any subsidiary which are
beneficially owned by a Related Person; and the acquisition by a Related Person
of beneficial ownership of voting securities, securities convertible into voting
securities or any rights, warrants or options to acquire voting securities of a
subsidiary of Fleet; a "Related Person" includes any person who is the
beneficial owner of 10% or more of Fleet's voting shares prior to the
consummation of a Business Combination or any person who is an affiliate of
Fleet and was the beneficial owner of 10% or more of Fleet's voting shares at
any time within the five years preceding the date on which a binding agreement
providing for a Business Combination is authorized by the Fleet Board; and the
"Continuing Directors" are those individuals who were members of the Fleet Board
prior to the time a Related Person became the beneficial owner of 10% or more of
Fleet's voting stock or those individuals designated as Continuing Directors
(prior to their initial election as directors) by a majority of the then
Continuing Directors. To amend these provisions, a super majority vote (80%) of
the Fleet Board, a majority vote of the Continuing Directors and a super
majority vote (80%) of Fleet's stockholders is required, unless the amendment is
recommended to the stockholders by a majority of the Fleet Board and not less
than 80% of the Continuing Directors, in which event only the vote provided
under Rhode Island Law is required.
DIRECTORS
The Fleet Articles contain a number of additional provisions which are
intended to delay an insurgent's ability to take control of the Fleet Board,
even after an insurgent has obtained majority ownership of the Fleet Common
Stock. The Fleet Articles provide for a classified board of directors,
consisting of three classes of directors serving staggered three-year terms.
Directors of Fleet may only be removed for cause and only (i) by a vote of the
holders of 80% of the outstanding shares of Fleet stock entitled to vote thereon
voting separately as a class at a meeting called for that purpose, or (ii) by a
vote of a majority of the Continuing Directors and a majority of the Fleet Board
as constituted at that time. Vacancies on the Fleet Board, whether due to
resignation, death, incapacity or an increase in the number of directors, may
only be filled by the Fleet Board, acting by a vote of 80% of the directors then
in office. The Fleet Articles provide that the number of directors of Fleet
(exclusive of directors to be elected by the holders of any one or more series
of the Preferred Stock voting separately as a class or classes) that shall
constitute the Fleet Board shall be 13, unless otherwise determined by
resolution adopted by a super majority vote (80%) of the Fleet Board and a
majority of the Continuing Directors. Pursuant to such an adopted resolution,
the number of directors that may serve is currently fixed at 20, except in the
event that quarterly dividends are not paid on non-voting Preferred Stock as
described above, and may only be increased by the affirmative vote of 80% of the
Fleet Board and a majority of the Continuing Directors. A super majority vote
(80%) of the Fleet Board, a majority vote of the Continuing Directors and a
super majority vote (80%) of the outstanding shares of Fleet stock entitled to
vote thereon voting separately as a class are required to amend any of these
provisions.
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COMPARISON OF STOCKHOLDERS' RIGHTS
GENERAL
Fleet and Quick & Reilly are incorporated in Rhode Island and Delaware,
respectively. Stockholders of Quick & Reilly receiving Fleet Common Stock in
connection with the Merger, whose rights as stockholders are currently governed
by Delaware Law, the Quick & Reilly Certificate and the Quick & Reilly By-laws
will, upon consummation of the Merger, automatically become stockholders of
Fleet, and their rights will be governed by Rhode Island Law, the Fleet Articles
and the Fleet By-laws. The following is a summary of the material differences
between the rights of holders of Fleet Common Stock and those of Quick & Reilly
Common Stock. The following does not purport to be a complete description of the
differences between the rights of Fleet and Quick & Reilly stockholders. Such
differences may be determined in full by reference to Rhode Island Law, Delaware
Law, the Fleet Articles, the Quick & Reilly Certificate, the Fleet By-laws and
the Quick & Reilly By-laws.
VOTING RIGHTS
REQUIRED VOTE FOR CERTAIN BUSINESS COMBINATIONS. Both Rhode Island Law and
Delaware Law generally require approval of a merger, consolidation, dissolution
or sale of all or substantially all of a corporation's assets by the affirmative
vote of the holders of a majority of the outstanding shares of the corporation
entitled to vote thereon, unless otherwise provided by statute. In addition,
under Rhode Island Law, if any class of stock is entitled to vote separately,
approval of the plan of merger or consolidation, dissolution or sale of all or
substantially all of the corporation's assets also requires the affirmative vote
of the holders of a majority of the shares of each class of stock entitled to
vote as a class thereon. Delaware Law, absent a charter provision to the
contrary, does not require such a class vote.
Rhode Island Law provides that unless the corporate charter provides
otherwise, the vote of the stockholders of a surviving corporation is not
required to approve a merger if: (i) the plan of merger does not amend the
corporation's charter, and (ii) the number of shares of common stock to be
issued or transferred in the merger plus the number of shares of common stock
into which any other securities to be issued in the merger are convertible
within one year does not exceed one-third of the total combined voting power of
all classes of stock then entitled to vote for the election of directors which
would be outstanding immediately after the merger.
Pursuant to Delaware Law, unless the corporate charter provides otherwise,
no vote of the stockholders of a surviving corporation is required to approve a
merger if: (i) the agreement of merger does not amend in any respect the
corporation's charter; (ii) each share of the corporation's stock outstanding
immediately prior to the effective date of the merger is to be an identical
outstanding or treasury share of the surviving corporation after the effective
date of the merger; and (iii) either no shares of common stock of the surviving
corporation and no shares, securities or obligations convertible into such stock
are to be issued or delivered under the plan of merger, or the number of
authorized unissued shares or treasury stock of the surviving corporation's
common stock to be issued or delivered under the plan of merger plus the number
of shares of common stock into which any other shares, securities or obligations
to be issued or delivered in the plan of merger are initially convertible does
not exceed 20% of the surviving corporation's common stock outstanding
immediately prior to the effective date of the merger.
No provisions relating to the approval of mergers with unrelated third
parties by holders of the respective corporation's common stock are contained in
the corporate charters of either Fleet or Quick & Reilly.
As more fully described above, the Fleet Articles contain certain provisions
regarding business combinations with certain persons. See "SELECTED PROVISIONS
IN THE ARTICLES OF FLEET".
The Quick & Reilly Certificate provides that any "Business Combination" (as
defined below) involving Quick & Reilly and an individual, partnership,
corporation or other entity (a "Person"), other than Quick & Reilly or any
subsidiary of Quick & Reilly, that is (i) the beneficial owner, directly or
indirectly, of 10% or more of the then outstanding voting stock; (ii) an
affiliate of Quick & Reilly and at
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any time during the prior two years was the beneficial owner, directly or
indirectly, of 10% or more of the then outstanding voting stock; or (iii) an
assignee of or has otherwise succeeded to any then outstanding voting stock of
which an Interested Stockholder was the beneficial owner at any time during the
prior two years, unless such assignment or succession occurs in a transaction
that is a public offering within the meaning of the Securities Act (an
"Interested Stockholder") must be approved by the holders of at least 80% of the
votes entitled to be cast by the holders of the outstanding shares of Quick &
Reilly voting stock, voting together as a single class (the "Voting
Requirement"). The Voting Requirement does not apply if (i) the Business
Combination is approved by a majority of the "Disinterested Directors" (defined
generally to include any director of Quick & Reilly who is not affiliated with
the Interested Stockholder who is proposing or involved in a Business
Combination and who either was a director prior to the time that such Interested
Stockholder became an Interested Stockholder or was recommended for election as
a director by a majority of the directors at the time of such recommendation who
were not then affiliated with such Interested Stockholder); or (ii) certain
"minimum price and procedural requirements" (defined generally to mean that the
consideration to be received by stockholders in such Business Combination shall
be at least equal to the higher of, and in the same form as, the consideration
paid by the Interested Stockholder for such Interested Stockholder's acquisition
of the applicable Quick & Reilly capital stock within the two-year period
immediately prior to the first public announcement of the proposal of the
Business Combination or in the transaction in which such person became an
Interested Stockholder) and other criteria are met. As defined in the Quick &
Reilly Certificate, a "Business Combination" includes, among other things:
(i) any merger of Quick & Reilly or any subsidiary with (a) an Interested
Stockholder, or (b) any other corporation (whether or not such other corporation
is an Interested Stockholder), that is, or after such merger would be, an
affiliate of an Interested Stockholder; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition (in one transaction or a series
of transactions) to or with an Interested Stockholder, or an affiliate of an
Interested Stockholder of any assets, of Quick & Reilly or any subsidiary having
an aggregate fair market value of more than twenty-five percent (25%) of the
"Fair Value" (defined as (a) the highest reported closing sale price during the
30-day period immediately preceding such date of a share of such capital stock
on the principal national securities exchange on which shares of such capital
stock are listed, (b) if shares of such capital stock are not listed on any
national securities exchange, the highest reported closing sale price or, if
there is no closing sale price, closing bid quotation for a share of such
capital stock during the 30-day period immediately preceding such date on the
National Association of Securities Dealers, Inc.'s Automated Quotation System or
any similar system then in use, or (c) if no such prices or quotations are
available, the fair market value on such date of a share of such capital stock
as determined in good faith by the Disinterested Directors) of the shares of
capital stock of Quick & Reilly outstanding immediately prior to such
transaction; (iii) any issuance or transfer by Quick & Reilly, or any subsidiary
(in one transaction or a series of transactions) of any securities of Quick &
Reilly or any subsidiary, to an Interested Stockholder, or any affiliate of an
Interested Stockholder, in exchange for cash, securities, other property or a
combination thereof having an aggregate fair market value of more than
twenty-five percent (25%) of the Fair Value of the shares of capital stock of
Quick & Reilly outstanding immediately prior to such transaction; (iv) any plan
or proposal for the liquidation or dissolution of Quick & Reilly proposed by or
on behalf of an Interested Stockholder, or any affiliate of an Interested
Stockholder; and (v) any reclassification of Quick & Reilly's securities
(including any reverse stock split), any recapitalization of Quick & Reilly, any
merger of Quick & Reilly with any subsidiary or any other transaction (whether
or not involving an Interested Stockholder or an affiliate of an Interested
Stockholder) that has the effect, directly or indirectly, of increasing the
proportionate beneficial ownership of an Interested Stockholder, or any
affiliate of an Interested Stockholder, of the outstanding shares of any class
of equity securities of Quick & Reilly or any subsidiary or any class of
securities exchangeable for or convertible into any such class of equity
securities.
CHARTER AND BY-LAW AMENDMENTS. Both Delaware Law and Rhode Island Law
generally provide that an amendment to a corporate charter requires (i) adoption
by the board of directors of a resolution submitting the proposed amendment to
the shareholders, and (ii) approval by the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote thereon. Both Delaware Law
and Rhode
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Island Law also provide for any class of stock or series to vote as a class on
the proposed amendment if the amendment would change the number or par value of
the aggregate authorized shares of a class. Rhode Island Law requires separate
class voting if the amendment would, among other things, change the
designations, preferences, limitations or relative rights of the class, effect
an exchange or create a right of exchange of all or any part of the shares of
another class into shares of the class, or create a new class of shares having
rights and preferences prior and superior to the shares of the class. Delaware
Law also requires class voting if the amendment would alter or modify the
powers, preferences or special rights of the shares of such class so as to
affect such class adversely. Under both Delaware Law and Rhode Island Law, the
board of directors' authority to adopt, amend or repeal the by-laws of a
corporation, if provided for in the articles of incorporation, does not divest
or limit the power of stockholders to adopt, amend or repeal the by-laws; Rhode
Island Law specifically provides that any amendment by the board of directors to
the by-laws may be subsequently changed by the affirmative vote of holders of a
majority of the shares entitled to vote thereon.
The Fleet Articles provide that any amendment, alteration, change or repeal
of the provisions in such charter relating to (i) directors and business
combinations requires the affirmative vote of 80% of the Fleet Board and a
majority of the Continuing Directors and the affirmative vote of the holders of
80% or more of the outstanding shares of capital stock entitled to vote
generally in the election of directors, voting separately as a class; and (ii)
the provisions in the Fleet Articles governing the amendment of such articles
require the affirmative vote of the holders of 80% or more of the outstanding
shares of capital stock entitled to vote generally in the election of directors,
voting separately as a class.
The Fleet By-laws provide that such by-laws may be altered, amended or
repealed in whole or in part and new by-laws may be adopted in whole or in part,
only by the affirmative vote of 80% of the Fleet Board and a majority of the
Continuing Directors or by an affirmative vote of the holders of at least 50% of
the Fleet Common Stock entitled to vote thereon.
The Quick & Reilly Certificate provides that the amendment, repeal or
adoption of any provisions inconsistent with the provisions of the Quick &
Reilly Certificate relating to Business Combinations shall require the
affirmative vote of at least 80% of the voting power of all shares of capital
stock of Quick & Reilly then outstanding entitled to vote generally for the
election of directors. Any repeal or modification by the stockholders of Quick &
Reilly relating to the provisions regarding the management of the business shall
not adversely affect any right or protection of a director of Quick & Reilly
existing immediately prior to such repeal or modification.
The Quick & Reilly Certificate further provides that directors shall have
the power to make, alter, amend, or repeal the Quick & Reilly By-laws, subject
to the powers of the holders of shares of capital stock of Quick & Reilly then
outstanding. Any action by stockholders to effect such alteration, change,
addition or repeal requires the affirmative vote of at least 80% of the voting
power of all shares of Quick & Reilly's capital stock entitled to vote generally
for the election of directors. The Quick & Reilly By-laws provide that notice of
any such action specifying or describing the same shall be contained in or
accompany the notice of the meeting at which the action is to be taken.
SPECIAL MEETINGS; CORPORATE ACTION WITHOUT A MEETING
SPECIAL MEETINGS. Rhode Island Law provides that a special meeting of
stockholders may be called by the president, the board of directors or the
holders of 10% or more of the shares entitled to vote at such meeting, or by
such other officers or persons specified in the charter or by-laws. The Fleet
By-laws permit special meetings of stockholders to be called by the Fleet Board
pursuant to a resolution adopted by a majority of the Fleet Board, or by the
Chairman of the Fleet Board or the President. In addition, the Fleet By-laws
require that the Secretary of Fleet must call a special meeting of stockholders
upon written request of three or more stockholders holding at least 80% of the
outstanding shares of stock of Fleet entitled to vote at such meeting.
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Under Delaware Law, a special meeting of stockholders may be called by the
board of directors or such other persons as are authorized by the certificate of
incorporation or by-laws. The Quick & Reilly By-laws provide that special
meetings of stockholders may be called at any time by the Quick & Reilly Board
pursuant to a resolution adopted by a majority of the total number of directors
Quick & Reilly would have if there were no vacancies or by the Chairman of the
Board. Such meetings shall be called by giving notice to that effect to all
stockholders entitled to vote at such meetings. Such notices shall state the
place, date, hour and purpose or purposes of such meetings. No business shall be
transacted at a special meeting unless it relates to the purpose or purposes for
such meeting set forth in the notice of such meeting. Any special meeting may be
adjourned from time to time until the business to be transacted at such meeting
is completed.
CORPORATE ACTION WITHOUT A MEETING. Except for corporate action relating to
a merger or consolidation, acquisition or disposition, Rhode Island Law permits
corporate action without a meeting if the charter of a corporation authorizes
such action and the shareholders consenting to such action would be entitled to
cast, at a meeting at which all stockholders entitled to vote thereon were
present, at least the minimum number of votes which would be required to take
such action. Rhode Island Law further provides that corporate action relating to
a merger, consolidation, acquisition or disposition may be taken without a
meeting if all stockholders entitled to vote thereon consent in writing. The
Fleet Articles authorize such action by stockholders if the written consent of
stockholders having not less than the minimum percentage of the total vote
statutorily required for the proposed corporate action is obtained and provided
that notice of such action is given to all Fleet stockholders who would have
been entitled to vote upon the action if such meeting were held.
Delaware Law permits corporate action without a stockholders' meeting,
without prior notice and without a vote of stockholders upon receipt of written
consent of that number of shares that would be necessary to authorize the
proposed corporate action at a meeting at which all shares entitled to vote
thereon were present and voting, unless the charter expressly provides
otherwise. Prompt notice of the taking of action without a meeting by less than
unanimous written consent must be given to all stockholders who have not
consented in writing and who, if the action had been taken at a meeting, would
have been entitled to receive notice of the meeting. The Quick & Reilly
Certificate does not provide otherwise.
DIVIDENDS
Under Rhode Island Law, the board of directors has the power to declare and
pay dividends in cash, property or securities of the corporation unless (i) such
corporation is or would be thereby made insolvent, or (ii) the declaration or
payment of such dividend would be contrary to any restrictions contained in the
charter. Rhode Island Law further provides that no distribution may be made (i)
if the corporation would become unable to pay its debts as they become due in
the usual course of business, or (ii) the corporation's total assets would be
less than the sum of its liabilities plus, unless the charter permits otherwise,
the amount that would be needed, if the corporation were to be dissolved at the
time of the distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution.
Under Delaware Law, the board of directors is generally permitted to declare
and pay dividends out of surplus or out of net profits for the current and/or
preceding fiscal year, provided that such dividends will not reduce capital
below the amount of capital represented by all classes of issued and outstanding
stock having a preference upon the distribution of assets. Also under Delaware
Law, a corporation may generally redeem or purchase shares of its stock if such
redemption or purchase will not impair the capital of the corporation.
APPRAISAL RIGHTS
Under Rhode Island Law, appraisal rights are available only in connection
with (i) a statutory merger or consolidation (unless the corporation is to be
the surviving corporation and no vote of its stockholders is
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required to approve the merger); (ii) acquisitions which require shareholder
approval; and (iii) sales or exchanges of all or substantially all of the
property and assets of a corporation in a transaction requiring stockholder
approval. In addition, unless otherwise provided in the charter, no appraisal
rights are available to holders of shares of any class of stock which, as of the
date fixed to determine the stockholders entitled to receive notice of the
proposed transaction, are (i) registered on a national securities exchange or
included as National Market securities in the National Association of Securities
Dealers, Inc.'s automated quotation system, or (ii) held of record by not less
than 2,000 stockholders. There are no provisions in the Fleet Articles providing
for appraisal rights. Under Rhode Island Law, holders of Fleet capital stock do
not have any appraisal rights in connection with the Merger. See "THE MERGER--
Appraisal Rights".
Under Delaware Law, appraisal rights are available in connection with a
statutory merger or consolidation in certain specified situations. Appraisal
rights are not available when a corporation is to be the surviving corporation
and no vote of its stockholders is required to approve the merger. In addition,
unless otherwise provided in the charter, no appraisal rights are available to
holders of shares of any class of stock which is either: (i) listed on a
national securities exchange or designated as a National Market security on an
inter-dealer quotation system by the National Association of Securities Dealers,
Inc., or (ii) held of record by more than 2,000 stockholders, unless such
stockholders are required by the terms of the merger to accept anything other
than: (a) shares of stock of the surviving corporation; (b) shares of stock of
another corporation which are or will be so listed on a national securities
exchange or designated as a National Market security on an inter-dealer
quotation system by the National Association of Securities Dealers, Inc. or held
of record by more that 2,000 stockholders; (c) cash in lieu of fractional shares
of such stock; or (d) any combination thereof. The Quick & Reilly Certificate
has no provisions for appraisal rights. Given that Quick & Reilly Common Stock
is listed on the NYSE and Quick & Reilly Stockholders will receive in the Merger
Fleet Common Stock, which is also listed on the NYSE, holders of Quick & Reilly
Common Stock will not have appraisal rights in connection with the Merger. See
"THE MERGER--Appraisal Rights".
PROVISIONS RELATING TO DIRECTORS
NUMBER OF DIRECTORS. Under both Rhode Island Law and Delaware Law, a
corporation must have a board of directors consisting of at least one director.
The Fleet Articles provide that the Fleet Board shall consist of 13 members
(exclusive of directors to be elected by holders of any one or more series or
classes of the Preferred Stock voting separately as a class or classes) unless
otherwise determined from time to time by resolution adopted by an affirmative
vote of at least 80% of the Fleet Board and a majority of the Continuing
Directors. Pursuant to such an adopted resolution, the number of directors that
may serve is currently fixed at 20. As of the Effective Time of the Merger, the
Fleet Board will consist of 19 members (exclusive of directors to be elected by
holders of any one or more series or classes of the Preferred Stock voting
separately as a class or classes) unless otherwise determined from time to time
by resolution adopted by an affirmative vote of at least 80% of the Fleet Board
and a majority of the Continuing Directors. Fleet has agreed to cause the Quick
& Reilly Board Designee to be elected or appointed as a director of the Fleet
Board as promptly as practicable after the Effective Time. The Quick & Reilly
By-laws provide that the Quick & Reilly Board consist of that number of
directors as fixed from time to time by resolutions adopted by a majority vote
of the total number of directors Quick & Reilly would have if there were no
vacancies. The initial Quick & Reilly Board consisted of twelve directors.
VACANCIES. The Fleet Articles provide that vacancies in the Fleet Board may
be filled only by the vote of 80% of the directors then in office. The Quick &
Reilly By-laws provide that vacancies may be filled by the vote of a majority of
the directors then in office.
CLASSIFICATION. Rhode Island Law and Delaware Law both permit
classification of the board of directors if the corporate charter so provides.
Delaware Law also permits classification of directors if an initial by-law so
provides, or by a by-law adopted by a vote of the stockholders. The Fleet
Articles and
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Fleet By-laws provide for classification of the Fleet Board into three classes
as nearly equal in number as possible, with one class being elected annually.
The Quick & Reilly Certificate and Quick & Reilly By-laws likewise provide for
classification of the Quick & Reilly Board into three classes as nearly equal in
number as possible, with one class being elected annually.
STOCKHOLDER NOMINATIONS. The holders of Fleet Common Stock may nominate
individuals for election to the Fleet Board. The procedure pursuant to which
such nomination must occur is set forth in the Fleet By-laws. The Fleet By-laws
specify that nominations of persons for election as director may be made at a
meeting of stockholders by or at the direction of the Fleet Board, or by any
holder of stock entitled to vote thereon who complies with the requisite notice
procedure. The notice procedure requires that a stockholder's nomination of a
person for election as a director must be made in writing and received by the
Secretary of Fleet not less than 30 days prior to the date of the meeting of
stockholders, provided, however, that if fewer than 40 days' notice or prior
public disclosure of the date of the meeting is given to stockholders, the
stockholder's nomination notice must be received not later than the close of
business on the seventh day following the first to occur of the publication or
mailing of the notice of the meeting date. The Fleet By-laws require that a
stockholder's notice to nominate an individual to the Fleet Board include
certain information about the nominee, including the information required to be
disclosed in solicitations for proxies for election of directors pursuant to
Regulation 14A under the Exchange Act (including such person's written consent
to being named in the proxy statement as a nominee and to serving as a director
if elected), along with the name, address, class and number of shares of Fleet
beneficially owned by the stockholder giving such notice and by other
stockholders known by such stockholder to be supporting such nominees on the
date of such stockholder's notice.
The Quick & Reilly By-laws establish procedures that must be followed for
stockholders to nominate individuals to the Quick & Reilly Board at the annual
meeting of stockholders. In order to nominate individuals to the Quick & Reilly
Board, a stockholder must provide timely notice of such nomination in writing to
the Secretary of Quick & Reilly. Such notice must be delivered or mailed to, and
received at, the principal executive office of Quick & Reilly not less than
seventy (70) days prior to the date of such meeting; provided, however, that if
less than eighty (80) days' notice or prior public disclosure of the date of
such meeting is given to stockholders or made, such notice must be so delivered
or mailed and received not later than the close of business on the tenth (10th)
day following the day on which notice or public disclosure of the date of such
meeting is given or made. Such notice must set forth (i) as to each person whom
such stockholder proposes to nominate for election or re-election as a director,
all information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors pursuant to Regulation 14A
under the Exchange Act (including each such person's written consent to serve as
director if elected); and (ii) as to the stockholder giving such notice (a) the
name and address of such stockholder as they appear on Quick & Reilly stock
register, (b) the classes and number of shares of each class of Quick & Reilly's
capital stock that are owned beneficially and of record by such stockholder, and
(c) any professional, commercial, business or familial relationship of such
stockholder to such nominees. The chairman presiding at such meeting shall
determine whether any nomination to be made at such meeting will be properly so
made in accordance with the Quick & Reilly By-laws and, if he should determine
that such nomination will not be properly so made, he shall so declare at such
meeting and such nomination shall not be made at such meeting.
REMOVAL. Under Rhode Island Law, a director may be removed by the
stockholders without cause, if the charter or by-laws so provide but, in the
case of a corporation permitting cumulative voting for the election of
directors, only if the number of shares voted against removal would not be
sufficient to elect the director if voted cumulatively. For a discussion of
provisions regarding the removal of directors in the Fleet Articles, see
"SELECTED PROVISIONS IN THE ARTICLES OF FLEET".
Under Delaware Law, any director or the entire board of directors of a
corporation may be removed, with or without cause, by the holders of a majority
of the shares then entitled to elect directors. In the case of a corporation
whose board is classified, stockholders may effect such removal only for cause
unless the charter provides otherwise. The Quick & Reilly Certificate does not
provide otherwise.
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DERIVATIVE SUITS
Under both Rhode Island Law and Delaware Law, stockholders may bring suits
on behalf of the corporation to enforce the rights of a corporation. Under both
Rhode Island Law and Delaware Law, a person may institute and maintain a suit if
such person was a stockholder at the time of the transaction which is the
subject of the suit or if such person's stock thereafter devolved upon him or
her by operation of law. Under Rhode Island Law, upon final judgment and a
finding that the commencement of a derivative action by a stockholder was
without reasonable cause, a court may require the plaintiff(s) to pay to the
parties named as defendant(s) the reasonable expenses, including legal fees,
incurred by them in defense of such action.
In addition, under Delaware Law, the plaintiff generally must be a
stockholder not only at the time of the transaction which is the subject of the
action but also throughout the duration of the derivative suit. Delaware Law
also requires that the derivative plaintiff make demand on the directors of the
corporation to assert the corporate claim unless such demand would be futile
before the suit may be prosecuted by the derivative plaintiff.
STATE ANTI-TAKEOVER STATUTES
Pursuant to Rhode Island Law, a corporation shall not engage in any business
combination with an interested stockholder (generally defined as the beneficial
owner of 10% or more of the corporation's outstanding voting stock or an
affiliate of the corporation who, within five years prior to the date in
question, was the beneficial owner of 10% or more of the corporation's
outstanding voting stock) for a period of five years following the date the
stockholder became an interested stockholder unless either (i) the board of
directors of the corporation approved the business combination or transaction
prior to the date the stockholder became an interested stockholder; (ii) holders
of two-thirds of the outstanding voting stock, excluding any stock owned by the
interested stockholder or any affiliate or associate of the interested
stockholder, have approved the business combination at a meeting called for such
purpose no earlier than five years after the interested stockholder's stock
acquisition date; or (iii) the business combination meets each of the following
conditions: (a) the nature, form and adequacy of the consideration to be
received by the corporation's stockholders in the business combination
transaction satisfies certain specific enumerated criteria; (b) the holders of
all the outstanding shares of stock of the corporation not beneficially owned by
the interested stockholder are entitled to receive the specified consideration
in the business combination transaction; and (c) the interested stockholder
shall not acquire additional shares of voting stock of the corporation except in
certain specifically identified transactions.
The restrictions prescribed by Rhode Island Law will not be applicable to
any business combination (i) involving a corporation that does not have a class
of voting stock registered under the Exchange Act, unless the charter provides
otherwise; (ii) involving a corporation which did not have a class of voting
stock registered under the Exchange Act at the time the corporation's charter
was amended to provide that the corporation shall be subject to the statutory
restriction provisions and the interested stockholder's stock acquisition date
is prior to the effective date of the charter amendment; (iii) involving a
corporation whose original charter contains a provision expressly electing not
to be subject to the statutory restrictions or which adopted an amendment
expressly electing not to be subject to the statutory restrictions either to its
by-laws prior to March 31, 1991 or to its charter if such charter amendment is
approved by the affirmative vote of holders, other than the interested
stockholders and their affiliates and associates, of two-thirds of the
outstanding voting stock, excluding the voting stock of the interested
stockholders; provided, that the amendment to the charter shall not be effective
until 12 months after the vote of the stockholders and shall not apply to any
business combination of the corporation with an interested stockholder whose
stock acquisition date is on or prior to the effective date of the amendment; or
(iv) involving a corporation with an interested stockholder who became an
interested stockholder inadvertently, if the interested stockholder divests
itself of such number of shares so that it is no longer the beneficial owner of
10% of the outstanding voting stock and, but for such inadvertent ownership, was
not an interested stockholder within the five-year period preceding the
announcement of the business combination. None of the Fleet Articles,
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the original Fleet charter or the Fleet By-laws contains any provisions
expressly providing that Fleet will not be subject to the restrictions
prescribed by the statute.
Pursuant to Delaware Law, a corporation shall not engage in any business
combination with an interested stockholder (generally defined as the holder of
15% or more of the corporation's voting stock) for a period of three years
following the date that such stockholder became an interested stockholder,
unless (i) the board of directors approved either the business combination or
transaction prior to the time that the interested stockholder became an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding, those shares owned by (a) any
persons who are directors and also officers, and (b) employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer; or (iii) at or subsequent to the time the stockholder became an
interested stockholder, the board of directors approved the transaction and the
stockholders approved the transaction, not by written consent, but at an annual
or special meeting of shareholders, with an affirmative vote of two-thirds of
the outstanding voting stock, excluding any stock owned by the interested
stockholder. The restrictions prescribed by the statute will not be applicable
if (i) a corporation's charter or by-laws contain a provision expressly
providing that the corporation shall not be subject to such statutory
restrictions; (ii) if the corporation does not have a class of voting stock that
is (a) listed on a national securities exchange; (b) authorized for quotation on
The Nasdaq Stock Market, Inc.; or (c) held of record by more than 2,000
stockholders, unless any of the foregoing results from action taken directly or
indirectly by an interested stockholder or from a transaction in which a person
becomes an interested stockholder; or (iii) a stockholder becomes an interested
stockholder inadvertently and divests itself of ownership of sufficient shares
so that the stockholder ceases to be an interested stockholder and would not, at
any time during the three-year period immediately prior to a business
combination between the corporation and the interested stockholder, have been an
interested stockholder but for the inadvertent acquisition of ownership; or (iv)
the business combination is proposed prior to the consummation or abandonment of
and subsequent to the earlier of the public announcement or required notice to
interested stockholders of a proposed transaction: (a) involving (A) a merger or
consolidation (except a merger in respect of which no vote of the stockholders
of the corporation is required); (B) a sale, lease, exchange, mortgage, pledge,
transfer or other disposition of assets of the corporation or of any direct or
indirect majority-owned subsidiary of the corporation having an aggregate market
value equal to 50% or more of either the aggregate market value of all the
assets of the corporation determined on a consolidated basis or the aggregate
market value of all the outstanding stock of the corporation; or (C) a proposed
tender offer or exchange offer for 50% or more of the outstanding voting stock
of the corporation; (b) is with or by a person who either was not an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of the corporation's board of directors or at a
time when these statutory restrictions did not apply for any of the reasons set
forth in clauses (i) and (ii) of this sentence; and (c) is approved or not
opposed by a majority of the members of the board of directors who were
directors prior to any person becoming an interested stockholder during the
previous three years or were recommended for election or elected to succeed such
directors by a majority of such directors. Neither the Quick & Reilly
Certificate nor the Quick & Reilly By-laws contain any provision expressly
providing that Quick & Reilly will not be subject to the restrictions prescribed
by the statute. See "--Voting Rights-- Required Vote for Certain Business
Combinations".
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COMPARATIVE COMMON STOCK PRICES AND DIVIDENDS
FLEET. Fleet Common Stock is listed on the NYSE under the symbol FLT. The
following table sets forth the high and low sales prices for Fleet Common Stock
as reported on the NYSE Composite Tape, and the cash dividends declared, for the
calendar periods indicated.
<TABLE>
<CAPTION>
PRICE CASH
-------------------- DIVIDENDS
CALENDER YEAR HIGH LOW DECLARED
- --------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
1995
First Quarter.................................................................... $ 34.625 $ 30.875 $ .40
Second Quarter................................................................... 38.375 32.125 .40
Third Quarter.................................................................... 39.125 35.000 .40
Fourth Quarter................................................................... 43.000 38.125 .43
1996
First Quarter.................................................................... $ 42.500 $ 39.250 $ .43
Second Quarter................................................................... 45.375 40.375 .43
Third Quarter.................................................................... 44.625 38.500 .43
Fourth Quarter................................................................... 55.875 44.875 .45
1997
First Quarter.................................................................... $ 62.750 $ 49.625 $ .45
Second Quarter................................................................... 65.813 55.500 .45
Third Quarter.................................................................... 70.750 63.375 .45
Fourth Quarter (through December 12, 1997)....................................... 75.063 61.938 .49
</TABLE>
QUICK & REILLY. Quick & Reilly Common Stock is listed on the NYSE under the
symbol BQR. The following table sets forth the high and low sales prices for
Quick & Reilly Common Stock as reported on the NYSE Composite Tape, and the cash
dividends declared, for the fiscal periods indicated.
<TABLE>
<CAPTION>
PRICE CASH
-------------------- DIVIDENDS
FISCAL YEAR ENDED THE LAST DAY OF FEBRUARY HIGH LOW DECLARED
- --------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
1996
First Fiscal Quarter............................................................. $ 13.750 $ 9.875 $ .044
Second Fiscal Quarter............................................................ 17.875 13.625 .044
Third Fiscal Quarter............................................................. 20.500 15.500 .047
Fourth Fiscal Quarter............................................................ 17.875 13.500 .100
1997
First Fiscal Quarter............................................................. $ 23.375 $ 15.875 $ .047
Second Fiscal Quarter............................................................ 22.625 18.125 .053
Third Fiscal Quarter............................................................. 19.625 17.125 .053
Fourth Fiscal Quarter............................................................ 26.750 18.125 .127
1998
First Fiscal Quarter............................................................. $ 25.083 $ 19.875 $ .060
Second Fiscal Quarter............................................................ 36.250 22.250 .060
Third Fiscal Quarter............................................................. 41.250 32.625 .060
Fourth Fiscal Quarter (through December 12, 1997)................................ 42.875 37.563 --
</TABLE>
On December 12, 1997, the latest practicable trading day before the printing
of this Proxy Statement-Prospectus, the closing sales price for Fleet Common
Stock as reported on the NYSE was $73.875 per share and the closing sales price
for Quick & Reilly Common Stock as reported on the NYSE was $42.250 per share.
On September 15, 1997, the last full trading day prior to the announcement of
the proposed
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Merger, the closing sales price of Fleet Common Stock as so reported was $67.500
per share, and the closing sales price of Quick & Reilly Common Stock as so
reported was $38.938 per share.
EXPERTS
The consolidated financial statements of Fleet incorporated by reference in
Fleet's Annual Report on Form 10-K for the fiscal year ended December 31, 1996,
incorporated by reference herein have been incorporated by reference herein in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, and upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements of Quick & Reilly incorporated by
reference in Quick & Reilly's Annual Report on Form 10-K for the fiscal year
ended February 28, 1997, incorporated by reference herein have been incorporated
by reference herein in reliance upon the report of Arthur Andersen LLP,
independent certified public accountants, and upon the authority of said firm as
experts in accounting and auditing.
LEGAL OPINIONS
The legality of the shares of Fleet Common Stock to be issued to the holders
of Quick & Reilly Common Stock pursuant to the Merger and certain other legal
matters in connection with the Merger, including an opinion substantially to the
effect that the Merger will constitute a "reorganization" under Section 368 of
the Code, will be passed upon for Fleet by Edwards & Angell, One Hospital Trust
Plaza, Providence, Rhode Island 02903. V. Duncan Johnson, a partner of Edwards &
Angell, is a director of Fleet National Bank, a wholly-owned subsidiary of
Fleet, and beneficially owns 4,052 shares of Fleet Common Stock.
The Merger Agreement provides as a condition to Quick & Reilly's obligation
to consummate the Merger that Quick & Reilly receive the opinion of Wachtell,
Lipton, Rosen & Katz, special counsel to Quick & Reilly, substantially to the
effect that the Merger will constitute a "reorganization" under Section 368 of
the Code. Wachtell, Lipton, Rosen & Katz has from time to time acted as counsel
in advising Fleet and its affiliates with respect to certain matters and in
connection with various transactions. Wachtell, Lipton, Rosen & Katz did not act
as counsel to Fleet or its affiliates with respect to the Merger or any
transaction in connection therewith.
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EXHIBIT A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF SEPTEMBER 16, 1997, AS AMENDED AS OF DECEMBER 12, 1997,
BY AND AMONG
THE QUICK & REILLY GROUP, INC.,
FLEET FINANCIAL GROUP, INC.
AND
FFG ACQUISITION CORP.
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of the 16th day of September, 1997,
as amended as of December 12, 1997 (this "Agreement"), by and among The Quick &
Reilly Group, Inc., a Delaware corporation (the "Company"), Fleet Financial
Group, Inc., a Rhode Island corporation (the "Buyer"), and FFG Acquisition Corp.
("Merger Sub"), a Delaware corporation.
WHEREAS, the Company is a Delaware corporation, having its principal place
of business in Palm Beach, Florida.
WHEREAS, the Buyer is a Rhode Island corporation, having its principal place
of business in Boston, Massachusetts.
WHEREAS, Merger Sub is a Delaware corporation and a wholly-owned subsidiary
of the Buyer.
WHEREAS, as a condition to, and immediately after the execution of this
Agreement, the Company will enter into a Stock Option Agreement with the Buyer
attached as Exhibit A.
WHEREAS, it is the intention of the parties to this Agreement that the
business combination contemplated hereby be treated as a "reorganization" under
Section 368 of the United States Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder (the "Code").
WHEREAS, the respective Boards of Directors of each of the Company, the
Buyer and Merger Sub have determined that it is in the best interests of their
respective companies and their stockholders to consummate the strategic business
combination transaction provided for herein.
WHEREAS, as a condition to, and immediately after the execution of this
Agreement, certain stockholders of the Company will enter into Support
Agreements in the form of Exhibit B.
WHEREAS, in connection with the Merger, certain employees of the Company
identified on ANNEX A hereto have entered or will enter into employment
agreements with the Company and the Buyer in the forms of ANNEX B and ANNEX C
hereto.
WHEREAS, the parties have agreed, in connection with the Merger, to
establish a retention program on substantially the terms described herein, the
purpose of which is to retain the services of certain employees of the Company
following the Merger.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein the
parties agree as follows:
ARTICLE I.
DEFINITIONS
1.1. DEFINITIONS. The following terms are used in this Agreement with the
meanings set forth below:
"1940 Act" means the Investment Company Act of 1940, as amended.
"Acquisition Proposal" means any tender or exchange offer, proposal for a
merger, consolidation or other business combination involving the Company or any
of its Subsidiaries or any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets or
deposits of, the Company or any of its Subsidiaries, other than the transactions
contemplated by this Agreement.
"Agreement" has the meaning set forth in the Preamble, as amended or
modified from time to time in accordance with SECTION 9.2.
"Broker-Dealer Subsidiaries" has the meaning set forth in SECTION
5.3(G)(IV).
"Buyer" has the meaning set forth in the Preamble.
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"Buyer Board" means the Board of Directors of the Buyer.
"Buyer Common Shares" means shares of the common stock, par value $0.01 per
share, of the Buyer, including the associated Buyer Rights.
"Buyer Rights" means the Buyer's preferred share purchase rights issued
pursuant to the Buyer Rights Agreement.
"Buyer Rights Agreement" means the Corporation's Rights Agreement dated as
of November 21, 1990, as amended March 28, 1991 and as further amended on July
12, 1991 and February 20, 1995, between Buyer and Fleet National Bank, as rights
agent.
"Code" has the meaning set forth in the Preamble.
"Company" shall mean, prior to the Effective Time, The Quick & Reilly Group,
Inc., and, from and after the Effective Time, the surviving corporation in the
Merger.
"Company Affiliate" has the meaning set forth in SECTION 6.7(A).
"Company Board" means the Board of Directors of the Company.
"Company By-Laws" has the meaning set forth in SECTION 2.1(C).
"Company Certificate of Incorporation" has the meaning set forth in Section
2.1(c).
"Company Common Shares" means shares of common stock, par value $.10 per
share, of the Company.
"Company ERISA Affiliate" has the meaning set forth in SECTION 5.3(N).
"Company Meeting" has the meaning set forth in SECTION 6.2.
"Company Preferred Shares" has the meaning set forth in SECTION 5.3(B).
"Company Regulatory Agreement" has the meaning set forth in SECTION
5.3(I)(II).
"Company Stock Options" has the meaning set forth in SECTION 3.6.
"Compensation and Benefit Plans" has the meaning set forth in SECTION
5.3(N)(I).
"Costs" has the meaning set forth in SECTION 6.10(A).
"Covered Employees" has the meaning set forth in SECTION 6.11(A).
"DGCL" means the Delaware General Corporation Law.
"Delaware Secretary of State" has the meaning set forth in SECTION 2.1(B).
"Disclosure Schedule" has the meaning set forth in SECTION 5.1.
"Effective Date" has the meaning set forth in SECTION 2.2.
"Effective Time" has the meaning set forth in SECTION 2.2.
"Employment Agreements" has the meaning set forth in SECTION 6.13.
"Environmental Laws" means all applicable United States federal, local and
state environmental, health and safety laws and regulations, including, without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation, and Liability Act, the Clean Water Act,
the Federal Clean Air Act and the Occupational Safety and Health Act, each as
amended, regulations thereunder, and state counterparts.
"ERISA" has the meaning set forth in SECTION 5.3(N)(I).
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"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in SECTION 3.4(A).
"Exchange Ratio" has the meaning set forth in Section 3.1(a).
"GAAP" means generally accepted accounting principles.
"Governmental Authority" means any court, administrative agency or
commission or other United States, federal, state, local or foreign governmental
authority or instrumentality.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder.
"Indemnified Party" has the meaning set forth in SECTION 6.10A).
"Insurance Policies" has the meaning set forth in SECTION 5.3(U).
"IRS" means the United States Internal Revenue Service.
"Liens" means any charge, mortgage, pledge, security interest, restriction,
claim, lien or encumbrance.
"Material Adverse Effect" means, with respect to the Company or Buyer, as
applicable, any effect that (a) is material and adverse to the financial
position, results of operations, business or operations of the Buyer and its
Subsidiaries taken as a whole or the Company and its Subsidiaries taken as a
whole, respectively, or (b) would materially impair the ability of either the
Buyer or the Company to perform its obligations under this Agreement or
otherwise materially threaten or materially impede the consummation of the
Merger and the other transactions contemplated by this Agreement; provided,
however, that Material Adverse Effect shall not be deemed to include the impact
of (i) changes in laws, regulations or interpretations thereof by Governmental
Authorities that affect in general the respective businesses in which the
Company and its Subsidiaries or the Buyer and its Subsidiaries, respectively,
are engaged, (ii) changes in GAAP or regulatory accounting requirements
applicable to broker-dealers generally, (iii) events or conditions generally
affecting the securities industry or arising from changes in general business or
economic conditions, including general changes in market prices or interest
rates, and (iv) any actions or omissions to act required by this Agreement or
taken with the prior written consent of the other party.
"Merger" has the meaning set forth in SECTION 2.1(A).
"Merger Sub" has the meaning set forth in the Preamble.
"New Certificate" has the meaning set forth in SECTION 3.4(A).
"NYSE" means the New York Stock Exchange, Inc.
"Old Certificates" has the meaning set forth in SECTION 3.4(A).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means any individual, bank, corporation, partnership, association,
joint-stock company, business trust or unincorporated organization.
"Previously Disclosed" by a party shall mean information set forth in its
Disclosure Schedule.
"Proxy Statement" has the meaning set forth in SECTION 6.3(A).
"Registration Statement" has the meaning set forth in SECTION 6.3(A).
"Regulatory Agencies" has the meaning set forth in SECTION 5.3(I)(I).
"Replacement Option" has the meaning set forth in SECTION 3.6.
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"Rights" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire, or any options, calls or commitments relating
to, or any stock appreciation right or other instrument the value of which is
determined, in whole or in part, by reference to the market price or value of,
shares of capital stock of such Person.
"SEC" means the United States Securities and Exchange Commission.
"SEC Documents" has the meaning set forth in SECTION 5.3(G)(I).
"Securities Act" means the Securities Act of 1933, as amended, and the rules
and regulations thereunder.
"SRO" has the meaning set forth in SECTION 5.3(F)(I).
"Subsidiary" and "Significant Subsidiary" have the meanings ascribed to them
in Rule 1-02 of Regulation S-X of the SEC.
"Surviving Corporation" has the meaning set forth in SECTION 2.1(A).
"Takeover Laws" has the meaning set forth in SECTION 5.3(P).
"Tax" and "Taxes" means all United States federal, state or local, or
foreign taxes, charges, fees, levies or other assessments, however denominated,
including, without limitation, all net income, gross income, gains, gross
receipts, sales, use, ad valorem, goods and services, capital, production,
transfer, franchise, windfall profits, license, withholding, payroll,
employment, disability, employer health, excise, estimated, severance, stamp,
occupation, property, environmental, unemployment or other taxes, custom duties,
fees, assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any taxing
authority whether arising before, on or after the Effective Date.
"Tax Returns" means, with respect to any Person, any return, amended return
or other report (including elections, declarations, disclosures, schedules,
estimates and information returns and including any Form 1099 or other document
or report required to be provided by such Person to third parties) required to
be filed with respect to any Tax.
"Treasury Stock" shall mean Company Common Shares held by the Company or any
of its Subsidiaries or by the Buyer or any of its Subsidiaries, in each case,
other than in a fiduciary (including custodial or agency) capacity or as a
result of debts previously contracted.
ARTICLE II.
THE MERGER
2.1. THE MERGER.
(a) THE MERGER. At the Effective Time, the Company shall merge with and
into Merger Sub (the "Merger"), the separate corporate existence of the Company
shall cease, and Merger Sub shall survive and continue to exist as a Delaware
corporation (Merger Sub, as the surviving corporation in the Merger, sometimes
being referred to herein as the "Surviving Corporation").
(b) EFFECTIVENESS OF THE MERGER. Subject to the satisfaction or waiver of
the conditions set forth in ARTICLE VII, the Merger shall become effective upon
the occurrence of the filing in the offices of the Secretary of State of the
State of Delaware (the "Delaware Secretary of State") of a certificate of merger
in accordance with Section 103 of the DGCL or such later date and time as may be
set forth in such certificate. The Merger shall have the effects prescribed in
the DGCL.
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(c) ARTICLES OF INCORPORATION AND BY-LAWS. The certificate of
incorporation (the "Merger Sub Certificate of Incorporation") and by-laws of
Merger Sub (the "Merger Sub By-Laws") immediately after the Merger shall be
those of the Surviving Corporation as in effect immediately prior to the
Effective Time.
(d) DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The directors and
officers of Merger Sub immediately after the Merger shall be the directors and
officers of the Surviving Corporation immediately prior to the Effective Time,
until such time as their successors shall be duly elected and qualified.
2.2. EFFECTIVE DATE AND EFFECTIVE TIME. Subject to the satisfaction or
waiver of the conditions set forth in ARTICLE VII, the parties shall cause the
effective date of the Merger (the "Effective Date") to occur on or before (a)
the fifth business day to occur after the last of the conditions set forth in
ARTICLE VII shall have been satisfied or waived in accordance with the terms of
this Agreement or (b) such other date to which the parties may agree in writing.
The time on the Effective Date when the Merger shall become effective is
referred to as the "Effective Time."
2.3. OPERATIONS OF BUSINESS. (a) Subject to applicable law, the parties
agree to cooperate and take all reasonable additional action prior to or
following the Effective Time to merge or otherwise consolidate or reorganize any
of their respective legal entities or business units, assets or operations to
the extent determined by the Buyer to be desirable for regulatory or other
reasons, and further agree that Buyer may at any time change the method of
effecting the Merger, including by merging the Company with and into the Buyer,
by merging the Company with and into a direct or indirect wholly owned
subsidiary of the Buyer other than Merger Sub or by merging any such subsidiary
with and into the Company, and the Company shall cooperate in such efforts,
including by entering into an appropriate amendment to this Agreement; PROVIDED,
HOWEVER, that any such actions shall not (a) alter or change the amount or kind
of consideration to be issued to holders of Company Common Stock as provided for
in this Agreement (the "Merger Consideration"), (b) adversely affect the
proposed accounting treatment for the Merger or the tax treatment to the
Company's stockholders as a result of receiving the Merger Consideration, or
(iii) materially delay the receipt of any approval referred to in Section 7.1(b)
or the consummation of the transactions contemplated by this Agreement.
(b) The operations of the business conducted by the Company prior to the
Effective Time will be conducted as a separate division of the Buyer after the
Effective Time. Subject to applicable legal and regulatory limitations, the
division will be operated autonomously and be headquartered in Palm Beach,
Florida. The division will conduct the discount brokerage business of the Buyer.
(c) Aggregate and individual compensation levels for the employees of the
Quick & Reilly division of the Buyer will be determined by an executive
management committee of the Quick & Reilly division consisting initially of the
members of Executive Management Committee of the Company immediately prior to
the Effective Time and two representatives named by the Buyer.
ARTICLE III.
CONSIDERATION; EXCHANGE PROCEDURES; RETENTION PROGRAM
3.1. MERGER CONSIDERATION. Subject to the provisions of this Agreement, at
the Effective Time, automatically by virtue of the Merger and without any action
on the part of any Person:
(a) OUTSTANDING COMPANY COMMON SHARES. Each Company Common Share,
excluding Treasury Stock, issued and outstanding immediately prior to the
Effective Time, shall, by virtue of the Merger, automatically and without any
action on the part of the holder thereof, become and be converted into the right
to receive 0.578 Buyer Common Shares (the "Exchange Ratio").
(b) OUTSTANDING CAPITAL STOCK. Each share of capital stock of Merger Sub,
issued and outstanding immediately prior to the Effective Time shall remain
issued and outstanding and unaffected by the Merger.
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(c) TREASURY SHARES. Each Company Common Share held as Treasury Stock
immediately prior to the Effective Time, shall be canceled and retired at the
Effective Time, and no consideration shall be issued in exchange therefor. All
Buyer Common Shares owned by the Company or any of its Subsidiaries (other than
Treasury Stock) shall become Treasury Stock of the Buyer.
3.2. RIGHTS AS STOCKHOLDERS; STOCK TRANSFERS. At the Effective Time,
holders of Company Common Shares shall cease to be, and shall have no rights as,
stockholders of the Company, other than to receive any dividend or other
distribution with respect to such Company Common Share with a record date
occurring prior to the Effective Time and the consideration provided under this
ARTICLE III. After the Effective Time, there shall be no transfers on the stock
transfer books of the Company or the Surviving Corporation of Company Common
Shares.
3.3. FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional Buyer Common Shares and no certificates or scrip therefor, or other
evidence of ownership thereof, will be issued in the Merger; instead, the Buyer
shall pay to each holder of Company Common Shares who would otherwise be
entitled to a fractional Buyer Common Share (after taking into account all Old
Certificates delivered by such holder) an amount in cash (without interest)
determined by multiplying such fraction by the average of the closing sale
prices of a Buyer Common Share, as reported by the NYSE for the five NYSE
trading days immediately preceding the Effective Date.
3.4. EXCHANGE PROCEDURES.
(a) As promptly as practicable after the Effective Date, the Buyer shall
send or cause to be sent to each former holder of record of Company Common
Shares immediately prior to the Effective Time transmittal materials for use in
exchanging such stockholder's certificates formerly representing Company Common
Shares (the "Old Certificates") for the consideration set forth in this ARTICLE
III. Buyer shall cause the certificates representing Buyer Common Shares (the
"New Certificates") and/or any check in respect of any fractional share
interests or dividends or distributions which such Person shall be entitled to
receive to be delivered to such stockholder upon delivery to First Chicago Trust
Company of New York, as exchange agent (the "Exchange Agent"), of Old
Certificates representing such Company Common Shares (or indemnity reasonably
satisfactory to the Buyer and the Exchange Agent, if any of such certificates
are lost, stolen or destroyed) owned by such stockholder, together with a
properly completed letter of transmittal, duly executed. No interest will be
paid on any such cash to be paid in lieu of fractional share interests or in
respect of dividends or distributions which any such Person shall be entitled to
receive pursuant to this ARTICLE III upon such delivery.
(b) After the Effective Time, there shall be no transfers on the stock
transfer books of the Company of the shares of Company Common Stock which were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such shares are presented for transfer
to the Exchange Agent, they shall be canceled and exchanged for certificates
representing shares of Company Common Stock and cash in lieu of fractional
shares, if any, as provided in this Article III.
(c) Any portion of the Buyer Common Shares and cash in lieu of fractional
shares that remains unclaimed by the stockholders of the Company for 12 months
after the Effective Time shall be paid to the Buyer. Any stockholders of the
Company who have not complied with this Article III shall thereafter look only
to the Buyer for payment of the shares of Buyer Common Stock and cash in lieu of
any fractional shares, if any, and any unpaid dividends and distributions on the
Buyer Common Stock deliverable in respect of each share of Company Common Stock
such stockholder holds as determined pursuant to this Agreement, without any
interest thereon. Notwithstanding the foregoing, neither the Exchange Agent nor
any party hereto shall be liable to any former holder of Company Common Shares
for any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(d) At the election of the Buyer, no dividends or other distributions with
respect to Buyer Common Shares with a record date occurring after the Effective
Time shall be paid to the holder of any unsurrendered Old Certificate
representing Company Common Shares converted in the Merger into the
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right to receive such Buyer Common Shares until the holder thereof shall be
entitled to receive New Certificates in exchange therefor in accordance with the
procedures set forth in this SECTION 3.4. After becoming so entitled in
accordance with this SECTION 3.4, the record holder thereof shall be entitled to
receive any such dividends or other distributions, without any interest thereon,
which theretofore had become payable with respect to the Buyer Common Shares
such holder had the right to receive upon surrender of the Old Certificate.
3.5. ANTI-DILUTION PROVISIONS. In the event the Buyer changes (or
establishes a record date for changing) the number of Buyer Common Shares issued
and outstanding prior to the Effective Date as a result of a stock split, stock
dividend, recapitalization or similar transaction with respect to the
outstanding Buyer Common Shares and the record date therefor shall be prior to
the Effective Date, the Exchange Ratio shall be proportionately adjusted.
3.6. OPTIONS. At the Effective Time, each outstanding option to purchase
Company Common Shares under the Compensation and Benefit Plans (each, a "Company
Stock Option"), whether vested or unvested, shall be converted into an option to
acquire, either by assumption of the Company's obligations under the
Compensation and Benefit Plans with respect to the Replacement Options (as
defined below) or pursuant to a replacement plan to be adopted by the Buyer, but
on the same terms and conditions as were applicable under such Company Stock
Option, the number of Buyer Common Shares equal to (a) the number of Company
Common Shares subject to the Company Stock Option, multiplied by (b) the
Exchange Ratio (such product rounded down to the nearest whole number) (a
"Replacement Option"), at an exercise price per share (rounded up to the nearest
whole cent) equal to the exercise price per share for the Company Common Shares
which were purchasable pursuant to such Company Stock Option divided by the
Exchange Ratio. Notwithstanding the foregoing, each Company Stock Option which
is intended to be an "incentive stock option" (as defined in Section 422 of the
Code), if any, shall be adjusted in accordance with the requirements of Section
424 of the Code. At or prior to the Effective Time, the Company shall take all
action, if any, necessary with respect to the Compensation and Benefit Plans to
permit the replacement of the outstanding Company Stock Options by the Buyer
pursuant to this SECTION 3.6.
3.7. DIRECTORS. The Buyer agrees to cause one member of the Company Board
on the date hereof (selected by the Buyer after consultation with the Company),
who is still a member of the Company Board immediately prior to the Effective
Time and willing and eligible to serve, to be elected or appointed as a director
of the Buyer Board as promptly as practicable after the Effective Time.
3.8. RETENTION PROGRAM. At the Effective Time, the Buyer will establish a
retention program as described in Schedule 3.8 of the Company's disclosure
schedule.
ARTICLE IV.
ACTIONS PENDING ACQUISITION
4.1. FORBEARANCES OF THE COMPANY. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement or as Previously
Disclosed, without the prior written consent of the Buyer, the Company will not,
and will cause each of its Subsidiaries not to:
(a) ORDINARY COURSE. Conduct the business of the Company and its
Subsidiaries other than in the ordinary and usual course or fail to use
reasonable best efforts to preserve intact their business organizations and
assets and maintain their rights, franchises and existing relations with
customers, suppliers, employees and business associates, or take any action
reasonably likely to have an adverse affect upon the Company's ability to
perform any of its material obligations under this Agreement or to adversely
affect or delay the ability of the Buyer or Merger Sub to obtain any necessary
approvals of any regulatory agency or governmental body required for the
transaction contemplated hereby.
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(b) CAPITAL STOCK. Other than pursuant to Rights Previously Disclosed and
outstanding on the date hereof, (i) issue, sell or otherwise permit to become
outstanding (including pursuant to any stock split, stock dividend,
recapitalization or similar transaction or pursuant to any Compensation and
Benefit Plan qualified under Section 401(k) of the Code to the extent such
Compensation and Benefit Plan offers Company Common Shares as an investment
option), or authorize the creation of, any capital stock, including any
additional Company Common Shares or any Rights, (ii) enter into any agreement,
understanding or arrangement with respect to the voting of its capital stock,
(iii) enter into any agreement with respect to the foregoing, or (iv) permit any
additional Company Common Shares to become subject to new grants of employee or
director stock options, other Rights or similar stock-based employee rights.
(c) DIVIDENDS, ETC. (i) Make, declare, pay or set aside for payment any
dividend (other than (A) subject to SECTION 6.15, quarterly cash dividends on
Company Common Shares in an amount not to exceed $0.06 per share with record and
payment dates consistent with past practice and (B) dividends from wholly owned
Subsidiaries to the Company or another wholly-owned Subsidiary of the Company)
on or in respect of, or declare or make any distribution on, any Company Common
Shares, or (ii) directly or indirectly, adjust, split, combine, redeem,
reclassify, purchase or otherwise acquire, any shares of its capital stock.
(d) COMPENSATION; EMPLOYMENT AGREEMENTS; ETC. (i) Enter into or amend or
renew any material employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of the Company or its
Subsidiaries, or (ii) grant any salary or wage increase or increase any employee
benefit (including incentive or bonus payments), except, in the case of (ii),
(A) for normal individual increases in compensation to employees in the ordinary
course of business consistent with past practice, (B) for other changes that are
required by applicable law, (C) to satisfy Previously Disclosed contractual
obligations existing as of the date hereof, or (D) for employment arrangements
for, or grants of awards to, newly hired employees consistent with past
practice.
(e) BENEFIT PLANS. Enter into, establish, adopt or amend (except (i) as
may be required by applicable law or (ii) to satisfy Previously Disclosed
contractual obligations existing as of the date hereof) any pension, retirement,
stock option, stock purchase, savings, profit sharing, deferred compensation,
consulting, bonus, group insurance or other employee benefit, incentive or
welfare contract, plan or arrangement, or any trust agreement (or similar
arrangement) related thereto, in respect of any director, officer or employee of
the Company or its Subsidiaries, or take any action to accelerate the vesting or
exercisability of stock options, restricted stock or other compensation or
benefits, or increase the compensation or benefits, payable thereunder.
(f) DISPOSITIONS. Except as Previously Disclosed, sell, transfer,
mortgage, encumber or otherwise dispose of or discontinue any of its material
assets (including any capital stock of its Subsidiaries), business or properties
except in the ordinary course of business consistent with past practice and in a
transaction that individually or in the aggregate with all such other
dispositions or discontinuances is not material to it and its Subsidiaries taken
as a whole.
(g) ACQUISITIONS. Except as Previously Disclosed, acquire (other than by
way of foreclosures or acquisitions of control in a bona fide fiduciary capacity
or in satisfaction of debts previously contracted in good faith, in each case,
in the ordinary and usual course of business consistent with past practice) all
or any portion of, the assets, business, or properties of any other entity, or
make any material investment in, whether by purchase of stock or securities of,
or contributions to capital, loans or advances or the transfer of property to,
any other Person, except in the ordinary course of business consistent with past
practice and in a transaction that individually or in the aggregate with all
such other acquisitions and investments is not material to it and its
Subsidiaries taken as a whole.
(h) GOVERNING DOCUMENTS. Amend the Company Certificate of Incorporation,
the Company By-laws or the certificate of incorporation or by-laws (or similar
governing documents) of any of the Company's Significant Subsidiaries.
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(i) ACCOUNTING METHODS. Implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by GAAP as
concurred with by Arthur Andersen LLP, its independent accountants, or change
any of its methods of reporting income and deductions for Federal income tax
purposes from those employed in the preparation of the Federal income tax
returns of the Company for the taxable years ending February 28, 1997 and
February 29, 1996, except as required by changes in law or regulation.
(j) CONTRACTS. Except in the ordinary course of business consistent with
past practice, enter into or terminate any material contract (as defined in
SECTION 5.3(K)(I)) or amend or modify in any material respect or extend any of
its existing material contracts.
(k) CLAIMS. Settle any material claim, action or proceeding, except for
any material claim, action or proceeding involving solely money damages in an
amount, individually or in the aggregate for all such settlements, that is not
material to the Company and its Subsidiaries, taken as a whole.
(l) ADVERSE ACTIONS. (i) Take any action that would, or is reasonably
likely to, prevent or impede the Merger from qualifying as a reorganization
within the meaning of Section 368 of the Code or for pooling of interest
accounting treatment; or (ii) take any action that is intended or is reasonably
likely to result in (A) any of its representations and warranties set forth in
this Agreement being or becoming untrue at any time at or prior to the Effective
Time (subject to the standard set forth in Section 5.2), (B) any of the
conditions to the Merger set forth in ARTICLE VII not being satisfied or (C) a
material violation of any provision set forth in this Article IV except, in each
case, as may be required by applicable law or regulation.
(m) RISK MANAGEMENT. Except as required by applicable law or regulation,
(i) implement or adopt any change in its risk management policies, procedures or
practices, which, individually or in the aggregate with all such other changes,
would be material, (ii) fail to use commercially reasonable means to avoid any
material increase in its aggregate exposure to risk from the general United
States securities markets or (iii) materially restructure or materially change
its investment securities portfolio, through purchases, sales or otherwise, or
the manner in which the portfolio is classified or reported.
(n) INDEBTEDNESS. Other than in the ordinary course of business consistent
with past practice, (i) incur any indebtedness for borrowed money (other than
short-term indebtedness incurred to refinance existing short-term indebtedness,
and indebtedness of the Company or any of its Subsidiaries to the Company or any
of its Subsidiaries, and indebtedness under existing lines of credit), (ii)
assume, guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other Person, (iii) make any loan or advance or (iv)
incur any capital expenditures, obligations or liabilities.
(o) COMMITMENTS. Agree or commit to do any of the foregoing.
4.2. FORBEARANCES OF BUYER. From the date hereof until the Effective Time,
except as expressly contemplated by this Agreement, without the prior written
consent of the Company, the Buyer will not, and will cause each of its
Subsidiaries not to:
(a) EXTRAORDINARY DIVIDENDS. Make, declare, pay or set aside for payment
any extraordinary dividend; provided, however, the foregoing shall not apply to
(i) increases in the quarterly dividend rate payable on Buyer Common Shares in
the ordinary course of business consistent with past practices or (ii) any
dividend paid in the ordinary course of business by any Subsidiary.
(b) ADVERSE ACTIONS. (i) Take any action that would, or is reasonably
likely to, prevent or impede the Merger from qualifying as a reorganization
within the meaning of Section 368 of the Code or for pooling of interest
accounting treatment; or (ii) take any action that is intended or is reasonably
likely to result in (A) any of its representations and warranties set forth in
this Agreement being or becoming untrue at any time at or prior to the Effective
Time (subject to the standard set forth in Section 5.2), (B) any of the
conditions to the Merger set forth in ARTICLE VII not being satisfied or (C) a
material violation of
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any provision of this ARTICLE IV except, in each case, as may be required by
applicable law or regulation; provided, however, that nothing contained herein
shall limit the ability of the Buyer to exercise its rights under the Stock
Option Agreement.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
5.1. DISCLOSURE SCHEDULES. On or prior to the date hereof, the Buyer has
delivered to the Company a schedule and the Company has delivered to the Buyer a
schedule (respectively, its "Disclosure Schedule") setting forth, among other
things, items the disclosure of which is necessary or appropriate either (a) in
response to an express disclosure requirement contained in a provision hereof or
(b) as an exception to one or more representations or warranties contained in
SECTION 5.3 or 5.4 or to one or more of its covenants contained in ARTICLE IV or
VI; PROVIDED that the mere inclusion of an item in a Disclosure Schedule as an
exception to a representation or warranty shall not be deemed an admission by a
party that such item represents a material exception or fact, event or
circumstance or that such item is reasonably likely to result in a Material
Adverse Effect.
5.2. STANDARD. No representation or warranty of the Company or the Buyer
contained in SECTION 5.3 or 5.4 shall be deemed untrue or incorrect, and no
party hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, circumstance or event, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
contained in SECTION 5.3 or 5.4 has had or is reasonably likely to have a
Material Adverse Effect on the party making such representation or warranty;
provided that the representations and warranties set forth in paragraphs (b),
(c)(i) and (ii), (d) and (e) of Section 5.3 and paragraphs (b)(ii), (d) and (e)
of Section 5.4 shall not be subject to the materiality standard provided for in
this Section 5.2.
5.3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Subject to SECTIONS
5.1 and 5.2 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, the Company hereby
represents and warrants to the Buyer:
(a) ORGANIZATION, STANDING AND AUTHORITY. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company is duly qualified to do business and is in good
standing in the states of the United States and any foreign jurisdictions where
its ownership or leasing of property or assets or the conduct of its business
requires it to be so qualified.
(b) COMPANY COMMON SHARES. The authorized capital stock of the Company
consists solely of (i) 60,000,000 Company Common Shares, of which no more than
38,664,015 shares were outstanding as of August 29, 1997, and (ii) 1,000,000
shares of preferred stock, $.01 par value per share, of the Company ("Company
Preferred Shares"), of which no shares are outstanding. Since July 31, 1997, the
Company has not (i) issued any shares of its capital stock or any Rights
(including pursuant to any stock split, stock dividend, recapitalization or
similar transaction), other than shares of Company Common Stock issued upon the
exercise or conversion of Rights as described in Section 5.3(b) of the Company's
Disclosure Schedule or (ii) taken any actions which would cause an antidilution
adjustment under any outstanding Rights. As of the date hereof, 29,636 Company
Common Shares and no Company Preferred Shares were held in treasury by the
Company or otherwise owned by the Company or its Subsidiaries. The outstanding
Company Common Shares have been duly authorized and are validly issued and
outstanding, fully paid and nonassessable, and subject to no preemptive rights
(and were not issued in violation of any preemptive rights), with no personal
liability attaching to the ownership thereof. As of the date hereof, there are
no Company Common Shares or Company Preferred Shares authorized and reserved for
issuance, the Company does not have any Rights issued or outstanding with
respect to Company Common Shares or Company Preferred Shares, the Company does
not have any commitment to authorize, issue or sell any Company Common Shares,
Company Preferred Shares or Rights, except pursuant to this Agreement and there
are no outstanding contractual obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock or Rights of the Company.
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(c) SUBSIDIARIES.
(i) (A) The Company has Previously Disclosed a list of all of its
Subsidiaries together with the jurisdiction of organization and principal
business of each such Subsidiary, (B) except as Previously Disclosed, the
Company owns, directly or indirectly, all the issued and outstanding equity
securities of each of its Subsidiaries, (C) no equity securities of any of the
Company's Subsidiaries are or may become required to be issued (other than to it
or its wholly-owned Subsidiaries) by reason of any Right or otherwise, (D) there
are no contracts, commitments, understandings or arrangements by which the
Company or any of such Subsidiaries is or may be bound to sell or otherwise
transfer any equity securities of any such Subsidiaries (other than to it or its
wholly-owned Subsidiaries), (E) there are no contracts, commitments,
understandings, or arrangements relating to the Company's rights to vote or to
dispose of such securities and (F) all the equity securities of each Subsidiary
held by the Company or its Subsidiaries are validly issued, fully paid and
nonassessable and are owned by the Company or its wholly owned Subsidiaries free
and clear of any Liens.
(ii) Except as set forth in the Disclosure Schedule, the Company does not
own beneficially, directly or indirectly, any equity securities or similar
interests of any Person, or any interest in a partnership or joint venture of
any kind, other than its Subsidiaries. The Company has provided or made
available to Buyer a true and complete copy of all partnership, joint venture or
similar agreements to which the Company or any of its Subsidiaries is a party.
The Company does not have outstanding any capital commitments with respect to
the partnership, joint venture and similar investments of the Company or any of
its Subsidiaries.
(iii) Each of the Company's Subsidiaries has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization, and is duly qualified to do business and in good standing in the
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified.
(d) CORPORATE POWER. The Company and each of its Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own or lease all its properties and assets; and the Company has
the corporate power and authority to execute, deliver and perform its
obligations under this Agreement.
(e) CORPORATE AUTHORITY. Subject to receipt of the requisite approval of
this Agreement by the holders of more than a majority of the outstanding Company
Common Shares entitled to vote thereon (which is the only shareholder vote
required thereon), this Agreement and the transactions contemplated hereby have
been duly authorized by all necessary corporate action of the Company. This
Agreement is a valid and legally binding obligation of the Company, enforceable
in accordance with its terms.
(f) REGULATORY APPROVALS; NO DEFAULTS.
(i) No consents or approvals of, or filings or registrations with, any
Governmental Authority or with any third party are required to be made or
obtained by the Company or any of its Subsidiaries in connection with the
execution, delivery or performance by the Company of this Agreement or to
consummate the Merger except for (A) filings of applications and notices with
the SEC and United States state securities authorities, (B) compliance with any
applicable requirements of the HSR Act, (C) the approval of this Agreement by
the stockholders of the Company, (D) any consent, authorizations, approvals,
filings or exemptions in connection with compliance with the applicable
provisions of United States federal and state, and foreign laws (including,
without limitation, securities and insurance laws) relating to the regulation of
broker-dealers, investment advisers and insurance agencies and any applicable
domestic or foreign industry self-regulatory organization ("SRO"), and the rules
of the NYSE, and (E) the filing of a certificate of merger with the Delaware
Secretary of State. As of the date hereof, the Company is not aware of any
reason why the approvals set forth in SECTION 7.1(B) will not be received
without the imposition of a condition, restriction or requirement of the type
described in SECTION 7.1(B).
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(ii) Subject to receipt of the regulatory approvals referred to in the
preceding paragraph, and expiration of related waiting periods, and required
filings under United States federal and state securities laws, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby and thereby do not and will not (A) constitute
a breach or violation of, or a default under, or give rise to any Lien, any
acceleration of remedies or any right of termination under, any law, rule or
regulation or any judgment, decree, order, governmental, SRO rule, regulation or
membership agreement or other permit or license, or agreement, indenture or
instrument of the Company or of any of its Subsidiaries or to which the Company
or any of its Subsidiaries or properties is subject or bound, (B) constitute a
breach or violation of, or a default under, the Company's Certificate of
Incorporation or the Company's By-Laws, or (C) require any consent or approval
under any such law, rule, regulation, judgment, decree, order, governmental, SRO
rule, regulation or membership agreement or other permit or license, agreement,
indenture or instrument.
(g) FINANCIAL REPORTS AND SEC DOCUMENTS.
(i) The Company's Annual Reports on Form 10-K for the fiscal years ended
February 28, 1995, 1996 and 1997, and all other reports, registration
statements, definitive proxy statements or information statements filed or to be
filed by it or any of its Subsidiaries subsequent to February 28, 1995 under the
Securities Act, or under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act,
in the form filed or to be filed with the SEC (collectively, "SEC Documents"),
as of the date filed, (A) complied or will comply as to form with the applicable
requirements under the Securities Act or the Exchange Act, as the case may be,
and (B) did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; and each of the balance sheets contained in or
incorporated by reference into any of the Company's SEC Document (including the
related notes and schedules thereto) fairly presents, or will fairly present,
the financial position of the Company and its Subsidiaries as of its date, and
each of the statements of income and changes in stockholders' equity and cash
flows or equivalent statements in the Company's SEC Documents (including any
related notes and schedules thereto) fairly presents, or will fairly present,
the results of operations, changes in stockholders' equity and changes in cash
flows, as the case may be, of the Company and its Subsidiaries for the periods
to which they relate, in each case, in compliance with applicable accounting
requirements and with the published rules of the SEC with respect thereto and in
accordance with GAAP consistently applied during the periods involved, except,
in each case, as may be noted therein, subject to normal year-end audit
adjustments in the case of unaudited statements.
(ii) Since February 28, 1997, the Company and its Subsidiaries have not
incurred any material liability other than in the ordinary course of business
consistent with past practice.
(iii) Since February 28, 1997, (A) the Company and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
consistent with past practice (excluding the incurrence of expenses related to
this Agreement and the transactions contemplated hereby), (B) no event has
occurred or fact or circumstance arisen that, individually or taken together
with all other facts, circumstances and events (described in any paragraph of
this SECTION 5.3 or otherwise), has had or is reasonably likely to have an
adverse effect with respect to the Company and (C) none of the Company nor any
of its Subsidiaries has taken any action or suffered any event that if taken or
suffered after the date hereof would violate Section 4.1 of this Agreement.
(iv) The Company has delivered to Buyer true and complete copies of the
FOCUS Reports filed on Form X-17A-5 (the "FOCUS Reports") as of March 31, 1997
and June 30, 1997 by each Subsidiary that is a "broker" or "dealer", as such
terms are defined in Sections 2(a)(4) and 2(a)(5) of the Exchange Act
(collectively, the "Broker-Dealer Subsidiaries"). Each FOCUS Report delivered
complied (and with respect to FOCUS Reports filed after the date hereof and
prior to the Effective Time, will comply) at the
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date thereof in all material respects with the rules and regulations of the SEC
relating thereto and fairly present the information required to be presented
therein pursuant to Rule 17a-5 under the Exchange Act.
(h) LITIGATION. No material litigation, claim, arbitration, investigation
or other proceeding before any court or governmental agency is pending against
the Company or any of its Subsidiaries, and, to the Company's knowledge, no such
litigation, claim, arbitration, investigation or other proceeding has been
threatened.
(i) REGULATORY MATTERS.
(i) The Company and each of its Subsidiaries have filed all reports,
registrations, applications and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
January 1, 1994 with (A) the SEC, (B) any SRO and (C) any Governmental Authority
(collectively with the SEC and the SROs, "Regulatory Agencies"), and all other
reports and statements required to be filed by them since January 1, 1994,
including, without limitation, any report or statement required to be filed
pursuant to the laws, rules or regulations of the United States, any United
States state or any Regulatory Agency, and have paid all fees and assessments
due and payable in connection therewith. Each of such reports, registrations,
applications and statements complied (and with respect to such reports,
registrations, applications and statements filed after the date hereof and prior
to the Effective Time, will comply) at the date thereof in all material respects
with the rules and regulations of the Regulatory Agencies relating thereto and
fairly present the information required to be presented therein. Except for
normal examinations conducted by a Regulatory Agency in the regular course of
the business of the Company and its Subsidiaries, no Regulatory Agency has
initiated any proceeding or, to the knowledge of the Company, investigation into
the business or operations of the Company or any of its Subsidiaries since
January 1, 1995. There is no unresolved violation, criticism, or exception by
any Regulatory Agency with respect to any report or statement relating to any
examinations of the Company or any of its Subsidiaries.
(ii) As of the date of this Agreement, neither the Company nor any of its
Subsidiaries or properties is subject to any cease-and-desist or other order
issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any supervisory letter from or has adopted any board resolutions at
the request of any Regulatory Agency or other Governmental Authority that
restricts the conduct of its business or that, in any manner, relates to its
capital adequacy, its credit policies, its management or its business (each,
whether or not set forth in the Company's Disclosure Schedule, a "Company
Regulatory Agreement"), nor has the Company or any of its Subsidiaries (A) been
advised since January 1, 1995 by any Regulatory Agency or other Governmental
Authority that it is considering issuing or requesting any such Company
Regulatory Agreement or (B) have knowledge of any pending or threatened
regulatory investigation.
(j) COMPLIANCE WITH LAWS. The Company and each of its Subsidiaries:
(i) is in compliance with all applicable United States federal, state and
local and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees conducting such
businesses;
(ii) has all permits, licenses, authorizations, orders and approvals of, and
has made all filings, applications and registrations with, all Regulatory
Agencies that are required in order to permit them to own or lease their
properties and to conduct their businesses as presently conducted; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect and, to the Company's knowledge, no suspension or cancellation
of any of them is threatened; has ownership of, or the right to use, all of its
intellectual property, including its names, without infringing upon the
intellectual property rights of any third party; and
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(iii) has received, since December 31, 1995, no notification or
communication from any Regulatory Agency (A) asserting that the Company or any
of its Subsidiaries is not in compliance with any statutes, regulations,
ordinances or rules or (B) threatening to revoke any license, franchise, permit,
membership privilege or governmental authorization.
(k) MATERIAL CONTRACTS; DEFAULTS. Except for those agreements and other
documents filed as exhibits to its SEC Documents, neither it nor any of its
Subsidiaries is a party to, bound by or subject to any agreement, contract,
arrangement, commitment or understanding (whether written or oral) (i) with
respect to the employment of any directors, executive officers, key employees or
consultants, (ii) which is a "material contract" within the meaning of Item
601(b)(10) of the SEC's Regulation S-K (without giving effect to the "ordinary
course" exception set forth therein), (iii) which limits the ability of it or
any Subsidiary to compete in any line of business or with any Person, or
involves any restriction of geographical area in which, or method by which, it
or any Subsidiary may carry on its business, including any contract which would
require exclusive referrals of business (other than as may be required by law or
any applicable Governmental Authority), (iv) any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement, or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement or (v) which would prohibit or
materially delay the consummation of the Merger or any of the transactions
contemplated by this Agreement (all such agreements, contracts, arrangements,
commitments and understandings referred to in clauses i-v being herein referred
to as "material contracts"). The Company has previously made available to Buyer
true and complete copies of all employment and deferred compensation agreements
with executive officers, key employees or material consultants which are in
writing and to which the Company or any of its Subsidiaries is a party. Neither
it nor any of its Subsidiaries is in default under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party, by which its respective assets, business, or operations may be bound
or affected, or under which it or its respective assets, business, or operations
receives benefits, and there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a default.
(l) NO BROKERS. No action has been taken by the Company that would give
rise to any valid claim against any party hereto for a brokerage commission,
finder's fee or other like payment with respect to the transactions contemplated
by this Agreement, excluding fees to payable to Gleacher NatWest, Inc. and
Goldman, Sachs & Co.
(m) INVESTMENT SECURITIES. Each of the Company and its Subsidiaries has
good and marketable title to all securities held by it (except securities sold
under repurchase agreements or held in any fiduciary or agency capacity), free
and clear of any Lien, except to the extent such securities are pledged in the
ordinary course of business consistent with prudent business practices to secure
obligations of the Company or any of its Subsidiaries. Such securities are
valued on the books of the Company in accordance with GAAP.
(n) EMPLOYEE BENEFIT PLANS.
(i) SECTION 5.3(N)(I) of the Company's Disclosure Schedule sets forth a true
and complete list as of the date hereof of each employee benefit plan,
arrangement or agreement that is maintained as of the date of this Agreement,
including all such bonus plans, other incentive compensation, profit sharing,
termination, severance, stock option, stock appreciation right, restricted
stock, pension, retirement, deferred compensation, employment, retiree medical
and retiree life insurance, welfare and other employee benefit plans,
arrangements or agreements relating to directors, officers, key employees,
employees or former employees and material consultants of the Company and its
material Subsidiaries (the "Compensation and Benefit Plans") by the Company or
any of its Subsidiaries or by any trade or business, whether or not incorporated
(a "Company ERISA Affiliate"), all of which together with the Company would be
deemed a "single employer" within the meaning of Section 4001 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Schedule 5.3(n)(i)
of the Company's Disclosure Schedule sets forth a list of all
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outstanding loans to any director, executive officer, key employee or material
consultant, other than margin loans entered into in the ordinary course of the
Company's business.
(ii) The Company has heretofore delivered or made available to the Buyer
true and complete copies of each of the Compensation and Benefit Plans and
certain related documents, including, but not limited to, (i) all plan documents
and amendments thereto, benefit schedules, trust agreements, and insurance
contracts and other funding vehicles, (ii) the three most recent Annual Reports
(Form 5500 series) and accompanying schedules, if any, (iii) the current summary
plan description, if any, (iv) the most recent annual financial report, if any,
and (v) the most recent determination letter from the IRS (if applicable) for
such Compensation and Benefit Plan. Except as set forth in Section 5.3(n)(iii)
of the Company's Disclosure Schedule, (i) each Compensation and Benefit Plan
covers only employees who are actively employed with the Company or its
Subsidiaries, retired employees with retirement accounts in Compensation and
Benefit Plans or former employees entitled to receive group health benefits
pursuant to Section 4980B of the Code or Part 6 of Title I of ERISA, (ii) no
Compensation and Benefit Plan covers or is required to provide coverage to any
persons classified by the Company or its Subsidiaries as independent
contractors, (iii) neither the Company nor its Subsidiaries has communicated to
employees or other persons any additional Compensation and Benefit Plan not set
forth in Schedule 5.3(n)(i) of the Company's Disclosure Schedules or any change
in or termination of any existing Compensation and Benefit Plans, and (iv)
substantially adequate and complete records have been maintained with respect to
each Compensation and Benefit Plan and are in the custody of the Company or the
respective plan administrator.
(iii) Except as set forth in Schedule 5.3.(n)(iii) of the Company's
Disclosure Schedule, each of the Compensation and Benefit Plans has been
operated and administered in accordance with applicable laws, including, but not
limited to, ERISA and the Code, (ii) except as set forth in Schedule 5.3(n)(iii)
of the Company's Disclosure Schedule, each of the Compensation and Benefit Plans
intended to be "qualified" within the meaning of Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service
which determination letter covers any amendments to such plans that were
required to be adopted under the Tax Reform Act of 1986 and legislation enacted
thereafter for which plan amendments are required to have been adopted as of the
Effective Date, and there are no circumstances that are reasonably likely to
result in the revocation of such favorable determination letter, (iii) none of
the Compensation and Benefit Plans is subject to Title IV of ERISA nor does any
Company ERISA Affiliate contribute or have an obligation to contribute to an
employee benefit plan subject to Title IV of ERISA, (iv) except as set forth in
Section 5.3.(n)(iii) of the Company's Disclosure Schedule, no material
Compensation and Benefit Plan provides benefits, including, without limitation,
death or medical benefits (whether or not insured), with respect to current or
former employees of the Company, its Subsidiaries or any Company ERISA Affiliate
beyond their retirement or other termination of service, other than (A) coverage
mandated by Section 4980B of the Code, Part 6 of Title I of ERISA or other
applicable Federal or state law, (B) death benefits or retirement benefits under
any "employee pension plan" (as such term is defined in Section 3(2) of ERISA),
(C) deferred compensation benefits accrued as liabilities on the books of the
Company, its Subsidiaries or the Company ERISA Affiliates or (D) benefits the
full cost of which is borne by the current or former employee (or his
beneficiary), (v) no material liability under Title IV of ERISA has been
incurred by the Company, its Subsidiaries or any Company ERISA Affiliate that
has not been satisfied in full, and, to the knowledge of the Company, no
condition exists that presents a material risk to the Company, its Subsidiaries
or any Company ERISA Affiliate of incurring a material liability thereunder,
(vi) no Compensation and Benefit Plan is a "multiemployer pension plan" (as such
term is defined in Section 3(37) of ERISA) ("Multiemployer Plan") or a plan that
has two or more contributing sponsors at least two of whom are not under common
control within the meaning of Section 4063 of ERISA ("Multiple Employer Plan"),
nor has the Company or any Company ERISA Affiliate at any time since September
2, 1974 contributed to or had been obligated to contribute to any Multiemployer
Plan or Multiple Employer Plan, (vii) all contributions or other amounts payable
by the Company or its Subsidiaries as of the Effective Time with respect to each
Compensation and Benefit Plan in respect of
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current or prior plan years have been paid or accrued in accordance with GAAP
and Section 412 of the Code, (viii) neither the Company, its Subsidiaries nor
any Company ERISA Affiliate has engaged in a transaction in connection with
which the Company, its Subsidiaries or any Company ERISA Affiliate reasonably
could be expected to become subject to either a material civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to
Section 4975 or 4976 of the Code, and (ix) except as set forth in Section
5.3(n)(iii) of the Company's Disclosure Schedule, there are no claims pending,
or threatened in writing or to the knowledge of the Company anticipated (other
than routine claims for benefits) lawsuits, investigations by governmental
authorities, termination proceedings or arbitrations which have been asserted or
instituted or, to the knowledge of the Company, threatened or anticipated, by,
on behalf of or against any of the Compensation and Benefit Plans or any trusts
related thereto.
(iv) All contributions required to be made to any Compensation and Benefit
Plan by applicable law or regulation or by any plan document or other
contractual undertaking, and all premiums due or payable with respect to
insurance policies funding any Compensation and Benefit Plan, for any period
through the date hereof have been timely made or paid in full or, to the extent
not required to be made or paid on or before the date hereof, have been fully
reflected on the Company's financial statements.
(v) Except as set forth in Section 5.3(n)(v) of the Company's Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) (i) result in any payment (including, without
limitation, severance, unemployment compensation, "excess parachute payment"
within the meaning of Section 280G of the Code, forgiveness of indebtedness or
otherwise) becoming due to any director or any employee of the Company or any of
its affiliates from the Company or any of its affiliates under any Compensation
and Benefit Plan or otherwise, (ii) increase any benefits otherwise payable
under any Compensation and Benefit Plan or (iii) result in any acceleration of
the time of payment or vesting of any such benefits.
(o) LABOR MATTERS. Neither the Company nor any of its Subsidiaries is a
party to or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is the
Company or any of its Subsidiaries the subject of a proceeding asserting that it
or any such Subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act) or seeking to compel the Company or
any such Subsidiary to bargain with any labor organization as to wages or
conditions of employment, nor is there any strike or other labor dispute
involving it or any of its Subsidiaries pending or, to the Company's knowledge,
threatened, nor is the Company aware of any activity involving its or any of its
Subsidiaries' employees seeking to certify a collective bargaining unit or
engaging in other organizational activity.
(p) TAKEOVER LAWS. The Company has taken all action required to be taken
by it in order to exempt, to the extent applicable, this Agreement and the
transactions contemplated hereby from Section 203 of the DGCL.
(q) ENVIRONMENTAL MATTERS. Neither the conduct nor operation of the
Company or its Subsidiaries nor any condition of any property presently or
previously owned, leased or operated by any of them (including, without
limitation, in a fiduciary or agency capacity), or on which any of them holds a
Lien, violates or violated Environmental Laws and no condition has existed or
event has occurred with respect to any of them or any such property that, with
notice or the passage of time, or both, has resulted or is reasonably likely to
result in liability under Environmental Laws. Neither the Company nor any of its
Subsidiaries has received any notice from any Person that the Company or its
Subsidiaries or the operation or condition of any property ever owned, leased,
operated, or held as collateral or in a fiduciary capacity by any of them are or
were in violation of or otherwise are alleged to have liability under any
Environmental Law, including, but not limited to, responsibility (or potential
responsibility) for the cleanup or other
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remediation of any pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on, beneath, or originating from any such property.
(r) TAX MATTERS. Except as provided in Schedule 5.3(r) of the Company's
Disclosure Schedule, each of the Company and its Subsidiaries has duly filed all
federal, state, county, foreign and local information returns and tax returns
required to be filed by it on or prior to the date of this Agreement (all such
returns being accurate and complete) and has duly paid or made provision for (in
accordance with GAAP) the payment of all Taxes and other governmental charges
which have been incurred or are due or claimed to be due from it by federal,
state, county, foreign or local taxing authorities on or prior to the date of
this Agreement (including, without limitation, if and to the extent applicable,
those due in respect of its properties, income, business, capital stock,
deposits, franchises, licenses, sales and payrolls) other than Taxes which (i)
are not yet delinquent or (ii) are being contested in good faith, have not been
finally determined and are adequately reserved against (in accordance with
GAAP). The consolidated federal income tax returns of the Company and its
Subsidiaries for each taxable year through March 31, 1993 have been examined by
the IRS, and either no deficiencies were asserted as a result of such
examination for which the Company does not have adequate reserves (in accordance
with GAAP) or all such deficiencies were satisfied. There are no disputes
pending, or claims asserted in writing for, Taxes or assessments upon the
Company or any of its Subsidiaries, nor has the Company or any of its
Subsidiaries been requested to give any currently effective waivers extending
the statutory period of limitation applicable to any federal, state, county or
local income tax return for any period. In addition, (i) proper and accurate
amounts have been withheld by the Company and its Subsidiaries from their
employees for all prior periods in compliance with the tax withholding
provisions of applicable federal, state and local laws, (ii) federal, state,
county and local returns which are accurate and complete have been filed by the
Company and its Subsidiaries for all periods for which returns were due with
respect to income tax withholding, Social Security and unemployment taxes, (iii)
the amounts shown on such federal, state, local or county returns to be due and
payable have been paid in full or adequate provision therefor (in accordance
with GAAP) has been included by the Company in its consolidated financial
statements as of February 28, 1997, and (iv) there are no Tax liens upon any
property or assets of the Company or its Subsidiaries except liens for current
taxes not yet due. Neither the Company nor any of its Subsidiaries has been
required to include in income any adjustment pursuant to Section 481 of the Code
by reason of a voluntary change in accounting method initiated by the Company or
any of its Subsidiaries, and the IRS has not initiated or proposed any such
adjustment or change in accounting method. Except as set forth in Section 5.3(r)
of the Company's Disclosure Schedule, neither the Company nor any of its
Subsidiaries (other than Subsidiaries that are not currently members of the
affiliated group (within the meaning of Section 1504(a)(1) of the Code) of which
the Company is a common parent) (i) has been a member of an affiliated group
filing a consolidated federal income tax return (other than a group the common
parent of which was the Company), (ii) is a party to a Tax allocation or Tax
sharing agreement (other than an agreement solely among members of a group the
common parent of which is the Company) or (iii) has any liability for the Taxes
of any person (other than any of the Company or its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract, or otherwise. Except as set
forth in the financial statements described in Section 5.3(g), neither the
Company nor any of its Subsidiaries has entered into a transaction which is
being accounted for under the installment method of Section 453 of the Code,
which is reasonably likely to have an adverse effect on the Company. The Company
is not a party to any contract, agreement or arrangement that would result,
separately or in the aggregate, in the payment of remuneration to any employee
that would not be deductible pursuant to Section 162(m) of the Code.
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(s) RISK MANAGEMENT INSTRUMENTS. All interest rate swaps, caps, floors,
option agreements, futures and forward contracts, and other similar risk
management arrangements, whether entered into for the Company's own account, or
for the account of one or more of the Company's Subsidiaries or their customers
(all of which are listed on the Company's Disclosure Schedule), were entered
into in the ordinary course of business (i) in accordance with prudent business
practices and all applicable laws, rules, regulations and regulatory policies
and (ii) with counterparties believed to be financially responsible at the time;
and each of them constitutes the valid and legally binding obligation of the
Company or one of its Subsidiaries, enforceable in accordance with its terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles), and are in full force and effect. Neither the Company nor its
Subsidiaries, nor, to the Company's knowledge, any other party thereto, is in
breach of any of its obligations under any such agreement or arrangement.
(t) BOOKS AND RECORDS. The books and records of the Company and its
Subsidiaries have been fully, properly and accurately maintained in accordance
with GAAP and any other applicable legal and accounting requirements, and there
are no material inaccuracies or discrepancies of any kind contained or reflected
therein, and they fairly present the financial position of the Company and its
Subsidiaries.
(u) INSURANCE. The Company's Disclosure Schedule sets forth all of the
insurance policies, binders, or bonds maintained by the Company or its
Subsidiaries ("Insurance Policies"). The Company and its Subsidiaries are
insured with reputable insurers against such risks and in such amounts as is
prudent in accordance with industry practices. All the Insurance Policies are in
full force and effect, the Company and its Subsidiaries are not in default
thereunder, and all claims thereunder have been filed in due and timely fashion.
(v) POOLING OF INTERESTS. Neither the Company nor, to the Company's
knowledge, any of its affiliates has taken or agreed to take any action that
would prevent the Buyer from accounting for the transactions to be effected
pursuant to this Agreement as a "pooling of interests" in accordance with GAAP
and applicable SEC regulations. As of the date of this Agreement, the Company
has no reason to believe that the Merger will not qualify as a "pooling of
interests" for accounting purposes.
(w) REGISTRATION MATTERS.
(i) Each Broker-Dealer Subsidiary is, and at the Effective Time will be,
duly registered under the Exchange Act as a broker-dealer with the SEC, and is,
and at the Effective Time will be, in compliance with the applicable provisions
of the Exchange Act and the applicable rules and regulations thereunder,
including, but not limited to the net capital requirements thereof. Each
Broker-Dealer Subsidiary is, and at the Effective Time will be, a member in good
standing with all required SROs and in compliance with all applicable rules and
regulations of the SROs. Each Broker-Dealer Subsidiary is, and at the Effective
Time will be, duly registered as a broker-dealer under, and in compliance with,
the applicable laws, rules and regulations of all jurisdictions in which it is
required to be so registered.
(ii) The Company has delivered to Buyer true, correct and complete copies of
each Broker-Dealer Subsidiary's Uniform Application for Broker-Dealer
Registration on Form BD (the "Form BD"), reflecting all amendments thereto filed
with the SEC to the date hereof. The Forms BD of the Broker-Dealer Subsidiaries
are in compliance with the applicable requirements of the Exchange Act and the
rules and regulations thereunder and do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Each director, officer, agent and employee
of each Broker-Dealer Subsidiary who is required to be registered as a
representative, principal or agent with the securities commission of any state
or with any SRO is duly registered as such and such registration is in full
force and effect. Each registered representative and principal of each
Broker-Dealer Subsidiary has at least the minimum series license for the
activities which such registered representative or principal performs for such
Broker-Dealer Subsidiary.
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(iii) The net capital, as such term is defined in Rule 15c3-1 under the
Exchange Act, of each Broker-Dealer Subsidiary satisfies, and since their
inception has satisfied, the minimum net capital requirements of the Exchange
Act and of the laws of any jurisdiction in which the Broker-Dealer Subsidiary
conducts business, and has been sufficient to permit each Broker-Dealer
Subsidiary to operate without restriction on its ability to expand its business
under NASD Conduct Rule 3130 or NYSE Rule 326.
(iv) None of the Broker-Dealer Subsidiaries nor any "associated person"
thereof (a) is subject to a "statutory disqualification" as such terms are
defined in the Exchange Act, or (b) is subject to a disqualification that would
be a basis for censure, limitations on the activities, functions or operations
of, or suspension or revocation of the registration of any Broker-Dealer
Subsidiary as broker-dealer, municipal securities dealer, government securities
broker or government securities dealer under Section 15, Section 15B or Section
15C of the Exchange Act and there is no reasonable basis for, or proceeding or
investigation, whether formal or informal, or whether preliminary or otherwise,
that is reasonably likely to result in, any such censure, limitations,
suspension or revocation.
(v) Neither the Company nor its Subsidiaries is required to be registered as
an investment company, investment adviser, commodity trading advisor, commodity
pool operator, futures commission merchant, introducing broker, insurance agent,
or transfer agent under any United States federal, state, local or foreign
statutes, laws, rules or regulations. No Broker-Dealer Subsidiary acts as the
"sponsor" of a "broker-dealer trading program", as such terms are defined in
Rule 17a-23 under the Exchange Act.
5.4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. Subject to SECTIONS
5.1and 5.2 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, each of the Buyer and
Merger Sub hereby represents and warrants to the Company as follows:
(a) ORGANIZATION, STANDING AND AUTHORITY. The Buyer is duly organized,
validly existing and in good standing under the laws of the State of Rhode
Island. The Buyer is duly qualified to do business and is in good standing in
the states of the United States and foreign jurisdictions where its ownership or
leasing of property or assets or the conduct of its business requires it to be
so qualified. The Buyer has in effect all federal, state, local, and foreign
governmental authorizations necessary for it to own or lease its properties and
assets and to carry on its business as it is now conducted.
(b) BUYER STOCK.
(i) As of the date hereof, the authorized capital stock of the Buyer
consists solely of (A) 600,000,000 Buyer Common Shares, of which no more than
265,000,000 shares were outstanding or held in treasury as of September 10,
1997, (B) 16,000,000 shares of preferred stock, par value $1.00 per share, of
the Buyer ("Buyer Preferred Shares"), of which, as of September 10, 1997, (i)
575,000 shares of 9.30% Cumulative Preferred Stock having a liquidation value of
$250 per share, plus accrued and unpaid dividends, were designated and 575,000
were outstanding (all of which were called for redemption on October 15, 1997),
(ii) 500,000 shares of 9.35% Cumulative Preferred Stock, having a liquidation
value of $250 per share, plus accrued and unpaid dividends, were designated and
500,000 were outstanding, (iii) 1,265,000 shares of Series V 7.25% Perpetual
Preferred Stock, having a liquidation value of $250 per share, plus accrued and
unpaid dividends, were designated and 764,989 were issued and outstanding, (iv)
690,000 shares of Series VI 6.75% Perpetual Preferred Stock (the "Series VI
Preferred"), having a liquidation value of $250 per share, plus accrued and
unpaid dividends, were designated and 600,000 were issued and outstanding, (v)
805,000 shares of Series VII Fixed/Adjustable Rate Cumulative Preferred Stock,
having a liquidation value of $250 per share, plus accrued and unpaid dividends,
were designated and 700,000 shares were issued and outstanding, (vi) 200,000
shares of Series VIII Fixed/Adjustable Rate Noncumulative Preferred Stock,
having a liquidation value of $250 per share, plus accrued and unpaid dividends,
were designated and 200,000 were issued and outstanding and (vii) 3,000,000
shares of Cumulative Participating Junior Preferred Stock issuable upon exercise
of the Buyer Rights, were designated, of which no shares were issued and
outstanding as of such date.
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(ii) Buyer Common Shares to be issued in exchange for Company Common Shares
in the Merger, when issued in accordance with the terms of this Agreement, will
be duly authorized, validly issued, fully paid and nonassessable.
(c) SUBSIDIARIES. Merger Sub and each of the Buyer's Significant
Subsidiaries have been duly organized and is validly existing in good standing
under the laws of the jurisdiction of its organization, and is duly qualified to
do business and in good standing in the jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and the Buyer owns, directly or indirectly, all the issued and
outstanding equity securities of Merger Sub and each of the Buyer's Significant
Subsidiaries.
(d) CORPORATE POWER. The Buyer, each of the Buyer's Significant
Subsidiaries and Merger Sub have the corporate power and authority to carry on
its business as it is now being conducted and to own or lease all its properties
and assets; and each of the Buyer and Merger Sub has the corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby.
(e) CORPORATE AUTHORITY. This Agreement and the transactions contemplated
hereby have been authorized by all necessary corporate action of each of the
Buyer and Merger Sub. This Agreement is a valid and legally binding agreement of
each of the Buyer and Merger Sub enforceable in accordance with its terms.
(f) REGULATORY APPROVALS; NO DEFAULTS.
(i) No consents or approvals of, or filings or registrations with, any
Governmental Authority or with any third party are required to be made or
obtained by the Buyer or any of its Subsidiaries in connection with the
execution, delivery or performance by the Buyer of this Agreement or to
consummate the Merger except for (A) the filing of applications and notices, as
applicable, with United States federal and state securities authorities, (B)
approval of the listing on the NYSE of Buyer Common Shares to be issued in the
Merger, (C) the filing and declaration of effectiveness of the Registration
Statement, (D) the filing of a certificate of merger with the Delaware Secretary
of State, (E) such filings as are required to be made or approvals as are
required to be obtained under the securities or "Blue Sky" laws of various
states in connection with the issuance of Buyer Common Shares in the Merger, (F)
compliance with any applicable requirements of the HSR Act, (G) any consent,
authorizations, approvals, filings or exemptions in connection with compliance
with the applicable provisions of United States federal and state securities
laws relating to the regulation of broker-dealers and of any applicable SRO, and
the rules of the NYSE, and approval of the Board of Governors of the Federal
Reserve System. As of the date hereof, the Buyer is not aware of any reason why
the approvals set forth in SECTION 7.1(B) will not be received.
(ii) Subject to receipt of the regulatory approvals referred to in the
preceding paragraph and expiration of the related waiting periods, and required
filings under United States federal and state securities laws, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (A) constitute a breach or
violation of, or a default under, or give rise to any Lien, any acceleration of
remedies or any right of termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or agreement, indenture
or instrument of the Buyer or of any of its Subsidiaries or to which the Buyer
or any of its Subsidiaries or properties is subject or bound, (B) constitute a
breach or violation of, or a default under, the articles of incorporation or
by-laws (or similar governing documents) of the Buyer or any of its
Subsidiaries, or (C) require any consent or approval under any such law, rule,
regulation, judgment, decree, order, governmental permit or license, agreement,
indenture or instrument.
(g) FINANCIAL REPORTS AND SEC DOCUMENTS; MATERIAL ADVERSE EFFECT.
(i) The Buyer's SEC Documents, as of the date filed, (A) complied or will
comply as to form with the applicable requirements under the Securities Act or
the Exchange Act, as the case may be, and (B) did not and will not contain any
untrue statement of a material fact or omit to state a material fact required to
be
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stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and each of the
balance sheets contained in or incorporated by reference into any of the Buyer's
SEC Document (including the related notes and schedules thereto) fairly
presents, or will fairly present, the financial position of the Buyer and its
Subsidiaries as of its date, and each of the statements of income and changes in
stockholders' equity and cash flows or equivalent statements in such of the
Buyer's SEC Documents (including any related notes and schedules thereto) fairly
presents, or will fairly present, the results of operations, changes in
stockholders' equity and changes in cash flows, as the case may be, of the Buyer
and its Subsidiaries for the periods to which they relate, in each case, in
compliance with applicable accounting requirements and with the published rules
of the SEC with respect thereto and in accordance with GAAP consistently applied
during the periods involved, except, in each case, as may be noted therein,
subject to normal year-end audit adjustments in the case of unaudited
statements.
(ii) Since December 31, 1996, no event has occurred or fact or circumstance
arisen that, individually or taken together with all other facts, circumstances
and events (described in any paragraph of this SECTION 5.4 or otherwise), is
reasonably likely to have an adverse effect with respect to it.
(h) LITIGATION; REGULATORY ACTION.
(i) Other than as set forth in its SEC Documents filed on or before the date
hereof, no litigation, claim, arbitration, investigation or other proceeding
before any Governmental Authority is pending against the Buyer or any of its
Subsidiaries, and, to the best of the Buyer's knowledge, no such litigation,
claim, arbitration, investigation or other proceeding has been threatened.
(ii) Neither the Buyer nor any of its Subsidiaries or properties is a party
to or is subject to any order, decree, agreement, memorandum of understanding or
similar arrangement with, or a commitment letter or similar submission to, or
extraordinary supervisory letter from a Governmental Authority, nor has the
Buyer or any of its Subsidiaries been advised by a Governmental Authority that
such Governmental Authority is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, commitment letter, supervisory
letter or similar submission.
(i) COMPLIANCE WITH LAWS. The Buyer and each of its Subsidiaries:
(i) in the conduct of its business, is in compliance with all applicable
United States federal, state and local, and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto or to the
employees conducting such businesses; and
(ii) has all permits, licenses, authorizations, orders and approvals of, and
has made all filings, applications and registrations with, all Governmental
Authorities that are required in order to permit them to conduct their
businesses substantially as presently conducted; all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect
and, to the best of its knowledge, no suspension or cancellation of any of them
is threatened.
(j) NO BROKERS. No action has been taken by the Buyer that would give rise
to any valid claim against any party hereto for a brokerage commission, finder's
fee or other like payment with respect to the transactions contemplated by this
Agreement, excluding a fee to be paid to UBS Securities, Inc.
(k) TAX MATTERS. Each of the Buyer and its Subsidiaries has duly filed all
federal, state, county, foreign and material local information returns and tax
returns required to be filed by it on or prior to the date of this Agreement
(all such returns being accurate and complete) and has duly paid or made
provision for (in accordance with GAAP) the payment of all Taxes and other
governmental charges which have been incurred or are due or claimed to be due
from it by federal, state, county, foreign or local taxing authorities on or
prior to the date of this Agreement (including, without limitation, if and to
the extent applicable, those due in respect of its properties, income, business,
capital stock, deposits, franchises, licenses, sales and payrolls) other than
Taxes which (i) are not yet delinquent or (ii) are being contested in good
faith, have not been finally determined and are adequately reserved against (in
accordance with GAAP). The
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consolidated federal income tax returns of the Buyer and its Subsidiaries for
each taxable year through December 31, 1990 have been examined by the IRS, and
either no deficiencies were asserted as a result of such examination for which
the Buyer does not have adequate reserves (in accordance with GAAP) or all such
deficiencies were satisfied. Except as set forth in Section 5.4(k) of the
Buyer's Disclosure Schedule, there are no disputes pending, or claims asserted
in writing for, Taxes or assessments in writing upon the Buyer or any of its
Subsidiaries, nor has the Buyer or any of its Subsidiaries been requested to
give any currently effective waivers extending the statutory period of
limitation applicable to any federal, state, county or local income tax return
for any period. In addition, (i) proper and accurate amounts have been withheld
by the Buyer and its Subsidiaries from their employees for all prior periods in
compliance with the tax withholding provisions of applicable federal, state and
local laws, (ii) federal, state, county and local returns which are accurate and
complete have been filed by the Buyer and its Subsidiaries for all periods for
which returns were due with respect to income tax withholding, Social Security
and unemployment taxes, (iii) the amounts shown on such federal, state, local or
county returns to be due and payable have been paid in full or adequate
provision therefor (in accordance with GAAP) has been included by the Buyer in
its consolidated financial statements as of December 31, 1996, and (iv) there
are no Tax liens upon any property or assets of the Buyer or its Subsidiaries
except liens for current taxes not yet due. Neither the Buyer nor any of its
Subsidiaries has been required to include in income any adjustment pursuant to
Section 481 of the Code by reason of a voluntary change in accounting method
initiated by the Buyer or any of its Subsidiaries, and the IRS has not initiated
or proposed any such adjustment or change in accounting method. Neither the
Buyer nor any of its Subsidiaries (other than Subsidiaries that are not
currently members of the affiliated group (within the meaning of Section
1504(a)(1) of the Code) of which the Buyer is the common parent) (i) has been a
member of an affiliated group filing a consolidated federal income tax return
(other than a group the common parent of which was the Buyer), (ii) is a party
to a Tax allocation or Tax sharing agreement (other than an agreement solely
among members of a group the common parent of which is the Buyer) or (iii) has
any liability for the Taxes of any person (other than any of the Buyer or its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise. Neither the Buyer nor any of its Subsidiaries has
entered into a transaction which is being accounted for under the installment
method of Section 453 of the Code.
(l) POOLING OF INTERESTS. Neither the Buyer nor, to the Buyer's best
knowledge, any of its affiliates has taken or agreed to take any action that
would prevent the Buyer from accounting for the transactions to be effected
pursuant to this Agreement as a "pooling of interests" in accordance with GAAP
and applicable SEC regulations. As of the date of this Agreement, the Buyer has
no reason to believe that the Merger will not qualify as a "pooling of
interests" for accounting purposes.
ARTICLE VI.
COVENANTS
6.1. REASONABLE BEST EFFORTS. Subject to the terms and conditions of this
Agreement, each of the Company and the Buyer agrees to use its reasonable best
efforts in good faith to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or desirable, or advisable under
applicable laws, so as to permit consummation of the Merger as promptly as
practicable and otherwise to enable consummation of the transactions
contemplated hereby, and shall cooperate fully with the other party hereto to
that end.
6.2. STOCKHOLDER APPROVAL. The Company agrees to take, in accordance with
applicable law, NYSE rules and the Company Certificate of Incorporation and the
Company By-Laws, all action necessary to convene an appropriate meeting of its
stockholders to consider and vote upon the approval and adoption of this
Agreement and any other matters required to be approved by the Company's
stockholders for consummation of the Merger (including any adjournment or
postponement thereof, the "Company Meeting"), as promptly as practicable after
the Registration Statement is declared effective. The Company
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Board shall recommend such approval, and the Company shall take all reasonable,
lawful action to solicit such approval by its stockholders.
6.3. REGISTRATION STATEMENT.
(a) The Buyer agrees to prepare a registration statement on Form S-4 or
other applicable form to be filed by the Buyer with the SEC in connection with
the issuance of Buyer Common Shares in the Merger (including the proxy statement
and prospectus and other proxy solicitation materials of the Buyer and the
Company constituting a part thereof (the "Proxy Statement") and all related
documents) (the "Registration Statement"). The Company agrees to cooperate, and
to cause its Subsidiaries to cooperate, with the Buyer, its counsel and its
accountants, in preparation of the Registration Statement and the Proxy
Statement; and provided that the Company and its Subsidiaries have cooperated as
required above, the Buyer agrees to file the Proxy Statement in preliminary form
with the SEC as promptly as reasonably practicable, and to file the Registration
Statement with the SEC as soon as reasonably practicable after any SEC comments
with respect to the preliminary Proxy Statement are resolved. Each of the Buyer
and the Company agrees to use all reasonable efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
reasonably practicable after filing thereof. The Buyer also agrees to use all
reasonable efforts to obtain all necessary United States state securities law or
"Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement. The Company agrees to furnish to the Buyer all
information concerning the Company, its Subsidiaries, officers, directors and
stockholders as may be reasonably requested in connection with the foregoing.
(b) Each of the Company and the Buyer agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in (i) the Registration Statement will,
at the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and (ii) the
Proxy Statement and any amendment or supplement thereto will, at the date of
mailing to stockholders and at the time of the Company Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
or any statement which, in the light of the circumstances under which such
statement is made, will be false or misleading with respect to any material
fact, or which will omit to state any material fact necessary in order to make
the statements therein not false or misleading or necessary to correct any
statement in any earlier statement in the Proxy Statement or any amendment or
supplement thereto. Each of the Company and the Buyer further agrees that, if it
shall become aware prior to the Effective Date of any information furnished by
it that would cause any of the statements in the Proxy Statement to be false or
misleading with respect to any material fact, or to omit to state any material
fact necessary to make the statements therein not false or misleading, to
promptly inform the other party thereof and to take the necessary steps to
correct the Proxy Statement.
(c) The Buyer agrees to advise the Company, promptly after the Buyer
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, of the issuance of any
stop order or the suspension of the qualification of Buyer Common Shares for
offering or sale in any jurisdiction, of the initiation or threat of any
proceeding for any such purpose, or of any request by the SEC for the amendment
or supplement of the Registration Statement or for additional information.
6.4. PRESS RELEASES. Each of the Company and the Buyer agrees that it will
not, without the prior approval of the other party, which consent will not be
unreasonably withheld or delayed, issue any press release or written statement
for general circulation relating to the transactions contemplated hereby, except
as otherwise required by applicable law or regulation or NYSE rules.
6.5. ACCESS; INFORMATION.
(a) Each of the Company and the Buyer agrees that, upon reasonable notice
and subject to applicable laws relating to the exchange of information, it
shall, and shall cause each of its Subsidiaries to, afford the
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other party and the other party's officers, employees, counsel, accountants and
other authorized representatives, such access during normal business hours
throughout the period prior to the Effective Time to the books, records
(including, without limitation, Tax Returns and work papers of independent
auditors), properties, personnel and to such other information as any party may
reasonably request, and, during such period, it shall, and shall cause each of
its Subsidiaries to, furnish promptly to such other party (i) a copy of each
material report, schedule, registration statement, application and other
document filed by it pursuant to the requirements of United States federal or
state securities or banking laws or received by it from any Regulatory Agency,
and (ii) all other information concerning the business, properties and personnel
of it as the other may reasonably request. Neither party nor any of its
respective Subsidiaries shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of such party's or its respective Subsidiaries' customers, jeopardize the
attorney-client privilege of the institution in possession or control of such
information or contravene any law, rule, regulation, order, judgment, decree, or
binding agreement entered into prior to the date of this Agreement. The parties
hereto will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.
(b) Each of the Company and the Buyer agrees that it will not, and will
cause its representatives not to, use any information obtained pursuant to this
SECTION 6.5 (as well as any other information obtained prior to the date hereof
in connection with the entering into of this Agreement) for any purpose
unrelated to the consummation of the transactions contemplated by this
Agreement. Subject to the requirements of law, each party will keep
confidential, and will cause its representatives to keep confidential, all
information and documents obtained pursuant to this SECTION 6.5 (as well as any
other information obtained prior to the date hereof in connection with the
entering into of this Agreement) unless such information (i) was already known
to such party, (ii) becomes available to such party from other sources not known
by such party to be bound by a confidentiality obligation, (iii) is disclosed
with the prior written approval of the party to which such information pertains
or (iv) is or becomes readily ascertainable from published information or trade
sources. In the event that this Agreement is terminated or the transactions
contemplated by this Agreement shall otherwise fail to be consummated, each
party shall promptly cause all copies of documents or extracts thereof
containing information and data as to another party hereto to be returned to the
party which furnished the same.
(c) No investigation by either party of the business and affairs of the
other shall affect or be deemed to modify or waive any representation, warranty,
covenant or agreement in this Agreement, or the conditions to either party's
obligation to consummate the transactions contemplated by this Agreement.
6.6. ACQUISITION PROPOSALS. The Company agrees that it shall not, and
shall cause its Subsidiaries and the Company's and its Subsidiaries' officers,
directors, agents, advisors and affiliates not to, solicit or encourage
inquiries or proposals with respect to, or engage in any negotiations
concerning, or provide any confidential information to, or have any discussions
with, any Person relating to, any Acquisition Proposal. It shall immediately
cease and cause to be terminated any activities, discussions or negotiations
conducted prior to the date of this Agreement with any parties other than the
Buyer with respect to any of the foregoing, and shall use its reasonable best
efforts to enforce any confidentiality or similar agreement relating to an
Acquisition Proposal. The Company shall promptly (and in any event, within 24
hours) advise the Buyer following the receipt by the Company of any Acquisition
Proposal and the substance thereof (including the identity of the Person making
such Acquisition Proposal), and advise the Buyer of any developments with
respect to such Acquisition Proposal immediately upon the occurrence thereof.
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6.7. AFFILIATE AGREEMENTS.
(a) Not later than the 15th day prior to the mailing of the Proxy Statement,
(i) the Company shall deliver to the Buyer a schedule of each Person that, to
the best of its knowledge, is or is reasonably likely to be, as of the date of
the Company Meeting, deemed to be an "affiliate" of the Company (each, a
"Company Affiliate") as that term is used in Rule 145 under the Securities Act
or SEC Accounting Series Releases 130 and 135.
(b) The Company shall use its reasonable best efforts to cause each Person
who may be deemed to be a Company Affiliate to execute and deliver to the Buyer,
on or before the date of mailing of the Proxy Statement, an agreement in the
form attached hereto as EXHIBIT C.
(c) The Buyer shall use its reasonable best efforts to publish no later than
90 days after the end of the first month after the Effective Time in which there
are at least 30 days of post-Merger combined operations (which month may be the
month in which the Effective Time occurs), combined sales and net income figures
as contemplated by and in accordance with the terms of SEC Accounting Series
Release No. 135.
6.8. NYSE LISTING. The Buyer agrees to use its reasonable best efforts to
list, prior to the Effective Date, on the NYSE, subject to official notice of
issuance, Buyer Common Shares to be issued to the holders of Company Common
Shares.
6.9. REGULATORY APPLICATIONS.
(a) The Buyer and the Company and their respective Subsidiaries shall
cooperate and use their respective reasonable best efforts to prepare all
documentation, to effect all filings and to obtain all permits, consents,
approvals and authorizations of all third parties and Governmental Authorities
necessary to consummate the transactions contemplated by this Agreement. Each of
the Buyer and the Company shall have the right to review in advance, and, to the
extent practicable, each will consult with the other, in each case, subject to
applicable laws relating to the exchange of information, with respect to all
material written information submitted to any third party or any Governmental
Authority in connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, each of the parties hereto agrees to act
reasonably and as promptly as practicable. Each party hereto agrees that it will
consult with the other party hereto with respect to the obtaining of all
material permits, consents, approvals and authorizations of all third parties
and Governmental Authorities necessary or advisable to consummate the
transactions contemplated by this Agreement, and each party will keep the other
party appraised of the status of material matters relating to completion of the
transactions contemplated hereby. The parties shall cooperate to ensure that any
application or notice to the Federal Reserve Board of Governors shall be filed
within 60 days of the date of this Agreement.
(b) Each party agrees, upon request, to furnish the other party with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders, and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice or application made by or on behalf of
such other party or any of its Subsidiaries to any third party or Governmental
Authority.
6.10. INDEMNIFICATION.
(a) Following the Effective Date and for a period of six years thereafter,
the Buyer shall indemnify, defend and hold harmless the present directors and
officers of the Company and its Subsidiaries (each, an "Indemnified Party")
against all costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities (collectively, "Costs") incurred
in connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement) to the fullest
extent that the Company is permitted to
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indemnify (and advance expenses to) its directors and officers under the laws of
the State of Delaware, the Company Certificate of Incorporation and the Company
By-Laws as in effect on the date hereof.
(b) Any Indemnified Party wishing to claim indemnification under SECTION
6.10(A), upon learning of any claim, action, suit, proceeding or investigation
described above, shall promptly notify the Buyer thereof; provided that the
failure so to notify shall not affect the obligations of the Buyer under SECTION
6.10(A) unless and to the extent that the Buyer is actually prejudiced as a
result of such failure.
(c) If the Buyer or any of its successors or assigns shall consolidate with
or merge into any other entity and shall not be the continuing or surviving
entity of such consolidation or merger or shall transfer all or substantially
all of its assets to any other entity, then and in each case, proper provision
shall be made so that the successors and assigns of the Buyer shall assume the
obligations set forth in this SECTION 6.10.
6.11. BENEFIT PLANS.
(a) For a period of two (2) years from and after the Effective Time, unless
otherwise mutually determined by the Buyer or the Company and the senior
management of the Company, in their reasonable discretion and in accordance with
applicable law, the benefits to be provided to employees of the Company as of
the Effective Time (other than those employees who are parties to the Employment
Agreements) ("Covered Employees") shall be the benefit plans and programs as
were provided by the Company to the Covered Employees immediately before the
Effective Time, including, without limitation, the Company's Retirement Trust
pension and profit-sharing plans and quarterly pre-tax profit bonus plan
pursuant to the terms of the Compensation and Benefit Plans set forth in the
Company's Disclosure Schedule, and to the extent consistent with applicable law,
shall honor all employee benefit obligations to current and former employees of
the Company under such plans for such two-year period. Notwithstanding the
foregoing, in the event that during the two (2) years following the Effective
Time the Buyer or the Company, in consultation with the senior management of the
Company, determines that the Covered Employees shall participate or be required
to participate in the Buyer's employee benefit plans and programs, then in no
event shall the benefit plans and programs provided to Covered Employees during
such two-year period be less favorable to the Covered Employees in the aggregate
than the benefits provided to the Covered Employees immediately before the
Effective Time. For purposes of all employee benefit plans, programs or
arrangements maintained or contributed to by the Buyer, in which the Covered
Employees shall be eligible to participate, the Buyer shall cause each such
plan, program or arrangement to treat the prior service with the Company of each
Covered Employee as service rendered to the Buyer for purposes of all
eligibility periods and vesting thereunder (but not for purposes of benefit
accruals). The Buyer shall cause any and all pre-existing condition limitations
and eligibility waiting periods under any health plans to be waived with respect
to Covered Employees and their eligible dependents who, immediately prior to the
date of conversion from the Company's health plans, participated in a health
plan.
(b) Following the Effective Time, the Buyer shall cause the Company to
perform, and shall guarantee the performance by the Company of, their respective
obligations under each of the Employment Agreements.
(c) No provisions of this Agreement shall be construed to constitute a
guarantee of continued employment for any Covered Employee, or to interfere with
the right of the Buyer or the Company to terminate the employment of any Covered
Employee.
(d) Following the Effective Time, the Buyer shall continue to pay quarterly
bonuses to the Company's employees based on the Company's quarterly pre-tax
profits, if any, in accordance with the Company's practice prior to the
Effective Time.
(e) Following the Effective Time, the Buyer shall cause the Company to pay,
and shall guarantee the payment by the Company of, the annual premiums for the
split-dollar life insurance policies in effect for the benefit of each of Mary
Quick Peterson, Nancy Quick Gibson and Patricia Quick, on the same basis as was
provided immediately prior to the Effective Time.
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6.12. NOTIFICATION OF CERTAIN MATTERS. Each of the Company and the Buyer
shall give prompt notice to the other of any fact, event or circumstance known
to it that (a) is reasonably likely, individually or taken together with all
other facts, events and circumstances known to it, to result in any Material
Adverse Effect with respect to it or (b) would cause or constitute a material
breach of any of its representations, warranties, covenants or agreements
contained herein.
6.13. EMPLOYMENT AGREEMENTS. The Buyer or Merger Sub shall offer
employment to each of the employees identified on Annex A pursuant to an
employment agreement in the form of Annex B or Annex C, as applicable (the
"Employment Agreements").
6.14. THE COMPANY'S NAME. The Buyer acknowledges that the name "QUICK &
REILLY" has great integrity and has significant value. The Buyer recognizes the
value to the Company's business of preserving such integrity. The Buyer agrees
that from and after the Effective Time, the Buyer shall, and shall cause its
subsidiaries to, continue the use of the name "Quick & Reilly" in connection
with the Company's ongoing business activities and shall maintain the Company's
standard of business integrity and quality related thereto.
6.15. DIVIDENDS. After the date of this Agreement, each of the Buyer and
the Company shall coordinate with the other the declaration of any dividends in
respect of Buyer Common Shares and Company Common Shares and the record dates
and payment dates relating thereto, it being the intention of the parties hereto
that holders of Buyer Common Shares or Company Common Shares shall not receive
two dividends, or fail to receive one dividend, for any quarter with respect to
their shares of Buyer Common Shares and/or Company Common Shares and any shares
of Buyer Common Shares any such holder receives in exchange therefor in the
Merger.
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE MERGERS
7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGERS. The
respective obligation of each of the Buyer and the Company to consummate the
Merger is subject to the fulfillment or written waiver by the Buyer and the
Company prior to the Effective Time of each of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have been duly
adopted by the requisite vote of the stockholders of the Company.
(b) REGULATORY APPROVALS. All regulatory approvals required to consummate
the transactions contemplated hereby shall have been obtained and shall remain,
in full force and effect, all statutory waiting periods in respect thereof shall
have expired and no such approvals shall contain any conditions or restrictions
which would reasonably be expected to result in a Material Adverse Effect on the
Buyer or the Company.
(c) NO INJUNCTION. No Governmental Authority of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and prohibits or materially
restricts or makes illegal consummation of the transactions contemplated by this
Agreement.
(d) REGISTRATION STATEMENT. The Registration Statement shall have become
effective under the Securities Act, and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
(e) "BLUE SKY" Approvals. All permits and other authorizations under United
States state securities laws necessary to consummate the transactions
contemplated hereby and to issue Buyer Common Shares to be issued in the Merger
shall have been received and be in full force and effect and no such approvals
shall contain any conditions or restrictions which would reasonably be expected
to result in a Material Adverse Effect on the Buyer, the Company, the Surviving
Corporation or any of their Subsidiaries.
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(f) LISTING. Buyer Common Shares to be issued in the Merger shall have been
approved for listing on the NYSE, subject to official notice of issuance.
(g) POOLING OF INTERESTS. The parties shall have received a letter KPMG Peat
Marwick LLP in form and substance satisfactory to Buyer to the effect that the
Merger will qualify for "pooling of interests" accounting treatment. Such
accountants shall have received a letter from the Company's accountants to the
effect that all conditions necessary to qualify for pooling of interest
accounting treatment to the extent such conditions pertain to the Company have
been satisfied.
(h) RETENTION PROGRAM. The Retention Program referred to in SECTION 3.8
shall have been established.
7.2. CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the
Company to consummate the Merger is also subject to the fulfillment or written
waiver by the Company prior to the Effective Time of each of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Buyer set forth in this Agreement shall be true and correct as of the date
of this Agreement and as of the Effective Date as though made on and as of the
Effective Date (except that representations and warranties that by their terms
speak as of the date of this Agreement or some other date shall be true and
correct as of such date), and the Company shall have received a certificate,
dated the Effective Date, signed on behalf of the Buyer by any Vice Chairman of
the Buyer, to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE BUYER. The Buyer shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Effective Time, and the Company shall have
received a certificate, dated the Effective Date, signed on behalf of the Buyer
by any Vice Chairman of the Buyer, to such effect.
(c) OPINION OF THE COMPANY'S COUNSEL. (i) The Company shall have received an
opinion of Wachtell, Lipton, Rosen & Katz, special counsel to the Company, dated
the Effective Date, to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion, (A) the Merger constitutes a
reorganization within the meaning of Section 368 of the Code and (B) no gain or
loss will be recognized by stockholders of the Company who receive Buyer Common
Shares in exchange for Company Common Shares, except with respect to cash
received in lieu of fractional share interests. In rendering its opinion,
Wachtell, Lipton, Rosen & Katz, may require and rely upon representations
contained in letters from the Company, the Buyer, Merger Sub and stockholders of
the Company.
(ii) The Company shall have received an opinion of Edwards & Angell, counsel
to the Buyer and Merger Sub, dated the Effective Date, to the effect that (A)
each of the Buyer and Merger Sub is duly organized, validly existing and in good
standing under the laws of the state of its jurisdiction or incorporation, with
the corporate power and authority to carry on its business as it is now being
conducted and to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby; (B) this
Agreement and the transactions contemplated hereby have been duly authorized by
all necessary corporate action of each of the Buyer and Merger Sub and (C) all
consents or approvals of, or filing or registrations with, any Governmental
Authority or with any third party required to be made or obtained by the Buyer
or Merger Sub in connection with the execution, delivery or performance by the
Buyer or Merger Sub of this Agreement or to consummate the Merger have been
obtained or made, and all applicable waiting periods have expired.
7.3. CONDITIONS TO OBLIGATION OF THE BUYER AND MERGER SUB. The obligation
of the Buyer and Merger Sub to consummate the Merger is also subject to the
fulfillment or written waiver by the Buyer prior to the Effective Time of each
of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company set forth in this Agreement shall be true and correct as of the date
of this Agreement and as of the Effective Date as though made on and as of the
Effective Date (except that representations and warranties that by their
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terms speak as of the date of this Agreement or some other date shall be true
and correct as of such date) and the Buyer shall have received a certificate,
dated the Effective Date, signed on behalf of the Company by the Chief Executive
Officer and the Chief Financial Officer of the Company, to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and the Buyer shall
have received a certificate, dated the Effective Date, signed on behalf of the
Company by the Chief Executive Officer and the Chief Financial Officer of the
Company, to such effect.
(c) CERTAIN EMPLOYMENT ARRANGEMENTS. Messrs. Leslie C. Quick, Jr., Leslie C.
Quick, III, Thomas C. Quick, Peter Quick, Christopher C. Quick and Pascal J.
Mercurio shall have (i) entered into an Employment Agreement in the form of
Annex B, and (ii) not engaged in conduct constituting "cause" for termination
thereunder as of the Effective Date; and the Employment Agreements entered into
with such individuals shall remain in effect (in each case, other than as a
consequence of death or disability).
(d) OPINION OF THE BUYER'S COUNSEL. (i) The Buyer shall have received an
opinion of Edwards & Angell, counsel to the Buyer, dated the Effective Date, to
the effect that, on the basis of facts, representations and assumptions set
forth in such opinion, the Merger constitutes a reorganization under Section 368
of the Code. In rendering its opinion, Edwards & Angell may require and rely
upon representations contained in letters from the Company, the Buyer, Merger
Sub and stockholders of the Company.
(ii) The Buyer shall have received an opinion of counsel to the Company,
which counsel shall be reasonably satisfactory to the Buyer, dated the Effective
Date, to the effect that (A) each of the Company and its Significant
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the state of its jurisdiction of incorporation, with the corporate power
and authority to carry on its business as it is now being conducted and, with
respect to the Company, to execute, deliver and perform its obligations under
this Agreement and to consummate the transactions contemplated hereby; (B) this
Agreement and the transactions contemplated hereby have been duly authorized by
all necessary corporate action of the Company and its shareholders and (C) all
consents or approvals of, or filings or registrations with, any Governmental
Authority or with any third party required to be made or obtained by the Company
or any of its Subsidiaries in connection with the execution, delivery or
performance by the Company of this Agreement or to consummate the Merger have
been obtained or made, and all applicable waiting periods have expired.
(e) NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement, no event
has occurred or fact or circumstance arisen that, individually or taken together
with all other facts, circumstances and events, has had a Material Adverse
Effect with respect to the Company and its Subsidiaries, taken as a whole.
ARTICLE VIII.
TERMINATION
8.1. TERMINATION. This Agreement may be terminated, and the Merger may be
abandoned:
(a) MUTUAL CONSENT. At any time prior to the Effective Time, by the mutual
written consent of the Buyer and the Company, if the Board of Directors of each
so determines by vote of a majority of the members of its entire Board of
Directors.
(b) BREACH. At any time prior to the Effective Time, by the Buyer or the
Company, if its Board of Directors so determines by vote of a majority of the
members of its entire Board of Directors, in the event of either: (i) a breach
by the other party of any representation or warranty contained herein (subject
to the standard set forth in SECTION 5.2), which breach cannot be or has not
been cured within 30 days after the giving of written notice to the breaching
party of such breach; or (ii) a breach by the other party of any of the
covenants or agreements or conditions contained herein, which breach cannot be
or has not been cured within 30 days after the giving of written notice to the
breaching party of such breach.
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(c) DELAY. At any time prior to the Effective Time, by the Buyer or the
Company, if its Board of Directors so determines by vote of a majority of the
members of its entire Board of Directors, in the event that the Merger is not
consummated by June 30, 1998, except to the extent that the failure of the
Merger then to be consummated arises out of or results from the failure of the
party seeking to terminate this Agreement to perform or observe the covenants
and agreements of such party set forth herein.
(d) NO APPROVAL. By the Company or the Buyer, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board of
Directors, in the event (i) the approval of any Governmental Authority required
for consummation of the Merger and the other transactions contemplated by this
Agreement shall have been denied by final nonappealable action of such
Governmental Authority or any Governmental Authority of competent jurisdiction
shall have issued a final nonappealable injunction permanently enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Agreement or (ii) any stockholder approval required by Section 7.1(a) herein is
not obtained at the Company Meeting.
8.2. EFFECT OF TERMINATION AND ABANDONMENT. In the event of termination of
this Agreement and the abandonment of the Merger pursuant to this ARTICLE VIII,
no party to this Agreement shall have any liability or further obligation to any
other party hereunder except (a) as set forth in SECTION 9.1 and (b) that
termination will not relieve a breaching party from liability for any willful
breach of this Agreement giving rise to such termination.
ARTICLE IX.
MISCELLANEOUS
9.1. SURVIVAL. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time (other than SECTION
6.10 which shall survive the Effective Time) or the termination of this
Agreement if this Agreement is terminated prior to the Effective Time (other
than SECTIONS 6.5(B) and 8.2, and this ARTICLE IX, which shall survive such
termination).
9.2. WAIVER; AMENDMENT. Prior to the Effective Time, any provision of this
Agreement may be (a) waived by the party benefited by the provision, or (b)
amended or modified at any time, by an agreement in writing between the parties
hereto executed in the same manner as this Agreement, except that, after the
Company Meeting, this Agreement may not be amended without further approval of
the stockholders of the Company if it would violate the DGCL or reduce the
consideration to be received by the Company's stockholders in the Merger. Such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
9.3. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.4. GOVERNING LAW. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of New York applicable to contracts
made and to be performed entirely within such State and without regard to any
laws that might otherwise govern under applicable principles of conflicts or
laws.
9.5. EXPENSES. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby, except
that printing and mailing expenses and SEC fees shall be shared equally between
the Company and the Buyer.
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9.6. NOTICES. All notices, requests and other communications hereunder to
a party shall be in writing and shall be deemed given if personally delivered,
telecopied (with confirmation) or mailed by registered or certified mail (return
receipt requested) to such party at its address set forth below or such other
address as such party may specify by notice to the parties hereto.
If to the Company, to:
The Quick & Reilly Group, Inc.
230 South County Road
Palm Beach, FL 33480
Attention: Thomas C. Quick
Facsimile: (561) 655-9010
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Edward D. Herlihy, Esq.
Facsimile: (212) 403-2000
If to the Buyer, to:
Fleet Financial Group, Inc.
One Federal Street, 37th Floor
Boston, Massachusetts 02116
Attention: Brian T. Moynihan
Managing Director, Strategic Planning
and Corporate Development
Facsimile: (617) 346-0137
with a copy to:
Fleet Financial Group, Inc.
75 State Street, 33rd Floor
Boston, Massachusetts 02110
Attention: Drew J. Pfirrman, Esq.
Assistant General Counsel
Facsimile: (617) 346-4284
and to:
Edwards & Angell
2700 Hospital Tower
Providence, Rhode Island
Attention: V. Duncan Johnson, Esq.
Facsimile: (401) 276-6611
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<PAGE>
9.7. ENTIRE UNDERSTANDING; NO THIRD-PARTY BENEFICIARIES. Except for the
Confidentiality Agreement, this Agreement (including the documents and
instruments referred to herein) represents the entire understanding of the
parties hereto with reference to the transactions contemplated hereby, and this
Agreement supersedes any and all other oral or written agreements heretofore
made. Except for SECTION 6.10(B), nothing in this Agreement expressed or
implied, is intended to confer upon any Person, other than the parties hereto or
their respective successors, any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
9.8. INTERPRETATION; EFFECT. When a reference is made in this Agreement to
Sections, Exhibit or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this Agreement unless otherwise indicated. The headings
contained in this Agreement are for reference purposes only and are not part of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". No provision of this Agreement shall be construed to require the
Company, the Buyer, Merger Sub or any of their respective Subsidiaries,
affiliates or directors to take any action which would violate applicable law
(whether statutory or common law), rule or regulation.
9.9. SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
9.10. ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations shall be assigned by either of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
<TABLE>
<S> <C> <C>
THE QUICK & REILLY GROUP, INC.
By: /s/ LESLIE C. QUICK, JR.
-----------------------------------------
Name: Leslie C. Quick, Jr.
Title: CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
FLEET FINANCIAL GROUP, INC.
By: /s/ H. JAY SARLES
-----------------------------------------
Name: H. Jay Sarles
Title: VICE CHAIRMAN
FFG ACQUISITION CORP.
By: /s/ BRIAN T. MOYNIHAN
-----------------------------------------
Name: Brian T. Moynihan
Title: PRESIDENT
</TABLE>
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<PAGE>
EXHIBIT B
STOCK OPTION AGREEMENT
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated September 16, 1997, between THE QUICK & REILLY
GROUP, INC., a Delaware corporation ("Issuer"), and FLEET FINANCIAL GROUP, INC.,
a Rhode Island corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to this Agreement; and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to 7,688,241 fully
paid and nonassessable shares of Issuer's Common Stock, par value $0.10 per
share ("Common Stock"), at a price of $35.04 per share (the "Option Price");
PROVIDED FURTHER that in no event shall the number of shares of Common Stock for
which this Option is exercisable exceed 19.9% of the Issuer's issued and
outstanding shares of Common Stock. The number of shares of Common Stock that
may be received upon the exercise of the Option and the Option Price are subject
to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement), the number of shares of Common Stock subject to the
Option shall be increased so that, after such issuance, it equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in whole
or part, and from time to time, if, but only if, both an Initial Triggering
Event (as hereinafter defined) and a Subsequent Triggering Event (as hereinafter
defined) shall have occurred prior to the occurrence of an Exercise Termination
Event (as hereinafter defined), PROVIDED that the Holder shall have sent the
written notice of such exercise (as provided in subsection (e) of this Section
2) within 90 days following such Subsequent Triggering Event. Each of the
following shall be an Exercise Termination Event: (i) the Effective Time of the
Merger; (ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of an
Initial Triggering Event except a termination by Grantee pursuant to Section
8.1(b) of the Merger Agreement (unless the breach by Issuer giving rise to such
right of termination is non-volitional); or (iii) the passage of twelve months
after termination of the Merger Agreement if such termination follows the
occurrence of an Initial Triggering Event or is a termination by Grantee
pursuant to Section 8.1(b) of the Merger Agreement (unless the breach by Issuer
giving rise to such right of termination is non-volitional) (PROVIDED that if an
Initial Triggering Event continues or occurs
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<PAGE>
beyond such termination and prior to the passage of such twelve-month period,
the Exercise Termination Event shall be twelve months from the expiration of the
Last Triggering Event but in no event more than 18 months after such
termination). The "Last Triggering Event" shall mean the last Initial Triggering
Event to expire. The term "Holder" shall mean the holder or holders of the
Option.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules
and regulations thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of Issuer shall have
recommended that the stockholders of Issuer approve or accept any
Acquisition Transaction. For purposes of this Agreement, "Acquisition
Transaction" shall mean (w) a merger or consolidation, or any similar
transaction, involving Issuer or any Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) of Issuer, (x) a purchase, lease or other
acquisition of all or a substantial portion of the assets of Issuer or any
Significant Subsidiary of Issuer, (y) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Issuer or any
Significant Subsidiary of Issuer, or (z) any substantially similar
transaction; PROVIDED, HOWEVER, that in no event shall any (i) merger,
consolidation or similar transaction involving Issuer or any Significant
Subsidiary in which the voting securities of Issuer outstanding immediately
prior thereto continue to represent (by either remaining outstanding or
being converted into the voting securities of the surviving entity of any
such transaction) at least 65% of the combined voting power of the voting
securities of the Issuer or the surviving entity outstanding immediately
after the consummation of such merger, consolidation, or similar
transaction, or (ii) any merger, consolidation, purchase or similar
transaction involving only the Issuer and one or more of its Subsidiaries or
involving only any two or more of such Subsidiaries, be deemed to be an
Acquisition Transaction, provided any such transaction is not entered into
in violation of the terms of the Merger Agreement;
(ii) Issuer or any Issuer Subsidiary, without having received Grantee's
prior written consent, shall have authorized, recommended, proposed or
publicly announced its intention to authorize, recommend or propose, to
engage in an Acquisition Transaction with any person other than Grantee or a
Grantee Subsidiary, or the Board of Directors of Issuer shall have publicly
withdrawn or modified, or publicly announced its interest to withdraw or
modify, in any manner adverse to Grantee, its recommendation that the
stockholders of Issuer approve the transactions contemplated by the Merger
Agreement;
(iii) Any person other than Grantee, any Grantee Subsidiary or any Issuer
Subsidiary acting in a fiduciary capacity in the ordinary course of its
business shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of Common
Stock (the term "beneficial ownership" for purposes of this Option Agreement
having the meaning assigned thereto in Section 13(d) of the 1934 Act, and
the rules and regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary shall have
made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Grantee to terminate the Merger Agreement and
(y) shall not have been cured prior to the Notice Date (as defined below);
or
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<PAGE>
(vi) Any person other than Grantee or any Grantee Subsidiary, other than
in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Federal
Reserve Board, or other federal or state bank regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 20% or more
of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in clause
(i) of subsection (b) of this Section 2, except that the percentage referred
to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of any
Initial Triggering Event or Subsequent Triggering Event (together, a "Triggering
Event"), it being understood that the giving of such notice by Issuer shall not
be a condition to the right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); PROVIDED that if prior
notification to or approval of the Federal Reserve Board or any other regulatory
agency is required in connection with such purchase, the Holder shall promptly
file the required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, PROVIDED that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder hereof
and Issuer and to resale restrictions arising under the Securities Act of
1933, as amended. A copy of such agreement is on file at the principal
office of Issuer and will be provided to the holder hereof without charge
upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s)
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<PAGE>
without such reference if the Holder shall have delivered to Issuer a copy of a
letter from the staff of the SEC, or an opinion of counsel, in form and
substance reasonably satisfactory to Issuer, to the effect that such legend is
not required for purposes of the 1933 Act; (ii) the reference to the provisions
to this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates
under this Section 2 in the name of the Holder or its assignee, transferee or
designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. Section18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to the Federal
Reserve Board or to any state regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board or such state regulatory authority as they may require) in order to permit
the Holder to exercise the Option and Issuer duly and effectively to issue
shares of Common Stock pursuant hereto; and (iv) promptly to take all action
provided herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time
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<PAGE>
to time as provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions, conversions,
exchanges of shares, distributions on or in respect of the Common Stock that
would be prohibited under the terms of the Merger Agreement, or the like, the
type and number of shares of Common Stock purchasable upon exercise hereof and
the Option Price shall be appropriately adjusted in such manner as shall fully
preserve the economic benefits provided hereunder and proper provision shall be
made in any agreement governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to
an Exercise Termination Event, Issuer shall, at the request of Grantee delivered
within 90 days of such Subsequent Triggering Event (whether on its own behalf or
on behalf of any subsequent holder of this Option (or part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly prepare, file and
keep current a shelf registration statement under the 1933 Act covering this
Option and any shares issued and issuable pursuant to this Option and shall use
its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
this Option and any shares of Common Stock issued upon total or partial exercise
of this Option ("Option Shares") in accordance with any plan of disposition
requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. The foregoing notwithstanding, if, at
the time of any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
and PROVIDED, HOWEVER, that after any such required reduction the number of
Option Shares to be included in such offering for the account of the Holder
shall constitute at least 25% of the total number of shares to be sold by the
Holder and Issuer in the aggregate; and PROVIDED FURTHER, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practical and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in such
underwriting agreements for the Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof to any other
person known to Issuer to be entitled to registration rights under this Section
6, in each case by promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies. Notwithstanding anything
to the contrary contained herein, in no event shall Issuer be obligated to
effect more than two registrations pursuant to this Section 6 by reason of the
fact that there shall be more than one Grantee as a result of any assignment or
division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event (as defined
below), (i) following a request of the Holder, delivered prior to an Exercise
Termination Event, Issuer (or any successor thereto) shall repurchase the Option
from the Holder at a price (the "Option Repurchase Price") equal to the amount
by which (A) the market/offer price (as defined below) exceeds (B) the Option
Price, multiplied by the number of shares for which this Option may then be
exercised and (ii) at the request of the owner of Option Shares from time to
time (the "Owner"), delivered within 90 days of such occurrence (or such later
period as provided in Section 10), Issuer shall repurchase such number of the
Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the market/
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offer price multiplied by the number of Option Shares so designated. The term
"market/offer price" shall mean the highest of (i) the price per share of Common
Stock at which a tender offer or exchange offer therefor has been made, (ii) the
price per share of Common Stock to be paid by any third party pursuant to an
agreement with Issuer, (iii) the highest closing price for shares of Common
Stock within the six-month period immediately preceding the date the Holder
gives notice of the required repurchase of this Option or the Owner gives notice
of the required repurchase of Option Shares, as the case may be, or (iv) in the
event of a sale of all or a substantial portion of Issuer's assets, the sum of
the price paid in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally recognized investment
banking firm selected by the Holder or the Owner, as the case may be, divided by
the number of shares of Common Stock of Issuer outstanding at the time of such
sale. In determining the market/offer price, the value of consideration other
than cash shall be determined by a nationally recognized investment banking firm
selected by the Holder or Owner, as the case may be and reasonably acceptable to
the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office, a
copy of this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder or the Owner,
as the case may be, elects to require Issuer to repurchase this Option and/or
the Option Shares in accordance with the provisions of this Section 7. Within
the latter to occur of (x) five business days after the surrender of the Option
and/or certificates representing Option Shares and the receipt of such notice or
notices relating thereto and (y) the time that is immediately prior to the
occurrence of a Repurchase Event, Issuer shall deliver or cause to be delivered
to the Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify the Holder and/or the Owner and thereafter deliver
or cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; PROVIDED, HOWEVER, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable law or regulation from delivering to the Holder and/or the
Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its
best efforts to obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to accomplish such
repurchase), the Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder
and/or the Owner, as appropriate, that portion of the Option Repurchase Price or
the Option Share Repurchase Price that Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the Holder, a new Stock Option
Agreement evidencing the right of the Holder to purchase that number of shares
of Common Stock obtained by multiplying the number of shares of Common Stock for
which the surrendered Stock Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price, or (B)
to the Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be deemed to
have occurred (i) upon the consummation of any merger, consolidation or similar
transaction involving Issuer or any purchase, lease or other acquisition of all
or a substantial portion of the assets of Issuer, other than any such
transaction which would not constitute an Acquisition Transaction pursuant to
the proviso to Section 2(b)(i) hereof or
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(ii) upon the acquisition by any person of beneficial ownership of 50% or more
of the then outstanding shares of Common Stock, provided that no such event
shall constitute a Repurchase Event unless a Subsequent Triggering Event shall
have occurred prior to an Exercise Termination Event. The parties hereto agree
that Issuer's obligations to repurchase the Option or Option Shares under this
Section 7 shall not terminate upon the occurrence of an Exercise Termination
Event unless no Subsequent Triggering Event shall have occurred prior to the
occurrence of an Exercise Termination Event.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding voting shares and voting share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than Issuer),
(ii) Issuer in a merger in which Issuer is the continuing or surviving
person, and (iii) the transferee of all or substantially all of Issuer's
assets.
(2) "Substitute Common Stock" shall mean the common stock issued by the
issuer of the Substitute Option upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the market/offer price, as defined in
Section 7.
(4) "Average Price" shall mean the average closing price of a share of
the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; PROVIDED that if Issuer is the issuer of
the Substitute Option, the Average Price shall be computed with respect to a
share of common stock issued by the person merging into Issuer or by any
company which controls or is controlled by such person, as the Holder may
elect.
(c) The Substitute Option shall have the same terms as the Option, PROVIDED,
that if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the Substitute Option
in substantially the same form as this Agreement, which shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
B-7
<PAGE>
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to (x) the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised plus (y) Grantee's Out-of-Pocket Expenses (to the extent
not previously reimbursed), and at the request of the owner (the "Substitute
Share Owner") of shares of Substitute Common Stock (the "Substitute Shares"),
the Substitute Option Issuer shall repurchase the Substitute Shares at a price
(the "Substitute Share Repurchase Price") equal to (x) the Highest Closing Price
multiplied by the number of Substitute Shares so designated plus (y) Grantee's
Out-of-Pocket Expenses (to the extent not previously reimbursed). The term
"Highest Closing Price" shall mean the highest closing price for shares of
Substitute Common Stock within the six-month period immediately preceding the
date the Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the case
may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or the portion thereof which the Substitute Option Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Issuer shall
immediately so notify the Substitute Option Holder and/or the Substitute Share
Owner and thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited; PROVIDED,
HOWEVER, that if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this
B-8
<PAGE>
Section 9 prohibited under applicable law or regulation from delivering to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
Substitute Option Repurchase Price and the Substitute Share Repurchase Price,
respectively, in full (and the Substitute Option Issuer shall use its best
efforts to receive all required regulatory and legal approvals as promptly as
practicable in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent of
the prohibition, whereupon, in the latter case, the Substitute Option Issuer
shall promptly (i) deliver to the Substitute Option Holder or Substitute Share
Owner, as appropriate, that portion of the Substitute Option Repurchase Price or
the Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Option Shares it is then so prohibited
from repurchasing.
10. The 90-day period for exercise of certain rights under Sections 2, 6, 7
and 13 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and reserve
and to permit it to issue, and at all times from the date hereof through the
termination of this Agreement in accordance with its terms will have reserved
for issuance upon the exercise of the Option, that number of shares of Common
Stock equal to the maximum number of shares of Common Stock at any time and from
time to time issuable hereunder, and all such shares, upon issuance pursuant
hereto, will be duly authorized, validly issued, fully paid, nonassessable, and
will be delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
(c) Issuer has taken all action (including if required redeeming all of the
Rights or amending or terminating the Rights Agreement) so that the entering
into of this Option Agreement, the acquisition of shares of Common Stock
hereunder and the other transactions contemplated hereby do not and will not
result in the grant of any rights to any person under the Rights Agreement or
enable or require the Rights to be exercised, distributed or triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter into
this Agreement and, subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Grantee.
This Agreement has been duly executed and delivered by Grantee.
B-9
<PAGE>
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 90
days following such Subsequent Triggering Event (or such later period as
provided in Section 10); PROVIDED, HOWEVER, that until the date 15 days
following the date on which the Federal Reserve Board approves an application by
Grantee under the BHCA to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (E.G., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the Federal Reserve
Board.
14. Each of Grantee and Issuer will use its best efforts to make all filings
with, and to obtain consents of, all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement, including without limitation making application to list the shares of
Common Stock issuable hereunder on the New York Stock Exchange upon official
notice of issuance and applying to the Federal Reserve Board under the BHCA for
approval to acquire the shares issuable hereunder, but Grantee shall not be
obligated to apply to state banking authorities for approval to acquire the
shares of Common Stock issuable hereunder until such time, if ever, as it deems
appropriate to do so.
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5
hereof), it is the express intention of Issuer to allow the Holder to acquire or
to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated
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<PAGE>
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
THE QUICK & REILLY GROUP, INC.
By: /s/ LESLIE C. QUICK, JR.
-----------------------------------
Name: Leslie C. Quick, Jr.
Title: CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
FLEET FINANCIAL GROUP, INC.
By: /s/ H. JAY SARLES
-----------------------------------
Name: H. Jay Sarles
Title: VICE CHAIRMAN
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<PAGE>
[LETTERHEAD]
December 15, 1997
Board of Directors
The Quick & Reilly Group, Inc.
230 South County Road
Palm Beach, FL 33480
Dear Ladies and Gentlemen:
The Quick & Reilly Group, Inc., a Delaware corporation ("Q&R" or "the Company"),
Fleet Financial Group, Inc., a Rhode Island corporation ("Fleet" or "the
Buyer"), and FFG Acquisition Corp., a Delaware corporation ("Merger Sub"), have
entered into an agreement dated as of September 16, 1997, as amended as of
December 12, 1997 (the "Merger Agreement"). The Merger Agreement provides that
each outstanding share of Q&R Common Stock will be converted into and become
exchangeable for 0.578 shares of Common Stock, par value $0.01 per share, of
Fleet (the "Exchange Ratio").
You have asked for our opinion as to whether the Exchange Ratio, to be paid by
the Buyer pursuant to the Merger Agreement, is fair to the holders of Company
Common Stock from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(i) reviewed the audited and unaudited financial statements and public
Securities Exchange Commission filings for the three most recent fiscal
years and interim periods to date of Q&R and Fleet ("SEC Reports");
(ii) on an operating and trading basis, compared financial information relating
to Q&R's and Fleet's businesses with published financial information
concerning certain companies whose businesses we deemed to be reasonably
similar, in whole or in part, to those of Q&R and Fleet;
(iii) on an operating and trading basis, compared financial information
relating to Q&R's businesses with published information of previously
acquired companies whose businesses we deemed to be reasonably similar,
in whole or in part, to those of Q&R;
(iv) analyzed the market prices and the trading characteristics of Q&R and
Fleet's common stock for recent periods to date;
(v) conducted discussions with members of senior management of Q&R and Fleet
concerning their businesses and prospects;
(vi) reviewed certain financial forecasts of Q&R (the "Forecasts") as prepared
by the Company;
(vii) based on the Forecasts and public research estimates, analyzed the pro
forma financial effects to the Company of the proposed business
combination;
(viii) assumed without independent investigation that no material contingent
liability exists with respect to Q&R or Fleet which is not disclosed in
the SEC Reports;
[LOGO]
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[LOGO]
(ix) reviewed the financial terms and conditions of the Merger Agreement; and
(x) reviewed such other financial studies and performed such other analyses and
took into account such other matters as we deemed appropriate.
It should be noted that our opinion necessarily is based upon prevailing market
conditions and other circumstances and conditions existing at the present time.
In preparing our opinion, we have relied upon the accuracy and completeness of
all information supplied or otherwise made available to us by the Company, and
we have not assumed any responsibility for independently verifying such
information or made or obtained an independent evaluation or appraisal of the
assets of the Company. With respect to the Forecasts, we have assumed without
independent investigation that the Forecasts have been reasonably prepared by
the Company, and have been generated on bases reflecting the best currently
available estimates and judgment of the Company's management as to the expected
future financial performance of the Company.
Q&R acknowledges that the opinion and any advice or materials provided by
Gleacher NatWest in connection with its engagement hereunder is directed to the
Board of Directors in considering the transaction to which the opinion, advice
or materials relate. This letter does not constitute a recommendation to any
stockholder of the Company as to how such stockholder should vote with respect
to the proposed transaction. Upon the advice of the Company and its legal and
accounting advisors, we have assumed that the proposed transaction will qualify
for pooling-of-interest accounting treatment under US GAAP and as a tax-free
transaction for US federal tax purposes.
We are acting as financial advisor to the Company in connection with the Merger
and will receive a fee for our services, a portion of which is contingent upon
the consummation of the proposed transaction. In addition, the Company has
agreed to indemnify us for certain liabilities which may arise out of the
rendering of this opinion.
Based on our analysis of the foregoing, and on our assessment of the general
economic environment, and assuming no material change therein, we are of the
opinion that the Exchange Ratio to be received by the Company pursuant to the
Merger Agreement is fair to the holders of Company common stock from a financial
point of view.
Very truly yours,
GLEACHER NATWEST INC.
By: /s/ MICHIEL MCCARTY, MANAGING DIRECTOR
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<PAGE>
EXHIBIT D
PERSONAL AND CONFIDENTIAL
December 15, 1997
Board of Directors
The Quick & Reilly Group, Inc.
230 South County Road
Palm Beach, FL 33480
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $0.10
per share (the "Shares"), of The Quick & Reilly Group, Inc. (the "Company"), of
the exchange ratio of 0.578 shares of Common Stock, par value $0.01 per share
("Fleet Stock"), of Fleet Financial Group, Inc. ("Fleet") to be received for
each Share (the "Exchange Ratio") pursuant to the Agreement and Plan of Merger,
dated as of September 16, 1997, as amended as of December 12, 1997, among Fleet,
FFG Acquisition Corp. ("Fleet Subsidiary"), a wholly-owned subsidiary of Fleet,
and the Company (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement. We also have provided certain investment banking services to Fleet
from time to time, and may provide investment banking services to Fleet or its
subsidiaries and affiliates in the future. Goldman, Sachs & Co. provides a full
range of financial advisory and securities services and, in the course of its
normal trading activities, may from time to time effect transactions and hold
securities, including derivative securities, of the Company or Fleet for its own
account and for the accounts of customers and may hold, at any time, a long or
short position in such securities.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Stock Option Agreement, dated September 16, 1997, between the
Company and Fleet; the Support Agreement dated September 16, 1997, among the
Company, Fleet and certain stockholders of the Company; the Registration
Statement on Form S-4, including the Proxy Statement-Prospectus relating to
Meeting of Stockholders of the Company to be held in connection with the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company and Fleet for the five fiscal years ended February 28, 1997 and December
31, 1996 for the Company and Fleet, respectively; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q of the Company and Fleet;
certain other communications from the Company and Fleet to their respective
stockholders; and certain internal financial analyses and forecasts for the
Company and Fleet prepared by their respective managements. We also have held
discussions with members of the senior management of the Company and Fleet
regarding the strategic rationale for, and the potential benefits of, the
transaction contemplated by the Agreement and the past and current business
operations, financial condition and future prospects of their respective
companies. In addition, we have reviewed the reported price and trading activity
for the Shares and the Fleet Stock, compared certain financial and stock market
information for the Company and Fleet with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the broker-dealer industry
specifically and performed such other studies and analyses as we considered
appropriate.
D-1
<PAGE>
The Quick & Reilly Group, Inc.
December 15, 1997
Page Two
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. We have assumed further,
with your consent, that obtaining any necessary regulatory or third-party
approvals for the transactions contemplated by the Agreement will not have an
adverse impact on Fleet. In addition, we have not made an independent evaluation
or appraisal of the assets and liabilities of the Company or Fleet or any of
their subsidiaries and we have not been furnished with any such evaluation or
appraisal. We have assumed with your consent, that the transaction will be
accounted for as a pooling of interests under generally accepted accounting
principles. Our advisory services and the opinion expressed herein are provided
for the information and assistance of the Board of Directors of the Company in
connection with its consideration of the transaction contemplated by the
Agreement and such opinion does not constitute a recommendation as to how any
holder of Shares should vote with respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Agreement is fair from a financial point of view to the
holders of Shares.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
(GOLDMAN, SACHS & CO.)
D-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's By-laws provide for indemnification to the extent permitted
by Section 7-1.1-4.1 of the Rhode Island Business Corporation Law. Such section,
as adopted by the By-laws, requires the Registrant to indemnify directors,
officers, employees or agents against judgments, fines, reasonable costs,
expenses and counsel fees paid or incurred in connection with any proceeding to
which such director, officer, employee or agent or his legal representative may
be a party (or for testifying when not a party) by reason of his being a
director, officer, employee or agent, provided that such director, officer,
employee or agent shall have acted in good faith and shall have reasonably
believed (a) if he was acting in his official capacity that his conduct was in
the Registrant's best interest, (b) in all other cases that his conduct was at
least not opposed to its best interest, and (c) in the case of any criminal
proceeding, he had no reasonable cause to believe his conduct was unlawful. The
Registrant's By-laws provide that such rights to indemnification are contract
rights and that the expenses incurred by an indemnified person shall be paid in
advance of a final disposition of any proceeding; provided, however, that if
required under applicable law, such person must deliver a written affirmation
that he has met the standards of care required under such provisions to be
entitled to indemnification and provides an undertaking by or on behalf of such
person to repay all amounts advanced if it is ultimately determined that such
person is not entitled to indemnification. With respect to possible
indemnification of directors, officers and controlling persons of the Registrant
for liabilities arising under the Securities Act of 1933, as amended, pursuant
to such provisions, the Registrant is aware that the Securities and Exchange
Commission has publicly taken the position that such indemnification is against
public policy as expressed in said Act and is, therefore, unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. The following is a list of Exhibits to this Registration
Statement:
<TABLE>
<CAPTION>
2 --Agreement and Plan of Merger dated as of September 16, 1997, as amended as of
December 12, 1997, by and among Fleet Financial Group, Inc. ("Fleet"), The Quick
& Reilly Group, Inc. ("Quick & Reilly") and FFG Acquisition Corp. (included in
Part I as Exhibit A to the Proxy Statement-Prospectus included in this
Registration Statement)
<S> <C>
4(a) --Rights Agreement dated November 21, 1990 between Fleet and Fleet National Bank,
as rights agent (incorporated by reference to Fleet's Registration Statement on
Form 8-A dated November 29, 1990), as amended by a First Amendment to Rights
Agreement dated March 28, 1991 and a Second Amendment to Rights Agreement dated
July 12, 1991 (incorporated by reference to Fleet's Form 8 Amendment to
Application or Report dated September 6, 1991) and as further amended by a Third
Amendment to Rights Agreement dated February 20, 1995 (incorporated by reference
to Fleet's Form 8-A/A dated March 17, 1995)
4(b) --Instruments defining the rights of security holders, including indentures (Fleet
has no instruments defining the rights of holders of equity or debt securities
where the amount of securities authorized thereunder exceeds 10% of the total
assets of Fleet and its subsidiaries on a consolidated basis. Fleet hereby
agrees to furnish a copy of any such instrument to the Commission upon request)
5 --Opinion of Edwards & Angell as to legality (previously filed)
8(a) --Opinion of Edwards & Angell as to federal income tax matters (previously filed)
8(b) --Opinion of Wachtell, Lipton, Rosen & Katz as to federal income tax matters
(previously filed)
12 --Computation of Fleet's Consolidated Ratios of Earnings to Fixed Charges and
Earnings to Fixed Charges and Dividends on Preferred Stock (previously filed)
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
23(a) --Consent of KPMG Peat Marwick LLP (previously filed)
23(b) --Consent of Arthur Andersen LLP (previously filed)
23(c) --Consent of Gleacher NatWest Inc. (previously filed)
23(d) --Consent of Goldman, Sachs & Co.
23(e) --Consent of Edwards & Angell (included in Exhibits 5 and 8(a))
23(f) --Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8(b))
24 --Powers of Attorney (included on signature pages to this Registration Statement)
99(a) --Form of Proxy for Quick & Reilly (previously filed)
99(b) --Stock Option Agreement dated September 16, 1997 between Fleet and Quick & Reilly
(included in Part I as Exhibit B to the Proxy Statement-Prospectus included in
this Registration Statement)
</TABLE>
(b) Financial Statement Schedules.
Not Applicable.
(c) Fairness Opinions.
Included in Part I as Exhibits C and D to the Proxy Statement-Prospectus
included in this Registration Statement.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to Item 15 of this Registration Statement, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against policy as expressed in the Securities Act
of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-4 and has duly caused this Pre-Effective
Amendment No. 1 to Form S-4 Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized in the City of Boston, and
Commonwealth of Massachusetts, on December 16, 1997.
FLEET FINANCIAL GROUP, INC.
By: /s/ WILLIAM C. MUTTERPERL
----------------------------------------
WILLIAM C. MUTTERPERL
SENIOR VICE PRESIDENT, SECRETARY AND
GENERAL COUNSEL
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to Form S-4 Registration Statement has been signed
by the following persons in the capacities indicated on December 16, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------------- --------------------------------------------------------
<C> <S>
* Chairman, Chief Executive
------------------------------------------ Officer and Director
TERRENCE MURRAY
* Vice Chairman and
------------------------------------------ Chief Financial Officer
EUGENE M. MCQUADE
* Controller
------------------------------------------
ROBERT C. LAMB, JR.
* Director
------------------------------------------
JOEL ALVORD
* Director
------------------------------------------
WILLIAM BARNET, III
* Director
------------------------------------------
BRADFORD R. BOSS
* Director
------------------------------------------
STILLMAN B. BROWN
* Director
------------------------------------------
PAUL J. CHOQUETTE, JR.
* Director
------------------------------------------
JOHN T. COLLINS
* Director
------------------------------------------
JAMES F. HARDYMON
* Director
------------------------------------------
ROBERT M. KAVNER
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------------- --------------------------------------------------------
<C> <S>
* Director
------------------------------------------
RAYMOND C. KENNEDY
* Director
------------------------------------------
ROBERT J. MATURA
* Director
------------------------------------------
ARTHUR C. MILOT
* Director
------------------------------------------
THOMAS D. O'CONNOR
* Director
------------------------------------------
MICHAEL B. PICOTTE
* Director
------------------------------------------
LOIS D. RICE
* Director
------------------------------------------
JOHN R. RIEDMAN
* Director
------------------------------------------
THOMAS M. RYAN
* Director
------------------------------------------
SAMUEL O. THIER
* Director
------------------------------------------
PAUL R. TREGURTHA
</TABLE>
<TABLE>
<S> <C>
*By: /s/ WILLIAM C. MUTTERPERL
---------------------------------
William C. Mutterperl
SECRETARY
ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE>
EXHIBIT 23(D)
December 15, 1997
Board of Directors
The Quick & Reilly Group, Inc.
230 South County Road
Palm Beach, FL 33480
Re: Proxy Statement-Prospectus which forms a part of the Registration Statement
of Fleet Financial Group, Inc. ("Fleet") relating to shares of Common Stock,
par value $0.01 per share ("Fleet Stock"), of Fleet being registered in
connection with the proposed merger of The Quick & Reilly Group, Inc. (the
"Company") with and into FFG Acquisition Corp. ("Fleet Subsidiary"), a
wholly-owned subsidiary of Fleet.
Ladies and Gentlemen:
Attached is our opinion letter dated December15, 1997, with respect to the
fairness from a financial point of view to the holders of the outstanding shares
of Common Stock, par value $0.10 per share (the "Shares"), of the Company, of
the exchange ratio of 0.578 shares of Fleet Stock, to be received for each Share
pursuant to the Agreement and Plan of Merger, dated as of September16, 1997, as
amended as of December 12, 1997, among Fleet, Fleet Subsidiary and the Company.
The foregoing opinion letter is provided for the information and assistance of
the Board of Directors of the Company in connection with its consideration of
the transaction contemplated therein and is not to be used, circulated, quoted
or otherwise referred to for any other purpose, nor is it to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent. We understand that the Company has determined to include our
opinion in the above-referenced Proxy Statement-Prospectus.
In that regard, we hereby consent to the reference to the opinion of our Firm
under the caption "SUMMARY OF PROXY STATEMENT-PROSPECTUS--Fairness Opinions of
Financial Advisors" and "THE MERGER--Fairness Opinions of Financial Advisors"
and to the inclusion of the foregoing opinion in the Proxy Statement-Prospectus.
In giving such consent, we do not thereby admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933 or the rulesand regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
(GOLDMAN, SACHS & CO.)
