<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 8, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FLEET FINANCIAL GROUP, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
RHODE ISLAND 6711 05-0341324
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) 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.
EXECUTIVE VICE PRESIDENT, SECRETARY 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>
GARY A. SPIESS, ESQ. EDWARD D. HERLIHY, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND WACHTELL, LIPTON,
CLERK ROSEN & KATZ
BANKBOSTON CORPORATION 51 WEST 52ND STREET
100 FEDERAL STREET NEW YORK, NEW YORK 10019
BOSTON, MASSACHUSETTS 02110
</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 BANKBOSTON
CORPORATION WITH AND INTO THE REGISTRANT HAVE BEEN SATISFIED OR WAIVED AS
DESCRIBED IN THE ENCLOSED JOINT PROXY STATEMENT-PROSPECTUS.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE FEE(3)
<S> <C> <C> <C> <C>
Common Stock, $.01 par value (and associated
Preferred Share Purchase Rights)................ 373,086,000 shares $43.3501 $16,173,315,410 $4,496,182
</TABLE>
(1) Based upon an estimate of the maximum number of shares of common stock,
$1.00 par value (the "BankBoston common stock"), of BankBoston Corporation
("BankBoston") which will each be exchanged for 1.1844 shares of common
stock, $.01 par value (the "Fleet common stock"), of Fleet Financial Group,
Inc. ("Fleet") pursuant to the merger described herein.
(2) Calculated in accordance with Rule 457(f)(1) under the Securities Act based
on the aggregate market value on July 1, 1999 of the shares of BankBoston
common stock expected to be canceled in connection with the merger and
computed by dividing (i) the product of (A) the average of the high and low
prices of BankBoston common stock as reported on the NYSE on July 1, 1999
($51.3438) and (B) 315,000,000, representing the maximum number of shares of
BankBoston common stock expected to be cancelled in connection with the
merger, by (ii) 373,086,000, representing the maximum number of shares of
Fleet common stock to be issued in connection with the merger.
(3) The registration fee of $4,496,182 was calculated pursuant to Rule 457(f)
under the Securities Act, as follows: .000278 multiplied by the proposed
maximum aggregate offering price. In accordance with Rule 457(b), the filing
fee of $3,014,518 paid pursuant to Section 14(g) of the Securities Exchange
Act of 1934, as amended, and Rule 0-11 thereunder at the time of the filing
of the Joint Proxy Statement-Prospectus contained in this Registration
Statement as preliminary proxy materials has been credited to offset the
$4,496,182 registration fee that would otherwise be payable, resulting in a
net fee payable of $1,481,664 as of the date hereof.
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>
<TABLE>
<S> <C>
[FLEET FINANCIAL GROUP LOGO] [BANKBOSTON LOGO]
</TABLE>
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of Fleet Financial Group, Inc. and BankBoston
Corporation have agreed on a merger of Fleet and BankBoston. The combined
company, to be named "Fleet Boston Corporation," will be the eighth-largest bank
holding company in the United States measured by total assets, with total assets
of about $180 billion before any divestitures required by regulatory
authorities. We believe that the combined company will be a formidable national
and international competitor, with great strengths in retail banking, commercial
banking, global banking, consumer finance, asset management and investment
banking.
In the merger, each share of BankBoston common stock will be converted into
1.1844 shares of common stock of the combined company and each share of Fleet
common stock will remain outstanding as a share of common stock of the combined
company. The market value of the consideration that BankBoston stockholders will
receive in the merger for each share of BankBoston common stock would be $53.08
BASED ON FLEET'S CLOSING STOCK PRICE ON JULY 6, 1999. We expect the merger to be
a TAX-FREE TRANSACTION FOR FLEET STOCKHOLDERS AND, IN GENERAL, BANKBOSTON
STOCKHOLDERS, except for the receipt by BankBoston stockholders of cash instead
of fractional shares of common stock of the combined company. After completion
of the merger, Fleet stockholders and BankBoston stockholders will own
approximately 62% and 38%, respectively, of the combined company.
Each of us will hold a special meeting of our stockholders to consider and
vote on this merger proposal and other matters. Whether or not you plan to
attend your company's special meeting, please take the time to vote by
completing and mailing the enclosed proxy card to us. If you sign, date and mail
your proxy card without indicating how you want to vote, your proxy will be
counted as a vote FOR the merger and the transactions contemplated by the merger
agreement and, for Fleet stockholders, a vote FOR the other matters. If you do
not return your card, or if you do not instruct your broker how to vote any
shares held for you in "street name," the effect will be a vote against the
merger.
The places, dates and times of the special meetings are as follows:
<TABLE>
<S> <C>
FOR FLEET STOCKHOLDERS: FOR BANKBOSTON STOCKHOLDERS:
August 11, 1999, August 11, 1999,
11:00 a.m., local time 10:30 a.m., local time
World Trade Center Boston Auditorium on the ground floor
164 Northern Avenue The Federal Reserve Bank of Boston
Boston, Massachusetts 600 Atlantic Avenue
Boston, Massachusetts
</TABLE>
We enthusiastically support this combination of two of the premier
franchises in the financial services industry and join with the other members of
our Boards of Directors in recommending that you vote in favor of the merger.
<TABLE>
<S> <C>
/s/ Terrence Murray /s/ Charles K. Gifford
Terrence Murray Charles K. Gifford
Chairman and Chief Executive Officer Chairman and Chief Executive Officer
Fleet Financial Group, Inc. BankBoston Corporation
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE SECURITIES TO BE ISSUED UNDER THIS JOINT PROXY
STATEMENT-PROSPECTUS OR DETERMINED IF THIS JOINT PROXY STATEMENT-PROSPECTUS IS
ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES WE ARE OFFERING THROUGH THIS DOCUMENT ARE NOT SAVINGS OR DEPOSIT
ACCOUNTS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY OF EITHER OF
OUR COMPANIES, AND THEY ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
JOINT PROXY STATEMENT-PROSPECTUS DATED JULY 8, 1999
AND FIRST MAILED TO STOCKHOLDERS ON JULY 9, 1999
<PAGE>
[FLEET FINANCIAL GROUP LOGO]
FLEET FINANCIAL GROUP, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 11, 1999
To the Stockholders
of Fleet Financial Group, Inc.:
We will hold a special meeting of stockholders of Fleet Financial Group, Inc., a
Rhode Island corporation, on Wednesday, August 11, 1999, at 11:00 a.m., local
time, at the World Trade Center Boston, 164 Northern Avenue, Boston,
Massachusetts, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan of
Merger, dated as of March 14, 1999, by and between BankBoston Corporation, a
Massachusetts corporation, and Fleet, and the consummation of the
transactions contemplated by the merger agreement, pursuant to which, among
other things, (a) BankBoston will merge with and into Fleet upon the terms
and subject to the conditions set forth in the merger agreement, (b) the
Fleet restated articles of incorporation, as amended, will be amended to
change the name of Fleet to "Fleet Boston Corporation" and (c) the Fleet
bylaws will be amended to add a new provision related to the succession of
Fleet's current Chief Executive Officer and Chairman of the Board and the
composition of the Board of Directors of the combined company, in each case,
as more fully described in the enclosed Joint Proxy Statement-Prospectus.
2. To consider and vote upon a proposal to adopt an amendment to Fleet's
articles to increase the number of authorized shares of Fleet common stock
from 1.2 billion to 2 billion, as more fully described in the enclosed Joint
Proxy Statement-Prospectus.
3. To consider and vote upon a proposal to approve the Amended and Restated
1994 Performance-Based Bonus Plan for the Chief Executive Officer and
certain other named executive officers.
4. To transact any other business as may properly be brought before the special
meeting or any adjournments or postponements of the Fleet special meeting.
We have fixed the close of business on June 28, 1999 as the record date for
determining those stockholders entitled to vote at the Fleet special meeting and
any adjournments or postponements of the Fleet special meeting. Accordingly,
only stockholders of record on that date are entitled to notice of, and to vote
at, the Fleet special meeting and any adjournments or postponements of the Fleet
special meeting.
By Order of the Board of Directors
/s/ William L. Mutterperl
William C. Mutterperl
SECRETARY
July 8, 1999
THE BOARD OF DIRECTORS OF FLEET UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE
MERGER AGREEMENT AND RELATED MATTERS AND ADOPTION OF THE AMENDMENT TO THE FLEET
ARTICLES.
THE AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF THE OUTSTANDING SHARES OF FLEET
COMMON STOCK ENTITLED TO VOTE ON THESE MATTERS IS REQUIRED TO APPROVE THE MERGER
AGREEMENT AND RELATED MATTERS AND ADOPT THE AMENDMENT TO THE FLEET ARTICLES.
WHETHER OR NOT YOU PLAN TO ATTEND THE FLEET SPECIAL MEETING IN PERSON, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF YOU ATTEND THE FLEET SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU
WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE>
[BANKBOSTON LOGO]
BANKBOSTON CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 11, 1999
To the Stockholders of
BankBoston Corporation:
We will hold a special meeting of stockholders of BankBoston Corporation, a
Massachusetts corporation, on Wednesday, August 11, 1999, at 10:30 a.m., local
time, in the Auditorium on the ground floor of The Federal Reserve Bank of
Boston, 600 Atlantic Avenue, Boston, Massachusetts, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan of
Merger, dated as of March 14, 1999, by and between BankBoston and Fleet
Financial Group, Inc., a Rhode Island corporation, pursuant to which, among
other things, BankBoston will merge with and into Fleet upon the terms and
subject to the conditions set forth in the merger agreement. This proposal
is more fully described in the enclosed Joint Proxy Statement-Prospectus.
2. To transact any other business as may properly be brought before the
BankBoston special meeting or any adjournments or postponements of the
BankBoston special meeting.
We have fixed the close of business on June 28, 1999 as the record date for
determining those stockholders entitled to vote at the BankBoston special
meeting and any adjournments or postponements of the BankBoston special meeting.
Accordingly, only stockholders of record on that date are entitled to notice of,
and to vote at, the BankBoston special meeting and any adjournments or
postponements of the BankBoston special meeting.
If the BankBoston stockholders approve the merger agreement at the BankBoston
special meeting and the merger occurs, any stockholder (1) who files with
BankBoston before the vote on the merger agreement, written objection to the
merger agreement stating that he or she intends to demand payment for his or
her shares of BankBoston common stock if the merger occurs and (2) whose
shares of BankBoston common stock are not voted in favor of the merger
agreement, has the right to demand in writing from Fleet Boston Corporation,
the combined company, within 20 days after Fleet Boston mails a written notice
that the merger has occurred, payment for his or her shares and an appraisal
of those shares' value. BankBoston and that stockholder will, in those cases,
have the rights and duties and are required to follow the procedures set forth
in sections 85 to 98, inclusive, of Chapter 156B of the General Laws of
Massachusetts, a copy of which is attached to the back of this Joint Proxy
Statement-Prospectus as Appendix I.
By Order of the Board of Directors
/s/ Gary A. Spiess
Gary A. Spiess
CLERK
Boston, Massachusetts
July 8, 1999
THE BOARD OF DIRECTORS OF BANKBOSTON UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
THE AFFIRMATIVE VOTE OF AT LEAST TWO-THIRDS OF THE OUTSTANDING SHARES OF
BANKBOSTON COMMON STOCK ENTITLED TO VOTE ON THIS MATTER IS REQUIRED TO APPROVE
THE MERGER AGREEMENT. WHETHER OR NOT YOU PLAN TO ATTEND THE BANKBOSTON SPECIAL
MEETING IN PERSON, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE ENCLOSED ENVELOPE. THE ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ATTEND THE BANKBOSTON SPECIAL MEETING, YOU MAY VOTE IN
PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SUMMARY.................................................................................................... 1
FLEET SPECIAL MEETING...................................................................................... 16
General.................................................................................................. 16
Matters to be Considered................................................................................. 16
Proxies.................................................................................................. 16
Solicitation of Proxies.................................................................................. 17
Record Date and Voting Rights............................................................................ 17
Recommendation of Fleet Board............................................................................ 18
BANKBOSTON SPECIAL MEETING................................................................................. 19
General.................................................................................................. 19
Matters to be Considered................................................................................. 19
Proxies.................................................................................................. 19
Solicitation of Proxies.................................................................................. 19
Record Date and Voting Rights............................................................................ 20
Recommendation of BankBoston Board....................................................................... 21
THE MERGER................................................................................................. 22
General.................................................................................................. 22
Background of the Merger................................................................................. 22
Recommendation of the Fleet Board and Reasons for the Merger............................................. 24
Recommendation of the BankBoston Board and Reasons for the Merger........................................ 27
Opinions of Fleet's Financial Advisors................................................................... 30
Opinions of BankBoston's Financial Advisors.............................................................. 43
Changing the Method of Effecting the Combination......................................................... 51
Conversion of Stock...................................................................................... 52
Treatment of Options..................................................................................... 52
Exchange of Certificates; Fractional Shares.............................................................. 52
Effective Time........................................................................................... 53
Representations and Warranties........................................................................... 54
Conduct of Business Pending the Merger and Other Agreements.............................................. 54
Conditions to Consummation of the Merger................................................................. 59
Regulatory Approvals Required for the Merger............................................................. 60
Material Federal Income Tax Consequences................................................................. 63
Accounting Treatment..................................................................................... 65
Termination of the Merger Agreement...................................................................... 65
Extension, Waiver and Amendment of the Merger Agreement.................................................. 66
Employee Benefits and Plans.............................................................................. 66
Stock Exchange Listing................................................................................... 67
Expenses................................................................................................. 67
Dividends................................................................................................ 67
Interests of Certain Persons in the Merger............................................................... 67
Fleet and BankBoston Option Agreements................................................................... 72
Restrictions on Resales by Affiliates.................................................................... 75
MANAGEMENT AND OPERATIONS AFTER THE MERGER................................................................. 76
Board of Directors....................................................................................... 76
Management............................................................................................... 76
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Operations............................................................................................... 77
PRICE RANGE OF COMMON STOCK AND DIVIDENDS.................................................................. 78
Fleet.................................................................................................... 78
BankBoston............................................................................................... 79
INFORMATION ABOUT FLEET.................................................................................... 80
General.................................................................................................. 80
Management and Additional Information.................................................................... 80
INFORMATION ABOUT BANKBOSTON............................................................................... 81
General.................................................................................................. 81
Management and Additional Information.................................................................... 81
REGULATION AND SUPERVISION................................................................................. 82
General.................................................................................................. 82
Liability for Bank Subsidiaries.......................................................................... 82
Capital Requirements..................................................................................... 83
Dividend Restrictions.................................................................................... 84
Deposit Insurance Assessments............................................................................ 85
Depositor Preference Statute............................................................................. 85
Brokered Deposits........................................................................................ 86
Interstate Banking and Branching......................................................................... 86
Control Acquisitions..................................................................................... 86
Future Legislation....................................................................................... 87
DESCRIPTION OF FLEET CAPITAL STOCK......................................................................... 88
General.................................................................................................. 88
Fleet Common Stock....................................................................................... 88
Transfer Agent and Registrar............................................................................. 89
Restrictions on Ownership................................................................................ 89
Preferred Share Purchase Rights.......................................................................... 89
Preferred Stock.......................................................................................... 89
SELECTED PROVISIONS IN THE ARTICLES OF FLEET............................................................... 93
Business Combinations With Related Persons............................................................... 93
Directors................................................................................................ 94
COMPARISON OF STOCKHOLDERS' RIGHTS......................................................................... 95
General.................................................................................................. 95
Voting Rights............................................................................................ 95
Special Meetings......................................................................................... 97
Appraisal Rights......................................................................................... 97
Provisions Relating to Directors......................................................................... 98
State Anti-Takeover Statutes............................................................................. 99
RIGHTS OF DISSENTING STOCKHOLDERS.......................................................................... 102
Fleet.................................................................................................... 102
BankBoston............................................................................................... 102
APPROVAL OF THE AMENDED AND RESTATED 1994 PERFORMANCE-BASED BONUS PLAN FOR THE NAMED EXECUTIVE OFFICERS.... 104
LEGAL MATTERS.............................................................................................. 105
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
EXPERTS.................................................................................................... 105
STOCKHOLDER PROPOSALS...................................................................................... 105
OTHER MATTERS.............................................................................................. 106
INDEPENDENT PUBLIC ACCOUNTANTS............................................................................. 106
WHERE YOU CAN FIND MORE INFORMATION........................................................................ 106
FORWARD-LOOKING STATEMENTS................................................................................. 108
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION............................................... 110
</TABLE>
<TABLE>
<S> <C> <C>
Appendix A Agreement and Plan of Merger............................................. A-1
Appendix B Fleet Stock Option Agreement............................................. B-1
Appendix C BankBoston Stock Option Agreement........................................ C-1
Appendix D Opinion of Donaldson, Lufkin & Jenrette Securities Corporation........... D-1
Appendix E Opinion of Goldman, Sachs & Co........................................... E-1
Appendix F Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated ........... F-1
Appendix G Opinion of Morgan Stanley & Co. Incorporated............................. G-1
Appendix H Bylaw Amendment.......................................................... H-1
Appendix I Dissenter Rights Provisions Under the MBCL............................... I-1
</TABLE>
iii
<PAGE>
SUMMARY
THIS BRIEF SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO
YOU. YOU SHOULD CAREFULLY READ THIS ENTIRE DOCUMENT AND THE OTHER DOCUMENTS TO
WHICH THIS DOCUMENT REFERS YOU TO FULLY UNDERSTAND THE MERGER. SEE "WHERE YOU
CAN FIND MORE INFORMATION."
THE MERGER (PAGE 22)
We propose a merger-of-equals in which BankBoston will merge with Fleet. The
name of the combined company will be "Fleet Boston Corporation." The combined
company will be headquartered in Boston, Massachusetts. We expect to complete
the merger late in the third quarter or early in the fourth quarter of 1999.
EACH BANKBOSTON SHARE WILL BE EXCHANGED FOR 1.1844 FLEET SHARES (PAGE 22)
When we complete the merger, your shares of Fleet common stock and BankBoston
common stock will become shares of the combined company.
FLEET STOCKHOLDERS. As a Fleet stockholder, each of your shares of Fleet common
stock will remain outstanding as one share of common stock of the combined
company. You do not need to surrender your shares or exchange them for new ones.
BANKBOSTON STOCKHOLDERS. As a BankBoston stockholder, each of your shares of
BankBoston common stock will automatically become the right to receive a fixed
exchange ratio of 1.1844 shares of common stock of the combined company.
Because the number of shares of common stock of the combined company that you
will receive in the merger is fixed, subject to adjustments that will not alter
the economic value of the exchange ratio, the value of the shares of common
stock of the combined company you will receive in the merger will fluctuate as
the price of Fleet common stock changes.
You will have to surrender your BankBoston common stock certificates to receive
new stock certificates representing common stock of the combined company. This
will not be necessary, however, until you receive written instructions after we
complete the merger.
TRANSACTION GENERALLY TAX-FREE FOR FLEET STOCKHOLDERS AND BANKBOSTON
STOCKHOLDERS (PAGE 63)
Fleet has received an opinion of counsel dated the date of this document
regarding tax consequences of the merger. The information below is based on that
opinion.
FLEET STOCKHOLDERS. As your shares of Fleet common stock will remain unchanged,
the merger will not cause you to recognize any gain or loss for U.S. federal
income tax purposes.
BANKBOSTON STOCKHOLDERS. We expect that your exchange of shares of BankBoston
common stock for shares of common stock of the combined company generally will
not cause you to recognize any gain or loss for U.S. federal income tax
purposes. You will, however, have to recognize income or gain in connection with
any cash received instead of fractional shares.
THIS TAX TREATMENT MAY NOT APPLY TO ALL BANKBOSTON STOCKHOLDERS. DETERMINING THE
ACTUAL TAX CONSEQUENCES OF THE MERGER TO YOU CAN BE COMPLICATED. THEY WILL
DEPEND ON YOUR SPECIFIC SITUATION AND ON VARIABLES NOT WITHIN OUR CONTROL. YOU
SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF THE MERGER'S TAX
CONSEQUENCES TO YOU.
Fleet and BankBoston will not be obligated to complete the merger unless we
receive additional legal opinions, dated the closing date, that the merger will
be treated as a transaction of a type that is generally tax-free for U.S.
federal income tax purposes. In that case, the U.S. federal income tax treatment
of the merger will be as we have described it above. These opinions will not
bind the Internal Revenue Service, however, which could take a different view.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (PAGE 78)
Fleet common stock and BankBoston common stock trade on the New York Stock
Exchange. Some examples of recent closing prices for Fleet
1
<PAGE>
common stock and BankBoston common stock are as follows:
<TABLE>
<CAPTION>
FLEET BANKBOSTON
---------- -----------
<S> <C> <C>
March 12, 1999............... $ 44.75 $ 46.9375
July 6, 1999................. $ 44.8125 $ 52.0625
</TABLE>
Based on the exchange ratio in the merger, which is 1.1844, the market value of
the consideration that BankBoston stockholders will receive in the merger for
each share of BankBoston common stock would be:
<TABLE>
<CAPTION>
FLEET BANKBOSTON
---------- -----------
<S> <C> <C>
March 12, 1999............... $ 44.75 $ 53.00
July 6, 1999................. $ 44.8125 $ 53.08
</TABLE>
In addition, recently declared per share dividend information for Fleet common
stock and BankBoston common stock is as follows:
<TABLE>
<CAPTION>
FLEET BANKBOSTON
------------ ------------
<S> <C> <C>
1st Quarter 1999.......... $ .27 $ .32
2nd Quarter 1999.......... $ .27 $ .32
</TABLE>
Of course, the market price of Fleet common stock will fluctuate prior to the
merger, while the exchange ratio is fixed. You should obtain current stock price
quotations for Fleet common stock and BankBoston common stock. You can get these
quotations from a newspaper, on the Internet or by calling your broker.
OUR FINANCIAL ADVISORS BELIEVE THE EXCHANGE RATIO IS FAIR TO STOCKHOLDERS (PAGE
30)
FLEET STOCKHOLDERS. Among other factors considered in deciding to approve the
merger, the Fleet Board of Directors received the oral opinions (which were
subsequently confirmed in writing) of each of its financial advisors, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co., that, as of
March 14, 1999, the exchange ratio was fair to the holders of Fleet common stock
from a financial point of view. Fleet has received updated opinions from each of
Donaldson, Lufkin & Jenrette and Goldman Sachs dated the date of this document.
We have attached these updated opinions to this document as Appendices D and E.
You should read these opinions completely to understand the assumptions made,
matters considered and limitations on review undertaken by each of Donaldson,
Lufkin & Jenrette and Goldman Sachs in providing their opinions. Fleet has
agreed to pay $15 million each to Donaldson, Lufkin & Jenrette and Goldman
Sachs, of which $11 million is payable to each advisor upon closing of the
merger.
BANKBOSTON STOCKHOLDERS. Among other factors considered in deciding to approve
the merger, the BankBoston Board of Directors received the oral opinion of each
of its financial advisors, Merrill Lynch, Pierce, Fenner & Smith Incorporated
and Morgan Stanley & Co. Incorporated, that, as of March 13, 1999, the exchange
ratio was fair to the holders of BankBoston common stock from a financial point
of view. BankBoston has received updated opinions from each of Merrill Lynch and
Morgan Stanley dated the date of this document. We have attached these updated
opinions to this document as Appendices F and G. You should read these opinions
completely to understand the assumptions made, matters considered and
limitations of the review undertaken by each of Merrill Lynch and Morgan Stanley
in providing their opinions. BankBoston has agreed to pay $20 million each to
Merrill Lynch and Morgan Stanley, of which $15 million is payable to each
advisor upon closing of the merger.
BANKBOSTON STOCKHOLDERS HAVE APPRAISAL RIGHTS (PAGE 97)
FLEET STOCKHOLDERS. Fleet stockholders will not have appraisal rights as a
result of the merger.
BANKBOSTON STOCKHOLDERS. Massachusetts law permits holders of BankBoston common
stock to dissent from the merger and to have the fair value of their BankBoston
common stock appraised by a court and paid to them in cash by the combined
company. TO DO THIS, HOLDERS OF THESE SHARES MUST FOLLOW REQUIRED PROCEDURES,
INCLUDING FILING NOTICES WITH BANKBOSTON, AND, IF THEY ARE ENTITLED TO VOTE,
EITHER ABSTAINING OR VOTING AGAINST THE MERGER. If you hold shares of BankBoston
common stock and you dissent from the merger and follow the required procedures,
your shares of BankBoston common stock will not become shares of common stock of
the combined company. Instead, your only right will be to receive the appraised
value of your shares in cash. We have attached the applicable provisions of
Massachusetts law related to dissenters' rights to this document as Appendix I.
2
<PAGE>
WE HAVE ATTACHED THE MERGER AGREEMENT TO THIS DOCUMENT AS APPENDIX A. PLEASE
READ THE MERGER AGREEMENT. IT IS THE LEGAL DOCUMENT THAT GOVERNS THE MERGER.
THE COMPANIES (PAGE 80)
FLEET FINANCIAL GROUP, INC.
ONE FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
(617) 346-4000
Fleet is a diversified financial services company engaged in a general
commercial banking and investment management business in Connecticut, Florida,
Maine, Massachusetts, New Hampshire, New Jersey, New York and Rhode Island.
Fleet also provides a variety of financial services nationwide, including:
- mortgage banking,
- asset-backed lending,
- lease financing,
- credit card services,
- real estate financing,
- brokerage, market-making and securities clearing services,
- services in the capital markets and investment banking,
- data processing, and
- student loan servicing.
At March 31, 1999, Fleet's total assets on a consolidated basis were $106.2
billion, its consolidated total deposits were $67.6 billion and its consolidated
total stockholders' equity was $9.6 billion. Based on total assets at March 31,
1999, Fleet was the ninth largest bank holding company in the United States.
BANKBOSTON CORPORATION
100 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
(617) 434-2200
BankBoston is a bank holding company engaged in consumer, small business and
corporate banking in New England. BankBoston also provides a broad range of
commercial and investment banking services to corporations and governments
nationally and internationally, and provides full-service banking in leading
Latin American markets.
BankBoston's principal subsidiary is BankBoston, N.A., headquartered in
Massachusetts. BankBoston, N.A. maintains branches in Massachusetts,
Connecticut, Rhode Island and New Hampshire, and operates a network of offices
across the United States and in Latin America and has a presence in Asia and
Europe.
At March 31, 1999, BankBoston's total assets on a consolidated basis were $75.7
billion, its total deposits were $48.5 billion and its consolidated total
stockholders' equity was $5.0 billion. Based on total assets at March 31, 1999,
BankBoston was the 14th largest bank holding company in the United States.
THE STOCKHOLDERS' MEETINGS (PAGE 16)
FLEET STOCKHOLDERS. The Fleet special meeting will be held on August 11, 1999
at 11:00 a.m., local time, at the World Trade Center Boston, 164 Northern
Avenue, Boston, Massachusetts. At the Fleet special meeting, you will be asked:
1. to approve:
- the merger of Fleet with BankBoston,
- a change of Fleet's name to "Fleet Boston Corporation" and
- procedures relating to succession of Fleet's current Chief Executive
Officer and Chairman of the Board and the composition of the Board of
Directors of the combined company;
2. to adopt an increase in the authorized number of shares of Fleet common
stock from 1.2 billion to 2 billion;
3. to approve an amended performance-based bonus plan for the Chief Executive
Officer and other named executive officers; and
4. to act on other matters that may properly be submitted to a vote at the
Fleet special meeting.
3
<PAGE>
BANKBOSTON STOCKHOLDERS. The BankBoston special meeting will be held on August
11, 1999 at 10:30 a.m., local time, in the Auditorium on the ground floor of The
Federal Reserve Bank of Boston, 600 Atlantic Avenue, Boston, Massachusetts. At
the BankBoston special meeting, you will be asked:
1. to approve the merger of BankBoston with Fleet; and
2. to act on other matters that may properly be submitted to a vote at the
BankBoston special meeting.
RECORD DATE; VOTE REQUIRED (PAGES 17 AND 20)
FLEET STOCKHOLDERS. You can vote at the Fleet special meeting if you owned
Fleet common stock at the close of business on June 28, 1999. On that date,
there were 569,256,931 shares of Fleet common stock outstanding and entitled to
vote. You can cast one vote for each share of Fleet common stock that you owned
on that date. In order to approve the merger, the name change, the new by-law
provision and the increase in authorized shares, the holders of a majority of
the outstanding shares of Fleet common stock must vote in favor of doing so.
Approval of the amended performance-based bonus plan requires the affirmative
vote of a majority of the votes cast at the Fleet special meeting.
BANKBOSTON STOCKHOLDERS. You can vote at the BankBoston special meeting if you
owned BankBoston common stock at the close of business on June 28, 1999. On that
date, there were 297,032,755 shares of BankBoston common stock outstanding and
entitled to vote. You can cast one vote for each share of BankBoston common
stock you owned on that date. In order to approve the merger, the holders of
two-thirds of the outstanding shares of BankBoston common stock must vote in
favor of doing so.
WE RECOMMEND THAT STOCKHOLDERS APPROVE THE MERGER (PAGE 24)
FLEET STOCKHOLDERS. The Fleet Board of Directors believes that the merger is
fair to you and in your best interests, and unanimously recommends that you vote
"FOR" the proposals to approve the merger and the related matters.
BANKBOSTON STOCKHOLDERS. The BankBoston Board of Directors believes that the
merger is fair to you and in your best interests, and unanimously recommends
that you vote "FOR" the proposal to approve the merger.
OUR REASONS FOR THE MERGER (PAGE 24)
Our companies are proposing to merge because we believe that by combining them
we can create a stronger and more diversified company that will be a premier
banking franchise and provide significant benefits to our stockholders and
customers alike. We also believe that by bringing our customers and banking
products together we can do a better job of growing our combined revenues than
we could if we did not merge. We believe that the merger will strengthen our
position as a competitor in the financial services industry, which is rapidly
changing and growing more competitive.
SHARED RESPONSIBILITY FOR MANAGEMENT AND OPERATIONS AFTER THE MERGER (PAGE 76)
The present managements of our companies will share the responsibility of
managing the combined company. The Board of Directors of the combined company
will be comprised of 22 directors. Twelve directors will come from Fleet and ten
directors will come from BankBoston. Terrence Murray, currently Fleet's Chairman
and Chief Executive Officer, will serve as Chairman and Chief Executive Officer
of the combined company, and Charles K. Gifford, currently BankBoston's Chairman
and Chief Executive Officer, will serve as President and Chief Operating Officer
of the combined company. Mr. Gifford will become Chief Executive Officer of the
combined company at year-end 2001 and will become Chairman of the combined
company one year later. Robert J. Higgins, currently Fleet's President and Chief
Operating Officer, and Henrique C. Meirelles, currently BankBoston's President
and Chief Operating Officer, will manage the businesses of the combined company.
We also address management and operations after the merger in the bylaw
amendment that we have attached to this document as Appendix H.
While we can make no assurances, we expect to achieve efficiencies in the merger
that should
4
<PAGE>
cause the merger to be 1% accretive to earnings per share in the year 2000 and
6% accretive to earnings per share in the year 2001. We also expect to recognize
an estimated $650 million after-tax charge to earnings upon closing of the
merger or shortly after that, and a $60 million after-tax charge to earnings in
subsequent periods, related in each case to costs of integrating our two
companies.
CONDITIONS TO COMPLETION OF THE MERGER (PAGE 59)
The completion of the merger depends on a number of conditions being met,
including approval of the merger agreement by both Fleet stockholders and
BankBoston stockholders and receipt of regulatory approvals.
Where the law permits, a party to the merger agreement could elect to waive a
condition to its obligation to complete the merger although that condition has
not been satisfied. We cannot be certain when (or if) the conditions to the
merger will be satisfied or waived or that the merger will be completed.
WE MAY DECIDE NOT TO COMPLETE THE MERGER
(PAGE 65)
We can agree at any time not to complete the merger, even if the stockholders of
both our companies have approved it. Also, either of us can decide, without the
consent of the other, not to complete the merger in a number of other
situations, including:
- the final denial of a required regulatory approval,
- a determination that the other party has substantially engaged in bad
faith in failing to obtain the requisite vote of its stockholders to
approve the merger, or
- the failure to complete the merger by March 14, 2000.
WE MAY AMEND THE TERMS OF THE MERGER AND WAIVE SOME CONDITIONS (PAGE 66)
We may jointly amend the terms of the merger, and each of us may waive our right
to require the other party to adhere to those terms, to the extent legally
permissible. However, after our stockholders approve the merger, they must
approve any amendment or waiver that reduces or changes the consideration that
will be received by them.
WE EXPECT "POOLING OF INTERESTS" ACCOUNTING TREATMENT (PAGE 65)
We expect the merger to qualify as a "pooling of interests." This means that,
for accounting and financial reporting purposes, we will treat our companies as
if they had always been one. We will not be required to complete the merger
unless we receive a letter from our respective independent accountants telling
us that the merger will qualify as a pooling of interests.
WE MAY NOT COMPLETE THE MERGER WITHOUT REQUIRED REGULATORY APPROVALS (PAGE 60)
We cannot complete the merger unless it is approved by the Board of Governors of
the Federal Reserve System. The U.S. Department of Justice has input into this
approval process, and state attorneys general may have input into this process
as well. Once the Board of Governors of the Federal Reserve System approves the
merger, we have to wait for up to 30 days before we can complete the merger. We
have proposed to divest approximately $12.5 billion of deposits, approximately
70% of which are in Massachusetts and New Hampshire. We believe our proposal is
consistent with the policies of the Board of Governors of the Federal Reserve
System and the U.S. Department of Justice, but we cannot be certain whether one
or both of these agencies will seek greater levels of divestiture. The estimated
divested income is $160 million after tax.
In addition, the merger is subject to the approval of, or notice to, applicable
state and other regulatory authorities, including the Board of Bank
Incorporation of the Commonwealth of Massachusetts. We may also be required to
obtain approvals from, and give notices to, applicable foreign bank and other
regulatory agencies as well.
We have filed all of the required applications and notices with the Board of
Governors of the Federal Reserve System and these other regulatory authorities.
As of the date of this document, we have not yet received the required
approvals. While we do not know of any reason why we would not be able to obtain
the necessary approvals in a
5
<PAGE>
timely manner, we cannot be certain when or if we will get them.
OFFICERS AND DIRECTORS HAVE SOME INTERESTS IN THE MERGER THAT ARE DIFFERENT FROM
OR IN ADDITION TO THEIR INTERESTS AS STOCKHOLDERS (PAGE 67)
Some of our directors and officers have interests in the merger that are
different from, or in addition to, their interests as stockholders in our
companies. These interests exist because of employment and/or severance
agreements that the officers have entered into with Fleet and/or BankBoston, and
rights that the officers and directors have under applicable benefit and
compensation plans maintained by BankBoston. These agreements and plans will
provide the officers with severance benefits if their employment with the
combined company is terminated after the merger and other rights in connection
with the merger.
Also, following the merger, the combined company will indemnify, and provide
directors' and officers' insurance for, the officers and directors of BankBoston
for events occurring before the merger, including events that are related to the
merger. Additional interests of some of our directors and executive officers are
described under "Management and Operations after the Merger."
The members of our Boards of Directors knew about these additional interests,
and considered them, when they approved the merger.
6
<PAGE>
UNAUDITED COMPARATIVE PER SHARE DATA
The following table shows historical information about our net income per
share, cash dividends per share and book value per share, and similar
information reflecting the merger, which we refer to as pro forma information.
In presenting the comparative pro forma information for the time periods shown
in the table, we assumed that we had been merged throughout those periods. See
"Unaudited Pro Forma Condensed Combined Financial Information" on page 110.
We also assumed that we will treat our companies as if they had always been
combined for accounting and financial reporting purposes, a method known as
pooling of interests accounting. The information listed as equivalent pro forma
was obtained by multiplying the pro forma amounts by the exchange ratio of
1.1844. We present this information to reflect the fact that BankBoston
stockholders will receive more than one share of combined company common stock
for each share of BankBoston common stock exchanged in the merger.
We expect that we will incur merger and restructuring expenses as a result
of combining our companies. We also anticipate that the merger will provide the
combined company with financial benefits that include reduced operating expenses
and enhanced opportunities to earn more revenue. The pro forma information,
while helpful in illustrating the financial characteristics of the combined
company under one set of assumptions, does not reflect these anticipated
financial benefits and, accordingly, does not attempt to predict or suggest
future results, nor does it include the effects of divestitures required by
regulatory authorities.
The information in the following table is based on the historical financial
information that we have presented in our prior Securities and Exchange
Commission filings. We are incorporating this material into this document by
reference. See "Where You Can Find More Information" on page 106.
7
<PAGE>
<TABLE>
<CAPTION>
AS OF OR FOR THE
QUARTERS ENDED MARCH AS OF OR FOR THE
31, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
FLEET COMMON STOCK:
Net income per share:
Basic:
Historical................................................. $ .74 $ .55 $ 2.61 $ 2.37 $ 2.02
Fleet/BankBoston pro forma (1)............................. .70 .60 2.47 2.39 1.88
Diluted:
Historical................................................. .72 .53 2.52 2.30 1.98
Fleet/BankBoston pro forma (1)............................. .68 .58 2.41 2.33 1.84
Cash dividends declared per common share:
Historical................................................. .27 .245 1.00 .92 .87
Fleet/BankBoston pro forma (2)............................. .27 .245 1.00 .92 .87
Book value per share at period end:
Historical................................................. 15.69
Fleet/BankBoston pro forma (1)............................. 14.38
BANKBOSTON COMMON STOCK:
Net income per share:
Basic:
Historical................................................. .75 .80 2.66 2.86 2.00
Fleet/BankBoston equivalent pro forma (3).................. .83 .71 2.93 2.83 2.23
Diluted:
Historical................................................. .75 .79 2.64 2.82 1.96
Fleet/BankBoston equivalent pro forma (3).................. .81 .69 2.85 2.76 2.18
Cash dividends declared per common share:
Historical................................................. .32 .29 1.16 .99 .85
Fleet/BankBoston equivalent pro forma (3).................. .32 .29 1.18 1.09 1.03
Book value per share at period end:
Historical................................................. 16.73
Fleet/BankBoston equivalent pro forma (3).................. 17.03
</TABLE>
- ------------------------
(1) The Fleet/BankBoston pro forma information reflects Fleet's historical
common shares outstanding and Fleet's historical basic and diluted
equivalent shares adjusted for the exchange of Fleet common stock in
connection with the merger at an exchange ratio of 1.1844 shares of Fleet
common stock for each share of BankBoston common stock, as well as all pro
forma adjustments.
(2) The Fleet/BankBoston pro forma dividends per share represent Fleet's
historical dividends per share.
(3) The Fleet/BankBoston equivalent pro forma per share amounts are calculated
by multiplying the Fleet/BankBoston pro forma information described in note
(1) by the exchange ratio of 1.1844.
8
<PAGE>
SELECTED FINANCIAL DATA
The following tables show selected historical financial data for each of us
and also show similar pro forma information reflecting the merger. The pro forma
information reflects the pooling of interests method of accounting.
We expect that we will incur merger and restructuring expenses as a result
of combining our companies. We also anticipate that the merger will provide the
combined company with financial benefits that include reduced operating expenses
and enhanced opportunities to earn more revenue. The pro forma information,
while helpful in illustrating the financial characteristics of the combined
company under one set of assumptions, does not reflect these financial expenses
or benefits and, accordingly, does not attempt to predict or suggest future
results, nor does it include the effects of divestitures required by regulatory
authorities.
The information in the following tables is based on historical financial
information that we have presented in our prior Securities and Exchange
Commission filings. You should read all of the summary financial information we
provide in the following tables together with this historical financial
information and with the more detailed pro forma financial information we
provide in this document, which you can find beginning at page 110. This
historical financial information is also incorporated into this document by
reference. See "Where You Can Find More Information" on page 106.
9
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF FLEET AND BANKBOSTON
FLEET FINANCIAL GROUP, INC.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
---------------------- ------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF OPERATIONS:
Interest income (fully taxable
equivalent)......................... $ 1,786 $ 1,603 $ 6,801 $ 6,130 $ 6,064 $ 6,257 $ 5,389
Interest expense...................... 744 665 2,896 2,391 2,566 3,139 2,245
-------- ---------- -------- -------- -------- -------- --------
Net interest income (fully taxable
equivalent)......................... 1,042 938 3,905 3,739 3,498 3,118 3,144
Provision for credit losses........... 149 92 470 322 213 101 65
-------- ---------- -------- -------- -------- -------- --------
Net interest income after provision
for credit losses (fully taxable
equivalent)......................... 893 846 3,435 3,417 3,285 3,017 3,079
Noninterest income.................... 959 695 3,237 2,631 2,333 1,939 1,654
Noninterest expense................... 1,125 997 4,129 3,715 3,512 3,755 3,221
Net income............................ 438 323(a) 1,532(a) 1,367(b) 1,221 679(d) 890
PER COMMON SHARE (F):
Basic................................. $ .74 $ .55 $ 2.61 $ 2.37 $ 2.02 $ .91 $ 1.62
Diluted............................... .72 .53(a) 2.52(a) 2.30(b) 1.98 .85(d) 1.50
Weighted average basic shares
outstanding
(in thousands)...................... 568,546 567,778 568,059 551,956 568,896 530,918 529,386
Weighted average diluted shares
outstanding
(in thousands)...................... 588,572 587,184 587,769 568,605 580,026 571,991 571,946
Book value............................ $ 15.69 $ 13.96 $ 15.31 $ 13.68 $ 12.04 $ 11.01 $ 9.94
Cash dividends declared............... .27 .245 1.00 .92 .87 .82 .70
Common dividend payout ratio.......... 36.11% 44.80% 38.34% 36.32% 40.64% 79.22% 35.86%
RATIO OF EARNINGS TO FIXED CHARGES:
Excluding interest on deposits........ 3.15x 3.23x 3.25x 3.90x 3.38x 1.79x 2.30x
Including interest on deposits........ 1.95 1.79 1.85 1.94 1.79 1.36 1.64
RATIO OF EARNINGS TO FIXED CHARGES AND
DIVIDENDS ON PREFERRED STOCK:
Excluding interest on deposits........ 3.02x 3.05x 3.09x 3.57x 3.10x 1.76x 2.24x
Including interest on deposits........ 1.92 1.77 1.83 1.90 1.76 1.36 1.62
CONSOLIDATED BALANCE SHEET-- AVERAGE
BALANCES:
Total assets.......................... $106,913 $ 91,834 $ 98,008 $ 86,660 $ 86,738 $ 86,241 $ 82,143
Securities held to maturity........... 1,062 1,239 1,145 1,167 1,045 7,736(e) 8,787(e)
Securities available for sale......... 9,503 8,812 9,198 7,507 10,287 12,779(e) 16,923(e)
Loans, net of unearned income......... 72,649 62,603 66,419 60,076 57,046 52,164 44,754
Due from brokers/dealers.............. 3,404 3,749 3,765 2,884 2,179 1,927 1,606
Interest-bearing deposit
liabilities......................... 51,496 48,596 50,572 47,514 47,334 43,120 40,113
Short-term borrowings................. 8,071 6,914 8,400 5,266 6,351 14,807 15,807
Due to brokers/dealers................ 3,865 4,564 4,501 3,463 2,645 2,341 1,821
Long-term debt/subordinated notes and
debentures (g)...................... 13,198 4,853 6,261 4,608 5,486 6,581 5,383
Stockholders' equity.................. 9,493 8,562 8,892 7,589 7,369 6,863 6,019
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
---------------------- ------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED RATIOS:
Net interest margin (fully taxable
equivalent)......................... 4.59% 4.75% 4.63% 5.01% 4.68% 4.03% 4.23%
Return on average assets.............. 1.63 1.43(a) 1.56(a) 1.58(b) 1.40 .79(d) 1.08
Return on average common stockholders'
equity.............................. 19.28 16.00(a) 18.07(a) 19.30(b) 17.68 9.93(d) 15.74
Average stockholders' equity to
average assets...................... 8.88 9.32 9.07 8.76 8.50 7.96 7.33
Tier 1 risk-based capital ratio....... 6.60 6.39 7.08 7.26 7.70 7.60 9.15
Total risk-based capital ratio........ 10.90 10.37 11.22 10.71 11.27 11.16 12.82
Period-end reserve for credit losses
to period-end loans, net of unearned
income.............................. 2.34 2.39 2.24 2.29 2.49 2.51 3.20
Net charge-offs to average loans, net
of unearned income.................. .83 .60 .71 .63 .65 .58 .53
Period-end nonperforming assets to
period-end loans, net of unearned
income and other real estate
owned............................... .38(c) .57(c) .41(c) .66(c) 1.21(c) .95(c) 1.63
</TABLE>
- --------------------------
(a) Includes impact of merger-related charges of $73 million ($44 million
post-tax) recorded in the first quarter of 1998. Excluding these
merger-related charges, return on average common stockholders' equity and
return on average assets would have been 18.27% and 1.62%, respectively, in
the first quarter of 1998 and 18.61% and 1.61%, respectively, in 1998, while
net income and diluted earnings per share would have been $367 million and
$.60, respectively, in the first quarter of 1998 and $1,576 million and
$2.60, respectively, in 1998.
(b) Includes impact of merger-related charges of $25 million ($22 million
post-tax) and $20 million ($12 million post-tax) of net gains on the sales
of business units, net of charges, in 1997. Excluding these merger-related
charges and net gains, return on average common stockholders' equity and
return on average assets would have been 19.45% and 1.59%, respectively,
while net income and diluted earnings per share would have been $1,377
million and $2.31, respectively.
(c) Excludes $187 million, $176 million, $46 million, $214 million, $265 million
and $317 million of nonperforming assets reclassified to held for sale by
accelerated disposition at March 31, 1999 and 1998, and December 31, 1998,
1997, 1996 and 1995, respectively. Including such amounts, the ratios would
have been .63%, .84%, .47%, 1.01%, 1.65% and 1.55% at March 31, 1999 and
1998, and December 31, 1998, 1997, 1996 and 1995, respectively.
(d) Includes impact of the loss on assets held for sale by accelerated
disposition ($175 million pre-tax) and merger-related charges ($490 million
pretax) recorded in 1995. Excluding these special charges, return on average
common stockholders' equity and return on average assets would have been
16.55% and 1.29%, respectively, while net income and diluted earnings per
share would have been $1,108 million and $1.60, respectively.
(e) Effective January 1, 1994, Fleet adopted Financial Accounting Standards
Board Statement No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." Financial Accounting Standards Board Statement No. 115
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 Financial
Accounting Standards Board 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 Financial Accounting Standards Board permitted a one-time
opportunity for institutions to reassess the appropriateness of the
designations of all securities.
(f) All per share and average share information has been adjusted to reflect
Fleet's two-for-one stock split, which was effective October 7, 1998.
(g) Amounts include guaranteed preferred beneficial interests in Fleet's junior
subordinated debentures.
11
<PAGE>
BANKBOSTON CORPORATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------ --------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
CONSOLIDATED SUMMARY OF OPERATIONS:
Interest income (fully taxable equivalent)...... $ 1,376 $ 1,341 $ 5,600 $ 5,188 $ 4,913 $ 5,141 $ 4,391
Interest expense................................ 737 734 3,050 2,735 2,553 2,870 2,339
-------- -------- -------- -------- ---------- ---------- --------
Net interest income (fully taxable
equivalent)................................... 639 607 2,550 2,453 2,360 2,271 2,052
Provision for credit losses..................... 70 140 380 200 231 275 154
-------- -------- -------- -------- ---------- ---------- --------
Net interest income after provision for credit
losses (fully taxable equivalent)............. 569 467 2,170 2,253 2,129 1,996 1,898
Noninterest income.............................. 595 589 2,032 1,563 1,344 1,309 1,035
Noninterest expense............................. 806 661 2,910 2,324 2,320 2,076 1,947
Net income...................................... 223 238 792 879 650(a) 678 542(b)
PER COMMON SHARE (C):
Basic........................................... $ .75 $ .80 $ 2.66 $ 2.86 $ 2.00 $ 2.09 $ 1.70
Diluted......................................... .75 .79 2.64 2.82 1.96 2.05 1.66
Weighted average basic shares outstanding
(in thousands)................................ 295,935 292,542 293,873 295,918 307,058 307,712 297,826
Weighted average diluted shares outstanding
(in thousands)................................ 298,477 296,840 296,663 300,080 312,224 313,536 307,232
Book value...................................... $ 16.73 $ 15.44 $ 16.33 $ 14.87 $ 14.45 $ 13.51 $ 11.54
Cash dividends declared......................... .32 .29 1.16 .99 .85 .64 .47
Common dividend payout ratio.................... 42.5% 36.3% 43.5% 34.3% 40.4% 28.1% 24.9%
RATIO OF EARNINGS TO FIXED CHARGES:
Excluding interest on deposits.................. 2.28x 2.39x 2.04x 2.35x 2.24x 2.08x 1.90x
Including interest on deposits.................. 1.47 1.53 1.41 1.53 1.44 1.42 1.41
RATIO OF EARNINGS TO FIXED CHARGES AND DIVIDENDS
ON PREFERRED STOCK:
Excluding interest on deposits.................. 2.28x 2.33x 2.01x 2.24x 2.09x 1.96x 1.79x
Including interest on deposits.................. 1.47 1.51 1.40 1.50 1.40 1.38 1.37
CONSOLIDATED BALANCE SHEET--
AVERAGE BALANCES:
Total assets.................................. $ 76,110 $ 69,710 $ 72,200 $ 65,263 $ 59,523 $ 55,744 $ 53,389
Securities held to maturity................... 437 636 598 658 713 4,039 4,198
Securities available for sale................. 12,810 9,970 10,821 9,083 7,409 3,424 2,275
Loans and leases.............................. 42,536 43,706 44,683 42,383 40,589 38,283 36,017
Due from brokers/dealers...................... 132 -- -- -- -- -- --
Interest-bearing deposit liabilities.......... 40,378 37,158 38,063 34,922 34,491 31,708 30,936
Funds borrowed................................ 13,376 12,309 13,271 11,864 8,751 9,132 8,018
Due to brokers/dealers........................ 140 -- -- -- -- -- --
Notes payable (d)............................. 5,526 3,749 4,698 3,382 2,666 2,142 2,123
Stockholders' equity.......................... 4,877 4,730 4,777 4,667 4,744 4,304 3,766
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED RATIOS:
Net interest margin (fully
taxable equivalent)........... 4.03% 4.07% 4.09% 4.25% 4.42% 4.58% 4.32%
Return on average assets........ 1.19 1.39 1.10 1.35 1.09 1.22 1.01
Return on average common
stockholders' equity.......... 18.54 21.31 16.91 20.05 14.47 16.86 15.50
Average stockholders' equity to
average assets................ 6.4 6.8 6.6 7.2 8.0 7.7 7.1
Tier 1 risk-based capital
ratio......................... 7.2 7.9 7.1 8.0 9.2 8.5 7.7
Total risk-based capital
ratio......................... 11.5 12.3 11.7 12.1 13.6 12.8 12.7
Period-end reserve for credit
losses to period-end loans and
leases........................ 1.77 1.65 1.76 1.62 2.15 2.29 2.19
Net charge-offs to average loans
and leases.................... .63 1.30 .81 .66 .57 .51 .81
Period-end nonperforming assets
to period-end loans and leases
and other real estate owned... .9 .8 .9 .8 1.1 1.1 1.5
</TABLE>
- ------------------------
(a) Includes $117 million ($180 million pretax) of merger-related charges
recorded in connection with the acquisition of BayBanks, Inc.
(b) Includes an extraordinary loss (net of tax) of $7 million related to the
early extinguishment of debt.
(c) All per share and average share information has been adjusted to reflect
BankBoston's two-for-one stock split which was effective in 1998.
(d) Amounts include guaranteed preferred beneficial interests in BankBoston's
junior subordinated debentures.
13
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED SELECTED FINANCIAL DATA OF FLEET AND
BANKBOSTON
The following unaudited pro forma condensed combined selected financial data
combines Fleet's historical results with BankBoston's historical results, in
each case, as of or for the three months ended March 31, 1999 and 1998 and the
fiscal years ended December 31, 1998, 1997 and 1996, and, in each case, giving
effect to the merger as if it had occurred on January 1, 1996. The pro forma
financial information does not include the effects of divestitures that may be
required in connection with obtaining regulatory approval of the merger.
See "Where You Can Find More Information" and "Unaudited Pro Forma Condensed
Combined Financial Information."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------------- ----------------------------------------
1999 1998 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
PRO FORMA CONSOLIDATED SUMMARY OF
OPERATIONS:
Interest income (fully taxable
equivalent)........................... $ 3,162 $ 2,944 $ 12,401 $ 11,318 $ 10,977
Interest expense........................ 1,481 1,399 5,946 5,126 5,119
---------- ---------- ---------- ---------- ----------
Net interest income (fully taxable
equivalent)........................... 1,681 1,545 6,455 6,192 5,858
Provision for credit losses............. 219 232 850 522 444
---------- ---------- ---------- ---------- ----------
Net interest income after provision for
credit losses (fully taxable
equivalent)........................... 1,462 1,313 5,605 5,670 5,414
Noninterest income...................... 1,554 1,284 5,269 4,194 3,659
Noninterest expense..................... 1,931 1,658 7,039 6,039 5,832
Net income.............................. 661 561 2,324 2,246 1,860
PRO FORMA PER COMMON SHARE:
Basic................................... $ .70 $ .60 $ 2.47 $ 2.39 $ 1.88
Diluted................................. .68 .58 2.41 2.33 1.84
Weighted average basic shares
outstanding (in thousands)............ 919,051 914,265 916,122 902,441 932,575
Weighted average diluted shares
outstanding (in thousands)............ 942,088 938,761 939,137 924,020 949,824
Book value.............................. $ 14.38(a) N/A N/A N/A N/A
Cash dividends declared................. $ .27 $ .245 $ 1.00 $ .92 $ .87
PRO FORMA CONSOLIDATED BALANCE SHEET--
AVERAGE BALANCES:
Total assets............................ $ 183,023 $ 161,544 $ 170,208 $ 151,923 $ 146,261
Securities.............................. 23,812 20,657 21,762 18,415 19,454
Loans, net of unearned income........... 115,185 106,309 111,102 102,459 97,635
Interest-bearing deposit liabilities.... 91,874 85,754 88,635 82,436 81,825
Funds borrowed.......................... 21,447 19,223 21,671 17,130 15,102
Notes payable........................... 18,724 8,602 10,959 7,990 8,152
Stockholders' equity.................... 14,370 13,292 13,669 12,256 12,113
PRO FORMA CONSOLIDATED RATIOS:
Net interest margin (fully taxable
equivalent)........................... 4.37% 4.46% 4.40% 4.68% 4.57%
Return on average assets................ 1.44 1.41 1.37 1.48 1.27
Return on average common stockholders'
equity................................ 18.90 17.94 17.65 19.59 16.33
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------------- ----------------------------------------
1999 1998 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Average stockholders' equity to average
assets................................ 7.85% 8.23% 8.03% 8.07% 8.28%
Tier 1 risk-based capital ratio......... 6.49(a) 7.00 7.12 7.56 8.31
Total risk-based capital ratio.......... 10.90(a) 11.22 11.52 11.32 12.20
Period-end reserve for credit losses to
period-end loans, net of unearned
income................................ 2.13 2.09 2.06 2.01 2.35
Net charge-offs to average loans, net of
unearned income....................... .76 .89 .75 .64 .61
Period-end nonperforming assets to
period-end loans, net of unearned
income and other real estate owned.... .57 .68 .61 .72 1.16
</TABLE>
- ------------------------
(a) Includes the effect of the $1 billion ($650 million post-tax) merger and
restructuring related charge, but does not include the gains anticipated to
be realized on the sales of branches and deposits which are expected to
occur during 2000.
The management of Fleet and BankBoston may adjust the pro forma information
included in this document as a result of their review of their classifications
and accounting policies. The management of Fleet and BankBoston do not expect
these adjustments to be material.
15
<PAGE>
FLEET SPECIAL MEETING
GENERAL
This Joint Proxy Statement-Prospectus is first being mailed by Fleet to the
holders of Fleet common stock, par value $.01 per share, on or about July 9,
1999, and is accompanied by the notice of the Fleet special meeting and a form
of proxy that is solicited by the Board of Directors of Fleet for use at the
Fleet special meeting, to be held on Wednesday, August 11, 1999, at 11:00 a.m.,
local time, at the World Trade Center Boston, 164 Northern Avenue, Boston,
Massachusetts, and at any adjournments or postponements of that meeting.
MATTERS TO BE CONSIDERED
The purpose of the Fleet special meeting is
(1) to approve the merger agreement, dated March 14, 1999, between
BankBoston Corporation, a Massachusetts corporation, and Fleet, and the
transactions contemplated by the merger agreement, including
(a) the merger of BankBoston with and into Fleet and
(b) as part of the merger, the amendment of
-- the Fleet Restated Articles of Incorporation, as amended, to
change the name of Fleet to "Fleet Boston Corporation" and
-- the bylaws of Fleet to add a provision relating to the succession
of Fleet's current Chief Executive Officer and Chairman of the
Board, and the composition of the Board of Directors of the
combined company after consummation of the merger (the "BYLAW
AMENDMENT"),
(2) to adopt an amendment to the Fleet articles to increase the authorized
number of shares of Fleet common stock from 1.2 billion to 2 billion,
(3) to approve the Amended and Restated 1994 Performance-Based Bonus Plan
for the Chief Executive Officer and certain other named executive officers (the
"AMENDED BONUS PLAN") and
(4) to act on any other matters that may properly be submitted to a vote at
the Fleet special meeting.
Fleet stockholders may also be asked to vote upon a proposal to adjourn or
postpone the Fleet special meeting. Fleet could use any adjournment or
postponement of the Fleet special meeting for the purpose, among others, of
allowing additional time for soliciting additional votes to approve the merger
agreement and the related matters, to adopt the amendment to the Fleet articles
and to approve the Amended Bonus Plan.
PROXIES
The accompanying form of proxy is for use at the Fleet special meeting if
you are unable or do not wish to attend in person. You may revoke your proxy at
any time before it is exercised, by submitting to the Secretary of Fleet written
notice of revocation or a properly executed proxy having a later date, or by
attending the Fleet special meeting and electing to vote in person. Written
notices of revocation and other communications with respect to the revocation of
Fleet proxies should be addressed to Fleet Financial Group, Inc., One Federal
Street, Boston, Massachusetts 02110, Attention: Corporate 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 in
these proxies. IF YOU MAKE NO SPECIFICATION, YOUR PROXY WILL BE VOTED IN FAVOR
OF THE MATTERS TO BE VOTED UPON AT THE FLEET
16
<PAGE>
SPECIAL MEETING, INCLUDING APPROVAL OF THE MERGER AGREEMENT, ADOPTION OF THE
AMENDMENT TO THE FLEET ARTICLES AND APPROVAL OF THE AMENDED BONUS PLAN.
The Fleet Board is unaware of any other matters that may be presented for
action at the Fleet special meeting. If other matters do properly come before
the Fleet 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. No proxy that is voted against
approval of the merger agreement will be voted in favor of any adjournment or
postponement of the Fleet special meeting for the purpose of soliciting
additional proxies.
SOLICITATION OF PROXIES
Fleet will bear the entire cost of soliciting proxies from Fleet
stockholders, except that each of BankBoston and Fleet has agreed to pay one
half of the printing costs of this Joint Proxy Statement-Prospectus and related
proxy materials. In addition to the solicitation of proxies by mail, Fleet will
request that banks, brokers and other record holders send proxies and proxy
material to the beneficial owners of the stock held by them and secure their
voting instructions if necessary. Fleet will reimburse those record holders for
their reasonable expenses in so doing. Fleet has also made arrangements with
Georgeson & Company Inc. to assist it in soliciting proxies from banks, brokers
and nominees, and has agreed to pay $20,000 plus expenses for those services. If
necessary, Fleet 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 or special delivery letter.
RECORD DATE AND VOTING RIGHTS
Fleet has fixed June 28, 1999 as the record date for determining those Fleet
stockholders entitled to notice of and to vote at the Fleet special meeting in
accordance with the provisions of the Rhode Island Business Corporation Act (the
"RIBCA"), the Fleet bylaws and the rules of the New York Stock Exchange, Inc.
(the "NYSE"). Accordingly, only holders of shares of Fleet common stock of
record at the close of business on the Fleet record date will be entitled to
notice of and to vote at the Fleet special meeting. At the close of business on
the Fleet record date, there were 569,256,931 shares of Fleet common stock held
by approximately 52,119 holders of record. The presence, in person or by proxy,
of shares of Fleet common stock representing a majority of Fleet shares
outstanding and entitled to vote on the Fleet record date is necessary to
constitute a quorum at the Fleet special meeting. Each share of Fleet common
stock outstanding on the Fleet record date entitles its holder to one vote.
Shares of Fleet common stock held by persons attending the Fleet special
meeting but not voting, and shares of Fleet common stock for which Fleet has
received proxies but with respect to which holders of those shares have
abstained from voting, will be counted as present at the Fleet special meeting
for purposes of determining the presence or absence of a quorum for the
transaction of business at the Fleet special meeting. Brokers who hold shares of
Fleet common stock in nominee or "street" name for customers who are the
beneficial owners of those shares are prohibited from giving a proxy to vote
shares held for those customers on the matters to be considered and voted upon
at the Fleet special meeting without specific instructions from those customers.
These so-called "broker non-votes" will be counted for purposes of determining
whether a quorum exists.
Under the RIBCA and the Fleet articles, approval of the merger agreement and
the related matters and the adoption of the amendment to the Fleet articles each
requires the affirmative vote of the holders of a majority of the outstanding
shares of Fleet common stock entitled to vote at the Fleet special meeting.
Approval of the Amended Bonus Plan requires the affirmative vote of a majority
of the votes cast at the Fleet special meeting.
BECAUSE APPROVAL OF THE MERGER AGREEMENT AND THE RELATED MATTERS AND
ADOPTION OF THE AMENDMENT TO THE FLEET ARTICLES EACH REQUIRES THE AFFIRMATIVE
VOTE OF THE HOLDERS OF A MAJORITY OF THE
17
<PAGE>
OUTSTANDING SHARES OF FLEET COMMON STOCK ENTITLED TO VOTE AT THE FLEET SPECIAL
MEETING, ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS VOTES
AGAINST APPROVAL OF THE MERGER AGREEMENT AND THE RELATED MATTERS AND ADOPTION OF
THE AMENDMENT TO THE FLEET ARTICLES. ACCORDINGLY, THE FLEET BOARD URGES FLEET
STOCKHOLDERS TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
As of the Fleet record date, directors and executive officers of Fleet owned
10,974,685 shares of Fleet common stock, entitling them to exercise
approximately 1.9% of the voting power of the Fleet common stock entitled to
vote at the Fleet special meeting. On the basis of the unanimous approval of the
merger agreement by the Fleet Board, we currently expect that each director and
executive officer of Fleet will vote the shares of Fleet common stock
beneficially owned by him or her for approval of the merger agreement and the
related matters, adoption of the amendment to the Fleet articles and approval of
the Amended Bonus Plan. Also, as of the Fleet record date, directors and
executive officers of BankBoston owned 39,086 shares of Fleet common stock, or
less than 1% of the voting power of the Fleet common stock entitled to vote at
the Fleet special meeting. As of the Fleet record date, the banking and trust
subsidiaries of Fleet, as fiduciaries, custodians or agents, held a total of
20,460,762 shares of Fleet common stock, representing approximately 3.6% of the
shares entitled to vote at the Fleet special meeting. These entities maintained
sole or shared voting power with respect to 11,119,013 of these shares. As of
the Fleet record date, the banking and trust subsidiaries of BankBoston, as
fiduciaries, custodians or agents, held a total of 1,155,002 shares of Fleet
common stock, representing less than 1% of the shares entitled to vote at the
Fleet special meeting. These entities maintained sole or shared voting power
with respect to 1,099,162 of these shares.
Additional information with respect to beneficial ownership of Fleet common
stock by individuals and entities owning more than 5% of that stock and more
detailed information with respect to beneficial ownership of Fleet common stock
by directors and executive officers of Fleet is incorporated by reference to the
Annual Report on Form 10-K of Fleet for the year ended December 31, 1998. See
"Where You Can Find More Information."
RECOMMENDATION OF FLEET BOARD
The Fleet Board has unanimously approved the merger agreement and the
related matters, the adoption of the amendment to the Fleet articles and the
Amended Bonus Plan. The Fleet Board believes that the merger agreement, the
amendment to the Fleet articles and the Amended Bonus Plan are in the best
interests of Fleet and Fleet stockholders, and recommends that Fleet
stockholders vote "FOR" approval of the merger agreement and the related
matters, adoption of the amendment to the Fleet articles and approval of the
Amended Bonus Plan. See "The Merger--Recommendation of the Fleet Board and
Reasons for the Merger."
18
<PAGE>
BANKBOSTON SPECIAL MEETING
GENERAL
This Joint Proxy Statement-Prospectus is first being mailed by BankBoston to
the holders of BankBoston common stock, par value $1.00 per share, on or about
July 9, 1999, and is accompanied by the notice of the BankBoston special meeting
and a form of proxy that is solicited by the Board of Directors of BankBoston
for use at the BankBoston special meeting, to be held on Wednesday, August 11,
1999, at 10:30 a.m., local time, in the Auditorium on the ground floor of The
Federal Reserve Bank of Boston, 600 Atlantic Avenue, Boston, Massachusetts, and
at any adjournments or postponements of that meeting.
MATTERS TO BE CONSIDERED
The purpose of the BankBoston special meeting is to approve the merger
agreement and the transactions contemplated by that agreement, including the
merger, and any other matters that may be properly submitted to a vote at the
BankBoston special meeting. BankBoston stockholders may also be asked to vote
upon a proposal to adjourn or postpone the BankBoston special meeting.
BankBoston could use any adjournment or postponement of the BankBoston special
meeting for the purpose, among others, of allowing additional time for
soliciting additional votes to approve the merger agreement.
PROXIES
The accompanying form of proxy is for your use at the BankBoston special
meeting if you are unable or do not wish to attend in person. You may revoke
your proxy at any time before it is exercised by submitting to the Clerk of
BankBoston written notice of revocation, a properly executed proxy having a
later date, or by attending the BankBoston special meeting and electing to vote
in person. Written notices of revocation and other communications with respect
to the revocation of BankBoston proxies should be addressed to BankBoston
Corporation, 100 Federal Street, Mail Stop MA BOS 01-25-01, Boston,
Massachusetts 02110, Attention: Gary A. Spiess, Clerk. 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 in those proxies. IF
YOU MAKE NO SPECIFICATION, YOUR PROXY WILL BE VOTED IN FAVOR OF APPROVAL OF THE
MERGER AGREEMENT.
The BankBoston Board is unaware of any other matters that may be presented
for action at the BankBoston special meeting. If other matters do properly come
before the BankBoston special meeting, however, the shares represented by
proxies in the accompanying form will be voted, or not voted, in the discretion
of the persons named in the proxies. No proxy that is voted against approval of
the merger agreement will be voted in favor of any adjournment or postponement
of the BankBoston special meeting for the purpose of soliciting additional
proxies.
SOLICITATION OF PROXIES
BankBoston will bear the entire cost of soliciting proxies from BankBoston
stockholders, except that each of Fleet and BankBoston has agreed to pay
one-half of the printing costs of this Joint Proxy Statement-Prospectus and
related proxy materials. In addition to the solicitation of proxies by mail,
BankBoston will request that banks, brokers and other record holders send
proxies and proxy material to the beneficial owners of stock held by them and
secure their voting instructions, if necessary. BankBoston will reimburse those
record holders for their reasonable expenses in so doing. BankBoston has also
made arrangements with D.F. King & Co., Inc. to assist it in soliciting proxies
from banks, brokers and nominees, and has agreed to pay approximately $30,000
plus expenses for those services. If necessary, BankBoston may also use regular
employees of its principal subsidiary, BankBoston, N.A.,
19
<PAGE>
who will not be specially compensated, to solicit proxies from BankBoston
stockholders, either personally or by telephone, telegram, facsimile or special
delivery letter.
RECORD DATE AND VOTING RIGHTS
In accordance with the provisions of the Massachusetts Business Corporation
Law (the "MBCL"), the BankBoston bylaws and the rules of the NYSE, BankBoston
has fixed June 28, 1999 as the record date for determining those BankBoston
stockholders entitled to notice of, and to vote at, the BankBoston special
meeting. Accordingly, only BankBoston stockholders of record at the close of
business on the BankBoston record date will be entitled to notice of and to vote
at the BankBoston special meeting. At the close of business on the BankBoston
record date, there were 297,032,755 shares of BankBoston common stock
outstanding held by approximately 25,670 holders of record. The presence, in
person or by proxy, of shares of BankBoston common stock representing a majority
of those shares outstanding and entitled to vote on the record date is necessary
to constitute a quorum at the BankBoston special meeting. Each share of
BankBoston common stock outstanding on the BankBoston record date entitles its
holder to one vote.
Shares of BankBoston common stock held by persons attending the BankBoston
special meeting but not voting, and shares of BankBoston common stock for which
BankBoston has received proxies but with respect to which holders of those
shares have abstained from voting, will be counted as present at the BankBoston
special meeting for purposes of determining the presence or absence of a quorum
for the transaction of business at the BankBoston special meeting. Brokers who
hold shares of BankBoston common stock in nominee or "street" name for customers
who are the beneficial owners of those shares are prohibited from giving a proxy
to vote shares held for those customers on matters to be considered and voted
upon at the BankBoston special meeting without specific instructions from those
customers. These so-called "broker non-votes" will be counted for purposes of
determining whether a quorum exists.
Under the MBCL and the BankBoston Restated Articles of Organization,
approval of the merger agreement requires the affirmative vote of the holders of
at least two-thirds of the outstanding shares of BankBoston common stock
entitled to vote at the BankBoston special meeting.
BECAUSE APPROVAL OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF
THE HOLDERS OF AT LEAST TWO-THIRDS OF THE OUTSTANDING SHARES OF BANKBOSTON
COMMON STOCK ENTITLED TO VOTE AT THE BANKBOSTON SPECIAL MEETING, ABSTENTIONS AND
BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS VOTES AGAINST APPROVAL OF THE
MERGER AGREEMENT. ACCORDINGLY, THE BANKBOSTON BOARD URGES BANKBOSTON
STOCKHOLDERS TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
As of the BankBoston record date, directors and executive officers of
BankBoston owned approximately 1,623,528 shares of BankBoston common stock,
entitling them to exercise less than 1% of the voting power of the BankBoston
common stock entitled to vote at the BankBoston special meeting. On the basis of
the unanimous approval of the merger agreement by the BankBoston Board, we
currently expect that each director and executive officer of BankBoston will
vote the shares of BankBoston common stock owned by him or her for approval of
the merger agreement and the transactions contemplated by the merger agreement.
As of the BankBoston record date, directors and executive officers of Fleet
owned approximately 23,172 shares of BankBoston common stock, entitling them to
exercise less than 1% of the voting power of the BankBoston common stock
entitled to vote at the BankBoston special meeting. As of the BankBoston record
date, the banking, trust and investment management subsidiaries of BankBoston,
as fiduciaries, custodians or agents, held a total of 1,130,732 shares of
BankBoston common stock. These entities maintained sole or shared voting power
with respect to none of these shares of BankBoston common stock. As of the
BankBoston record date, Fleet held a total of 79,500 shares of BankBoston common
stock, representing less than 1% of the shares
20
<PAGE>
entitled to vote of the BankBoston special meeting. As of the BankBoston record
date, the banking and trust subsidiaries of Fleet, as fiduciaries, custodians or
agents, held a total of 1,668,751 shares, representing less than 1% of the
shares entitled to vote at the BankBoston special meeting. These entities
maintained sole or shared voting power with respect to 971,739 of these shares.
Additional information with respect to the beneficial ownership of
BankBoston common stock by individuals and entities owning more than 5% of that
stock and more detailed information with respect to beneficial ownership of
BankBoston common stock by directors and executive officers of BankBoston is
incorporated by reference to the Annual Report on Form 10-K of BankBoston for
the year ended December 31, 1998. See "Where You Can Find More Information."
RECOMMENDATION OF BANKBOSTON BOARD
The BankBoston Board has unanimously approved the merger agreement and the
transactions contemplated by the merger agreement. The BankBoston Board believes
that the merger agreement is in the best interests of BankBoston and BankBoston
stockholders and recommends that the BankBoston stockholders vote "FOR" approval
of the merger agreement. See "The Merger--Recommendation of the BankBoston Board
and Reasons for the Merger."
21
<PAGE>
THE MERGER
THE FOLLOWING SUMMARY OF MATERIAL TERMS AND PROVISIONS OF THE MERGER
AGREEMENT AND THE RELATED OPTION AGREEMENTS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MERGER AGREEMENT AND THE RELATED OPTION AGREEMENTS, DATED AS OF
MARCH 14, 1999, BETWEEN FLEET AND BANKBOSTON. THE MERGER AGREEMENT IS ATTACHED
AS APPENDIX A TO THIS JOINT PROXY STATEMENT-PROSPECTUS. THE OPTION AGREEMENTS
ARE ATTACHED AS APPENDICES B AND C TO THIS JOINT PROXY STATEMENT-PROSPECTUS.
GENERAL
The Fleet Board and the BankBoston Board each have unanimously approved the
merger agreement, which provides for the merger. We expect to complete the
merger late in the third quarter or early in the fourth quarter of 1999. Fleet
will be the surviving corporation in the merger. With certain limited exceptions
described below, each share of Fleet common stock issued and outstanding at the
effective time of the merger will remain issued and outstanding as one share of
common stock of the combined company, and each share of BankBoston common stock
issued and outstanding at the effective time will be converted into the right to
receive 1.1844 (the "EXCHANGE RATIO") shares of Fleet common stock, together
with the preferred share purchase rights (the "FLEET RIGHTS") issued to Fleet
stockholders pursuant to the Fleet Rights Agreement, dated as of November 21,
1990, as amended, by and between Fleet and Fleet National Bank, as rights agent
(the "FLEET RIGHTS AGREEMENT").
The Fleet rights are transferred with the Fleet common stock and, when
exercisable, entitle the holders (other than an "Acquiring Person," as defined
in the Fleet rights agreement) to buy Fleet common stock with a market value of
$100 from Fleet for $50. The Fleet rights are intended to enable Fleet
stockholders to realize the long-term value of their investment in Fleet and
should encourage anyone seeking to acquire Fleet to negotiate with the Fleet
Board prior to attempting a takeover. See "Description of Fleet Capital
Stock--Preferred Share Purchase Rights."
While the common stock of the combined company to be issued to BankBoston
stockholders in the merger and the common stock of the combined company to
remain outstanding with Fleet stockholders following the merger is referred to
in this document as Fleet common stock, the combined company will be named
"Fleet Boston Corporation" and will trade on the NYSE under the Fleet Boston
Corporation name under the symbol "FLT."
The Fleet articles, amended to reflect the name change and to increase the
authorized number of shares of Fleet common stock from 1.2 billion to 2 billion,
will be the articles of incorporation of the combined company after consummation
of the merger, and the Fleet bylaws, amended to add a provision related to the
succession of Fleet's current Chief Executive Officer and Chairman of the Board
and the composition of the Board of Directors of the combined company, will be
the bylaws of the combined company.
This section of the Joint Proxy Statement-Prospectus describes the material
terms of the merger agreement and the option agreements.
BACKGROUND OF THE MERGER
The senior managements of Fleet and BankBoston have, over time, regularly
considered the possibility of, and each of Fleet and BankBoston has, in the
past, engaged in, acquisitions and strategic combinations with a variety of
financial institutions and financial services companies, including other bank
holding companies. In considering and engaging in these transactions, Fleet and
BankBoston have taken into account various factors, including their potential
strategic fit with these institutions based on their businesses (both banking
and non-banking), their management and employee cultures, and the geographic
location and breadth of their businesses. In addition, in light of recent trends
toward
22
<PAGE>
consolidation and cross-industry expansion in the financial services industry
nationally and internationally, in particular, on a large scale, the senior
managements of Fleet and BankBoston have from time to time had informal
discussions with senior managements of other comparably-sized financial
institutions, including each other, regarding potential business combination
transactions.
In April 1998, Terrence Murray, Chairman and Chief Executive Officer of
Fleet, held informal, preliminary discussions with Charles K. Gifford, Chairman
and Chief Executive Officer of BankBoston, regarding a possible strategic
combination of their two companies. These discussions, which included a limited
number of additional members of the senior managements of Fleet and BankBoston,
were exploratory in nature and did not result in any agreement with respect to
the terms of a business combination of the two companies. In addition, Messrs.
Murray and Gifford reached no understanding regarding future discussions.
Messrs. Murray and Gifford continued to have limited contact from time to
time in the ordinary course during 1998. In late 1998 and early 1999, Messrs.
Murray and Gifford began new discussions regarding a possible strategic
combination of their two companies. Commencing in mid-February 1999, at the
request of Messrs. Murray and Gifford, a limited number of additional members of
the senior managements of Fleet and BankBoston held preliminary meetings to
discuss issues relating to a possible business combination between the two
companies. On February 19, 1999, Fleet and BankBoston entered into a customary
confidentiality agreement with respect to the exchange of information in
connection with their mutual consideration of a potential business combination.
After executing the confidentiality agreement, Fleet and BankBoston exchanged
limited financial information, including information with respect to the banking
and non-banking business operations conducted by each organization.
Thereafter, Messrs. Murray and Gifford and certain members of their senior
management teams continued discussions with respect to a possible business
combination, including the specific terms of a potential transaction. On
February 26 and 27, 1999, senior management of BankBoston met with the
BankBoston Board at a regularly scheduled annual review of BankBoston's
businesses and overall strategic direction. This meeting principally focused on
BankBoston's existing businesses. The BankBoston Board did not formally review
management's preliminary discussions with Fleet at this meeting, although
management advised a number of directors individually that those discussions
were taking place.
In early March 1999, following the BankBoston Board meeting of late February
1999, discussions intensified between Messrs. Murray and Gifford and additional
members of their management teams regarding a possible business combination and
the various possible structures for that combination. During the course of these
meetings, senior managements of Fleet and BankBoston proposed that each party
conduct due diligence investigations in the near future with respect to the
other's operations.
On March 9, 1999, senior management of Fleet reviewed with the Fleet Board
the status of the discussions with BankBoston and the issues related to a
possible business combination. After considering these matters, the Fleet Board
determined that senior management of Fleet should continue discussions with
BankBoston and conduct further due diligence analysis, and, in addition, should
negotiate the terms of definitive documentation. At about the same time as
senior management of Fleet was meeting with the Fleet Board, senior management
of BankBoston met informally with individual groups of directors of the
BankBoston Board to review the progress of the discussions and negotiations with
Fleet. After these meetings, the BankBoston Board reached an informal consensus
to proceed with due diligence and to continue exploring a possible business
combination with Fleet. Following these meetings, Messrs. Murray and Gifford and
members of their senior management teams held additional meetings before
agreeing to proceed with a due diligence investigation that senior management
teams from both Fleet and BankBoston would conduct in New York and Latin
America.
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Following these meetings, Fleet retained Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") and Goldman, Sachs & Co. as its financial
advisors in connection with the possible business combination with BankBoston.
At approximately the same time, BankBoston retained Merrill Lynch & Co. and
Morgan Stanley & Co. Incorporated as its financial advisors in connection with
the possible business combination with Fleet. Simultaneously, Fleet's and
BankBoston's outside legal advisors began to draft and negotiate the
documentation with respect to a possible business combination. Discussions and
negotiations continued from March 10, 1999 through March 14, 1999 with respect
to the possible business combination. During this period, each party conducted
due diligence, and senior managements of Fleet and BankBoston were then
separately briefed on the findings that their teams had reached during due
diligence. The parties and their respective financial advisors met frequently
during this period to discuss the financial and other terms of the possible
business combination, including the exchange ratio.
On March 14, 1999, the Fleet Board held a special meeting at which senior
management of Fleet reviewed its discussions and negotiations with BankBoston
regarding a business combination, as well as the results of its due diligence
investigation of BankBoston. Senior management of Fleet, DLJ, and Goldman Sachs
presented financial information with respect to BankBoston and the potential
transaction to the Fleet Board, and each of DLJ and Goldman Sachs rendered its
oral opinion (which was subsequently confirmed in writing) that, as of that
date, the exchange ratio set forth in the merger agreement was fair to Fleet
stockholders from a financial point of view. Also, at this meeting, the Fleet
Board reviewed with counsel to Fleet the terms of the merger agreement and the
option agreements and the legal standards applicable to its decision to approve
those agreements and the transactions contemplated by those agreements. After
questions by and discussion among the members of the Fleet Board, and after
consideration of the factors described under "--Recommendation of the Fleet
Board and Reasons for the Merger," the Fleet Board voted unanimously, on March
14, 1999, to approve the merger agreement and the transactions contemplated by
the merger agreement, as well as the option agreements.
The BankBoston Board held two special meetings, the first on March 13, 1999
and the second on March 14, 1999, at which senior management of BankBoston
reviewed its discussions and negotiations with Fleet regarding a business
combination, as well as the results of its due diligence investigation of Fleet.
Merrill Lynch and Morgan Stanley, together with senior management of BankBoston,
presented financial information with respect to Fleet and the potential
transaction to the BankBoston Board, and each of Merrill Lynch and Morgan
Stanley rendered its oral opinion (which was subsequently confirmed in writing)
that, as of March 13, 1999, the exchange ratio contemplated in the merger
agreement was fair to BankBoston stockholders from a financial point of view.
Also, at this meeting, the BankBoston Board discussed with counsel to BankBoston
the terms of the merger agreement and the option agreements, and the legal
standards applicable to its decision to approve those agreements and the
transactions contemplated by those agreements. After questions by and discussion
among the members of the BankBoston Board, and after consideration of the
factors described under "--Recommendation of the BankBoston Board and Reasons
for the Merger," the BankBoston Board voted unanimously, on March 14, 1999, to
approve the merger agreement and the transactions contemplated by the merger
agreement, as well as the option agreements.
Fleet and BankBoston entered into the merger agreement and the option
agreements on March 14, 1999.
RECOMMENDATION OF THE FLEET BOARD AND REASONS FOR THE MERGER
THE FLEET BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, FLEET AND FLEET STOCKHOLDERS. ACCORDINGLY, THE FLEET BOARD HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE AMENDMENT TO THE FLEET
ARTICLES AND UNANIMOUSLY RECOMMENDS THAT FLEET STOCKHOLDERS VOTE "FOR"
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APPROVAL OF THE MERGER AGREEMENT AND THE RELATED MATTERS, AND ADOPTION OF THE
AMENDMENT TO THE FLEET ARTICLES.
The Fleet Board believes that the consummation of the merger presents a
unique opportunity to combine two strong franchises to create a premier banking
and financial services company with a commitment to making its northeastern
United States base of operations the springboard for domestic and global growth.
In reaching its decision to approve the merger agreement and the option
agreements, the Fleet Board consulted with management of Fleet, as well as with
its financial and legal advisors, and considered a variety of factors, including
the following:
- The Fleet Board's familiarity with and review of BankBoston's business,
operations, financial condition, earnings and prospects.
- The anticipated effectiveness of the merger in allowing Fleet to enhance
stockholder returns by identifying and achieving efficiencies and cost
savings and by creating one of the nation's premier financial services
providers with large, diverse business lines capable of competing
globally.
- The business, operations, financial condition, earnings and prospects of
each of Fleet and BankBoston. In making its determination, the Fleet Board
took into account the results of Fleet's due diligence review of
BankBoston's business.
- The scale, scope, strength and diversity of operations, product lines and
delivery systems that could be achieved by combining Fleet and BankBoston,
as illustrated by the fact that, based on information available as of the
date of the merger agreement, the combined company would be:
- the eighth-largest bank holding company in the United States measured
by total assets, with total assets of about $180 billion on a pro forma
basis before any divestitures required by regulatory authorities,
- with 5,750 distribution outlets and over 1,500 branches,
- while serving 20 million customers, 500,000 electronic banking
customers and 450,000 small business customers.
- The global wholesale banking market of the combined company as a premier
international services provider, with offices in 20 countries.
- The complementary nature of the businesses of Fleet and BankBoston and the
anticipated improved stability of the combined company's businesses and
earnings in varying economic and market climates relative to Fleet on a
stand-alone basis made possible by the merger as a result of substantially
greater geographic, asset and line-of-business diversification.
- The anticipated financial impact of the proposed transaction on the
combined company's future financial performance, including, without
limitation, that the transaction is expected to be accretive to the
combined company's earnings per share by 1% in 2000 and 6% in 2001. The
foregoing is based on consensus "street" earnings estimates published by
I/B/E/S International, Inc. ("IBES") for both Fleet and BankBoston. IBES
is a data service that monitors and publishes compilations of earnings
estimates produced by selected research analysts regarding companies of
interest to institutional stockholders. The combined company's ability to
achieve these results depends on various factors, a number of which will
be beyond its control, including the regulatory environment, economic
conditions, unanticipated changes in business conditions and inflation,
and, therefore, there can be no assurance in this regard. See
"Forward-Looking Statements."
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- The expectation that the merger would result in synergies for the combined
company's operations, including an advantageous cost structure relative to
competitors and to Fleet on a stand-alone basis, as well as the
possibility of enhancing revenues through cross-selling of the products
and services of the two companies. The Fleet Board noted that, although no
assurances could be given that any particular level of cost synergies will
be achieved, the managements of Fleet and BankBoston had identified
potential after-tax cost savings of approximately $360 million annually,
with 60% expected to be achieved in 2000 and 100% expected to be achieved
by 2001. See "Management and Operations after the Merger" and
"Forward-Looking Statements."
- The belief of senior management of Fleet and the Fleet Board that Fleet
and BankBoston share a common vision with respect to delivering financial
performance and stockholder value and that their managements and employees
possess complementary skills and expertise.
- The Fleet Board's belief that, while no assurances can be given, it was
likely that the merger would be completed and that the business and
financial advantages contemplated in connection with the merger are likely
to be achieved within a reasonable time frame.
- The structure of the merger and the terms of the merger agreement and the
option agreements, which are reciprocal in nature, including the fact that
the fixed exchange ratio provides certainty as to the number of shares of
the common stock of the combined company to be issued in the merger and
that the merger is intended to qualify as a transaction of a type that is
generally tax-free for U.S. federal income tax purposes and as a pooling
of interests for accounting purposes.
- The proposed arrangements with members of management of Fleet and
BankBoston, including the fact that:
- Mr. Murray will serve as Chairman and Chief Executive Officer of the
combined company,
- Mr. Gifford will serve as President and Chief Operating Officer of the
combined company,
- Robert J. Higgins, currently President and Chief Operating Officer of
Fleet and Henrique C. Meirelles, currently President and Chief
Operating Officer of BankBoston, will manage the businesses of the
combined company, and
- Mr. Gifford will become Chief Executive Officer at year-end 2001 and
will become Chairman one year later.
See "Management and Operations after the Merger."
- The opinions of each of DLJ and Goldman Sachs to the Fleet Board that,
based on and subject to the considerations set forth in each opinion, the
exchange ratio was fair from a financial point of view to Fleet
stockholders. See "--Opinions of Fleet's Financial Advisors."
- The likelihood of the merger being approved by the appropriate regulatory
authorities. See "--Regulatory Approvals Required for the Merger." In this
connection, the Fleet Board considered that approximately $13.0 billion of
divestitures of deposit liabilities could be required by regulatory
authorities in connection with the merger.
- Consideration of the effect of the merger on Fleet's other constituencies,
including the customers and communities served by Fleet and its employees,
including management of Fleet. In this regard, the Fleet Board was advised
that Fleet expects approximately 5,000 positions at the combined company
to be eliminated as a result of the consolidation of the operations of
Fleet and BankBoston in the merger, and that BankBoston and Fleet would be
implementing hiring freezes in order to help mitigate the extent of the
resulting job loss. The Fleet Board considered this factor in light of all
other relevant factors relating to the merger, including that the merger
would allow the combined company to maintain a significant presence in the
regions currently served by Fleet, including maintaining a headquarters in
Boston, and that Fleet employees who
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would not be continuing with the combined company would be covered by the
severance and other applicable benefit plans and programs currently in
effect at Fleet.
This discussion of the information and factors considered by the Fleet Board
is not intended to be exhaustive but includes all material factors considered by
the Fleet Board. In reaching its determination to approve and recommend the
merger, the Fleet Board did not assign any relative or specific weights to those
factors, and individual directors may have given differing weights to different
factors. The Fleet Board is unanimous in its recommendation that Fleet
stockholders vote for approval of the merger agreement and related matters, and
adoption of the amendment to the Fleet articles.
RECOMMENDATION OF THE BANKBOSTON BOARD AND REASONS FOR THE MERGER
THE BANKBOSTON BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, BANKBOSTON AND ITS STOCKHOLDERS. ACCORDINGLY, THE BANKBOSTON BOARD
HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT BANKBOSTON
STOCKHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE MERGER.
The BankBoston Board believes that the consummation of the merger presents a
unique opportunity to combine two strong franchises to create a premier banking
and financial services company with a commitment and the resources to make its
northeastern United States base of operations the springboard for domestic and
global growth.
In reaching its decision to approve the merger agreement and the option
agreements, the BankBoston Board consulted with management of BankBoston, as
well as with its financial and legal advisors, and considered a variety of
factors, including the following:
- The BankBoston Board's familiarity with and review of Fleet's business,
operations, financial condition, earnings and prospects.
- The BankBoston Board's knowledge and analysis of the current financial
services industry environment, characterized by
- rapid consolidation, particularly among the nation's largest bank
holding companies,
- increased opportunities for cross-industry expansion,
- evolving trends in technology and increasing nationwide competition,
and
- the need to anticipate, and best position BankBoston in light of,
industry trends.
- The BankBoston Board's belief that a combination of BankBoston and Fleet
will enhance the combined company's ability to compete effectively with
other large bank holding companies and other financial service providers,
and will expand its banking franchise to serve a significantly greater
number of customers, recognizing the benefits associated with Fleet's
franchise in New York and New Jersey, as well as its provision of
financial services on a national basis.
- The BankBoston Board's evaluation of the financial terms of the
merger-of-equals structure and the effect of those financial terms on the
BankBoston stockholders, including the exchange ratio of 1.1844, which
represented a 13% premium over the closing price of BankBoston common
stock on March 12, 1999 and a 35% premium to the average closing price of
BankBoston common stock for the 30 trading days preceding the BankBoston
Board's approval of the merger agreement; the BankBoston Board's belief
that these terms are fair to and in the best interests of BankBoston and
BankBoston stockholders and are consistent with BankBoston's long-term
strategy, and that the transaction is expected to be accretive to the
combined company's earnings per share by 1% in 2000 and 6% in 2001. This
analysis is based on consensus "street" earnings estimates published by
First Call. The combined company's ability to achieve these results
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depends on various factors, a number of which will be beyond its control,
including the regulatory environment, economic conditions and
unanticipated changes in business conditions, and, therefore, there can be
no assurance in this regard. See "Forward-Looking Statements."
- The business, operations, financial condition, earnings and prospects of
each of BankBoston and
Fleet. In making its determination, the BankBoston Board took into account
the results of BankBoston's due diligence review of Fleet's businesses.
- The scale, scope, strength and diversity of operations, product lines and
delivery systems that could be achieved by combining BankBoston and Fleet,
as illustrated by the fact that, based on information available as of the
date of the merger agreement, the combined company
- would be the eighth-largest bank holding company in the United States
measured by total assets, with total assets of about $180 billion on a
pro forma basis before any divestitures required by regulatory
authorities,
- will deliver financial products through 5,750 distribution outlets and
over 1,500 branches,
- will serve 20 million customers, and
- will have 500,000 electronic banking customers and 450,000 small
business customers.
- The complementary nature of the businesses of BankBoston and Fleet and the
anticipated improved stability of the combined company's businesses and
earnings in varying economic and market climates relative to BankBoston on
a stand-alone basis as a result of substantially greater geographic, asset
and line-of-business diversification.
- The BankBoston Board's belief that the merger represents
- an opportunity to leverage BankBoston's technology, management,
infrastructure, products, marketing, and lines of business over a
larger consumer, business and corporate customer base through Fleet's
geographically diverse network, and
- the possibility of achieving significant expense savings and operating
efficiencies through, among other things, the elimination of duplicate
efforts, as well as
- the belief that the merger could provide revenue growth opportunities
based on the combined company's leadership in the northeastern United
States and the potential cross-selling opportunities available to the
combined company.
The BankBoston Board noted that, although no assurances could be given
that any particular level of expense savings and operating efficiencies
will be achieved, the managements of BankBoston and Fleet had identified
potential after-tax cost savings of approximately $360 million annually,
with 60% expected to be achieved in 2000 and 100% expected to be achieved
by 2001. See "Forward-Looking Statements."
- The global wholesale banking market of the combined company as a premier
international services provider, with offices in 20 countries.
- The competitive advantage that the combined company would have as a
full-service investment banking company through the combination of Fleet's
retail discount brokerage capability with BankBoston's wholesale
investment banking and asset management capability into a single franchise
that will have over $110 billion in managed assets, $28 billion in assets
under administration and 250,000 electronic brokerage customers.
- The structure of the merger and the terms of the merger agreement and the
option agreements, which are reciprocal in nature, including the fact that
the fixed exchange ratio provides certainty as to the number of shares of
common stock of the combined company to be issued in the
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merger, and that the merger is intended to qualify as a transaction of a
type that is generally tax-free for U.S. federal income tax purposes and
as a pooling of interests for accounting purposes.
- The non-financial terms of the merger agreement and related agreements,
including that:
- ten members of the BankBoston Board and 12 members of the Fleet Board
would comprise the combined company board,
- Mr. Murray will serve as Chairman and Chief Executive Officer of the
combined company and Mr. Gifford will serve as President and Chief
Operating Officer of the combined company,
- Mr. Gifford will become Chief Executive Officer at year-end 2001 and
will become Chairman one year later,
- Mr. Higgins, currently President and Chief Operating Officer of Fleet,
and Mr. Meirelles, currently President and Chief Operating Officer of
BankBoston, will manage the businesses of the combined company,
- the terms of the corporate succession would be set forth in the Fleet
bylaws,
- the combined company will have greater depth of management talent than
either company on its own,
- the corporate and banking headquarters would be in Boston,
Massachusetts,
- the corporate name initially would be Fleet Boston Corporation, and
- both companies have strong brand names that can be utilized in building
the combined company.
- The belief of senior management of BankBoston and of the BankBoston Board
that the cultures of BankBoston and Fleet are compatible and that their
respective managements possess complementary skills and expertise,
including the revenue generation orientation and expense efficiency of
Fleet and the sales and service culture and the alternative banking
service delivery capability of BankBoston. In this regard, the BankBoston
Board took into account the fact that the managements of BankBoston and
Fleet had each demonstrated in the past the ability to successfully
integrate substantial combinations in a timely manner.
- The opinions of each of Merrill Lynch and Morgan Stanley to the BankBoston
Board that, based on and subject to the considerations set forth in each
opinion, the exchange ratio was fair from a financial point of view to
BankBoston stockholders. See "--Opinions of BankBoston's Financial
Advisors."
- The BankBoston Board's belief that, while no assurances could be given,
the level of execution risk in connection with the merger was moderate,
and that the business and financial advantages contemplated in connection
with the merger were likely to be achieved within a reasonable timeframe.
- The likelihood of the merger being approved by the appropriate regulatory
authorities. In this connection, the BankBoston Board considered that
approximately $13 billion of divestitures of deposits could be required by
regulatory authorities in connection with the merger.
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- Consideration of the effect of the merger on BankBoston's other
constituencies, including the customers and communities served by
BankBoston and its employees, including management of BankBoston. In this
regard, the BankBoston Board was advised that BankBoston expects
approximately 5,000 positions at the combined company to be eliminated as
a result of the consolidation of the operations of Fleet and BankBoston in
the merger, and that BankBoston and Fleet would be implementing hiring
freezes in order to help mitigate the extent of the resulting job loss.
The BankBoston Board considered this factor in light of all other relevant
factors relating to the merger, including that the merger would allow the
combined company to maintain a significant presence in the regions
currently served by BankBoston, including maintaining a headquarters in
Boston, and that BankBoston employees who would not be continuing with the
combined company would be covered by the severance and other applicable
benefit plans and programs currently in effect at BankBoston.
This discussion of the information and factors considered by the BankBoston
Board is not intended to be exhaustive but includes all material factors
considered by the BankBoston Board. In reaching its determination to approve and
recommend the merger, the BankBoston Board did not assign any relative or
specific weights to those factors, and individual directors may have given
differing weights to different factors. The BankBoston Board is unanimous in its
recommendation that BankBoston stockholders vote for approval of the merger
agreement and the transactions contemplated by the merger agreement.
OPINIONS OF FLEET'S FINANCIAL ADVISORS
GOLDMAN SACHS/DLJ
Fleet retained Goldman Sachs and DLJ to act as its financial advisors in
connection with a possible business combination with BankBoston based upon their
qualifications, expertise and reputations as well as upon their prior investment
banking relationships with Fleet. On March 14, 1999, Goldman Sachs and DLJ each
rendered to the Fleet Board its oral opinion, which each subsequently confirmed
in writing, that, based upon and subject to the considerations set forth in each
of their opinions, as of March 14, 1999, the exchange ratio was fair to holders
of Fleet common stock from a financial point of view. Goldman Sachs and DLJ each
subsequently confirmed and updated its March 14, 1999 opinion in writing by
delivering to the Fleet Board a written opinion dated as of the date of this
Joint Proxy Statement-Prospectus. In connection with their written opinions,
each of Goldman Sachs and DLJ confirmed the appropriateness of its reliance on
the analyses used to render their earlier opinions. They also performed
procedures to update certain of their analyses and reviewed the assumptions used
in their analyses and the factors considered in connection with their earlier
opinions.
You should consider the following when reading the discussion of the
opinions of Fleet's financial advisors in this document:
- We urge you to read carefully the entire opinions of the financial
advisors, which are contained in the Appendices of this document.
- The following descriptions of the financial advisors' opinions are
qualified by reference to the full opinions attached as Appendices D and E
to this Joint Proxy Statement-Prospectus.
- The financial advisors' advisory services and opinions were provided to
the Fleet Board for its information in its consideration of the merger and
were directed only to the fairness of the exchange ratio from a financial
point of view to holders of Fleet common stock.
- The financial advisors' opinions do not address the merits of Fleet's
underlying business decision to engage in the merger.
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- The financial advisors' opinions do not address the price or range of
prices at which the BankBoston common stock may trade before the merger or
at which the Fleet common stock may trade before or after the merger.
- The financial advisors' opinions were necessarily based upon conditions as
they existed and could be evaluated on the date of this Joint Proxy
Statement-Prospectus, and the financial advisors assumed no responsibility
to update or revise their opinions based upon circumstances or events
occurring after that date.
- The opinions did not constitute a recommendation to the Fleet Board in
connection with the merger, and do not constitute a recommendation to any
holder of Fleet common stock as to how to vote on the merger or any
related matter.
Although Fleet's financial advisors each evaluated the fairness, from a
financial point of view, of the exchange ratio to the holders of Fleet common
stock, the exchange ratio itself was determined by Fleet and BankBoston through
arms'-length negotiations. Fleet did not provide specific instructions to, or
place any limitations on, its financial advisors with respect to the procedures
to be followed or factors to be considered by these advisors in performing their
analyses or providing their opinions.
OPINION AND ANALYSIS OF GOLDMAN SACHS
In connection with its opinion, Goldman Sachs, among other things:
- reviewed the merger agreement;
- reviewed the annual reports to stockholders of Fleet and BankBoston for
each of the years in the five year period ended December 31, 1998;
- reviewed the annual reports on Form 10-K of Fleet for each of the years in
the four-year period ended December 31, 1997 and the annual reports on
Form 10-K for BankBoston for each of the years in the five-year period
ended December 31, 1998;
- reviewed financial statements on Form 8-K of Fleet for the year ended
December 31, 1998;
- reviewed interim reports to shareholders and Quarterly Reports on Form
10-Q of Fleet and BankBoston;
- reviewed other communications from Fleet and BankBoston to their
respective stockholders;
- reviewed internal financial analyses and forecasts of Fleet and BankBoston
prepared by their respective managements, including cost savings,
operating synergies, and the impact of certain divestitures projected by
the management of Fleet to result from the merger;
- held discussions with members of the senior management of Fleet and
BankBoston regarding the strategic rationale for, and the potential
benefits of, the merger and the past and current business operations,
financial condition and future prospects of their respective companies;
- reviewed the reported prices and trading activity for Fleet common stock
and BankBoston common stock;
- compared certain financial and stock market information for Fleet and
BankBoston with similar information for certain other publicly-traded
companies;
- reviewed the financial terms of certain recent business combinations in
the commercial banking industry specifically and in other industries
generally; and
- performed those other studies and analyses as it considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed that accuracy and
completeness for purposes of rendering its
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opinion. In that regard, Goldman Sachs assumed that the financial forecasts for
Fleet and BankBoston, including, without limitation, the projected cost savings,
operating synergies and divestitures expected to result from the merger and
projections regarding under-performing and non-performing assets and net
charge-offs, in each case, prepared by management of Fleet, were reasonably
prepared on a basis that reflected the best currently available estimates and
judgments of Fleet, and that those projections and forecasts would be realized
in the amounts and time periods contemplated. The analysis of Goldman Sachs
prepared for the Fleet board and included in this Joint Proxy
Statement-Prospectus relied on early estimates of projected pre-tax cost savings
and after-tax restructuring charges that were subsequently revised by Fleet
management after further due diligence. Goldman Sachs has informed Fleet that
these differences would not have affected its conclusion as to the fairness of
the exchange ratio to holders of Fleet common stock from a financial point of
view.
Goldman Sachs is not an expert in the evaluation of loan and lease
portfolios for the purposes of assessing the adequacy of the allowances for
losses with respect to those portfolios and assumed that those allowances for
each of Fleet and BankBoston are in the aggregate adequate to cover all those
losses. Goldman Sachs did not review individual credit files nor did it make an
independent evaluation or appraisal of the assets and liabilities (including any
hedge or derivative positions) of Fleet or BankBoston or any of their respective
subsidiaries and Goldman Sachs was not furnished with any evaluation or
appraisal. In addition, Goldman Sachs assumed that the merger will be accounted
for as a pooling of interests under generally accepted accounting principles
("GAAP") and that all material governmental, regulatory or other consents and
approvals necessary for the consummation of the merger will be obtained without
any adverse effect on Fleet or BankBoston or on the contemplated benefits of the
merger, other than the impact of the divestitures projected by management of
Fleet and BankBoston to result from the merger.
Goldman Sachs, 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. Goldman Sachs is
familiar with Fleet, having provided certain investment banking services to
Fleet from time to time, including having acted as financial advisor to Fleet in
connection with the disposition of the Fleet Automotive Division in September of
1997 and the acquisition of Sanwa Business Credit Corporation, having acted as
agent on Fleet's medium-term note program, having acted as dealer on Fleet's
commercial paper program, having acted as manager of a public offering of $500
million of 6 7/8% Subordinated Debentures due 2028 in October 1997, manager of a
public offering of 10,750,000 shares of Fleet common stock in December 1997, and
manager of a public offering of $250 million of Floating Rate Capital Securities
of Fleet Capital Trust V in September 1998, and having acted as financial
advisor in connection with, and having participated in certain of the
negotiations leading to, the merger agreement. Goldman Sachs has also provided
certain investment banking services to BankBoston from time to time, including
having acted as (1) its financial advisor in connection with the disposition of
BankBoston's domestic institutional trust and custody business in October 1998,
(2) agent on BankBoston's medium-term note program, and (3) manager of a public
offering of $200 million of 7.375% Subordinated Notes of BankBoston in September
1996 and as manager of a public offering of $250 million of 8.25% Capital
Securities of BankBoston Capital Trust I in November 1996. Goldman Sachs
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 Fleet and
BankBoston for its own account and the accounts of customers.
Fleet has agreed to pay Goldman Sachs a transaction fee of $15 million, $2
million of which was payable in cash upon execution of Goldman Sachs' engagement
letter, $2 million of which was payable in cash at the time of mailing of this
document and the remainder payable in cash upon consummation of the merger. In
addition, if the merger is not consummated, Fleet has agreed to pay Goldman
Sachs
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a fee equal to 2.5% of the value of any consideration received by it pursuant to
the BankBoston option agreement. Fleet has also agreed to reimburse Goldman
Sachs for its reasonable out-of-pocket expenses, including attorneys' fees, and
to indemnify Goldman Sachs against certain liabilities, including certain
liabilities under the U.S. federal securities laws. In addition, since, January
1, 1997, Fleet has paid Goldman Sachs approximately $8.1 million for investment
banking and advisory services unrelated to the merger.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its opinion to the Fleet Board on
March 14, 1999 and does not purport to be a complete description of the analyses
performed by Goldman Sachs. The following quantitative information, to the
extent it is based on market data, is based on market data as it existed at or
about March 12, 1999 and is not necessarily indicative of current market
conditions. You should understand that the order of analyses (and results of
those analyses) described does not represent relative importance or weight given
to those analyses by Goldman Sachs. The summary of financial analyses includes
information presented in tabular format. THE TABLES SHOULD BE READ TOGETHER WITH
THE TEXT.
Implied Premium and Multiple Analysis. Goldman Sachs calculated that, based
upon the exchange ratio and the $44.75 closing market price of Fleet common
stock on March 12, 1999, each share of BankBoston common stock would be
converted into Fleet common stock with an implied market value of $53.00,
representing a premium of 12.9% to the $46.94 closing price per share of
BankBoston common stock on March 12, 1999. Goldman Sachs also analyzed the
multiple of this implied offer price to historical 1998 and estimated 1999, 2000
and 2001 earnings per share, based both on management and IBES estimates.
Accretion/(Dilution) Analysis. Goldman Sachs analyzed the pro forma
financial impact of the merger on Fleet's fully diluted GAAP earnings per share
("EPS"). For purposes of these analyses, Goldman Sachs assumed that the merger
would close in the fourth quarter of 1999 and utilized earnings per share
projections provided by management of Fleet for Fleet and BankBoston for 2000
and 2001. Goldman Sachs performed this analysis using Fleet management
assumptions with respect to operating synergies, including the phase-in period
for achieving those synergies, and required regulatory divestitures. Goldman
Sachs' analyses of the merger from Fleet's perspective showed that the merger,
compared to continued operation of Fleet on a stand-alone basis, would be
accretive to Fleet's GAAP estimated earnings in 2000 and 2001.
Historical Exchange Ratio Analysis. Goldman Sachs calculated the ratio of
the closing price per share of BankBoston common stock to the closing price per
share of Fleet common stock for each trading day in the period from March 11,
1996 to March 11, 1999 and compared those ratios with the exchange ratio.
Contribution Analysis. Based upon the exchange ratio, Goldman Sachs
calculated that holders of Fleet common stock and BankBoston common stock would
receive 61.9% and 38.1%, respectively, of the outstanding common stock of the
combined company. Goldman Sachs reviewed the relative contributions of each of
Fleet and BankBoston to the combined company on a pro forma basis in terms of
historical market capitalization, assets, loans, deposits, common equity,
tangible common equity, assets under management, and 1999 and 2000 estimated net
income, based both on management earnings estimates and IBES earnings
projections. The following table compares the pro forma ownership of
33
<PAGE>
Fleet stockholders and BankBoston stockholders in the combined company with each
company's respective contribution to each element of this analysis:
<TABLE>
<CAPTION>
PRO FORMA OWNERSHIP OF PRO FORMA OWNERSHIP OF
FLEET STOCKHOLDERS BANKBOSTON STOCKHOLDERS
IN THE COMBINED COMPANY IN THE COMBINED COMPANY
--------------------------- ---------------------------
<S> <C> <C>
61.9% 38.1%
</TABLE>
<TABLE>
<CAPTION>
FLEET CONTRIBUTION BANKBOSTON CONTRIBUTION
TO COMBINED COMPANY TO COMBINED COMPANY
--------------------------- ---------------------------
<S> <C> <C>
Market capitalization
March 12, 1999 64.7% 35.3%
10-day average 66.1% 33.9%
30-day average 68.0% 32.0%
60-day average 68.1% 31.9%
Assets 58.7% 41.3%
Loans 61.9% 38.1%
Deposits 59.0% 41.0%
Common equity 64.4% 35.6%
Tangible common equity 59.6% 40.4%
Assets under management 76.4% 23.6%
1999 estimated net income
Management estimates 63.0% 37.0%
IBES estimates 64.2% 35.8%
2000 estimated net income
Management estimates 62.8% 37.2%
IBES estimates 63.6% 36.4%
</TABLE>
Comparable Transactions Analysis. Goldman Sachs also analyzed certain
financial, operating, stock market and other information for the merger and for
the following 18 selected domestic merger transactions in the banking industry
since 1995: Deutsche Bank AG/Bankers Trust Corporation, SunTrust Banks,
Inc./Crestar Financial Corporation, Star Banc Corporation/Firstar Corporation,
Norwest Corporation/Wells Fargo & Company, Banc One Corporation/First Chicago
NBD Corporation, NationsBank Corporation/BankAmerica Corporation, Travelers
Group, Inc./Citicorp, Washington Mutual, Inc./ H.F. Ahmanson & Company, National
City Corporation/First of America Bank Corporation, First Union
Corporation/CoreStates Financial Corp., NationsBank Corporation/Barnett Banks,
Inc., First Bank System, Inc./U.S. Bancorp, Washington Mutual, Inc./Great
Western Financial Corporation, Dean Witter Discover & Co./Morgan Stanley Group
Inc., NationsBank Corporation/Boatmen's Bancshares, Inc., Wells Fargo &
Company/First Interstate Bancorp, Chemical Banking Corporation/The Chase
Manhattan Corporation and First Union Corporation/First Fidelity Bancorporation.
In each case, the shareholders of the second-named company (comparable to
BankBoston in the merger) received stock (or, in the case of Bankers Trust
Corporation, cash, and, in the case of Barnett Banks, Inc., a
34
<PAGE>
cash election) of the first-named company (comparable to Fleet in the merger) in
the relevant transaction. The following table compares information derived by
Goldman Sachs with respect to the merger and the ranges and medians indicated
for these selected transactions:
<TABLE>
<CAPTION>
RANGE FOR MEDIAN FOR
THE SELECTED SELECTED
MERGER TRANSACTIONS TRANSACTIONS
----------- ----------------- -------------
<S> <C> <C> <C>
Multiple of implied value of equity consideration received by holders of
stock in second-named company to tangible book value 3.9x 1.4x- 5.7x 4.0x
Multiple of implied value of equity consideration received by
stockholders in second-named company to IBES estimated earnings for
second fiscal year following announcement date 15.2x 10.8x-28.8x 17.0x
Premium of implied offer value to second-named company's average stock
price for ten trading days ending five trading days prior to
announcement 24.8% 2.6%-48.9% 20.5%
Premium (discount) of implied offer value to stock price of second-named
company one day prior to announcement 12.9% (1.8)%-37.2% 19.2%
</TABLE>
Public Market Comparison. Goldman Sachs performed a public market
comparison of Fleet and BankBoston and a selected group of other publicly traded
banking organizations consisting of Citigroup Inc., BankAmerica Corporation, The
Chase Manhattan Corporation, Banc One Corporation, Wells Fargo & Company, First
Union Corporation, The Bank of New York Company, Inc., U.S. Bancorp, National
City Corporation, SunTrust Banks, Inc., Firstar Corporation, Fifth Third
Bancorp, Mellon Bank Corporation, Wachovia Corporation, PNC Bank Corp., KeyCorp
and BB&T Corporation (in each case, pro forma for any recent acquisitions) on
the basis of various financial and operating ratios. The comparable companies
were selected for comparison purposes through a review of publicly traded
banking institutions with similar operating characteristics and size. In
general, financial data used was as of or annualized for the latest 12 months
ended December 31, 1998 and market data was as of March 12, 1999. Projected
earnings per share were based on IBES estimates.
35
<PAGE>
The following table compares information derived by Goldman Sachs with
respect to Fleet and BankBoston and the medians indicated for these comparable
companies:
<TABLE>
<CAPTION>
MEDIAN
FOR OTHER
INSTITUTIONS FLEET BANKBOSTON
----------- --------- ---------------
<S> <C> <C> <C>
Closing stock price on March 12, 1999 as a percentage of 52-week high 95.0% 96.0% 80.0%
Multiple of stock price as of March 12, 1999 to calendar 1998 earnings per share 21.4x 17.1x 17.6x
Multiple of stock price as of March 12, 1999 to estimated 1999 earnings per
share 17.4x 15.6x 14.7x
Multiple of stock price as of March 12, 1999 to estimated 2000 earnings per
share 15.1x 14.2x 13.2x
Estimated earnings per share growth from 1999 to 2000 13.6% 9.8% 11.3%
Ratio of stock price as of March 12, 1999 to estimated 1999 cash earnings per
share (IBES estimated 1999 earnings per share adjusted to exclude amortization
of intangibles) 16.3x 13.7x 14.1x
Ratio of stock price as of March 12, 1999 to estimated 2000 cash earnings per
share (IBES estimated 1999 earnings per share adjusted to exclude amortization
of intangibles) 14.4x 12.6x 12.7x
IBES projected five-year earnings per share compound annual growth rate 12.0% 11.5% 11.0%
Ratio of estimated 2000 earnings per share to IBES projected five-year earnings
per share compound annual growth rate 1.3x 1.2x 1.2x
Multiple of stock price as of March 12, 1999 to stated book value per share 3.3x 2.9x 2.9x
Multiple of stock price as of March 12, 1999 to tangible book value per share 4.1x 4.3x 3.4x
Tangible common equity as a percentage of tangible assets 6.2% 5.8% 5.5%
Tier 1 Leverage 6.5% 6.8% 6.7%
Return on average assets 1.3% 1.6% 1.1%
Return on average common equity 16.9% 18.7% 17.1%
Net interest margin 4.0% 4.6% 4.1%
Efficiency ratio 57.1% 53.1% 62.6%
Non-interest income as a percentage of total revenue 41.1% 44.8% 40.4%
Non-performing assets as a percentage of total loans and other real estate owned 0.5% 0.4% 1.0%
Reserves as a percentage of non-performing assets 336.2% 586% 201%
</TABLE>
Historical Stock Price Performance. Goldman Sachs reviewed the relationship
between movements in the closing prices of Fleet common stock and BankBoston
common stock for the one-year period ending March 12, 1999. Goldman Sachs also
reviewed the relationship between movements in the closing prices of Fleet
common stock and BankBoston common stock for the one-, three- and five-year
periods ended March 12, 1999 with both the Standard & Poor's 500 Composite Index
and an index of publicly traded banking organizations consisting of BankAmerica
Corporation/NationsBank Corporation, Citigroup Inc., The Chase Manhattan
Corporation, Banc One Corporation/First Chicago NBD Corporation, Wells Fargo &
Company/Norwest Corporation, First Union Corporation, The Bank of New York
Company, Inc., U.S. Bancorp, National City Corporation, SunTrust Banks,
Inc./Crestar
36
<PAGE>
Financial Corporation, Fifth Third Bancorp, Mellon Bank Corporation, Wachovia
Corporation, Firstar Corporation/Star Banc Corporation, PNC Bank Corp., KeyCorp,
BankBoston and BB&T Corporation.
Historical Forward Price/Earnings Analysis. For each trading day in the
two-year period ended March 11, 1999, Goldman Sachs calculated the ratio of the
Fleet closing stock price and the BankBoston closing stock price to IBES
estimated one-year forward earnings per share and IBES estimated two-year
forward earnings per share.
The preparation of a fairness opinion is a complex process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analyses or of the summary set forth
above, without considering the analyses as a whole, could create an incomplete
view of the processes underlying Goldman Sachs' opinion. In arriving at its
fairness determination, Goldman Sachs considered the results of all those
analyses and did not attribute any particular weight to any factor or analysis
considered by it; rather, Goldman Sachs made its determination as to fairness on
the basis of its experience and professional judgment after considering the
results of all these analyses. In addition, in performing its analyses, Goldman
Sachs made numerous assumptions with respect to industry performance, general
business, economic, market and financial conditions and other matters. No
company or transaction used in the above analyses as a comparison is directly
comparable to Fleet or BankBoston or the merger. The analyses were prepared for
purposes of Goldman Sachs providing its opinion to the Fleet Board as to the
fairness of the exchange ratio from a financial point of view and do not purport
to be appraisals or necessarily reflect the prices at which businesses or
securities actually may be sold. Analyses based upon forecasts of future results
are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by those analyses. Because
those analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of the parties or their respective
advisors, Goldman Sachs does not assume responsibility if future results are
materially different from those forecast.
As described above, the opinion of Goldman Sachs to the Fleet Board was
among many factors taken into consideration by the Fleet Board in making its
determination to approve the merger agreement. Consequently, the analyses
described above should not be viewed as determinative of the Fleet Board's or
Fleet management's opinion with respect to the value of Fleet or a combination
of Fleet and BankBoston, or of whether the Fleet Board or Fleet management would
have been willing to agree to a different exchange ratio. Fleet placed no limits
on the scope of the analysis performed, or opinion expressed, by Goldman Sachs.
OPINION AND ANALYSIS OF DLJ
In connection with its opinion, DLJ, among other things:
- reviewed the merger agreement;
- reviewed financial and other information that was publicly available or
furnished to DLJ by Fleet and BankBoston, including IBES earnings
estimates and information provided during discussions with their
respective managements;
- reviewed assumptions with respect to financial projections of Fleet and
BankBoston provided by management of Fleet, including certain cost savings
and operating synergies, and the impact of certain divestitures
anticipated by management of Fleet and BankBoston to result from the
merger;
- held discussions with members of the senior management of Fleet and
BankBoston regarding the strategic rationale for, and the potential
benefits of, the merger, and the past and current business operations,
financial condition and future prospects of their respective companies;
37
<PAGE>
- compared certain financial and securities data of Fleet and BankBoston
with data for various other companies whose securities are traded in
public markets, reviewed historical stock prices and trading volumes of
the Fleet common stock and the BankBoston common stock;
- reviewed prices and premiums paid in certain other business combinations;
and
- conducted those other financial studies, analyses and investigations as it
deemed appropriate.
DLJ relied upon and assumed the accuracy and completeness of all of the
financial and other information that was available to it from public sources,
that was provided to it by Fleet, BankBoston or their respective
representatives, or that was otherwise reviewed by it and assumed that Fleet was
not aware of any information prepared by it or its other advisors that might be
material to DLJ's opinion that was not made available to DLJ. In particular, DLJ
relied upon estimates of Fleet's management of, and discussions with management
of Fleet and BankBoston concerning, the cost savings and operating synergies
achievable as a result of the merger and the impact of anticipated divestitures.
DLJ assumed that the financial projections reviewed by it, including cost
savings and operating synergies and the impact of divestitures, were reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the management of Fleet and BankBoston as to the future operating
and financial performance of Fleet, BankBoston and the combined company,
respectively. The analysis of DLJ prepared for the Fleet board and included in
this Joint Proxy Statement-Prospectus relied on early estimates of projected
pre-tax cost savings and after-tax restructuring charges that were subsequently
revised by Fleet management after further due diligence. DLJ has informed Fleet
that these differences would not have affected its conclusion as to the fairness
of the exchange ratio to holders of Fleet common stock from a financial point of
view.
DLJ is not an expert in the evaluation of loan and lease portfolios for
purposes of assessing the adequacy of the allowances for losses and assumed that
those allowances for each of Fleet and BankBoston are in the aggregate adequate
to cover all those losses. DLJ did not review individual credit files nor did it
make an independent evaluation or appraisal of the assets and liabilities of
Fleet or BankBoston or any of their subsidiaries, including any hedge or
derivative positions, and DLJ was not furnished with any evaluation or
appraisal. DLJ did not assume any responsibility for making any independent
evaluation of any assets or liabilities or for making any independent
verification of any of the information reviewed by it. In addition, DLJ assumed
that the merger will qualify as a pooling of interests transaction under GAAP,
that the transaction will qualify as a tax-free reorganization for U.S. federal
income tax purposes, and that all material governmental, regulatory or other
consents and approvals necessary for the consummation of the merger will be
obtained without any adverse effect, other than the impact of the anticipated
divestitures, on Fleet, BankBoston or on the anticipated benefits of the merger.
DLJ, as part of its investment banking business, is regularly engaged in the
valuation of businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements, and valuations for corporate and other purposes. In the
ordinary course of its business, DLJ and its affiliates actively trade the
securities of Fleet and BankBoston for their own account and for the accounts of
customers, and, accordingly, may at any time hold a long or short position in
those securities. DLJ has performed investment banking and other services for
Fleet and BankBoston in the past and has been compensated for such services.
Fleet has agreed to pay DLJ a transaction fee of $15 million, $2 million of
which was payable in cash upon execution of DLJ's engagement letter, $2 million
of which is payable in cash at the time of mailing of this document and the
remainder payable in cash upon consummation of the merger. In addition, if the
merger is not consummated, Fleet has agreed to pay DLJ a fee equal to 2.5% of
the value of any consideration received by it pursuant to the BankBoston option
agreement. Fleet has also agreed to reimburse DLJ for its reasonable
out-of-pocket expenses, including attorneys' fees, and to indemnify DLJ against
certain liabilities, including certain liabilities under U.S. federal securities
laws.
38
<PAGE>
In addition, since January 1, 1997, Fleet has paid DLJ approximately $100,000
for investment banking and advisory services unrelated to the merger.
The following is a summary of the material financial analyses used by DLJ in
connection with providing its opinion to the Fleet Board on March 14, 1999 and
does not purport to be a complete description of the analyses performed by DLJ.
The following quantitative information, to the extent it is based on market
data, is based on market data as it existed at or about March 12, 1999 and is
not necessarily indicative of current market conditions. You should understand
that the order of analyses (and the results of those analyses) described does
not represent relative importance or weight given to such analyses by DLJ. The
summary of financial analyses includes information presented in tabular format.
THE TABLES SHOULD BE READ TOGETHER WITH THE TEXT.
Historical Market Performance Analysis. DLJ compared the daily closing
price per share of Fleet common stock and BankBoston common stock for the
one-year period ended March 12, 1999. For each of Fleet and BankBoston, DLJ also
compared the ratio of closing stock price on March 12, 1999 to the 52-week high
and low prices. DLJ noted that the closing price of Fleet common stock of $44.75
per share on March 12, 1999 represented 95.6% and 149.2% of the 52-week high and
low prices, respectively, and that the closing price of BankBoston common stock
of $46.94 per share on March 12, 1999 represented 79.5% and 182.3% of the
52-week high and low prices, respectively.
Historical Exchange Ratio Analysis. DLJ calculated the ratio of the closing
price per share of BankBoston common stock to the closing price per share of
Fleet common stock for each trading day in the period from March 11, 1996 to
March 12, 1999 and compared those ratios with the exchange ratio. DLJ also
calculated the ratio of the multiple of Fleet's stock price to forward 12-months
earnings per share to the multiple of BankBoston's stock price to forward
12-months earnings per share, in each case, based on IBES earnings estimates,
over the same period.
BankBoston Business Review. DLJ analyzed the different domestic and
international business lines comprising BankBoston's business. In that regard,
DLJ reviewed the historical 1998 operating income generated and the projected
1999 operating income expected to be generated by each business line, both in
dollar terms and as a percentage of total operating income, in order to assess
BankBoston's earnings contribution to the combined company and the diversity of
its business line performance.
Pro Forma Merger Analysis. Based upon the exchange ratio, DLJ calculated
that holders of Fleet common stock and BankBoston common stock would receive
61.9% and 38.1%, respectively, of the outstanding common stock of the combined
company. DLJ also reviewed the respective market share, in terms of branches and
deposits, of each of Fleet and BankBoston in the states in which each company
operates and the combined company's expected market share and ranking in each of
these states after giving effect to management's anticipated divestitures in
connection with the merger. DLJ also compared the relative scale of various
major business lines of each of Fleet and BankBoston with those of the combined
company on a pro forma basis and analyzed the combined company's expected
national market share for each of these business lines after giving effect to
divestitures anticipated to result from the merger.
Accretion/(Dilution) Analysis. DLJ analyzed the pro forma financial impact
of the merger, on both a GAAP basis and a cash basis, on Fleet's fully diluted
earnings per share. For purposes of these analyses, DLJ assumed that the merger
would close in the fourth quarter of 1999, utilized IBES earnings per share
estimates for Fleet and BankBoston for 1999 and 2000, and assumed a 10% compound
annual earnings per share growth rate, based on management estimates, for Fleet
and BankBoston. DLJ performed this analysis using Fleet management's assumptions
with respect to operating synergies, including the phase-in period for achieving
those synergies, divestitures required by regulatory authorities and return on
excess capital. DLJ's analyses of the merger from Fleet's perspective showed
that the merger, compared to continued operation of Fleet on a stand-alone
basis, would be
39
<PAGE>
accretive to Fleet's GAAP estimated earnings starting in 2000 and to Fleet's
estimated cash earnings starting in 2001.
DLJ also compared anticipated accretion to Fleet's GAAP fully diluted
earnings per share with the announced accretion/(dilution) of each of the
precedent bank merger transactions described below under "--Comparable
Transactions Analysis." DLJ noted that the anticipated accretion to Fleet's GAAP
fully diluted earnings per share compared favorably to the medians for all of
such transactions taken together as a group and for the partial-market
transactions (which DLJ considered most similar to the merger) included in those
precedent transactions. In addition, for each of these precedent transactions,
DLJ compared, for the one, 14-, and 30-day periods following announcement, the
relative stock price performance, measured against the Standard & Poor's Bank
Index, for each company issuing shares relative to the announced accretion or
dilution.
Contribution Analysis. DLJ computed the contribution of each of Fleet and
BankBoston to various elements of the combined company's income statement,
balance sheet and market capitalization excluding expense savings and other
incremental earnings adjustments. Projected earnings were based on IBES
estimates. The following table compares the pro forma ownership of Fleet and
BankBoston stockholders in the combined company based upon the exchange ratio
with each company's respective contribution to each element of this analysis:
<TABLE>
<CAPTION>
PRO FORMA OWNERSHIP OF PRO FORMA OWNERSHIP OF
FLEET STOCKHOLDERS BANKBOSTON STOCKHOLDERS
IN THE COMBINED COMPANY IN THE COMBINED COMPANY
--------------------------- ---------------------------
<S> <C> <C>
61.9% 38.1%
</TABLE>
<TABLE>
<CAPTION>
FLEET CONTRIBUTION BANKBOSTON CONTRIBUTION
TO COMBINED COMPANY TO COMBINED COMPANY
--------------------------- ---------------------------
<S> <C> <C>
Income statement
1998 net income 64.6% 35.4%
Estimated 1999 net income 64.1% 35.9%
Balance sheet (as of 12/31/98)
Loans 61.8% 38.2%
Total assets 58.7% 41.3%
Total deposits 59.0% 41.0%
Tangible common equity 59.8% 40.2%
Common equity 64.4% 35.6%
Total equity 66.1% 33.9%
Market capitalization
current (as of 3/12/99) 65.2% 34.8%
one-month average 72.2% 27.8%
three-month average 72.8% 27.2%
six-month average 72.1% 27.9%
one-year average 71.0% 29.0%
</TABLE>
Comparable Transactions Analysis. DLJ also analyzed certain publicly
available financial, operating and stock market information for the merger and
for 17 selected domestic merger transactions greater than $5 billion in
transaction value in the banking industry announced since 1995. DLJ divided
these transactions into the following three groups:
- IN-MARKET TRANSACTIONS. These are transactions between banks operating
primarily in the same markets. The transactions in this group were
NationsBank Corporation/Barnett Banks, Chemical Banking Corporation/The
Chase Manhattan Corporation and Washington Mutual, Inc./H.F. Ahmanson &
Company.
40
<PAGE>
- PARTIAL-MARKET TRANSACTIONS. These are transactions between banks whose
operations overlap in some, but not all, markets. The transactions in this
group were First Union Corporation/CoreStates Financial Corp., Inc., Wells
Fargo & Company/First Interstate Bancorp and Washington Mutual, Inc./Great
Western Financial Corporation.
- OUT-OF-MARKET TRANSACTIONS. These are transactions between merger partners
operating primarily in different markets. The transactions in this group
were NationsBank Corporation/BankAmerica Corporation, Norwest
Corporation/Wells Fargo & Company, Banc One Corporation/First Chicago NBD
Corporation, SunTrust Banks, Inc./Crestar Financial Corporation,
NationsBank Corporation/Boatmen's Bancshares, Inc., Deutsche Bank
AG/Bankers Trust Corporation, First Bank System, Inc./U.S. Bancorp, Star
Banc Corporation/Firstar Corporation, National City Corp./First of America
Bank Corporation, First Union Corporation/First Fidelity Bancorporation
and NBD Bancorp/First Chicago Corp.
In each case, the shareholders of the second-named company (comparable to
BankBoston in the merger) received stock (or, in the case of Bankers Trust
Corporation, cash, and, in the case of Barnett Banks, Inc., a cash election) of
the first-named company in the relevant transaction. The first-named company is
comparable to Fleet in the merger. The following table compares information
derived by DLJ with respect to the merger and the ranges and medians indicated
for these selected transactions:
<TABLE>
<CAPTION>
SELECTED TRANSACTIONS
-------------------------- THE
RANGE MEDIAN MERGER
------------- ----------- -----------
<S> <C> <C> <C>
IN-MARKET TRANSACTIONS
Implied premium of offer price to market price on last trading day prior to
announcement 6.7%-43.4% 22.7% 12.9%
Ratio of implied offer price to:
Book value per share 1.38x-4.05x 2.97x 3.25x
Tangible book value per share 1.66x-5.96x 4.04x 3.88x
Latest 12 months earnings per share 11.6x-24.9x 21.2x 18.5x
Forward 12 months earnings per share 10.8x-22.0x 19.2x 16.7x
PARTIAL-MARKET TRANSACTIONS
Implied premium of offer price to market price on last trading day prior to
announcement 6.5%-25.9% 17.2% 12.9%
Ratio of implied offer price to:
Book value per share 2.72x-5.39x 2.88x 3.25x
Tangible book value per share 3.08x-5.95x 3.61x 3.88x
Latest 12 months earnings per share 12.5x-27.6x 22.1x 18.5x
Forward 12 months earnings per share 12.0x-20.5x 17.4x 16.7x
OUT-OF-MARKET TRANSACTIONS
Implied premium (discount) of offer price to market price on last trading day
prior to announcement (3.0)%-44.1% 22.4% 12.9%
Ratio of implied offer price to:
Book value per share 1.24x-4.27x 3.08x 3.25x
Tangible book value per share 1.30x-8.60x 3.98x 3.88x
Latest 12 months earnings per share 9.1x -31.3x 21.9x 18.5x
Forward 12 months earnings per share 8.5x -25.8x 17.4x 16.7x
</TABLE>
41
<PAGE>
In addition, DLJ calculated the median values of all of the foregoing
information with respect to all of these transactions taken together as a group.
The following table compares information derived by DLJ with respect to the
merger and these medians:
<TABLE>
<CAPTION>
MEDIAN OF ALL THE
PRECEDENT TRANSACTIONS MERGER
------------------------- -----------
<S> <C> <C>
Implied premium of offer price to market price on last trading day prior to
announcement 22.4% 12.9%
Ratio of implied offer price to:
Book value per share 2.97x 3.25x
Tangible book value per share 3.98x 3.88x
Latest 12 months earnings per share 21.8x 18.5x
Forward 12 months earnings per share 17.4x 16.7x
</TABLE>
DLJ also compared the announced transaction synergies for each of those
precedent transactions with the operating synergies expected by management of
Fleet to be achieved in connection with the merger. Based on this analysis, DLJ
determined that the operating synergies expected by management of Fleet to be
achieved in connection with the merger were in line with the corresponding
medians for the partial-market transactions, which DLJ considered most similar
to the merger, and for all of the precedent transactions taken together as a
group.
The preparation of a fairness opinion is a complex process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analyses or of the summary set forth
above, without considering the analyses as a whole, could create an incomplete
view of the processes underlying DLJ's opinion. In arriving at its fairness
determination, DLJ considered the results of all those analyses and did not
attribute any particular weight to any factor or analysis considered by it;
rather, DLJ made its determination as to fairness on the basis of its experience
and professional judgment after considering the results of all those analyses.
In addition, in performing its analyses, DLJ made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters. No company or transaction used in the
above analyses as a comparison is directly comparable to Fleet or BankBoston or
the merger. The analyses were prepared for purposes of DLJ providing its opinion
to the Fleet Board as to the fairness of the exchange ratio from a financial
point of view and do not purport to be appraisals or necessarily reflect the
prices at which businesses or securities actually may be sold. Analyses based
upon forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
those analyses. Because those analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors, DLJ does not assume responsibility if future results
are materially different from those forecast.
As described above, the opinion of DLJ to the Fleet Board was among many
factors taken into consideration by the Fleet Board in making its determination
to approve the merger agreement. Consequently, the analyses described above
should not be viewed as determinative of the Fleet Board's or Fleet management's
opinion with respect to the value of Fleet or a combination of Fleet and
BankBoston, or of whether the Fleet Board or Fleet management would have been
willing to agree to a different exchange ratio. Fleet placed no limits on the
scope of the analysis performed, or opinion expressed, by DLJ.
42
<PAGE>
OPINIONS OF BANKBOSTON'S FINANCIAL ADVISORS
BankBoston retained Merrill Lynch and Morgan Stanley to act as its financial
advisors in connection with the merger. On March 13, 1999, the BankBoston Board
held a meeting to evaluate the merger. At the meeting, Merrill Lynch and Morgan
Stanley each rendered its oral opinion that, as of that date and based upon and
subject to the factors and assumptions set forth in their respective opinions,
the exchange ratio was fair, from a financial point of view, to BankBoston
stockholders. Merrill Lynch and Morgan Stanley each subsequently confirmed and
updated its March 13, 1999 opinion in writing by delivering to the BankBoston
Board a written opinion dated as of the date of this Joint Proxy
Statement-Prospectus. In connection with their written opinions, each of Merrill
Lynch and Morgan Stanley confirmed the appropriateness of its reliance on the
analyses used to render their earlier opinions. They also performed procedures
to update certain of their analyses and reviewed the assumptions used in their
analyses and the factors considered in connection with their earlier opinions.
The full text of the Merrill Lynch and Morgan Stanley opinions, which
describe, among other things, the assumptions made, matters considered, and
qualifications and limitations on the review undertaken by Merrill Lynch and
Morgan Stanley, respectively, are attached as Appendices F and G to this
document and are incorporated in this document by reference. BankBoston
stockholders are urged to, and should, read these opinions carefully and in
their entirety. Merrill Lynch's and Morgan Stanley's opinions are each directed
to the BankBoston Board and address only the fairness, from a financial point of
view, of the exchange ratio to the BankBoston stockholders. Neither of the
opinions addresses any other aspect of the merger or any related transaction, or
constitutes a recommendation to any stockholder as to how to vote at the
BankBoston special meeting. The summary of the fairness opinions set forth in
this Joint Proxy Statement-Prospectus is qualified in its entirety by reference
to the full text of the opinions.
The summary below does not purport to be a complete description of the
analyses underlying the Merrill Lynch opinion or the Morgan Stanley opinion or
the presentation made by Merrill Lynch and Morgan Stanley to the BankBoston
Board, but summarizes the material analyses performed and presented in
connection with such opinions. The preparation of a fairness opinion is a
complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, a fairness opinion
is not readily susceptible to partial analysis or summary description. In
arriving at their respective opinions, neither Merrill Lynch nor Morgan Stanley
attributed any particular weight to any analysis or factor that it considered,
but rather made qualitative judgments as to the significance and relevance of
each analysis and factor. Accordingly, each of Merrill Lynch and Morgan Stanley
believes that its analyses and the summary of its analyses must be considered as
a whole and that selecting portions of its analyses and factors or focusing on
the information presented in tabular format, without considering all analyses
and factors or the narrative description of the analysis, could create a
misleading or incomplete view of the process underlying their analyses and
opinions.
THE MERRILL LYNCH OPINION. In arriving at its opinion, Merrill Lynch, among
other things:
- reviewed certain publicly available business and financial information
relating to BankBoston and Fleet that Merrill Lynch deemed to be relevant;
- reviewed certain information, including financial forecasts, relating to
the respective businesses, earnings, assets, liabilities and prospects of
BankBoston and Fleet furnished to Merrill Lynch by the senior management
of BankBoston and Fleet as well as the amount and timing of the cost
savings, revenue enhancements and related expenses expected to result from
the merger furnished to Merrill Lynch by senior management of BankBoston
and Fleet;
43
<PAGE>
- conducted discussions with members of senior management of BankBoston and
Fleet concerning the matters described in the bullet points set forth
above, as well as their respective businesses and prospects before and
after giving effect to the merger and the expected cost savings, revenue
enhancements and related expenses expected to result from the merger;
- reviewed the market prices and valuation multiples for BankBoston common
stock and Fleet common stock and compared them with those of certain
publicly traded companies that Merrill Lynch deemed to be relevant;
- reviewed the publicly reported financial conditions and results of
operations of BankBoston and Fleet and compared them with those of certain
publicly traded companies that Merrill Lynch deemed to be relevant;
- compared the proposed financial terms of the merger with the financial
terms of certain other transactions that Merrill Lynch deemed to be
relevant;
- participated in certain discussions and negotiations with representatives
of BankBoston and Fleet and their financial and legal advisors;
- reviewed the potential pro forma impact of the merger;
- reviewed the merger agreement and the related stock option agreements; and
- reviewed those other financial studies and analyses and took into account
those other matters as Merrill Lynch deemed necessary, including Merrill
Lynch's assessment of general economic, market and monetary conditions.
In rendering its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with, or reviewed by, or for Merrill Lynch, or publicly
available. In addition, Merrill Lynch did not assume any responsibility for
independently verifying this information or undertake an independent evaluation
or appraisal of the assets or liabilities of BankBoston or Fleet nor has Merrill
Lynch been furnished any such evaluation or appraisal. Merrill Lynch is not an
expert in the evaluation of allowances for loan losses, and neither made an
independent evaluation of the adequacy of the allowances for loan losses of
BankBoston or Fleet, nor reviewed any individual credit files of BankBoston or
Fleet or been requested to conduct such a review, and, as a result, Merrill
Lynch has assumed that the aggregate allowances for loan losses for both
BankBoston and Fleet are adequate to cover those losses and will be adequate on
a pro forma basis for the combined company. In addition, Merrill Lynch did not
assume any obligation to conduct, nor did Merrill Lynch conduct, any physical
inspection of the properties or facilities of BankBoston or Fleet. With respect
to the financial and operating forecast information furnished to or discussed
with Merrill Lynch by BankBoston or Fleet, including the cost savings, revenue
enhancements and related expenses expected to result from the merger, Merrill
Lynch assumed that they had been reasonably prepared and reflect the best
currently available estimates and judgments of the senior management of each of
BankBoston and Fleet as to the future financial and operating performance of
BankBoston, Fleet or the combined company, as the case may be. Merrill Lynch's
opinion is necessarily based upon market, economic and other conditions as in
effect on, and on the information made available to Merrill Lynch as of, the
date of its opinion.
For the purposes of rendering its opinion, Merrill Lynch assumed that, in
all respects material to its analysis:
- the merger will be consummated substantially in accordance with the terms
set forth in the merger agreement;
- the representations and warranties of each party in the merger agreement
and in all related documents and instruments referred to in the merger
agreement are true and correct;
- each party to the merger agreement and all related documents will perform
all of the covenants and agreements required to be performed by that party
under that documents;
44
<PAGE>
- all conditions to the consummation of the merger will be satisfied without
any waivers; and
- in the course of obtaining the necessary regulatory, contractual or other
consents or approvals for the merger, no restrictions, including any
divestiture requirements or amendment or modifications, will be imposed
that will have a material adverse effect on the future results of
operations or financial condition of the combined entity or the
contemplated benefits of the merger, including the cost savings, revenue
enhancements and related expenses expected to result from the merger.
Merrill Lynch further assumed that the merger will be accounted for as a
pooling of interests under GAAP, and that the merger will qualify as a tax-free
reorganization for U.S. federal income tax purposes. Merrill Lynch's opinion is
not an expression of an opinion as to the prices at which shares of BankBoston
common stock or shares of Fleet common stock will trade following the
announcement of the merger or the actual value of the shares of common stock of
the combined company when issued pursuant to the merger, or the prices at which
the shares of common stock of the combined company will trade following the
closing of the merger.
THE MORGAN STANLEY OPINION. In arriving at its opinion, Morgan Stanley,
among other things:
- reviewed certain publicly available financial statements and other
information of BankBoston and Fleet, respectively;
- reviewed certain internal financial statements and other financial and
operating data concerning BankBoston and Fleet prepared by the management
of BankBoston and Fleet, respectively;
- discussed the past and current operations and financial condition and the
prospects, including the financial prospects, of BankBoston and Fleet with
senior executives of BankBoston and Fleet, respectively;
- reviewed the reported prices and trading activity for BankBoston common
stock and Fleet common stock;
- compared the financial performance of BankBoston and Fleet and the prices
and trading activity of BankBoston common stock and Fleet common stock
with that of certain other comparable publicly traded companies and their
securities;
- discussed the results of regulatory examinations of BankBoston and Fleet
and recent discussions with regulators regarding the merger with senior
management of BankBoston and Fleet, respectively;
- discussed with senior management of BankBoston and Fleet the strategic
objectives of the merger and their estimates of the synergies and other
benefits of the merger for the combined company;
- analyzed the pro forma impact of the merger on the combined company's
earnings per share, consolidated capitalization and financial ratios;
- reviewed the financial terms, to the extent publicly available, of certain
comparable merger transactions;
- participated in discussions and negotiations among representatives of
BankBoston and Fleet and their financial and legal advisors;
- reviewed the merger agreement and certain related documents; and
- performed those other analyses and considered those other factors as
Morgan Stanley deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
reviewed by Morgan Stanley for the purposes of the Morgan Stanley opinion. With
respect to the financial prospects, including the synergies and other benefits
expected to result from the merger, Morgan Stanley assumed that they have been
reasonably
45
<PAGE>
prepared on bases reflecting the best currently available estimates and
judgments of the future financial performance of BankBoston and Fleet. Morgan
Stanley did not make any independent valuation or appraisal of the assets or
liabilities of BankBoston and Fleet, nor was Morgan Stanley furnished with any
such appraisals. Morgan Stanley has not examined any individual loan files of
BankBoston or Fleet. In addition, Morgan Stanley assumed the merger will be
closed substantially in accordance with the terms set forth in the merger
agreement. Morgan Stanley further assumed that, in connection with the receipt
of all necessary regulatory approvals for the merger, including any divestiture
requirements or amendments or modifications, no restrictions will be imposed
that would have a material adverse effect on the consolidated benefits expected
to be derived in the merger. The Morgan Stanley opinion is necessarily based on
economic, market and other conditions as in effect on, and the information made
available to Morgan Stanley as of, the date of the Morgan Stanley opinion.
ANALYSIS OF MERRILL LYNCH AND MORGAN STANLEY
In performing their respective analyses, Merrill Lynch and Morgan Stanley
made numerous assumptions with respect to industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of Merrill Lynch, Morgan Stanley, BankBoston and
Fleet. Any estimates contained in the analyses performed by Merrill Lynch and
Morgan Stanley are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
these analyses. Additionally, estimates of the value of businesses or securities
do not purport to be appraisals or to reflect the prices at which those
businesses or securities might actually be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. In addition, the
Merrill Lynch and Morgan Stanley opinions were among several factors taken into
consideration by the BankBoston Board in making its determination to approve the
merger agreement and the merger. Consequently, the analyses described below
should not be viewed as determinative of the decision of the BankBoston Board or
BankBoston's management with respect to the fairness of the exchange ratio.
The following is a summary of the material financial analyses presented by
Merrill Lynch and Morgan Stanley to the BankBoston Board on March 13, 1999 in
connection with the rendering of their respective opinions on that date. The
financial analyses summarized below include information presented in tabular
format. In order to fully understand Merrill Lynch's and Morgan Stanley's
financial analyses, the tables must be read together with the text of each
summary. The tables alone do not constitute a complete description of the
financial analyses. Considering the tabular data set forth below without
considering the full narrative description of the financial analyses, including
the methodologies and assumptions underlying the analyses, could create a
misleading or incomplete view of Merrill Lynch's and Morgan Stanley's financial
analyses.
Calculation of Implied Value of Exchange Ratio. Merrill Lynch and Morgan
Stanley reviewed the terms of the merger. They noted that the exchange ratio of
1.1844 had an implied value of $53.00 per share of BankBoston common stock,
based upon the closing price of Fleet common stock on March 12, 1999, the last
trading day prior to the presentation by Merrill Lynch and Morgan Stanley to the
BankBoston Board. The closing price of Fleet common stock on that day was
$44.75. They also noted that this resulted in a premium of approximately 13% to
the closing price of $46.94 of BankBoston common stock as of March 12, 1999 and
a 35% premium to BankBoston's last 30 trading days average price.
Discounted Dividend Analysis--BankBoston. Merrill Lynch and Morgan Stanley
performed a discounted dividend analysis to estimate a range of present values
per share of BankBoston common stock assuming BankBoston continued to operate as
a stand-alone entity. This range was determined by adding (1) the present value
of the estimated future dividend stream that BankBoston could generate, and (2)
the present value of the "terminal value" of BankBoston common stock at December
31, 2003.
In calculating a terminal value of BankBoston common stock at December 31,
2003, Merrill Lynch and Morgan Stanley applied a multiple of 12.0x to 14.0x to
year 2004 forecasted cash earnings. The
46
<PAGE>
dividend stream and terminal value were then discounted back to December 31,
1998 using discount rates from 13.0% to 15.0%, which rates Merrill Lynch and
Morgan Stanley viewed as the appropriate range of discount rates for a company
with BankBoston's risk characteristics.
In performing this analysis, Merrill Lynch and Morgan Stanley used First
Call earnings estimates for 1999 and 2000. For periods after 2000, earnings were
grown at First Call's estimated long-term earnings growth rate of 11%. First
Call is a recognized data service that monitors and publishes compilations of
earnings estimates by selected research analysts regarding companies of interest
to institutional investors. Merrill Lynch and Morgan Stanley also assumed an
annual asset growth rate of 5%. Merrill Lynch and Morgan Stanley further assumed
that earnings in excess of those necessary to maintain BankBoston's tangible
common equity ratio at 6.00% are dividendable. Based on the above assumptions,
the stand-alone present value of the BankBoston common stock ranged from $39.94
to $48.88 per share.
Discounted Dividend Analysis--Fleet. Merrill Lynch and Morgan Stanley
performed a discounted dividend analysis to estimate a range of present values
per share of Fleet common stock assuming Fleet continued to operate as a
stand-alone entity. The range was determined in the same manner as that
determined with regard to BankBoston, using the same multiples, terminal years,
and discount rates, which rates Merrill Lynch and Morgan Stanley viewed as the
appropriate range of discount rates for a company with Fleet's risk
characteristics. In performing this analysis, Merrill Lynch and Morgan Stanley
used First Call earnings estimates for 1999 and 2000. For periods after 2000,
earnings were grown at First Call's estimated long-term earnings growth rate of
11%. Merrill Lynch and Morgan Stanley also assumed an annual asset growth rate
of 5%. Merrill Lynch and Morgan Stanley further assumed that earnings in excess
of those necessary to maintain Fleet's tangible common equity ratio at 5.50% are
dividendable. Based on the above assumptions, the stand-alone present value of
the Fleet common stock ranged from $39.33 to $47.85 per share.
Pro Forma Discounted Dividend Analysis. Merrill Lynch and Morgan Stanley
also performed a pro forma discounted dividend analysis to estimate a range of
present values per share of Fleet common stock and BankBoston common stock based
on the pro forma combined company. This range was arrived at using the same
valuation methodology applied in the preceding four paragraphs in terms of
calculating the terminal value of the combined company and the discount rates
applicable to that value. Merrill Lynch and Morgan Stanley also made the same
assumptions as set forth in the preceding four paragraphs, except that: (1)
earnings estimates for the combined company are based on First Call's combined
Consensus Equity Analysts' Estimates; (2) synergies are assumed to equal $600
million pre-tax in 2001, with 60% realized in 2000 and 100% in 2001, with
synergies growing at 3% thereafter; and (3) a deposit premium of 12% is assumed
to be received for the $13.4 billion in deposits assumed to be divested, with a
further assumption that a 1.20% return on average assets is received on the
divestiture package with the proceeds reinvested to earn 10% pre-tax.
Based on these assumptions, the present value of Fleet common stock ranged
from $40.68 to $49.72 per share. Merrill Lynch and Morgan Stanley then applied
the exchange ratio to the pro forma discounted dividend values arrived at per
share of Fleet common stock to determine a range of present values per share of
BankBoston common stock, and determined that the present value of the BankBoston
common stock under this analysis ranged from $48.18 to $58.88 per share.
The analyses set forth in each of the preceding six paragraphs is not
necessarily indicative of actual values or actual future results and does not
purport to reflect the prices at which any securities may trade at the present
or at any time in the future. The discount rates applied to BankBoston and Fleet
referred to in those paragraphs were based on several factors, including the
financial advisors' knowledge of each of BankBoston and Fleet and the industry
in which they operate, the business risk of each company and the overall
interest rate environment as of March 13, 1999. The asset growth rates applied
for BankBoston and Fleet took into consideration several factors, including the
historical asset growth of each of BankBoston and Fleet as well as projected
long-term growth rates. Dividend discount
47
<PAGE>
analysis is a widely used valuation methodology, but the results of this
methodology are highly dependent upon the numerous assumptions that must be
made, including earnings growth rates, dividend payout rates, terminal values
and discount rates.
Contribution Analysis. Merrill Lynch and Morgan Stanley also reviewed the
relative contributions of BankBoston and Fleet to the pro forma combined company
with regard to certain financial and operating measurements. This analysis was
based on market information as of March 12, 1999 and financial data as of, or
for the quarter ended, December 31, 1998. This analysis also took into account
the acquisition of Sanwa Business Credit Corporation by Fleet.
Merrill Lynch and Morgan Stanley then compared these contributions to the
pro forma implied stock ownership interests of BankBoston and Fleet of 38% and
62%, respectively, resulting from the merger. These pro forma implied stock
ownership percentages were based on the exchange ratio and on fully diluted
shares based on stated shares outstanding as of December 31, 1998 and options
and warrants accounted for under the treasury stock method based on the market
price as of March 12, 1999. The following table indicates what BankBoston's and
Fleet's percentage contributions would have been on a pro forma basis to the
combined company in the categories listed. The fully diluted market
capitalization analysis was based on fully diluted shares based on stated shares
outstanding as of December 31, 1998 and options and warrants accounted for under
the treasury stock method based on the market price as of March 12, 1999. The
1999 and 2000 estimated net income analyses were based on consensus First Call
earnings estimates.
<TABLE>
<CAPTION>
CONTRIBUTION
------------------------------
BANKBOSTON FLEET
----------------- -----
<S> <C> <C>
Total assets.......................................... 40% 60%
Total loans........................................... 36 64
Total deposits........................................ 41 59
Common equity......................................... 36 64
Tangible common equity................................ 42 58
Fully diluted market capitalization................... 35 65
1999 estimated net income............................. 36 64
2000 estimated net income............................. 36 64
</TABLE>
Peer Group Total Stock Returns Analysis. Merrill Lynch and Morgan Stanley
analyzed the compound annual growth rates of the stock prices of the following
publicly held companies in the financial services industry that Merrill Lynch
and Morgan Stanley selected and deemed to be relevant. This analysis adjusted
the stock prices for the companies involved to take into account the
reinvestment of dividends in stock and was pro forma for pending acquisitions:
- Chase Manhattan Corp.;
- Firstar Corporation;
- Mellon Bank Corporation;
- SunTrust Banks Inc. (GA);
- Wells Fargo & Company;
- Wachovia Corporation;
- U.S. Bancorp;
- National City Corporation (OH);
- PNC Bank Corp.;
- BankAmerica Corporation;
- KeyCorp;
- Bank One Corporation; and
- First Union Corporation.
48
<PAGE>
Merrill Lynch and Morgan Stanley also analyzed comparable data for those
companies that are in the S&P Bank Index and then compared the data on the
selected companies and the companies in the S&P Bank Index to comparable data
for BankBoston and Fleet, based on one-year, two-year, three-year, four-year and
five-year growth rates. The following table indicates the fully adjusted stock
price compound annual growth rate, including the reinvestment of dividends in
stock, over the one- to five-year period for BankBoston and Fleet as compared to
the average for the companies selected by Merrill Lynch and Morgan Stanley and
the companies that are in the S&P Bank Index.
<TABLE>
<CAPTION>
FULLY ADJUSTED STOCK PRICE COMPOUND ANNUAL GROWTH
RATE
--------------------------------------------------
<S> <C> <C> <C> <C>
1-YEAR 2-YEAR 3-YEAR 4-YEAR
----------- ----------- ----------- -----------
Merrill-Morgan Selected Companies Average................................ 9% 20% 33% 36%
S&P Bank Index........................................................... 3 13 26 31
BankBoston............................................................... (8) 12 30 39
Fleet.................................................................... 17 23 35 34
<CAPTION>
<S> <C>
5-YEAR
-----------
Merrill-Morgan Selected Companies Average................................ 30%
S&P Bank Index........................................................... 25
BankBoston............................................................... 37
Fleet.................................................................... 24
</TABLE>
Comparison of Selected Comparable Companies. Merrill Lynch and Morgan
Stanley compared selected operating and stock market results of BankBoston and
Fleet to the publicly available corresponding data for the companies selected by
Merrill Lynch and Morgan Stanley that are listed above. The following table
compares selected financial data of BankBoston and Fleet with corresponding
median data for the companies selected by Merrill Lynch and Morgan Stanley
relating to stock trading multiples, among other things, that are based on
financial data as of December 31, 1998, earnings estimates from First Call as of
March 12, 1999 and market prices as of March 12, 1999. The calculations of
price-to-1999 and price-to-2000 First Call estimated earnings per share are
based on estimated earnings per share calculated in accordance with GAAP.
<TABLE>
<CAPTION>
FIRST CALL
PRICE/ PRICE/ PRICE/ PROJECTED
PRICE/ STATED 1999 FIRST 2000 FIRST PRICE/ PRICE/ FIVE-YEAR
STATED TANGIBLE CALL CALL 1999 2000 EPS
BOOK BOOK ESTIMATED ESTIMATED ESTIMATED ESTIMATED GROWTH
VALUE VALUE EPS EPS CASH EPS CASH EPS RATE
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Merrill-Morgan Selected Companies
Average............................. 3.40x 4.74x 16.81x 14.84x 15.51x 13.81x 12.0%
BankBoston............................ 2.87 3.43 14.81 13.45 14.03 12.81 11.0
Fleet................................. 2.92 4.52 15.59 14.16 13.45 12.37 11.0
<CAPTION>
2000
PRICE
EARNINGS
GROWTH
RATIO
-------------
<S> <C>
Merrill-Morgan Selected Companies
Average............................. 121%
BankBoston............................ 122
Fleet................................. 129
</TABLE>
Merrill Lynch and Morgan Stanley also compared selected financial data of
BankBoston and Fleet to corresponding median data for the companies selected by
Merrill Lynch and Morgan Stanley relating to certain profitability ratios, among
other things, that are based on financial data as of December 31, 1998 with
earnings normalized for non-recurring charges.
<TABLE>
<CAPTION>
LATEST
LATEST QUARTER
QUARTER ANNUALIZED
ANNUALIZED RETURN ON NON-INTEREST
RETURN ON AVERAGE EXPENSE/ NON-INTEREST
AVERAGE COMMON NET INTEREST AVERAGE INCOME/
ASSETS EQUITY MARGIN ASSETS REVENUES
------------- ------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Merrill-Morgan Selected Companies Average.... 1.44% 17.76% 4.12% 3.97% 44.0%
BankBoston................................... 1.10 17.35 4.13 4.33 43.9
Fleet........................................ 1.68 19.90 4.62 4.15 46.8
<CAPTION>
EFFICIENCY
RATIO
-------------
<S> <C>
Merrill-Morgan Selected Companies Average.... 59.1%
BankBoston................................... 67.2
Fleet........................................ 52.4
</TABLE>
49
<PAGE>
Merrill Lynch and Morgan Stanley further compared selected financial data of
BankBoston and Fleet to corresponding median data for the companies selected by
Merrill Lynch and Morgan Stanley relating to certain balance sheet and asset
quality ratios, among other things, that are based on asset quality information
as of December 31, 1998.
<TABLE>
<CAPTION>
TANGIBLE
COMMON NON- RESERVES/
EQUITY/ INTANGIBLES/ PERFORMING NON-
LOANS/ EQUITY/ TANGIBLE COMMON ASSETS/ PERFORMING
DEPOSITS ASSETS ASSETS EQUITY ASSETS ASSETS
----------- ----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Merrill-Morgan Selected Companies Average.... 102.1% 8.14% 6.12% 24.80% 0.37% 294.8%
BankBoston................................... 88.3 6.55 5.54 16.38 0.55 187.6
Fleet........................................ 99.6 8.49 5.24 35.26 0.27 550.4
<CAPTION>
RESERVES/
LOANS
-----------
<S> <C>
Merrill-Morgan Selected Companies Average.... 1.68%
BankBoston................................... 1.76
Fleet........................................ 2.24
</TABLE>
No company or transaction used in the comparable company analyses described
above is identical to BankBoston, Fleet, the pro forma combined company, or the
merger, as the case may be. Accordingly, an analysis of the results of the
foregoing necessarily involves complex considerations and judgments concerning
financial and operating characteristics and other factors that could affect the
merger, public trading or other values of the companies to which they are being
compared. Mathematical analysis, such as determining the average or median, is
not in itself a meaningful method of using comparable transaction data or
comparable company data.
Pro Forma Financial Impact. Based on an exchange ratio of 1.1844, Merrill
Lynch and Morgan Stanley also analyzed the pro forma per share financial impact
of the merger on BankBoston's and Fleet's earnings per share, book value per
share, tangible book value per share, and tangible common equity. The analysis
was based on the assumption that the combined company would realize management's
projected fully phased-in pre-tax synergies ($600 million) within the time
periods specified by BankBoston and Fleet (60% in 2000 and 100% in 2001).
The analyses performed indicated that, on a per share basis, the merger
would be accretive to BankBoston's and Fleet's estimated earnings per share
(calculated in accordance with GAAP) in each of 2000 and 2001 based on consensus
First Call earnings estimates, First Call long-term growth rates and estimated
pre-tax synergies of $600 million (realized 60% in 2000 and 100% in 2001), and
assuming deposit divestitures of $13.4 billion.
The analyses performed also indicated that the merger would be accretive to
BankBoston's and dilutive to Fleet's book value per share and further indicated
that the merger would be accretive to Fleet's and dilutive of BankBoston's
tangible book value per share, in each case, as of the closing of the merger.
The book value per share and tangible book value per share analyses assume
deposit divestitures of $13.4 billion, and include the impact of an estimated
restructuring charge of $1 billion pretax. The analysis performed further
indicated that the merger would result in a tangible common equity ratio of
5.98% after taking into account the impact of the pro forma adjustments.
The actual operating and financial results achieved by the pro forma
combined company may vary from projected results and variations may be material
as a result of business and operational risks, the timing, amount and costs
associated with achieving cost savings and revenue enhancements, as well as
other factors.
Historical Exchange Ratio Analysis. Merrill Lynch and Morgan Stanley also
compared the per share market prices of Fleet common stock and BankBoston common
stock during different periods during the one-year period prior to March 12,
1999 to determine the implied average exchange ratio
50
<PAGE>
that existed between Fleet common stock and BankBoston common stock for those
periods, and compared those ratios with the exchange ratio. The following table
indicates the average exchange ratio of BankBoston common stock for Fleet common
stock for the periods listed.
<TABLE>
<CAPTION>
AVERAGE
EXCHANGE RATIO
-----------------
<S> <C>
March 12, 1999............................................ 1.049
Five-day period........................................... 1.010
Ten-day period............................................ 0.973
One-month period.......................................... 0.947
Two-month period.......................................... 0.901
Three-month period........................................ 0.901
Six-month period.......................................... 0.932
Nine-month period......................................... 1.027
12-month period........................................... 1.093
</TABLE>
BankBoston retained each of Merrill Lynch and Morgan Stanley based upon
their experience and expertise. Merrill Lynch and Morgan Stanley are
internationally recognized investment banking and advisory firms. As part of
their investment banking businesses, Merrill Lynch and Morgan Stanley are each
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes.
In addition, in the ordinary course of their respective businesses, each of
Merrill Lynch and Morgan Stanley and their respective affiliates also may
actively trade the debt and equity securities of BankBoston and Fleet for their
own account and/or the accounts of their respective customers, and, accordingly,
may at any time hold a long or short position in these securities. In the past
two years, Merrill Lynch and Morgan Stanley each has provided financial
advisory, investment banking and other services to BankBoston unrelated to the
proposed merger, and Merrill Lynch has received approximately $10.2 million, and
Morgan Stanley has received approximately $7.0 million, from BankBoston for the
rendering of such services. Merrill Lynch and Morgan Stanley may provide these
type of services to the combined company in the future and receive fees for
those services.
Pursuant to separate letter agreements between BankBoston and Merrill Lynch
and BankBoston and Morgan Stanley, each dated as of March 11, 1999, BankBoston
agreed to pay each of Merrill Lynch and Morgan Stanley for financial advisory
services rendered through the closing of the merger (1) an initial fee of $5
million payable upon the execution of the merger agreement and regardless of
whether the merger is closed, and (2) a transaction fee of $20 million payable
if and when the merger agreement or any other transaction with Fleet is closed.
Any initial fee paid to each of Merrill Lynch and Morgan Stanley will be
credited against the transaction fee paid to these firms. BankBoston also
agreed, among other things, to reimburse each of Merrill Lynch and Morgan
Stanley for certain expenses incurred in connection with the services provided
by Merrill Lynch and Morgan Stanley, and to indemnify each of Merrill Lynch and
Morgan Stanley and their respective affiliates from and against certain
liabilities and expenses, which may include certain liabilities under U.S.
federal securities laws in connection with their engagements.
CHANGING THE METHOD OF EFFECTING THE COMBINATION
Fleet may, at any time, change the method of effecting the combination of
BankBoston and Fleet, including a change to provide for the merger of a
wholly-owned subsidiary of either party with and into the other. However, no
change may (a) alter or change the amount or kind of consideration to be issued
to holders of the capital stock of BankBoston as provided for in the merger
agreement, except for appropriate adjustments in the event of a change in the
structure of the merger, (b) adversely affect the tax treatment of BankBoston
stockholders as a result of receiving the merger consideration, or
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(c) materially impede or delay consummation of the transactions contemplated by
the merger agreement.
CONVERSION OF STOCK
At the effective time, each share of BankBoston common stock outstanding,
other than the shares described in the following sentence, will be converted
into the right to receive 1.1844 shares of Fleet common stock, subject to
customary antidilution adjustments as provided in the merger agreement and
described below. Shares of BankBoston common stock held by Fleet or BankBoston
or any subsidiary of either company will not be converted into the right to
receive Fleet common stock, except
- in both cases, for shares held, directly or indirectly, in trust accounts,
managed accounts and the like, or otherwise held in a fiduciary capacity
that are beneficially owned by third parties ("TRUST ACCOUNT SHARES") or
in respect of a debt previously contracted ("DPC SHARES"), and
- for shares of BankBoston common stock outstanding immediately prior to the
effective time, the holders of which delivered to BankBoston a written
demand for appraisal of their shares in the manner provided in Sections 86
and 89 of the MBCL.
BECAUSE THE EXCHANGE RATIO IS FIXED AND BECAUSE THE MARKET PRICE OF FLEET COMMON
STOCK PRIOR TO THE EFFECTIVE TIME MAY FLUCTUATE, THE VALUE OF THE SHARES OF
FLEET COMMON STOCK THAT HOLDERS OF BANKBOSTON COMMON STOCK WILL RECEIVE IN THE
MERGER MAY INCREASE OR DECREASE PRIOR TO AND FOLLOWING THE MERGER.
Each outstanding share of BankBoston common stock owned by Fleet or its
subsidiaries or BankBoston or its subsidiaries, other than trust account shares
or DPC shares, or by BankBoston as treasury stock will be cancelled at the
effective time and will cease to exist, and no Fleet common stock or other
consideration will be delivered in exchange for their cancelled shares.
Each share of Fleet common stock and each share of the preferred stock, par
value $1.00 per share, of Fleet issued and outstanding immediately prior to the
effective time will remain issued and outstanding as one share of common stock
or preferred stock, as the case may be, of the combined company immediately
after consummation of the merger.
TREATMENT OF OPTIONS
Each stock option to acquire BankBoston common stock granted under
BankBoston's stock option and incentive plans outstanding and unexercised
immediately prior to the effective time will be converted automatically at the
effective time into a stock option to purchase common stock of the combined
company and will continue to be governed by the terms of the BankBoston stock
plan under which it was granted. The combined company will assume the BankBoston
stock plans. In each case, the number of shares of Fleet common stock subject to
the new Fleet stock option will be equal to the product of the number of shares
of BankBoston common stock subject to the BankBoston stock option and the
exchange ratio, rounded down to the nearest whole share. The exercise price per
share of Fleet common stock subject to the new Fleet stock option will be equal
to the exercise price per share of BankBoston common stock under the BankBoston
stock option divided by the exchange ratio, rounded up to the nearest whole
cent. The duration and other terms of each new Fleet stock option will be
substantially the same as the prior BankBoston stock option. In any event, stock
options that are incentive stock options under the Code will be adjusted in the
manner prescribed by the Code.
EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
At or prior to the effective time, Fleet will deposit, or cause to be
deposited, with a subsidiary of Fleet, or another bank or trust company
reasonably acceptable to both Fleet and BankBoston, certificates representing
the shares of Fleet common stock and cash in lieu of any fractional shares to be
issued pursuant to the merger agreement in exchange for outstanding shares of
BankBoston common stock. That subsidiary or bank will act as the exchange agent
for the benefit of the holders of certificates of BankBoston common stock.
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As soon as practicable after the effective time, a form of transmittal
letter will be mailed by the exchange agent to BankBoston stockholders. This
transmittal letter will contain instructions with respect to the surrender of
certificates representing BankBoston common stock.
YOU SHOULD NOT RETURN YOUR BANKBOSTON COMMON STOCK CERTIFICATES WITH THE
ENCLOSED PROXY AND SHOULD NOT FORWARD THEM TO THE EXCHANGE AGENT UNTIL YOU
RECEIVE A LETTER OF TRANSMITTAL FOLLOWING THE EFFECTIVE TIME.
Until they surrender their BankBoston stock certificates for exchange after
the effective time, holders of those certificates will accrue but will not be
paid dividends or other distributions declared after the effective time with
respect to Fleet common stock into which their shares have been converted. When
they surrender their certificates, the combined company will pay any unpaid
dividends or other distributions, without interest. After the effective time,
there will be no transfers on the stock transfer books of BankBoston of shares
of BankBoston common stock issued and outstanding immediately prior to the
effective time. If certificates representing shares of BankBoston common stock
are presented after the effective time, they will be canceled and exchanged for
a certificate representing the applicable number of shares of Fleet common
stock.
No fractional shares of Fleet common stock will be issued to any holder of
BankBoston common stock upon consummation of the merger. For each fractional
share that would otherwise be issued, Fleet will pay cash in an amount equal to
the fraction multiplied by the average of the closing sale prices of Fleet
common stock on the NYSE as reported by THE WALL STREET JOURNAL for the five
trading days immediately preceding the date of the effective time. No interest
will be paid or accrued on cash payable to holders of those certificates in lieu
of fractional shares.
None of Fleet, BankBoston or any other person will be liable to any former
holder of BankBoston common stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
If a certificate for BankBoston common stock has been lost, stolen or
destroyed, the exchange agent will issue the consideration properly payable
under the merger agreement upon receipt of appropriate evidence as to that loss,
theft or destruction, appropriate evidence as to the ownership of that
certificate by the claimant, and appropriate and customary indemnification.
Holders of Fleet common stock will not be required to exchange certificates
representing their shares of Fleet common stock or otherwise take any action as
a result of the consummation of the merger. THERE IS NO NEED FOR FLEET
STOCKHOLDERS TO SUBMIT THEIR FLEET COMMON STOCK CERTIFICATES TO FLEET,
BANKBOSTON, THE EXCHANGE AGENT OR TO ANY OTHER PERSON IN CONNECTION WITH THE
MERGER.
For a description of Fleet common stock and a description of the differences
between the rights of the holders of BankBoston common stock, on the one hand,
and holders of Fleet common stock, on the other hand, see "Description of Fleet
Capital Stock" and "Comparison of Stockholders' Rights."
EFFECTIVE TIME
The effective time of the merger will be the time and date set forth in the
articles of merger that will be filed with each of the Secretary of State of the
State of Rhode Island and the Secretary of the Commonwealth of the Commonwealth
of Massachusetts on the closing date of the merger. The closing date will occur
on a date to be specified by the parties. Subject to applicable law, this date
will be no later than five business days after the satisfaction or waiver of the
latest to occur of the conditions precedent to the merger set forth in the
merger agreement. Fleet and BankBoston each anticipate that the merger will be
consummated during the fourth quarter of 1999, if not earlier. However,
consummation of the merger could be delayed if there is a delay in obtaining the
required regulatory approvals or in satisfying other conditions to the merger.
There can be no assurances as to whether, and on what date, Fleet and BankBoston
will obtain those approvals or that Fleet and BankBoston will consummate the
merger. If the merger is not completed on or before March 14, 2000, either Fleet
or BankBoston may terminate the agreement, unless the failure to effect the
merger by that date is due to the failure
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of the party seeking to terminate the merger agreement to perform or observe the
covenants and agreements of that party set forth in the merger agreement. See
"--Conditions to Consummation of the Merger" and "--Regulatory Approvals
Required for the Merger."
REPRESENTATIONS AND WARRANTIES
The merger agreement contains reciprocal representations and warranties of
Fleet and BankBoston, as to, among other things,
- their corporate organization and existence and that of their subsidiaries;
- their capitalization and that of their subsidiaries;
- their corporate power and authority;
- the compliance of the merger agreement with (1) their articles and bylaws,
(2) applicable law, and (3) certain material agreements;
- governmental and third-party approvals;
- the timely filing of required regulatory reports;
- their financial statements and filings with the Securities and Exchange
Commission (the "SEC");
- their brokers' fees;
- the absence of certain changes in their businesses since December 31,
1998;
- the absence of material legal proceedings and injunctions;
- the filing and accuracy of their tax returns;
- their employee benefit plans and related matters;
- the availability and accuracy of their reports and filings with the SEC;
- their compliance with applicable law;
- the validity of, and the absence of material defaults under, certain
contracts;
- conduct of their non-U.S. banking, consumer finance and securities
operations;
- their agreements with regulatory agencies;
- their use of interest rate risk management instruments, such as swaps and
options;
- the absence of undisclosed liabilities;
- their insurance;
- the absence of environmental liabilities;
- the inapplicability to the merger of Massachusetts and Rhode Island
anti-takeover laws, the Fleet rights agreement and the Rights Agreement,
dated June 28, 1990, as amended, between BankBoston and BankBoston, N.A.,
as Rights Agent (the "BANKBOSTON RIGHTS AGREEMENT");
- their year 2000 risk management plans;
- qualification of the merger as a transaction of a type that is generally
tax-free for U.S. federal income tax purposes and for pooling of interests
accounting treatment;
- the absence of stockholder agreements;
- their receipt of opinions from financial advisors; and
- the accuracy of information provided for inclusion in documents filed with
regulatory agencies.
CONDUCT OF BUSINESS PENDING THE MERGER AND OTHER AGREEMENTS
Pursuant to the merger agreement, prior to the effective time, each of Fleet
and BankBoston has agreed to, and to cause their respective subsidiaries to:
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- conduct its business in the ordinary course;
- use its reasonable best efforts to maintain and preserve intact its
business organization, employees and advantageous business relationships,
and to retain the services of its officers and key employees;
- take no action that would adversely affect or delay the receipt of any
required regulatory approvals or to perform its covenants and agreements
under the merger agreement or the option agreements;
- use its reasonable best efforts to promptly prepare and file all necessary
applications, notices, petitions and filings, and to cooperate in
obtaining permits, consents, approvals and authorizations of all necessary
third parties and governmental entities;
- furnish to the other party all information concerning themselves and their
subsidiaries, directors, officers and stockholders and any other matters
as may be necessary in connection with the merger, and to use its
reasonable best efforts to take all necessary actions to comply promptly
with all legal requirements that may be imposed on a party or its
subsidiaries to consummate the merger; and
- 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, and for
the purposes set forth in, the merger agreement.
Fleet and BankBoston also agreed that the employee benefit plans in place at
the effective time with respect to employees of Fleet and BankBoston, as the
case may be, will remain in effect for those employees, until the combined
company adopts new benefit plans covering those employees who continue to be
employed by the combined company. Fleet and BankBoston agreed to cooperate in
reviewing, evaluating and analyzing the Fleet benefit plans and the BankBoston
benefit plans with a view towards developing appropriate new benefit plans.
Under the terms of the BankBoston Performance Recognition Opportunity Plan
and certain incentive plans of BankBoston's business units, certain employees of
BankBoston and its subsidiaries will be entitled to receive PRO RATA bonuses for
performance during 1999 prior to completion of the merger. BankBoston has agreed
to determine these bonuses in accordance with the terms of those plans and
consistent with past practice. BankBoston has also agreed that the aggregate
amount required to be contributed as a result of the merger to trusts maintained
in respect of certain BankBoston benefit plans will be subject to a dollar
limitation. Fleet and BankBoston also reached certain agreements with respect to
directors' and officers' indemnification and insurance, and with respect to
dividends. See "--Interests of Certain Persons in the Merger."
Assuming that BankBoston delivers to Fleet the Section 16 information
described below in a timely fashion, Fleet also has agreed to adopt a resolution
providing that the receipt by BankBoston insiders of Fleet common stock in
exchange for BankBoston common stock, and of stock options on Fleet common stock
upon conversion of stock options on BankBoston common stock, is intended to be
exempt from liability pursuant to Section 16(b) under the Securities and
Exchange Act of 1934, as amended (the "EXCHANGE ACT").
"SECTION 16 INFORMATION" means information accurate in all respects
regarding the BankBoston insiders, the number of shares of BankBoston common
stock held by each BankBoston insider and expected to be exchanged for Fleet
common stock in the merger, and the number and description of the stock options
on BankBoston common stock held by each BankBoston insider and expected to be
converted into stock options on Fleet common stock in connection with the
merger.
"BANKBOSTON INSIDERS" means those officers and directors of Bank Boston who
are subject to the reporting requirements of Section 16(a) of the Exchange Act
and who are listed in the Section 16 information.
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In addition, except as expressly contemplated by the merger agreement or
specified in a schedule to the merger agreement, or as contemplated by the
option agreements, each of Fleet and BankBoston has agreed that, without the
consent of the other party, it and its subsidiaries will not, among other
things:
INDEBTEDNESS
- other than in the ordinary course of business,
- incur any indebtedness for borrowed money, although the parties have
made an exception for short-term indebtedness incurred to refinance
short-term indebtedness and indebtedness of Fleet or any of its
subsidiaries to Fleet or any of its subsidiaries, on the one hand, or
of BankBoston or any of its subsidiaries to BankBoston or any of its
subsidiaries, on the other hand,
- assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other individual, corporation or
other entity, or
- make any loan or advance;
DIVIDENDS AND STOCK REPURCHASES
- make, declare or pay any dividend or make any other distribution on or,
directly or indirectly, redeem, purchase or otherwise acquire any shares
of its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, except:
- in the case of BankBoston, for regular quarterly cash dividends at a
rate not in excess of $.32 per share of BankBoston common stock,
- in the case of Fleet, for regular quarterly cash dividends on Fleet
common stock at a rate not in excess of $.27 per share of Fleet common
stock and regular quarterly cash dividends on Fleet preferred stock
outstanding as of the date of the merger agreement at the rates set
forth in the applicable certificate of designations for that Fleet
preferred stock,
- for dividends paid by any of the subsidiaries of each of Fleet and
BankBoston to Fleet or BankBoston or any of their subsidiaries,
respectively, and dividends paid in the ordinary course of business by
any subsidiaries, whether or not wholly owned, of each of BankBoston
and Fleet, and
- for the acceptance of shares of BankBoston common stock or Fleet common
stock, as the case may be, as payment for the exercise price of stock
options or for withholding taxes incurred in connection with the
exercise of stock options or the vesting of restricted stock, in each
case, in accordance with past practice and the terms of the applicable
award agreements;
CAPITAL STOCK
- adjust, split, combine or reclassify any capital stock;
- grant any stock appreciation right or grant any individual, corporation or
other entity any right to acquire any shares of its capital stock other
than:
- pursuant to the Fleet rights agreement or the BankBoston rights
agreement or any renewal or replacement of either of them, or
- pursuant to the Fleet stock plans or the BankBoston stock plans, as the
case may be, in the ordinary course of business;
- issue any additional shares of capital stock except:
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- pursuant to the exercise of stock options outstanding as of March 14,
1999 or issued in compliance with the preceding bullet point,
- pursuant to the option agreements,
- pursuant to the Fleet rights agreement or the BankBoston rights
agreement or any renewal or replacement of either of them, or
- in the ordinary course of business consistent with past practice in
connection with the BankBoston dividend reinvestment plan, the
BankBoston stock plans, the Fleet stock plans and the Fleet dividend
reinvestment plan;
DISPOSITIONS AND ACQUISITIONS
- sell, transfer, mortgage, encumber or otherwise dispose of any of its
material properties or assets to any individual, corporation or other
entity, other than a subsidiary, or cancel, release or assign any
indebtedness to any person or any claims held by any person, in each case,
other than in the ordinary course of business or pursuant to contracts or
agreements in force at the date of the merger agreement;
- except for transactions in the ordinary course of business or pursuant to
contracts or agreements in force at the date of or permitted by the merger
agreement, make any material investment either by purchase of stock or
securities, contributions to capital, property transfers, or purchase of
any property or assets of any other individual, corporation or other
entity, other than a subsidiary;
CONTRACTS
- except for transactions in the ordinary course of business, terminate or
waive any material provision of, any material contract or agreement, or
make any change in any instrument or agreement governing the terms of any
of its securities or material leases or contract, other than normal
renewals of contracts and leases without material adverse changes of
terms;
EMPLOYEES
- increase in any manner the compensation or fringe benefits of any of its
employees or pay any pension or retirement allowance not required by any
existing plan or agreement to any of its employees, or
- become a party to, amend or commit itself to any pension, retirement,
profit-sharing or welfare benefit plan or agreement or employment
agreement with or for the benefit of any employee other than in the
ordinary course of business, or
- accelerate the vesting of, or the lapsing of restrictions with respect to,
any stock options or other stock-based compensation;
ACQUISITION PROPOSALS
- solicit or encourage from any third party, enter into any negotiations,
discussions or agreement in respect of, authorize any individual,
corporation or other entity to solicit or encourage from any third party,
enter into any negotiations, discussions or agreements in respect of,
provide or cause to be provided any confidential information in connection
with, any inquiries or proposals relating to the disposition of all or
substantially all of its businesses or assets, the acquisition of its
voting securities, or the merger of it or any of its subsidiaries with any
corporation or other entity other than as provided by the merger
agreement;
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SETTLING CLAIMS
- settle any material claim, action or proceeding involving money damages,
except in the ordinary course of business;
ADVERSE ACTIONS
- knowingly take any action that would prevent or impede the merger from
qualifying for pooling of interests accounting treatment or as a
transaction of a type that is generally tax-free for U.S. federal income
tax purposes, or
- take any action that is in violation of any provision of the merger
agreement, is intended or expected to result in any of its representations
and warranties set forth in the merger agreement being or becoming untrue
in any material respect at any time prior to the effective time, or in any
of the conditions to the merger set forth in the merger agreement not
being satisfied, except, in every case, as may be required by applicable
law;
AMENDMENTS TO GOVERNING DOCUMENTS
- except as required under the merger agreement, amend its articles or its
bylaws, amend or redeem the rights issued under the Fleet rights agreement
or the BankBoston rights agreement, as the case may be, or otherwise take
any action to exempt any individual or entity (other than BankBoston or
its subsidiaries or Fleet or its subsidiaries, as the case may be) or any
action taken by that individual or entity from the Fleet rights agreement
or the BankBoston rights agreement, as the case may be, or any state
anti-takeover law or similar restrictive provisions of a party's
organizational documents;
INVESTMENT PORTFOLIO
- other than in prior consultation with the other party, restructure or
materially change its investment securities portfolio or its gap position
through purchases, sales or otherwise,
- other than in prior consultation with the other party, materially change
the manner in which the portfolio is classified or reported;
ACCOUNTING
- implement or adopt any change in its accounting principles, practices or
methods, other than as may be required by GAAP or regulatory guidelines;
or
OTHER AGREEMENTS
- agree to take, make any commitment to take, or adopt any resolutions of
its board of directors in support of, any of the actions listed above.
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CONDITIONS TO CONSUMMATION OF THE MERGER
Each party's obligation to effect the merger is subject to the satisfaction
or waiver, where permissible, of the following conditions at or prior to the
effective time:
- adoption of the merger agreement by the requisite affirmative votes of the
holders of Fleet common stock and BankBoston common stock entitled to vote
on the matter;
- authorization for listing on the NYSE of the shares of Fleet common stock
that are to be issued to BankBoston stockholders upon consummation of the
merger, subject to official notice of issuance;
- receipt of all regulatory approvals required to consummate the merger and
all those approvals remaining in full force and effect and all statutory
waiting periods with respect to those approvals having expired;
- effectiveness of the registration statement (the "REGISTRATION STATEMENT")
of which this Joint Proxy Statement-Prospectus forms a part and no stop
order suspending its effectiveness having been issued and no proceedings
for that purpose having been initiated or threatened by the SEC;
- no order, injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the merger or any of the other transactions contemplated
by the merger agreement will be in effect, and no statute, rule,
regulation, order, injunction or decree will have been enacted, entered,
promulgated or enforced by any court, administrative agency or commission
or other governmental authority or instrumentality that prohibits or makes
illegal consummation of the merger;
- receipt by Fleet and BankBoston of the opinions of their respective
counsel, Wachtell, Lipton, Rosen & Katz and Skadden, Arps, Slate, Meagher
& Flom LLP, in form and substance reasonably satisfactory to Fleet and
BankBoston, as the case may be, dated as of the closing date,
substantially that, on the basis of facts, representations and assumptions
set forth in their opinions that are consistent with the state of facts
existing at the effective time, the merger will be treated as a
transaction of a type that is generally tax-free for U.S. federal income
tax purposes;
- receipt by each of Fleet and BankBoston of a letter from their respective
independent accountants, KPMG Peat Marwick LLP and PricewaterhouseCoopers
LLP, addressed to Fleet or BankBoston, as the case may be, that the merger
will qualify for pooling of interests accounting treatment;
- the representations and warranties of the other party to the merger
agreement will be true and correct in all material respects as of the date
of the merger agreement and, except to the extent those representations
and warranties speak as of an earlier date, as of the closing date as
though made on the closing date. For purposes of this condition, those
representations and warranties will be deemed to be true and correct,
unless the failure or failures of those representations and warranties to
be so true and correct, individually or in the aggregate, and without
giving effect to any qualification as to materiality or material adverse
effect set forth in those representations and warranties, would have a
material adverse effect on the party making the representation; and
- each party will have performed in all material respects all obligations
required to be performed by it under the merger agreement at or prior to
the closing date.
Fleet's obligation to effect the merger is also subject to the condition
that no contract, agreement, arrangement or commitment to sell or divest a
significant amount of the branch deposits of Fleet located within either the
State of Connecticut or the State of Rhode Island will have been entered into or
contemplated.
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BankBoston's obligation to effect the merger is also subject to the
following additional conditions that:
- no contract, agreement, arrangement or commitment to sell or divest a
significant amount of the branch deposits of BankBoston located within the
Commonwealth of Massachusetts will have been entered into or contemplated;
and
- Fleet will have taken all actions as are necessary so that (1) the Bylaw
Amendment is adopted by the Fleet Board and the Fleet stockholders not
later than the effective time and (2) the resolutions related to the
combined company board and the committees of the combined company board
are adopted by the Fleet Board not later than the effective time.
No assurance can be provided as to if, or when, the required 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 March 14,
2000, either Fleet or BankBoston may terminate the merger agreement, unless the
failure to effect the merger by that date is due to the failure of the party
seeking to terminate the merger agreement to perform or observe covenants and
agreements of that party set forth in the merger agreement.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
Fleet and BankBoston have agreed to use their reasonable best efforts to
obtain all regulatory approvals required to consummate the transactions
contemplated by the merger agreement. These approvals include approval from the
Board of Governors of the Federal Reserve System (the "FEDERAL RESERVE BOARD")
and various state regulatory authorities. Fleet and BankBoston have completed
the filing of applications and notifications to obtain the required regulatory
approvals. The merger cannot proceed in the absence of those required regulatory
approvals. There can be no assurance that those required regulatory approvals
will be obtained, and, if obtained, there can be no assurance as to the date of
any of those approvals or the absence of any litigation challenging those
approvals. There can likewise be no assurance that the U.S. Department of
Justice (the "DOJ") or any state attorney general will not attempt to challenge
the merger on antitrust grounds, or, if a challenge is made, the result of the
challenge.
Fleet and BankBoston are not aware of any other material governmental
approvals or actions that are required prior to the parties' consummation of the
merger other than those described below. If any additional governmental
approvals or actions are required, the parties presently intend to seek those
approvals or actions. There can be no assurance, however, that the parties will
obtain these additional approvals or actions.
FEDERAL RESERVE BOARD. The merger is subject to approval by the Federal
Reserve Board pursuant to Sections 3 and 4 of the Bank Holding Company Act of
1956, as amended (the "BHCA"), and Section 25(a) of the Federal Reserve Act, as
amended (the "FEDERAL RESERVE ACT"). Fleet and BankBoston have filed the
required application and notification with the Federal Reserve Board for
approval of the merger. Assuming Federal Reserve Board approval, the parties may
not consummate the merger until 30 days after that approval. During that time,
the DOJ may challenge the merger on antitrust grounds and seek the divestiture
of certain assets and liabilities. With the approval of the Federal Reserve
Board and the DOJ, the waiting period may be reduced to no fewer than 15 days.
The Federal Reserve Board is prohibited from approving any transaction under
the applicable statutes that (1) would result in a monopoly, (2) would be in
furtherance of any combination or conspiracy to monopolize or to attempt to
monopolize the business of banking in any part of the United States, or (3) may
have the effect in any section of the United States of substantially lessening
competition, tending to create a monopoly or resulting in a restraint of trade,
unless the Federal Reserve Board finds that the anti-competitive effects of the
transaction are clearly outweighed in the public interest by the probable effect
of the transaction in meeting the convenience and needs of the communities to be
served.
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In addition, in reviewing a transaction under the applicable statutes, the
Federal Reserve Board will consider the financial and managerial resources of
the companies and their subsidiary banks and the convenience and needs of the
communities to be served. As part of, or in addition to, consideration of these
factors, the parties anticipate that the Federal Reserve Board will consider the
regulatory status of Fleet and BankBoston, current and projected economic
conditions in the areas of the United States where Fleet and BankBoston operate,
and the overall capital and safety and soundness standards established by the
Federal Deposit Insurance Corporation Improvement Act of 1991 (the "FDICIA") and
the regulations promulgated under the FDICIA.
Furthermore, the Federal Reserve Board will assess the degree to which Fleet
and BankBoston and their subsidiaries have taken appropriate steps to assure
that electronic data processing systems and those of their vendors are year 2000
compliant, as well as their plans for ensuring year 2000 readiness of the
combined company. Additional information about Fleet's and BankBoston's year
2000 compliance efforts to date may be found in each company's Annual Report on
Form 10-K for the year ended December 31, 1998. See "Where You Can Find More
Information."
Under the Community Reinvestment Act of 1977, as amended (the "CRA"), the
Federal Reserve Board must take into account the record of performance of each
of Fleet and BankBoston in meeting the credit needs of the entire community,
including low- and moderate-income neighborhoods, served by each company and
their subsidiaries. Each of Fleet's and BankBoston's subsidiary depository
institutions (the "BANKS"), has either an outstanding or satisfactory CRA rating
with the appropriate federal regulator. None of the Banks received any negative
comments from its respective federal regulator in its last CRA examination
relating to those ratings that were material and remain unresolved.
The Federal Reserve Board will furnish notice and a copy of the application
for approval of the merger to the Office of the Comptroller of the Currency (the
"OCC"). The OCC has 30 days to submit their views and recommendations to the
Federal Reserve Board. The Federal Reserve Board is required to hold a public
hearing in the event it receives a written recommendation of disapproval of the
application from the OCC within that 30-day period. Furthermore, the BHCA and
Federal Reserve Board regulations require publication of notice of, and the
opportunity for public comment on, the application submitted by Fleet for
approval of the merger, and authorize the Federal Reserve Board to hold a public
meeting in connection with the application if the Federal Reserve Board
determines that a meeting would be appropriate. Any meeting or comments provided
by third parties could prolong the period during which the application is
subject to review by the Federal Reserve Board.
As noted above, the merger may not be consummated until 30 days after
Federal Reserve Board approval, during which time the DOJ may challenge the
merger on antitrust grounds and seek the divestiture of certain assets and
liabilities. With the approval of the Federal Reserve Board and the DOJ, the
waiting period may be reduced to no fewer than 15 days. The commencement of an
antitrust action by the DOJ would stay the effectiveness of Federal Reserve
Board approval of the merger, unless a court specifically orders otherwise. In
reviewing the merger, the DOJ could analyze the merger's effect on competition
differently from the Federal Reserve Board, and, thus, it is possible that the
DOJ could reach a different conclusion than the Federal Reserve Board regarding
the merger's competitive effects. While Fleet and BankBoston believe there are
substantial arguments to the contrary, failure of the DOJ to object to the
merger may not prevent the filing of antitrust actions by private persons or
state attorneys general.
In general, the Federal Reserve Board and the DOJ will examine the impact of
the merger on competition in various product and geographic markets, including
competition for deposits and loans, especially loans to small- and middle-market
businesses. Fleet and BankBoston have proposed divestitures of branches that
together account for approximately $12.5 billion in deposits, dispersed
approximately as follows: Massachusetts and New Hampshire--70%; Rhode
Island--18%; and Connecticut--12%. Accompanying the divestiture will be
associated small business and middle-market loans and a substantial
infrastructure to support those loan portfolios. Fleet and BankBoston believe
that their proposed divestiture is consistent with the antitrust guidelines of
the Federal Reserve Board and the
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DOJ, but can give no assurance that one or both of these agencies will not seek
greater levels of divestiture. Fleet and BankBoston do not believe that the
proposed divestiture will have any significant negative effect on the combined
company.
Fleet's and BankBoston's rights to exercise their respective options under
the option agreements are also subject to the prior approval of the Federal
Reserve Board, to the extent that the exercise of their respective options under
the option agreements would result in Fleet or BankBoston, as the case may be,
owning more than 5% of the outstanding shares of BankBoston common stock or
Fleet common stock, respectively. In considering whether to approve Fleet's or
BankBoston's right to exercise its respective option, including its respective
right to purchase more than 5% of the outstanding shares of BankBoston common
stock or Fleet common stock, as the case may be, the Federal Reserve Board would
generally apply the same statutory criteria it will apply to its consideration
of the merger.
MASSACHUSETTS BOARD OF BANK INCORPORATION. The merger requires the approval
of the Massachusetts Board of Bank Incorporation under Section 2 of Chapter 167A
of the Massachusetts General Laws. In determining whether to approve the merger,
the Massachusetts Board would consider whether or not the merger will
unreasonably affect competition among Massachusetts banking institutions and
will promote public convenience and advantage. In making this determination, the
Massachusetts Board would consider, but would not be limited to, a showing of
net new benefits including initial capital investments, job creation plans,
consumer and business services and commitments to maintain and open branch
offices within a bank's statutorily-delineated local community.
Section 4 of Chapter 167A of the Massachusetts General Laws also requires
that, for a merger or acquisition requiring approval, the Massachusetts Board
receive notice from the Massachusetts Housing Partnership Fund (the
"MASSACHUSETTS HOUSING FUND") that the proposed acquiror has made arrangements
satisfactory to the Massachusetts Housing Fund to make 0.9% of its assets
located in Massachusetts available for call by the Massachusetts Housing Fund
for a period of ten years for purposes of funding various affordable housing
programs. Under the statute, unless waived by the Massachusetts Commissioner of
Banks, Fleet will be required to maintain, for a period of two years following
the consummation of the merger, the asset base of BankBoston N.A. at a level
equal to or greater than the total assets of BankBoston N.A. on the date of
consummation of the merger. In addition, unless waived by the Massachusetts
Commissioner of Banks, the Massachusetts Board may not approve any proposed
acquisition or merger if that acquisition or merger would result in a bank
holding company holding or controlling in excess of 30% of the total deposits,
exclusive of foreign deposits, of depository institutions in Massachusetts
insured by the FDIC. After the merger and divestitures contemplated by the
parties, it is estimated that the combined company would not control more than
30% of those total deposits, and, therefore, a permanent waiver of the deposit
cap limit will not be required from the Massachusetts Commissioner of Banks.
Fleet's and BankBoston's rights to exercise their respective options under
the option agreements are also subject to the prior approval of the
Massachusetts Board to the extent that the exercise of those options would
result in Fleet or BankBoston, as the case may be, owning more than 5% of the
outstanding shares of BankBoston common stock or Fleet common stock,
respectively. In considering whether to approve Fleet's or BankBoston's right to
purchase more than 5% of the outstanding shares of BankBoston common stock or
Fleet common stock, as the case may be, the Massachusetts Board would generally
apply the same statutory criteria it will apply to its consideration of the
merger.
CERTAIN FOREIGN APPROVALS. Approvals will also be required from, and
notices must be submitted to, certain foreign bank and securities regulatory
authorities in connection with the merger and the change in ownership of certain
businesses that are controlled by BankBoston abroad. Fleet and BankBoston have
filed and submitted, or will shortly file and submit, all applications and
notices required to be submitted to obtain these approvals and provide these
notices.
OTHER STATE REGULATORY AUTHORITIES. The parties have been or will be filing
applications or notifications with various other state financial institution
regulatory and insurance authorities in connection
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with acquisitions or changes in control of subsidiaries of BankBoston that may
be deemed to result from the consummation of the merger. An application will be
filed with the Maine Bureau of Banking and a copy of the Federal Reserve Board
application will be filed with the Florida Department of Banking and Finance. In
addition, the merger may be reviewed by the state attorneys general in the
various states in which Fleet and BankBoston own Banks. While Fleet and
BankBoston believe there are substantial arguments to the contrary, these
authorities may seek, under the applicable state laws and regulations, to
investigate and/or disapprove the merger under the circumstances and based upon
the review set forth in applicable state laws and regulations. There can be no
assurance that one or more state attorneys general will not attempt to file an
antitrust action to enjoin the merger.
OTHER REQUISITE APPROVALS, NOTICES AND CONSENTS. Approvals also will be
required from certain non-bank regulatory authorities in connection with the
changes, as a result of the merger, in the ownership of certain businesses that
are controlled by BankBoston. Ownership changes regarding registered
broker-dealers controlled by BankBoston are subject to review by the various
regulatory and self-regulatory organizations, including the NYSE, the National
Association of Securities Dealers, Inc. and the Boston Stock Exchange, Inc., as
well as approvals of certain relationships between various subsidiaries of Fleet
and BankBoston. The reviews could require that additional policies and
procedures be adopted by some of these subsidiaries. Fleet and BankBoston do not
anticipate, however, that these policies and procedures would have a material
impact on the business of any subsidiary.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated U.S. federal income
tax consequences of the merger to BankBoston stockholders who hold BankBoston
common stock as a capital asset, that is, generally for investment. The summary
is based on the Internal Revenue Code (the "CODE"), Treasury regulations issued
under the Code, and administrative rulings and court decisions in effect as of
the date of this Joint Proxy Statement-Prospectus, all of which are subject to
change at any time, possibly with retroactive effect. This discussion summarizes
the opinion of the law firm of Wachtell, Lipton, Rosen & Katz, counsel to Fleet.
This summary is not a complete description of all of the consequences of the
merger and, in particular, may not address U.S. federal income tax
considerations applicable to BankBoston stockholders subject to special
treatment under U.S. federal income tax law. BankBoston stockholders subject to
special treatment include, for example, foreign persons, financial institutions,
dealers in securities, traders in securities who elect to apply a mark-to-market
method of accounting, insurance companies, tax-exempt entities, holders who
acquired their shares of BankBoston common stock pursuant to the exercise of an
employee stock option or right or otherwise as compensation, and holders who
hold BankBoston common stock as part of a "hedge," "straddle" or "conversion
transaction." In addition, no information is provided in this document with
respect to the tax consequences of the merger under applicable foreign, state or
local laws.
BANKBOSTON STOCKHOLDERS ARE URGED TO CONSULT WITH THEIR TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE MERGER TO THEM IN THEIR PARTICULAR
SITUATIONS, INCLUDING THE EFFECTS OF U. S. FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS.
GENERAL. In connection with the filing of the Registration Statement,
Wachtell, Lipton, Rosen & Katz has delivered to Fleet its opinion, dated the
date of this Joint Proxy Statement-Prospectus, addressing the U.S. federal
income tax consequences of the merger described below. Wachtell, Lipton, Rosen &
Katz has rendered its opinion on the basis of facts, representations and
assumptions set forth or referred to in its opinion that are consistent with the
state of facts expected to exist at the effective time. In rendering this
opinion, Wachtell, Lipton, Rosen & Katz required and relied upon factual
representations contained in certificates of officers of Fleet and BankBoston.
With respect to those certificates, Wachtell, Lipton, Rosen & Katz relied only
on factual statements and representations contained in those certificates and,
to the extent that those certificates also contain legal conclusions, Wachtell,
Lipton, Rosen & Katz did not rely upon those legal conclusions. The opinion is
that, for U.S.
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federal income tax purposes, the merger will be treated as a transaction of a
type that is generally tax-free and, accordingly:
- neither Fleet nor BankBoston will recognize any gain or loss as a result
of the merger;
- BankBoston stockholders who exchange all of their BankBoston common stock
solely for Fleet common stock pursuant to the merger will recognize no
gain or loss, except with respect to cash received in lieu of a fractional
share interest in Fleet common stock;
- the aggregate tax basis of the shares of Fleet common stock received by
BankBoston stockholders, including fractional shares deemed received and
redeemed as described below, will equal the aggregate tax basis of the
shares of BankBoston common stock surrendered in exchange for that Fleet
common stock;
- the holding period of a share of Fleet common stock received in the
merger, including a fractional share deemed received and redeemed as
described below, will include the holder's holding period in the
BankBoston common stock surrendered in exchange for that Fleet common
stock; and
- Cash received by a BankBoston stockholder in lieu of a fractional share
interest in Fleet common stock will be treated as received in redemption
of that fractional share interest, and a BankBoston stockholder will
recognize capital gain or loss for U.S. federal income tax purposes
measured by the difference between the amount of cash received and the
portion of the tax basis of the share of BankBoston common stock allocable
to that fractional share interest, if the deemed redemption meaningfully
reduces the BankBoston stockholder's interest in Fleet, taking into
account the constructive ownership rules of the Code. This capital gain or
loss will be a long-term capital gain or loss if the holding period for
that share of BankBoston common stock is greater than one year at the
effective time. A common stockholder that owns an extremely small
percentage of the stock of BankBoston, exercises no control over the
affairs of Fleet or BankBoston, and who does not actually or
constructively own any shares of Fleet stock other than those received in
the merger, will be treated as experiencing a meaningful reduction in
interest.
The obligations of Fleet and BankBoston to consummate the merger are
conditioned upon the receipt of further opinions of their respective counsel,
Wachtell, Lipton, Rosen & Katz and Skadden, Arps, Slate, Meagher & Flom LLP, in
form and substance reasonably satisfactory to Fleet and BankBoston, as the case
may be, dated the closing date, substantially that, on the basis of facts,
factual representations and assumptions set forth in each opinion that are
consistent with the state of facts existing at the effective time, the merger
will be treated as a reorganization within the meaning of Section 368(a) of the
Code, that is, a transaction of a type that is generally tax-free for U.S.
federal income tax purposes. In rendering those opinions, counsel may require
and rely upon representations contained in certificates of officers of Fleet,
BankBoston and others, reasonably satisfactory in form and substance to counsel.
None of the tax opinions to be delivered to the parties in connection with the
merger as described in this document is binding on the Internal Revenue Service
(the "IRS") or the courts, and the parties do not intend to request a ruling
from the IRS with respect to the merger. Accordingly, there can be no assurance
that the IRS will not challenge the conclusions reflected in those opinions or
that a court will not sustain such challenge.
In the event that (a) either Fleet or BankBoston fails to receive the
opinion of its counsel described in the immediately preceding paragraph, (b)
Fleet and BankBoston decide to waive the condition to their obligations to
consummate the merger relating to those opinions and (c) Fleet and BankBoston
determine that the tax consequences of the merger are materially different from
those described above, Fleet and BankBoston will circulate additional materials
to the Fleet stockholders and the BankBoston stockholders and will resolicit
their approval of the merger.
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ACCOUNTING TREATMENT
Fleet and BankBoston anticipate that the merger will be accounted for as a
pooling of interests transaction under GAAP. Under this method of accounting,
BankBoston stockholders and Fleet stockholders will be deemed to have combined
their existing voting common stock interests by virtue of the exchange of shares
of BankBoston common stock for shares of Fleet common stock. Accordingly, the
book value of the assets, liabilities and stockholders' equity of each of Fleet
and BankBoston, as reported on their respective consolidated balance sheets,
will be carried over to the consolidated balance sheet of the combined company,
and no goodwill will be created. The combined company will be able to include in
its consolidated income the consolidated income of both companies for the entire
fiscal year in which the merger occurs. However, the combined company must treat
certain expenses incurred to effect the merger as current charges against
income, rather than adjustments to the combined company balance sheet.
It is a condition to consummation of the merger that each of Fleet and
BankBoston receive an opinion from its respective independent accountants, KPMG
Peat Marwick LLP and PricewaterhouseCoopers LLP, that the merger will be
accounted for as a pooling of interests. See "--Conditions to Consummation of
the Merger."
The parties have prepared the unaudited pro forma financial information
contained in this Joint Proxy Statement-Prospectus using the pooling of
interests accounting method to account for the merger. See "Summary--Unaudited
Comparative Per Share Data" and "Unaudited Pro Forma Condensed Combined
Financial Information."
TERMINATION OF THE MERGER AGREEMENT
The merger agreement provides that the merger may be terminated at any time
prior to the effective time, whether before or after approval by holders of
Fleet common stock and BankBoston common stock:
- by mutual consent of Fleet and BankBoston in a written instrument, if the
board of directors of each so determines by a vote of a majority of its
members;
- by either the Fleet Board or the BankBoston Board, if any governmental
entity that must grant a requisite regulatory approval has denied approval
of the merger and that denial has become final and non-appealable, or any
governmental entity of competent jurisdiction has issued a final
non-appealable order enjoining or otherwise prohibiting the consummation
of the transactions contemplated by the merger agreement;
- by either the Fleet Board or the BankBoston Board, if the merger is not
consummated on or before March 14, 2000, unless the failure of the closing
to occur by this date is due to the failure of the party seeking to
terminate the merger agreement to perform or observe the covenants and
agreements of that party set forth in the merger agreement; and
- by either the Fleet Board or the BankBoston Board, if (a) the terminating
party is not then in material breach of any representation, warranty,
covenant or other agreement contained in the merger agreement and (b)
there has been a material breach of any of the covenants or agreements or
any of the representations or warranties set forth in the merger agreement
on the part of BankBoston, in the case of a termination by Fleet, or on
the part of Fleet, in the case of a termination by BankBoston, which
breach, individually or in the aggregate, would constitute, if occurring
or continuing on the closing date, the failure of the conditions described
under "--Conditions to Consummation of the Merger" and which breach is not
cured within 45 days following written notice to the party committing the
breach, or which breach, by its nature, cannot be cured prior to the
closing date.
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The parties have agreed that, if either party fails to obtain the requisite
vote of that party's stockholders at the Fleet special meeting or the BankBoston
special meeting, as applicable, the parties will use their reasonable best
efforts to negotiate a restructuring of the transaction for the purpose of
resubmitting the transaction to their respective stockholders for approval.
Either party may terminate the merger agreement if it determines in good faith
that the other party has substantially engaged in bad faith in breach of its
obligations set forth in the preceding sentence.
Whether or not the merger is consummated, all fees and expenses incurred in
connection with the merger and the transactions contemplated thereby will be
paid by the party incurring these expenses, except that Fleet and BankBoston
will equally bear the costs and expenses of printing and mailing this Joint
Proxy Statement-Prospectus, and all filing and other fees paid to the SEC in
connection with the filing of this document.
EXTENSION, WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
EXTENSION AND WAIVER. At any time prior to the effective time, Fleet and
BankBoston, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed:
- extend the time for the performance of any of the obligations or other
acts of the other party;
- waive any inaccuracies in the representations and warranties contained in
the merger agreement or in any document delivered pursuant to the merger
agreement; and
- waive compliance with any of the agreements or conditions contained in the
merger agreement.
However, after the stockholders of Fleet or BankBoston approve the transactions
contemplated by the merger agreement, Fleet or BankBoston, as the case may be,
may not, without further approval of those stockholders, enter into any
extension or waiver of the merger agreement that reduces the amount or changes
the form of the consideration to be delivered to the holders of BankBoston
common stock, other than as contemplated by the merger agreement.
AMENDMENT. Subject to compliance with applicable law and the ability of the
parties to change the method of effecting the combination of Fleet and
BankBoston, Fleet and BankBoston may amend the merger agreement by action taken
or authorized by their respective Boards of Directors at any time before or
after approval of the matters presented in connection with the merger by Fleet
stockholders or BankBoston stockholders. However, after any approval of the
transactions contemplated by the merger agreement by Fleet stockholders or
BankBoston stockholders, there may not be, without further approval of those
stockholders, any amendment of the merger agreement that changes the amount or
the form of the consideration to be delivered to the BankBoston stockholders,
other than as contemplated by the merger agreement.
EMPLOYEE BENEFITS AND PLANS
From and after the effective time, unless the combined company determines
otherwise, the employee or director benefit plans, arrangements or agreements
maintained, or contributed to, as of the date of the merger agreement, by each
of Fleet and BankBoston and disclosed to the other party in connection with the
execution and delivery of the merger agreement, in each case, as in effect as of
the date of the merger agreement, will remain in effect with respect to
employees of Fleet and BankBoston (or their subsidiaries) covered by those plans
at the effective time, until the combined company, subject to applicable law,
the terms of the merger agreement and the terms of those plans, adopts new
benefit plans. In the merger agreement, Fleet and BankBoston have agreed that,
prior to the closing date, they will cooperate in reviewing, evaluating and
analyzing the Fleet benefit plans and BankBoston benefit plans with a view
towards developing appropriate new benefit plans for the employees covered by
those existing plans subsequent to the merger.
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Fleet is obligated under the merger agreement to honor in accordance with
their terms all disclosed Fleet benefit plans, BankBoston benefit plans and
other employee benefit plans, contracts, arrangements, commitments or
understandings, except that the combined company may amend, modify or terminate
any Fleet benefit plans, BankBoston benefit plans, or other employee benefit
plans, contracts, arrangements, commitments or understandings, in accordance
with their terms and applicable law. Vested rights of employees under Fleet
benefit plans and BankBoston benefit plans and other agreements, as the case may
be, will, however, be honored in accordance with their terms.
In addition, in connection with the approval of the merger, the BankBoston
Board approved an amendment to the BankBoston, N.A. Cash Balance Retirement Plan
to provide that the execution of the merger agreement and related agreements and
the actions and the transactions contemplated by the merger agreement will not
constitute a "change-of-control" within the meaning of that plan; however, the
plan is being amended to provide that accrued benefits will vest as of the
effective time.
STOCK EXCHANGE LISTING
Fleet has agreed to cause the shares of Fleet common stock to be issued in
the merger to be approved for listing on the NYSE. It is a condition to the
consummation of the merger that those shares be authorized for listing on the
NYSE, subject to official notice of issuance.
EXPENSES
The merger agreement provides that each of Fleet and BankBoston will pay its
own expenses in connection with the merger and the transactions contemplated by
the merger agreement. However, Fleet and BankBoston will divide equally the
payment of all printing costs, filing fees and registration fees paid to the SEC
in connection with the filing of this document.
DIVIDENDS
The merger agreement provides that, prior to the effective time, Fleet and
BankBoston will coordinate the declaration and payment of dividends in respect
of Fleet common stock and/or BankBoston common stock with the intent that Fleet
stockholders and BankBoston stockholders will not receive two dividends for a
single quarter or fail to receive one dividend that they would otherwise receive
in the absence of the merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Fleet's and BankBoston's management and the Fleet Board
and the BankBoston Board may have interests in the merger that are in addition
to their interests as Fleet stockholders or BankBoston stockholders generally.
Certain executive officers and directors of each of Fleet and BankBoston will
serve as executive officers and directors of the combined company following the
merger. In addition, completion of the merger will constitute a change in
control of BankBoston for purposes of determining the entitlement of certain
executive officers of BankBoston to certain severance and other benefits.
Furthermore, as described below, certain members of the management of BankBoston
have entered into agreements relating to their employment with the combined
company that will provide employment and severance benefits following the merger
and certain other members of the management of BankBoston have, or will have by
the effective time, entered into amendments to their existing severance
agreements with BankBoston.
The Fleet Board and the BankBoston Board were aware of these interests and
considered them, among many other matters, in approving the merger agreement and
the transactions contemplated by the merger agreement.
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The directors, officers and principal stockholders of BankBoston and their
associates may have had in the past, and expect to have in the future,
transactions in the ordinary course of business with Fleet and its subsidiaries
and affiliates. The directors, officers and principal stockholders of Fleet and
their associates may have had in the past, and expect to have in the future,
transactions in the ordinary course of business with BankBoston and its
subsidiaries and affiliates. Those transactions were, and are expected to be, on
substantially the same terms as those prevailing at the time for comparable
transactions with others.
EMPLOYMENT AGREEMENTS WITH THE COMBINED COMPANY. As provided in the merger
agreement, each of Charles K. Gifford, Chairman and Chief Executive Officer of
BankBoston, Henrique C. Meirelles, President and Chief Operating Officer of
BankBoston, Paul F. Hogan, Vice Chairman of BankBoston and Bradford H. Warner,
Vice Chairman of BankBoston have entered into agreements relating to their
employment with the combined company after the effective time. The employment
agreements for these executives will supersede certain existing severance
agreements in effect between BankBoston and each of these executives.
Pursuant to their employment agreements, after the effective time, Mr.
Gifford will initially be employed as President and Chief Operating Officer of
the combined company, and Mr. Meirelles will be employed as President, Global
Banking and Financial Services of the combined company. Each of Messrs. Gifford
and Meirelles will also serve as members of the combined company's Board of
Directors and Executive Committee, with equivalent positions in the lead bank of
the combined company. The employment agreements for Messrs. Gifford and
Meirelles will each have a term commencing at the effective time and ending on
January 1, 2003. Mr. Gifford's employment agreement provides that on the earlier
of January 1, 2002 or the date on which Mr. Murray, who will initially serve as
the Chairman and Chief Executive Officer of the combined company, ceases to be
Chief Executive Officer, Mr. Gifford will become Chief Executive Officer of the
combined company. Furthermore, Mr. Gifford's employment agreement provides that
on the earlier of January 1, 2003 or the date on which Mr. Murray ceases to be
Chairman, Mr. Gifford will become Chairman of the combined company. If the
combined company fails to fulfill either of these obligations, the combined
company will contribute the sum of $15,000,000, less applicable taxes, to a
charitable foundation as directed by Mr. Gifford.
During his employment term, while Mr. Gifford is President and Chief
Operating Officer, he will be paid an annual base salary of not less than the
annual base salary paid to Mr. Murray and an annual bonus of not less than 90%
of the annual bonus awarded to Mr. Murray. During the period that Mr. Gifford is
Chief Executive Officer of the combined company, but prior to his becoming its
Chairman, he will be entitled to an annual bonus as determined by the Board of
Directors of the combined company, or the compensation committee of the Board of
Directors, but in no event will the bonus be in an amount less than 10/9 of the
annual bonus paid to Mr. Murray during this period. Under Mr. Gifford's
employment agreement, he will be granted at the effective time 300,000
restricted shares of common stock of the combined company. The restrictions with
respect to the restricted shares will lapse as follows, subject to the
attainment of certain corporate performance goals: 1/6 at the end of the first
full fiscal quarter of the combined company; 1/3 on each of December 31, 2000
and December 31, 2001; and 1/6 on December 31, 2002. Mr. Gifford has directed
that 75,000 shares of his restricted stock award, less the number of shares
necessary to pay applicable taxes, be donated to a charitable foundation of his
choice. In addition, under Mr. Gifford's employment agreement, he will be
granted at the effective time and on each of the first two anniversaries of the
effective time an option to purchase 300,000 shares of common stock of the
combined company, in each case, at an exercise price per share equal to the fair
market value per share of the common stock of the combined company on the date
of grant. The shares subject to each option grant will become exercisable as
determined by the Board of Directors of the combined company or the compensation
committee of the Board of Directors, but no later than in equal installments on
the first, second and third anniversaries of the date of grant. In addition to
participation in all other employee and fringe benefits (excluding split dollar
insurance) on
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a basis not less favorable than provided to Mr. Murray, upon his termination of
employment, Mr. Gifford will also be entitled to an annual defined benefit
retirement income (the "SERP BENEFIT") of not less than $1.25 million, reduced
by any other qualified and nonqualified defined benefit retirement income, but
unreduced for early retirement, with an annual defined benefit retirement income
payable to his surviving spouse, during her lifetime, equal to 75% of such
amount. Approximately three-quarters of Mr. Gifford's SERP benefit is
attributable to BankBoston's pre-existing qualified and nonqualified retirement
plans, estimated as set forth in BankBoston's Proxy Statement for its 1999
Annual Meeting of Stockholders, assuming payment at the retirement age of 65.
During his employment term, Mr. Meirelles will receive an annual base salary
of $800,000 and an annual bonus of not less than 70% of the annual bonus awarded
to the Chief Executive Officer of the combined company. Under Mr. Meirelles'
employment agreement, he will be granted at the effective time an award of
300,000 restricted shares of common stock of the combined company. The
restrictions with respect to the restricted shares will lapse as follows,
subject to the attainment of certain corporate performance goals: 1/6 at the end
of the first full fiscal quarter of the combined company; 1/3 on each of
December 31, 2000 and December 31, 2001; and 1/6 on December 31, 2002. In
addition, under Mr. Meirelles' employment agreement, he will be granted at the
effective time and on each of the first two anniversaries of the effective time
an award of an option to purchase 200,000 shares of common stock of the combined
company, in each case, at an exercise price per share equal to the fair market
value per share of the common stock of the combined company on the date of
grant. The shares subject to each option grant will become exercisable as
determined by the Board of Directors of the combined company or the compensation
committee of the Board of Directors, but no later than in equal installments on
the first, second and third anniversaries of the date of grant. Mr. Merielles
will be entitled to participate in all other employee and fringe benefits on a
basis not less favorable than other similarly situated executives (provided that
specified current fringe benefits will be continued), including a SERP Benefit
of not less than $750,000, reduced by any other qualified and nonqualified
defined benefit retirement income, but unreduced for early retirement, with an
annual defined benefit retirement income payable to his surviving spouse, during
her lifetime, equal to 75% of that amount. Approximately one-half of Mr.
Meirelles' SERP benefit is attributable to BankBoston's pre-existing qualified
and nonqualified retirement plans, estimated as set forth in BankBoston's Proxy
Statement for its 1999 Annual Meeting of Stockholders, assuming payment at the
retirement age of 65.
The employment agreements of Messrs. Gifford and Meirelles further provide
that if termination of the executive's employment occurs during the executive's
employment term and the termination is by the combined company, other than for
"cause" (as defined in the employment agreement), or by the executive for "good
reason" (as defined in the employment agreement) or by reason of the executive's
death or disability, the executive will be entitled to, among other things, (a)
an amount designed to approximate the benefits to which the executive would be
entitled under his existing severance agreement with BankBoston, based upon his
salary and bonus immediately prior to the effective time, such amount consisting
of three times the sum of annual salary and highest annual bonus of the three
preceding years, the cost of providing life, disability, accident and health
insurance benefits for three years, and service credit accruing for three years
under certain benefit and retirement plans (the "SEVERANCE PAYMENTS"), plus
compound interest at the prime rate from the effective time; (b) a pro rata
portion of the executive's maximum annual bonus; and (c) the lapse of
restrictions on all existing restricted shares and the acceleration of
exercisability of all shares subject to stock options previously granted. If (1)
either executive voluntarily terminates employment for other than "good reason"
during the executive's term or (2) the executive's employment terminates for any
reason after January 1, 2003, the executive will be entitled to receive the
Severance Payments, plus compound interest at the prime rate from the effective
time, and the SERP Benefit. If any payments received under the agreements are
subjected to the excise tax imposed under Section 4999 of the Code, each
agreement provides for an additional payment to the executive to restore him to
the same after-tax position which he would have had if the excise tax not been
imposed. However, if those payments, including additional amounts
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payable due to the excise tax, do not exceed 110% of the greatest amount that
could be paid without giving rise to the excise tax, no additional payment will
be made with respect to the excise tax. In that case, the payments otherwise due
to the executive will be reduced to an amount necessary to prevent the
application of the excise tax. At the effective time, each of Mr. Gifford and
Mr. Meirelles will enter into a separate agreement providing for the payment of
specified benefits following a change in control of the combined company, on
terms substantially identical to those of the change-in-control agreement
between Fleet and its most senior executive. The separate agreement will provide
that, if termination of the executive's employment occurs within the two-year
period following a change in control of the combined company and that
termination is by the combined company other than for cause or by the executive
for good reason (each as defined in the agreement), the executive will be
entitled to receive, among other things, an amount equal to the sum of his
annual base salary and highest annual bonus, multiplied by three. Severance
benefits payable to Messrs. Gifford and Meirelles under the separate agreement
will be offset by the Severance Payments.
Under their employment agreements, Messrs. Hogan and Warner will be employed
by the combined company in positions commensurate with their positions with
BankBoston immediately before the effective time. The employment agreements for
Messrs. Hogan and Warner will each have a term commencing at the effective time
and ending on January 1, 2003. In addition to a base salary of $525,000, an
annual bonus for 1999 no less than the highest bonus earned in respect of the
three preceding years and other benefits, each of Messrs. Hogan and Warner will
be granted an award of 100,000 restricted shares of common stock of the combined
company, which will vest in the same manner provided in Mr. Gifford's employment
agreement, and each will be entitled to participate in the supplemental
retirement plans available to senior executives of Fleet. Mr. Warner's benefits
payable under Fleet's supplemental retirement plans will be compared to the
benefits he would have received under the supplemental retirement plans of
BankBoston, and he will be entitled to receive the more favorable of the two.
The combined company will also provide to Messrs. Hogan and Warner severance
benefits in the event of a termination of their employment with the combined
company on the same basis as provided to Mr. Gifford. At the effective time,
Messrs. Hogan and Warner will enter into a separate agreement, substantially
identical to Mr. Gifford's, providing for specified benefits following a change
in control of the combined company.
Following the effective time, Ms. Susannah Swihart, Vice Chairman and Chief
Financial Officer of BankBoston, will no longer serve in that capacity with the
combined company. It is anticipated that Ms. Swihart will remain an employee of
the combined company, with responsibility for the management
of a charitable foundation to be created by the combined company. Ms. Swihart
has a severance agreement with BankBoston which provides, among other things,
for the payment of benefits to her after termination of her employment following
a change in control of BankBoston. The terms of Ms. Swihart's agreement are
identical to the terms of the existing severance agreement between BankBoston
and Mr. Gifford.
BankBoston and eight other officers of BankBoston (six of whom are executive
officers) will enter into amendments providing for an extension of their
existing severance agreements with BankBoston. More specifically, these
amendments will provide that if the employment of any of these executives
terminates within five years of the effective time for any reason, other than
for cause, the executive will be entitled to receive the amounts he or she
otherwise would have been entitled to receive under his or her existing
severance agreement with BankBoston. These severance agreements provide that the
executive is entitled to receive, among other things, an amount equal to two or,
in some cases, three times the sum of his or her annual salary and highest
annual bonus of the three preceding years, an amount equal to the cost to the
combined company to provide life, disability, accident and health insurance
benefits for two or, in some cases, three years, and service credit accruing for
two or, in some cases, three years under certain benefit and retirement plans.
Based on certain assumptions described below, the aggregate amounts which would
be payable to Messrs. Gifford, Meirelles, Hogan and Warner and
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Ms. Swihart and the six other executive officers referred to above would be $80
million. This amount is calculated on the assumptions that the employment of
these executives with the combined company is terminated immediately after the
effective time and in circumstances entitling them to the maximum benefits under
their agreements.
PRO RATA BONUSES. Pursuant to the terms of the BankBoston Performance
Recognition Opportunity Plan, within 30 days of a change in control of
BankBoston, unpaid awards for completed performance periods become payable and
pro rata awards will be payable for the period through the date of the change in
control. Assuming the effective time occurs on September 1, 1999, the aggregate
pro rata bonus amount under the Performance Recognition Opportunity Plan payable
at the effective time to the executive officers of BankBoston (other than
Messrs. Gifford, Meirelles, Hogan and Warner) are estimated to be $8 million.
Actual awards will be based upon performance through the effective time. The
amounts of the 1999 bonuses for Messrs. Gifford, Meirelles, Hogan and Warner
will be determined in accordance with the terms of their employment agreements,
as described above.
SEVERANCE BENEFITS. In addition to the executives of BankBoston discussed
above, certain other executive officers of BankBoston have severance agreements
with BankBoston which provide for the payment of benefits after a termination of
employment following a change in control of BankBoston. These severance
agreements provide that the executive is entitled to receive, among other
things, an amount equal to two or, in some cases, three times the sum of his or
her annual salary and highest annual bonus of the three preceding years, an
amount equal to the cost to the combined company to provide life, disability,
accident and health insurance benefits for two or, in some cases, three years,
and service credit accruing for two or, in some cases, three years under certain
benefit and retirement plans. Based on certain assumptions described below, the
aggregate amounts which would be payable to the executive officers of
BankBoston, other than Messrs. Gifford, Meirelles, Hogan and Warner, Ms. Swihart
and the six other executive officers referred to above, would be approximately
$21 million. This amount is calculated on the assumptions that the employment of
these executive officers with the combined company is terminated immediately
after the effective time and in circumstances entitling them to the maximum
benefits under their agreements.
STOCK-BASED RIGHTS. The merger agreement provides that, at the effective
time, each outstanding and unexercised stock option to acquire shares of
BankBoston common stock granted under the BankBoston stock plans will cease to
represent the right to acquire shares of BankBoston common stock and will be
converted into and become a right with respect to Fleet common stock, and the
BankBoston stock plans will be assumed by Fleet. See "--Conversion of Stock and
- --Treatment of Options."
At the effective time, all restrictions will lapse with respect to
previously granted restricted common stock (or restricted share units) held by
officers and employees and all shares subject to previously granted stock
options held by such officers and employees will become exercisable, in
accordance with the terms of the respective grants under BankBoston stock plans.
This includes shares of restricted stock (or restricted share units) and stock
options held by Messrs. Gifford, Meirelles, Hogan and Warner and Ms. Swihart as
follows:
- Mr. Gifford--110,262 restricted shares and 422,221 shares subject to
option;
- Mr. Meirelles--82,563 restricted shares (or restricted share units) and
352,609 shares subject to option;
- Mr. Hogan--47,657 restricted shares and 183,432 shares subject to option;
- Mr. Warner--40,208 restricted shares and 144,500 shares subject to option;
and
- Ms. Swihart--38,491 restricted shares and 149,789 shares subject to
option.
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In addition, under the merger agreement, in order to induce certain
employees of BankBoston to remain with the combined company, an aggregate of
275,000 shares of restricted common stock of the combined company has been made
available for grant, on or after the effective time, to those employees, the
restrictions with respect to which will lapse over future periods as determined
by the combined company. Messrs. Gifford, Meirelles, Hogan and Warner are not
eligible for this grant.
Following the merger, Fleet will use, for future stock option and stock
award grants under the BankBoston 1996 Long-Term Incentive Plan assumed by Fleet
in the merger, the number of shares of Fleet common stock equal to the product
of (i) the number of reserved shares of BankBoston common stock available for
awards under the BankBoston 1996 Long-Term Incentive Plan that are not otherwise
subject to an award under such Plan as of the effective time and (ii) the
exchange ratio. As of May 31, 1999, the number of shares of Fleet common stock
which would be available for future grants is approximately 3,344,751, which is
equal to approximately 2,824,005 shares of BankBoston common stock multiplied by
the exchange ratio. The number of shares of Fleet common stock available for
future grants is subject to change each calendar year in accordance with the
terms of the BankBoston 1996 Long-Term Incentive Plan.
PAYMENT OF DEFERRED DIRECTORS' FEES. Certain nonemployee directors of
BankBoston have elected to defer payment of cash directors' fees and retainers
pursuant to one or more BankBoston deferral plans or other arrangements.
BankBoston has, prior to the effective time, established trusts for the payment
of certain of these deferred cash director fees. Under the terms of these
director deferral plans, these trusts are required to be funded upon a change in
control of BankBoston. In addition, under the terms of certain of these deferral
arrangements, benefits are payable to certain directors following a change in
control of BankBoston.
Prior to 1997, BankBoston made a retirement benefit available to each
nonemployee director that had served continuously for 60 months as a director of
BankBoston. Under this plan, which was discontinued as to future accruals in
April 1997, BankBoston gave all directors that had accrued retirement benefits
as of that date the choice to maintain their current benefit or to convert the
accrued amount to deferred or restricted shares of BankBoston common stock under
BankBoston's Retirement Benefits Exchange Program. All restrictions on deferred
or restricted shares of BankBoston common stock into which BankBoston directors'
accrued retirement benefits converted will lapse at the effective time.
INDEMNIFICATION; DIRECTORS AND OFFICERS LIABILITY INSURANCE. The merger
agreement provides that in the event of any threatened or actual claim or
proceeding in which any person who is or has been a director, officer or
employee of BankBoston, Fleet or any of their respective subsidiaries or any of
their predecessors is, or is threatened to be, made a party based in whole or in
part on, or pertaining to, the fact that the person was a director, officer or
employee of BankBoston, Fleet or any of their respective subsidiaries or any of
their predecessors, or the merger agreement, the option agreements or the
transactions contemplated by these agreements, Fleet will, subject to the
conditions set forth in the merger agreement, indemnify that person to the
fullest extent permitted by law against any liability or expense incurred in
connection with any of these claims or proceedings. The merger agreement further
provides that Fleet will, subject to the conditions set forth in the merger
agreement, use its best efforts to cause the persons serving as officers and
directors of BankBoston immediately prior to the merger to be covered for a
period of at least six years following the effective time by BankBoston's
directors' and officers' liability insurance policy, or any equivalent
substitute for that policy.
FLEET AND BANKBOSTON OPTION AGREEMENTS
GENERAL. Immediately after the execution of the merger agreement, Fleet
entered into a stock option agreement pursuant to which Fleet granted BankBoston
an irrevocable option to purchase from Fleet up to 113,127,918 shares of Fleet
common stock or a lesser or greater amount of shares that is
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19.9% of the outstanding Fleet common stock at the time the option is exercised,
subject to certain adjustments. The exercise price of the Fleet option is $44.75
per share, subject to certain adjustments. At the same time, BankBoston entered
into a stock option agreement, pursuant to which BankBoston granted Fleet an
irrevocable option to purchase from BankBoston up to 59,005,179 shares of
BankBoston common stock or a lesser or greater amount of shares that is 19.9% of
the outstanding BankBoston common stock at the time the option is exercised,
subject to certain adjustments. The exercise price of the the BankBoston option
is $46.938 per share, subject to certain adjustments.
Except as otherwise noted below, the terms and conditions of the Fleet
option agreement and the BankBoston option agreement are identical in all
material respects. Fleet and BankBoston are sometimes referred to in this
section as "ISSUER" of their respective common stock upon the exercise of an
option, and as "OPTIONEES" holding an option on the common stock of the other
party. Shares issued pursuant to either of the option agreements are sometimes
referred to in this section as "ISSUER OPTION SHARES."
EXERCISE. The options will become exercisable, in whole or in part and
subject to regulatory approval, only if both an initial triggering event and a
subsequent triggering event occur prior to an exercise termination event. For
purposes of each option agreement:
(1) an "INITIAL TRIGGERING EVENT" will occur if one of the following
events occurs:
(a) the issuer enters into an agreement to engage in an acquisition
transaction, or the issuer's board of directors recommends that
stockholders of the issuer approve or accept an acquisition
transaction,
(b) the issuer, without the optionee's prior written consent,
authorizes, recommends, proposes or publicly announces its
intention to authorize, recommend or propose to engage in an
acquisition transaction, or the issuer's board of directors
publicly withdraws or modifies, or publicly announces its
intention to withdraw or modify, in any manner adverse to the
optionee, its recommendation that its stockholders approve the
merger agreement in anticipation of engaging in an acquisition
transaction,
(c) a third party acquires beneficial ownership, or the right to
acquire beneficial ownership, of 10% or more of the outstanding
shares of issuer common stock,
(d) a third party makes a BONA FIDE proposal to the issuer or its
stockholders by public announcement or written communication that
becomes the subject of public disclosure to engage in an
acquisition transaction,
(e) the issuer breaches and does not cure within a specified time
period any covenant or obligation in the merger agreement after
an overture is made by a third party to engage in an acquisition
transaction, and following that breach the optionee would be
entitled to terminate the merger agreement, or
(f) any person, other than the optionee or any subsidiary of the
optionee, other than in connection with a transaction to which
the optionee has given its prior written consent, files an
application or notice with the Federal Reserve Board, or some
other U.S. federal or state bank regulatory authority, which has
been accepted for processing, for approval to engage in an
acquisition transaction.
(2) As used above in (1), the term "ACQUISITION TRANSACTION" means:
(a) a merger or consolidation, or any similar transaction with the
issuer or any of its significant subsidiaries,
(b) a purchase, lease or other acquisition or assumption of all or
substantially all of the assets or deposits of the issuer or any
of its significant subsidiaries,
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(c) a purchase or other acquisition of securities representing 10% or
more of the voting power of the issuer, or
(d) any substantially similar transaction.
(3) A "SUBSEQUENT TRIGGERING EVENT" will occur if either of the
following occurs:
(a) any person acquires beneficial ownership of 20% or more of the
then-outstanding shares of issuer common stock; or
(b) the initial triggering event described above in clause (1)(a)
occurs, except that the percentage referred to in clause (2)(c)
of the definition of "acquisition transaction" set forth above is
20%.
(4) An "EXERCISE TERMINATION EVENT" means the earliest of:
(a) the effective time,
(b) termination of the merger agreement in accordance with its terms
if the termination occurs prior to the occurrence of an initial
triggering event, except in the case of the termination of the
merger agreement by the optionee as a result of an uncured,
volitional and material breach by the issuer of any of its
representations, warranties, covenants or agreements, or
(c) the date that is 12 months after the termination of the merger
agreement.
As of the date of this Joint Proxy Statement-Prospectus, to the knowledge of
Fleet and BankBoston, no initial triggering event or subsequent triggering event
has occurred.
REPURCHASE OF THE OPTION. Each option agreement permits the optionee to
require that the issuer repurchase the option or any shares issued under the
option for a cash fee equal to the surrender price.
The "SURRENDER PRICE" is
- $560 million, plus
- if applicable, the aggregate purchase price previously paid by the
optionee with respect to any issuer option shares, minus
- if applicable, the sum of the excess of (1) the net cash amounts, if any,
received by the optionee pursuant to the arm's-length sale of issuer
option shares, over (2) the aggregate purchase price previously paid by
the optionee with respect to those issuer option shares, and the net cash
amounts, if any, received by the optionee pursuant to an arm's-length sale
of a portion of the option.
ADJUSTMENT. Each option agreement provides for adjustment to the number of
shares and the exercise price of the option upon the occurrence of certain
changes to the capital structure of the issuer or certain other events or
transactions.
REGULATORY MATTERS. Some rights and obligations of Fleet and BankBoston as
the optionee and the issuer under the option agreements are subject to receipt
of required regulatory approvals. Fleet and BankBoston must obtain the approvals
of the Federal Reserve Board and the Massachusetts Board to acquire more than 5%
of the outstanding shares of issuer common stock. Accordingly, both Fleet and
BankBoston have included or will include in their applications with the Federal
Reserve Board and the Massachusetts Board a request for approval of the exercise
of their rights under the option agreement, including their right to purchase
more than 5% of the outstanding shares of issuer common stock. See "--Regulatory
Approvals Required for the Merger."
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RESTRICTIONS ON RESALES BY AFFILIATES
Shares of Fleet common stock to be issued to BankBoston stockholders in the
merger have been registered under the Securities Act of 1933, as amended (the
"SECURITIES ACT"). Shares of Fleet common stock issued in the merger may be
traded freely and without restriction by those stockholders not deemed to be
affiliates (as that term is defined under the Securities Act) of BankBoston. Any
subsequent transfer of shares, however, by any person who is an affiliate of
BankBoston at the time the merger is submitted for vote of the holders of
BankBoston common stock will, under existing law, require either:
- the further registration under the Securities Act of the shares of Fleet
common stock to be transferred,
- compliance with Rule 145 promulgated under the Securities Act, which
permits limited sales under certain circumstances, or
- the availability of another exemption from registration.
An "AFFILIATE" of BankBoston is a person who directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with, BankBoston. These restrictions are expected to apply to the
directors and executive officers of BankBoston and the holders of 10% or more of
the BankBoston common stock. The same restrictions apply to certain relatives or
the spouse of those persons and any trusts, estates, corporations or other
entities in which those person have a 10% or greater beneficial or equity
interest. Fleet will give stop transfer instructions to the transfer agent with
respect to the shares of Fleet common stock to be received by persons subject to
these restrictions, and the certificates for their shares will be appropriately
legended.
SEC 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. SEC guidelines indicate
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 those affiliates do not dispose of any of the shares of the
corporation they own or shares of a corporation they receive in connection with
a merger during the period beginning 30 days before the merger and ending when
financial results covering at least 30 days of post-merger operations of the
combined entity have been published.
Each of BankBoston and Fleet has agreed in the merger agreement to use its
best efforts to cause each person who is an affiliate of that party for purposes
of Rule 145 under the Securities Act, and for purposes of qualifying the merger
for pooling of interests accounting treatment, to deliver to the other party a
written agreement intended to ensure compliance with the Securities Act and
preserve the ability to treat the merger as a pooling of interests.
Fleet has agreed in the merger agreement to use its best efforts to publish
as promptly as reasonably practicable, but in no event later than 90 days after
the end of the first month after the effective time in which there are at least
30 days of post-merger combined operations, combined revenue and net income
figures as contemplated by Accounting Series Release No. 135, the SEC's release
addressing pooling of interests transactions.
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MANAGEMENT AND OPERATIONS AFTER THE MERGER
BOARD OF DIRECTORS
At the effective time, the combined company board will consist of 22
persons, 12 of whom will be Fleet directors and ten of whom will be BankBoston
directors. The Fleet Board will select the 12 individuals from Fleet to serve
initially on the combined company board as of the effective time, and the
BankBoston Board will select the ten persons from BankBoston to serve initially
on the combined company board as of the effective time. Four Fleet directors
will be assigned to each of the three classes of directors of the combined
company board, and the ten BankBoston directors will be assigned to the three
classes of the combined company board so that two of those classes will contain
three BankBoston directors and one class will contain four BankBoston directors.
Prior to the effective time, Fleet will designate all Fleet directors and
BankBoston directors who will serve as directors of the combined company after
the effective time as "Continuing Directors" for purposes of Article Seventh and
Article Ninth of the Fleet articles.
From and after the effective time, each of the committees of the combined
company board will be comprised of an equal number of Fleet directors and
BankBoston directors and the respective chairpersons of those committees will be
drawn equally from the Fleet directors and the BankBoston directors. Messrs.
Murray and Gifford mutually will determine the identity of the members of the
committees and their chairpersons.
The term "FLEET DIRECTOR" means (1) any individual serving as a director of
Fleet on March 14, 1999 who continues as a director of the combined company at
the effective time and (2) any individual who becomes a director of the combined
company and who is designated as a Fleet director by the Fleet Board prior to
his or her election. The term "BANKBOSTON DIRECTOR" means (1) any individual
serving as a director of BankBoston on March 14, 1999 who continues as a
director of the combined company at the effective time and (2) any person who
becomes a director of the combined company and who is designated as a BankBoston
director by the BankBoston Board prior to his or her election.
These provisions are contained in the Bylaw Amendment proposed for adoption
by Fleet stockholders at the Fleet special meeting. See "Fleet Special Meeting."
The Bylaw Amendment is attached as Appendix H to this Joint Proxy
Statement-Prospectus.
MANAGEMENT
Mr. Murray, currently Chairman and Chief Executive Officer of Fleet, will
serve as Chairman and Chief Executive Officer of the combined company. Mr.
Gifford, currently Chairman and Chief Executive Officer of BankBoston, will
serve as President and Chief Operating Officer of the combined company. Mr.
Gifford will become Chief Executive Officer of the combined company at year-end
2001 and will become Chairman one year later, or, in each case, sooner if Mr.
Murray ceases to serve in that position.
In addition, the following individuals will hold responsibilities in the
combined company as follows:
- Robert J. Higgins--President of Commercial and Regional Banking
- Henrique C. Meirelles--President of Global Banking and Financial Services
- Eugene M. McQuade--Vice Chairman and Chief Financial Officer
- David L. Eyles--Vice Chairman and Chief Risk Officer
- Paul F. Hogan--Vice Chairman, Corporate/Investment Banking
- H. Jay Sarles--Vice Chairman and Chief Administrative Officer, National
Financial Services
- Joseph A. Smialowski--Vice Chairman, Technology/Operations
- Bradford H. Warner--Vice Chairman, Investment Services, and
- Michael R. Zucchini--Vice Chairman, Technology/Operations.
On April 30, 1999, Fleet announced that Mr. Zucchini, currently Vice
Chairman and Chief Technology Officer of Fleet, will retire effective December
31, 1999.
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Additional information about those individuals listed above and the
directors of Fleet and BankBoston, is contained in Fleet's and BankBoston's
respective Annual Reports on Form 10-K for the year ended December 31, 1998,
which are incorporated by reference in this Joint Proxy Statement-Prospectus.
See "Where You Can Find More Information." From time to time prior to
consummation of the merger, additional decisions will be made with respect to
the management and operations of the combined company following the merger,
including the selection of executive officers and other senior management of the
combined company.
OPERATIONS
While there can be no assurance as to the achievement of business and
financial goals, Fleet and BankBoston currently expect to achieve approximately
$360 million in annual after-tax cost savings as a result of the merger, with
60% to be realized by the end of 2000 and 100% to be realized by the end of
2001. Fleet and BankBoston also expect that the combined company will incur a
$650 million after-tax charge to earnings upon consummation of the merger or
shortly thereafter. This charge includes transaction costs, exit costs including
severance and facilities-related charges, and accelerated depreciation in excess
of normal scheduled depreciation on duplicate systems and excess facilities that
will be taken out of service. We also expect to recognize a $60 million
after-tax charge to earnings in subsequent periods related to costs of
integrating our two companies. In addition, the parties expect that divestitures
of certain deposit liabilities of approximately $12.5 billion could be required
by regulatory authorities in connection with the merger, resulting in estimated
divested income of $160 million after tax. These statements constitute
"forward-looking statements" for purposes of the Private Securities Litigation
Reform Act of 1995, and actual results, which are dependent on a number of
factors, many of which are beyond the control of Fleet and BankBoston, may
differ materially. See "Forward-Looking Statements."
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PRICE RANGE OF COMMON STOCK AND DIVIDENDS
FLEET.
Fleet common stock is listed on the NYSE and traded under the symbol "FLT."
The following table sets forth, for the periods indicated, the high and low
reported closing prices per share of Fleet common stock on the NYSE Composite
Transactions reporting system and cash dividends declared per share of Fleet
common stock. The cash dividend and stock price information has been adjusted to
reflect Fleet's two-for-one stock split paid on October 7, 1998.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
-------------------- DIVIDENDS
HIGH LOW DECLARED
--------- --------- -----------
<S> <C> <C> <C>
1996
First Quarter............................................... $21 1/4 $19 5/8 $ .215
Second Quarter.............................................. 22 11/16 20 3/16 .215
Third Quarter............................................... 22 5/16 19 1/4 .215
Fourth Quarter.............................................. 27 15/16 22 7/16 .225
1997
First Quarter............................................... 31 3/8 24 13/16 .225
Second Quarter.............................................. 32 29/32 27 3/4 .225
Third Quarter............................................... 35 3/8 31 11/16 .225
Fourth Quarter.............................................. 37 9/16 30 31/32 .245
1998
First Quarter............................................... 42 17/32 34 5/16 .245
Second Quarter.............................................. 45 39 .245
Third Quarter............................................... 44 7/32 32 25/32 .245
Fourth Quarter.............................................. 44 11/16 31 11/16 .27
1999
First Quarter............................................... 46 3/4 37 5/8 .27
Second Quarter.............................................. 44 15/16 37 3/8 .27
Third Quarter (through July 6, 1999)........................ 44 7/8 44 11/16
</TABLE>
The timing and amount of future dividends will depend upon earnings, cash
requirements, the financial condition of Fleet and its subsidiaries, applicable
government regulations and other factors deemed relevant by the Fleet Board. As
described under "Regulation and Supervision--Dividend Restrictions," various
U.S. state and federal laws limit the ability of affiliated banks to pay
dividends to Fleet. The merger agreement restricts the cash dividends payable on
Fleet common stock pending consummation of the merger. See "The Merger--Conduct
of Business Pending the Merger and Other Agreements."
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BANKBOSTON.
BankBoston common stock is listed on the NYSE and traded under the symbol
"BKB." BankBoston common stock is also listed on the Boston Stock Exchange. The
following table sets forth, for the periods indicated, the high and low reported
closing prices per share of BankBoston common stock on the NYSE Composite
Transaction reporting system, and cash dividends declared per share of
BankBoston common stock. The cash dividend and stock price information has been
adjusted to reflect BankBoston's two-for-one stock split, paid on June 22, 1998.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
-------------------- DIVIDENDS
HIGH LOW DECLARED
--------- --------- -----------
<S> <C> <C> <C>
1996
First Quarter............................................... 25 20 13/16 $ .185
Second Quarter.............................................. 25 3/4 23 .22
Third Quarter............................................... 28 15/16 25 1/16 .22
Fourth Quarter.............................................. 35 29 .22
1997
First Quarter............................................... 39 3/8 31 15/16 .22
Second Quarter.............................................. 38 7/16 31 13/16 .255
Third Quarter............................................... 45 7/8 36 9/16 .255
Fourth Quarter.............................................. 48 27/32 38 17/32 .255
1998
First Quarter............................................... 55 15/16 43 15/16 .29
Second Quarter.............................................. 58 51 15/16 .29
Third Quarter............................................... 58 11/16 33 .29
Fourth Quarter.............................................. 44 1/4 27 5/8 .29
1999
First Quarter............................................... 47 7/16 34 1/2 .32
Second Quarter.............................................. 51 7/8 43 1/16 .32
Third Quarter (through July 6, 1999)........................ 52 1/4 51 3/4
</TABLE>
The timing and amount of future dividends will depend upon earnings, cash
requirements, the financial condition of BankBoston and its subsidiaries,
applicable government regulations and other factors deemed relevant by the
BankBoston Board. As described under "Regulation and Supervision-- Dividend
Restrictions," various U.S. state and federal laws limit the ability of
affiliated banks to pay dividends to BankBoston. The merger agreement restricts
the cash dividends payable on BankBoston common stock pending consummation of
the merger. See "The Merger--Conduct of Business Pending the Merger and Other
Agreements."
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INFORMATION ABOUT FLEET
GENERAL
Fleet is a diversified financial services company organized under the laws
of Rhode Island and registered under the BHCA. Fleet is engaged in a general
commercial banking and investment management business through its banking
subsidiaries located in Connecticut, Florida, Maine, Massachusetts, New
Hampshire, New Jersey, New York and Rhode Island. Fleet also provides
nationwide, through its other subsidiaries, a variety of financial services,
including mortgage banking, asset-based lending, lease financing, credit card
services, real estate financing, brokerage, market-making and securities
clearing services, services in the capital markets and investment banking, data
processing, and student loan servicing. At March 31, 1999, Fleet's consolidated
total assets were $106.2 billion, its consolidated total deposits were $67.6
billion and its consolidated total stockholders' equity was $9.6 billion. Based
on total assets at March 31, 1999, Fleet was the ninth largest bank holding
company in the United States.
The principal office of Fleet is located at One Federal Street, Boston,
Massachusetts 02110, telephone number (617) 346-4000.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to the executive compensation, various benefit
plans (including stock option plans), voting securities, including the principal
holders of those securities, certain relationships and related transactions and
other matters as to Fleet is incorporated by reference from or set forth in
Fleet's Annual Report on Form 10-K for the year ended December 31, 1998,
incorporated herein by reference. Stockholders desiring copies of this document
and other documents may contact Fleet at its address or telephone number
indicated under "Where You Can Find More Information."
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INFORMATION ABOUT BANKBOSTON
GENERAL
BankBoston is a bank holding company registered under the BHCA and
incorporated in Massachusetts with both national and international operations.
Based on assets as of March 31, 1999, BankBoston was the 14th largest bank
holding company in the United States.
BankBoston, through its subsidiaries and, in certain cases, joint ventures,
is engaged in consumer, small business and corporate banking in New England,
provides a broad range of commercial and investment banking services to
corporations nationally and internationally, and provides full-service banking
in leading Latin American markets.
BankBoston's principal subsidiary is BankBoston, N.A., a national bank with
its headquarters in Massachusetts. BankBoston, N.A. maintains branches in
Massachusetts, Connecticut, Rhode Island and New Hampshire and, through its
subsidiaries, operates a network of offices across the United States and in
Latin America and has a presence in Asia and Europe.
At March 31, 1999, BankBoston's consolidated total assets were $75.7
billion, its total deposits were $48.5 billion, and its consolidated total
stockholders' equity was $5.0 billion.
The principal office of BankBoston is located at 100 Federal Street, Boston,
Massachusetts 02110, telephone number (617) 434-2200.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to the executive compensation, various benefit
plans (including stock option plans), voting securities, including the principal
holders of those securities, certain relationships and related transactions and
other matters as to BankBoston is incorporated by reference or set forth in
BankBoston's Annual Report on Form 10-K for the year ended December 31, 1998,
which is incorporated in this Joint Proxy Statement-Prospectus by reference.
Stockholders desiring copies of this document and other documents may contact
BankBoston at its address or telephone number indicated under "Where You Can
Find More Information."
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REGULATION AND SUPERVISION
The following discussion sets forth the material elements of the regulatory
framework applicable to bank holding companies and their subsidiaries, and
provides certain specific information relevant to Fleet and BankBoston. This
regulatory framework primarily is intended for the protection of depositors and
the deposit insurance funds that insure deposits of banks, and not for the
protection of security holders. To the extent that the following information
describes statutory and regulatory provisions, it is qualified in its entirety
by reference to those provisions. A change in the statutes, regulations or
regulatory policies applicable to Fleet and BankBoston or their respective
subsidiaries may have a material effect on the business of Fleet and BankBoston,
as the case may be.
GENERAL
As a bank holding company, each of Fleet and BankBoston is subject to
regulation under the BHCA, and to inspection, examination and supervision by the
Federal Reserve Board. Under the BHCA, bank holding companies generally may not
acquire ownership or control of more than 5% of the voting shares or
substantially all the assets of any company, including a bank, without the
Federal Reserve Board's prior approval. In addition, bank holding companies
generally may engage, directly or indirectly, only in banking and those other
activities as are determined by the Federal Reserve Board to be closely related
to banking.
Various governmental requirements, including Sections 23A and 23B of the
Federal Reserve Act limit borrowings by each of Fleet and BankBoston and its
non-bank subsidiaries from its affiliate insured depository institutions, and
also limit various other transactions between each of Fleet and BankBoston and
its non-bank subsidiaries, on the one hand, and its affiliate insured depository
institutions, on the other. For example, Section 23A of the Federal Reserve Act
limits to no more than 10% of its total capital the aggregate outstanding amount
of any insured depository institution's loans and other "covered transactions"
with any particular non-bank affiliate, and limits to no more than 20% of its
total capital the aggregate outstanding amount of any insured depository
institution's covered transactions with all of its non-bank affiliates. Section
23A of the Federal Reserve Act also generally requires that an insured
depository institution's loans to its non-bank affiliates be secured, and
Section 23B of the Federal Reserve Act generally requires that an insured
depository institution's transactions with its non-bank affiliates be on
arms'-length terms.
Fleet operates five Banks: two national banks, two state chartered banks and
a federal savings bank. BankBoston operates three Banks, each of which is a
national bank. Each of Fleet's and BankBoston's affiliated national banking
associations are subject to regulation primarily by the OCC and, secondarily, by
the FDIC and the Federal Reserve Board. In connection with its international
operations, BankBoston is also subject to regulation by various foreign bank and
securities regulatory agencies in those countries in which it does business.
Each of Fleet's state-chartered banks are also subject to regulation by the FDIC
and the Federal Reserve Board and, in addition, by their respective state
banking supervisors. Fleet's federal savings bank is subject to regulation by
the Office of Thrift Supervision (the "OTS") and the FDIC. Fleet, BankBoston and
their respective subsidiaries are also affected by the fiscal and monetary
policies of the U.S. federal government and the Federal Reserve Board, and by
various other governmental requirements and regulations.
LIABILITY FOR BANK SUBSIDIARIES
Under current Federal Reserve Board policy, a bank holding company is
expected to act as a source of financial and managerial strength to each of its
subsidiary banks and to maintain resources adequate to support each subsidiary
bank. This support may be required at times when the bank holding company may
not have the resources to provide it. In addition, Section 55 of the National
Bank Act permits the OCC to order the PRO RATA assessment of stockholders of a
national bank whose
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capital has become impaired. If a stockholder fails, within three months, to pay
that assessment, the OCC can order the sale of the stockholder's stock to cover
the deficiency. In the event of a bank holding company's bankruptcy, any
commitment by the bank holding company to a U.S. federal bank regulatory agency
to maintain the capital of a subsidiary bank would be assumed by the bankruptcy
trustee and entitled to priority of payment.
Any depository institution insured by the FDIC can be held liable for any
loss incurred, or reasonably expected to be incurred, by the FDIC in connection
with:
- the default of a commonly controlled FDIC-insured depository institution
or
- any assistance provided by the FDIC to a commonly controlled FDIC-insured
depository institution in danger of default.
"DEFAULT" generally is defined as the appointment of a conservator or
receiver and "IN DANGER OF DEFAULT" generally is defined as the existence of
certain conditions indicating that a default is likely to occur in the absence
of regulatory assistance.
All of Fleet's and BankBoston's Banks are FDIC-insured depositary
institutions. Also, if a default occurred with respect to a bank, any capital
loans to the bank from its parent holding company would be subordinate in right
of payment to payment of the bank's depositors and certain of its other
obligations.
CAPITAL REQUIREMENTS
Each of Fleet and BankBoston is subject to risk-based capital requirements
and guidelines imposed by the Federal Reserve Board, which are substantially
similar to the capital requirements and guidelines imposed by the Federal
Reserve Board, the OCC, the OTS and the FDIC on the depository institutions
within their respective jurisdictions. For this purpose, a depository
institution's or holding company's assets and certain specified off-balance
sheet commitments are assigned to four risk categories, each weighted
differently based on the level of credit risk that is ascribed to those assets
or commitments. In addition, risk-weighted assets are adjusted for low-level
recourse and market-risk equivalent assets. A depository institution's or
holding company's capital, in turn, is divided into three tiers:
- core ("TIER 1") capital, which includes common equity, non-cumulative
perpetual preferred stock, a limited amount of cumulative perpetual
preferred stock and related surplus (excluding auction rate issues), and a
limited amount of cumulative perpetual preferred stock and minority
interests in equity accounts of consolidated subsidiaries, less goodwill,
certain identifiable intangible assets and certain other assets;
- supplementary ("TIER 2") capital, which includes, among other items,
perpetual preferred stock not meeting the Tier 1 definition, mandatory
convertible securities, subordinated debt and allowances for loan and
lease losses, subject to certain limitations, less certain required
deductions; and
- market risk ("TIER 3") capital, which includes qualifying unsecured
subordinated debt.
Each of Fleet and BankBoston, like other bank holding companies, currently
is required to maintain Tier 1 and "TOTAL CAPITAL" (the sum of Tier 1, Tier 2
and Tier 3 capital) equal to at least 4% and 8% of its total risk-weighted
assets (including certain off-balance-sheet items, such as unused lending
commitments and standby letters of credit), respectively. At March 31, 1999,
each of Fleet and BankBoston met both requirements, with Tier 1 and total
capital equal to 6.6% and 10.9% (in the case of Fleet), and 7.2% and 11.5% (in
the case of BankBoston) of its total risk-weighted assets, respectively.
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The Federal Reserve Board, the FDIC and the OCC have adopted rules to
incorporate market and interest rate risk components into their risk-based
capital standards. Amendments to the risk-based capital requirements,
incorporating market risk, became effective January 1, 1998. Under the new
market-risk requirements, capital will be allocated to support the amount of
market risk related to a financial institution's ongoing trading activities.
The Federal Reserve Board also requires bank holding companies to maintain a
minimum "LEVERAGE RATIO" (Tier 1 capital to adjusted total assets) of 3%, if the
bank holding company has the highest regulatory rating and meets certain other
requirements, or of 3% plus an additional cushion of at least 100 to 200 basis
points if the bank holding company does not meet these requirements. At March
31, 1999, Fleet's leverage ratio was 7.1% and BankBoston's leverage ratio was
6.9%.
The Federal Reserve Board may set capital requirements higher than the
minimums noted above for holding companies whose circumstances warrant it. For
example, bank holding companies experiencing or anticipating significant growth
may be expected to maintain strong capital positions substantially above the
minimum supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve Board has indicated that it will consider a
"TANGIBLE TIER I CAPITAL LEVERAGE RATIO" (deducting all intangibles) and other
indicia of capital strength in evaluating proposals for expansion or new
activities.
Each of the Banks is subject to similar risk-based and leverage capital
requirements adopted by its applicable U.S. federal banking agency. Each of
Fleet's and BankBoston's Banks was in compliance with the applicable minimum
capital requirements as of March 31, 1999.
Failure to meet capital requirements could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business, which are described under
"--FDICIA."
FDICIA. The FDICIA, among other things, identifies five capital categories
for insured depository institutions--well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized--and requires U.S. federal bank regulatory agencies to
implement systems for "prompt corrective action" for insured depository
institutions that do not meet minimum capital requirements based on these
categories. The FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the category in
which an institution is classified. Unless a bank or thrift is well-capitalized,
it is subject to restrictions on its ability to offer brokered deposits and on
certain other aspects of its operations. An undercapitalized bank or thrift must
develop a capital restoration plan and its parent bank holding company must
guarantee the bank's or thrift's compliance with the plan up to the lesser of 5%
of the bank's or thrift's assets at the time it became undercapitalized and the
amount needed to comply with the plan.
As of March 31, 1999, each bank and thrift subsidiary of Fleet and
BankBoston was well-capitalized, based on the prompt corrective action ratios
and guidelines described above. It should be noted, however, that a bank's
capital category is determined solely for the purpose of applying the OCC's, or
the FDIC's, prompt corrective action regulations and that the capital category
may not constitute an accurate representation of the bank's overall financial
condition or prospects.
DIVIDEND RESTRICTIONS
Various U.S. federal and state statutory provisions limit the amount of
dividends Fleet's and BankBoston's Banks can pay to Fleet or BankBoston, as the
case may be, without regulatory approval. Dividend payments by national banks
are limited to the lesser of:
- the level of undivided profits, and
- absent regulatory approval, an amount not in excess of net income for the
current year combined with retained net income for the preceding two
years.
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Likewise, the approval of the Federal Reserve Board is required for any dividend
by a state-chartered bank that is a member of the Federal Reserve System (a
"STATE MEMBER BANK") if the total of all dividends declared by the bank in any
calendar year would exceed the total of its net profits, as defined by
regulatory agencies for that year combined with its retained net profits for the
preceding two years. In addition, a state member bank may not pay a dividend in
an amount greater than its net profits then on hand. Depending on certain
factors, a U.S. federal savings bank may be required to file an application or
notice with the OTS prior to the payment of any dividends. For example, an
application is required if the total amount of all dividends and other capital
distributions for the current calendar year paid by a U.S. federal savings bank
exceeds its net income for that year as well as its retained net income for the
preceding two years. A prior notice is required if, among other things, a U.S.
federal savings bank is proposing to pay a dividend that would reduce the amount
of, or retire any of part of, its common or preferred stock or retire any part
of any debt instruments which are included in its capital for purposes of OTS
regulations.
At March 31, 1999, $1.1 billion and $556 million of the total stockholders'
equity of the Banks was available for payment of dividends to Fleet and
BankBoston, respectively, without approval by the applicable regulatory
authority.
In addition, U.S. federal bank regulatory authorities have authority to
prohibit Fleet's and BankBoston's Banks from engaging in an unsafe or unsound
practice in conducting their business. The payment of dividends, depending upon
the financial condition of the Bank in question, could be deemed to constitute
an unsafe or unsound practice. The ability of Fleet's and BankBoston's Banks to
pay dividends in the future is currently, and could be further, influenced by
bank regulatory policies and capital guidelines.
DEPOSIT INSURANCE ASSESSMENTS
The deposits of each of Fleet's and BankBoston's Banks are insured up to
regulatory limits by the FDIC, and, accordingly, are subject to deposit
insurance assessments to maintain the Bank Insurance Fund (the "BIF") and/or the
Savings Association Insurance Fund ("SAIF") 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 (1) the bank's capitalization and (2)
supervisory evaluations provided to the FDIC by the institution's primary U.S.
federal regulator. Each insured bank's insurance assessment rate is then
determined by the risk category in which it is classified by the FDIC.
Effective January 1, 1997, the annual insurance premiums on bank deposits
insured by the BIF and the SAIF vary between $0.00 per $100 of deposits for
banks classified in the highest capital and supervisory evaluation categories to
$0.27 per $100 of deposits for banks classified in the lowest capital and
supervisory evaluation categories.
The Deposit Insurance Funds Act provides for assessments to be imposed on
insured depository institutions with respect to deposits insured by the BIF and
the SAIF (in addition to assessments currently imposed on depository
institutions with respect to BIF- and SAIF-insured deposits) to pay for the cost
of Financing Corporation ("FICO") funding. The FDIC established the FICO
assessment rates effective January 1, 1999 at $0.012 per $100 annually for
BIF-assessable deposits and $0.061 per $100 annually for SAIF-assessable
deposits. The FICO assessments do not vary depending upon a depository
institution's capitalization or supervisory evaluations. Fleet's and
BankBoston's Banks held approximately $2.7 billion and $681 million,
respectively, of SAIF-assessable deposits as of March 31, 1999.
DEPOSITOR PREFERENCE STATUTE
In the "liquidation or other resolution" of an institution by any receiver,
U.S. federal legislation provides that deposits and certain claims for
administrative expenses and employee compensation
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against the insured depository institution would be afforded a priority over
other general unsecured claims against that institution, including federal funds
and letters of credit.
BROKERED DEPOSITS
Under FDIC regulations, no FDIC-insured depository institution can accept
brokered deposits unless it (1) is well capitalized, or (2) is adequately
capitalized and receives a waiver from the FDIC. In addition, these regulations
prohibit any depository institution that is not well-capitalized from (1) paying
an interest rate on deposits in excess of 75 basis points over certain
prevailing market rates or (2) offering "pass through" deposit insurance on
certain employee benefit plan accounts, unless it provides certain notice to
affected depositors.
INTERSTATE BANKING AND BRANCHING
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
("RIEGLE-NEAL"), subject to certain concentration limits and other requirements:
- bank holding companies such as Fleet and BankBoston are permitted to
acquire banks and bank holding companies located in any state;
- any bank that is a subsidiary of a bank holding company is permitted to
receive deposits, renew time deposits, close loans, service loans and
receive loan payments as an agent for any other bank subsidiary of that
bank holding company; and
- banks are permitted to acquire branch offices outside their home states by
merging with out-of-state banks, purchasing branches in other states and
establishing DE NOVO branch offices in other states. The ability of banks
to acquire branch offices through purchase or opening of other branches is
contingent, however, on the host state having adopted legislation "opting
in" to those provisions of Riegle-Neal. In addition, the ability of a bank
to merge with a bank located in another state is contingent on the host
state not having adopted legislation "opting out" of that provision of
Riegle-Neal.
The combined company might use Riegle-Neal to acquire banks in additional
states and to consolidate its bank subsidiaries under a smaller number of
separate charters.
CONTROL ACQUISITIONS
The Change in Bank Control Act (the "CBCA") prohibits a person or group of
persons from acquiring "control" of a bank holding company, unless the Federal
Reserve Board has been notified and has not objected to the transaction. Under a
rebuttable presumption established by the Federal Reserve Board, the acquisition
of 10% or more of a class of voting stock of a bank holding company with a class
of securities registered under Section 12 of the Exchange Act, such as Fleet or
BankBoston, would, under the circumstances set forth in the presumption,
constitute acquisition of control of the bank holding company.
In addition, a company is required to obtain the approval of the Federal
Reserve Board under the BHCA before acquiring 25% (5% in the case of an acquiror
that is a bank holding company) or more of any class of outstanding common stock
of a bank holding company, or otherwise obtaining control or a "controlling
influence" over that bank holding company.
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FUTURE LEGISLATION
Various legislation, including proposals to substantially change the
financial institution regulatory system, expand the powers of banking
institutions and bank holding companies, and limit the investments that a
depository institution may make with insured funds, is from time to time
introduced in the U.S. Congress. This legislation may change banking statutes
and the operating environment of the combined company and its subsidiaries in
substantial and unpredictable ways. Neither Fleet nor BankBoston can accurately
predict whether this potential legislation will ultimately be enacted, and, if
enacted, the ultimate effect that it, or implementing regulations, would have
upon the financial condition or results of operations of the combined company or
any of its subsidiaries.
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DESCRIPTION OF FLEET CAPITAL STOCK
GENERAL
As of the effective time, the authorized capital stock of Fleet will consist
of 2 billion shares of Fleet common stock, and 16 million shares of Fleet
preferred stock, issuable in one or more series from time to time by action of
the Fleet Board.
At March 31, 1999, 568,733,155 shares of Fleet common stock were
outstanding. In addition, as of March 31, 1999, Fleet had outstanding five
series of Fleet preferred stock as follows:
- 500,000 shares of 9.35% Cumulative preferred stock having a liquidation
value of $250 per share, plus accrued and unpaid dividends, were
designated, issued and outstanding;
- 765,010 shares of Series V 7.25% Perpetual preferred stock having a
liquidation value of $250 per share, plus accrued and unpaid dividends,
were designated, issued and outstanding;
- 600,000 shares of Series VI 6.75% Perpetual preferred stock having a
liquidation value of $250 per share, plus accrued and unpaid dividends,
were designated, issued and outstanding;
- 700,000 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, issued and outstanding; and
- 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, issued and outstanding.
In addition, as of December 31, 1995, the Fleet Board established a series
of 6 million shares of Cumulative Participating Junior preferred stock issuable
upon exercise of the Fleet rights described below, of which no shares were
issued and outstanding as of such date. Each such outstanding series and class
of Fleet preferred stock is described under "--Preferred Stock."
The following summary does not purport to be complete and is subject in all
respects to the applicable provisions of the RIBCA, the Fleet articles and the
Fleet bylaws.
FLEET COMMON STOCK
Holders of Fleet common stock are entitled to receive dividends when, as and
if declared by the Fleet Board out of any funds legally available for dividends.
Holders of Fleet common stock are also entitled, upon the liquidation of Fleet,
and after claims of creditors and preferences of Fleet preferred stock, and any
other class or series of Fleet preferred stock outstanding at the time of
liquidation, to receive PRO RATA the net assets of Fleet. Fleet pays dividends
on Fleet common stock only if it has paid or provided for all dividends on the
outstanding series of Fleet 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 any cumulative Fleet preferred stock, all prior periods.
Fleet preferred stock has, or upon issuance will have, preference over Fleet
common stock with respect to the payment of dividends and the distribution of
assets in the event of the liquidation or dissolution of Fleet. Fleet preferred
stock also has such other preferences as may be fixed by the Fleet Board.
Holders of Fleet common stock are entitled to one vote for each share that
they hold and are vested with all of the voting power except as the Fleet Board
has provided, or may provide in the future, with respect to Fleet preferred
stock or any other class or series of Fleet preferred stock that it may
hereafter authorize. See "--Preferred Stock." Shares of Fleet common stock are
not redeemable, and have no subscription, conversion or preemptive rights.
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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 between Fleet and/or its 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 BankBoston common
stock upon consummation of the merger will be, validly issued, fully paid and
non-assessable. The holders of Fleet common stock are not, and will not be,
subject to any liability as stockholders.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for Fleet common stock is First Chicago
Trust Company of New York, a division of EquiServe LP.
RESTRICTIONS ON OWNERSHIP
The BHCA requires any "bank holding company" (as defined in the BHCA) 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 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. See "Regulation and Supervision."
PREFERRED SHARE PURCHASE RIGHTS
On November 21, 1990, the Fleet Board declared a dividend of one Fleet right
for each outstanding share of Fleet common stock (adjusted to one-half of a
right per share upon Fleet's two-for-one common stock split that was effective
October 7, 1998). Fleet paid the dividend on December 4, 1990 to the
stockholders of record on that date. Each Fleet right, when exercisable and
prior to adjustment, 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, subject to
certain adjustments. Until the "Distribution Date" (as defined in the Fleet
rights agreement), Fleet will issue one Fleet right with each share of Fleet
common stock.
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" (as defined in the Fleet rights agreement), 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 of such Fleet common stock. Until
there is an acquiring person, however, the Fleet rights generally may be
redeemed by the Fleet Board at $.005 per Fleet right.
PREFERRED STOCK
GENERAL. Fleet may issue Fleet preferred stock in series, with those
relative rights, preferences and limitations of each series as may be fixed by
the Fleet Board.
The following summary of the outstanding series of Fleet preferred stock
does not purport to be complete, and is subject in all respects to the
applicable provisions of the RIBCA, the Fleet articles and the Fleet bylaws.
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9.35% PREFERRED. Fleet must pay dividends on the outstanding 9.35%
preferred cumulatively and on a quarterly basis at the rate of 9.35% PER ANNUM.
Fleet may not redeem any shares of Fleet common stock or any other class of
Fleet stock ranking junior to or on a parity with the 9.35% preferred, unless
full cumulative dividends for all past dividend payment periods have been paid.
Further, if any dividends on the 9.35% preferred are in arrears, Fleet may not
redeem any shares of the 9.35% preferred, unless all outstanding shares of the
9.35% preferred are simultaneously redeemed, except pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
the 9.35% preferred.
Fleet may redeem the 9.35% preferred on at least 30 but not more than 60
days' notice, at Fleet's option, in 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. The holders of Series V preferred are entitled to
receive dividends at the rate of 7.25% PER ANNUM, payable quarterly, before any
dividend may be declared or paid on Fleet common stock or the junior preferred
stock. The dividends on the Series V preferred are cumulative. Fleet may redeem
the Series V preferred, 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.
However, so long as any shares of the Series V preferred are outstanding, Fleet
may not redeem any shares of Fleet common stock or any other class of Fleet
preferred stock ranking junior to or on a parity with the Series V preferred,
unless full cumulative dividends on all outstanding shares of the Series V
preferred are paid for all past dividend payment periods.
If any dividends on the Series V preferred are in arrears, Fleet may not
redeem any shares of the Series V preferred, unless all outstanding shares of
the Series V preferred are simultaneously redeemed, except pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
shares of the Series V preferred.
SERIES VI PREFERRED. The holders of Series VI preferred are entitled to
receive dividends at the rate of 6.75% PER ANNUM, payable quarterly, before any
dividend may be declared or paid on the Fleet common stock or the junior
preferred stock. The dividends on the 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.
Fleet may redeem the Series VI preferred, 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. Fleet may also redeem the Series VI preferred prior to April
15, 2006, in whole, at Fleet's option, 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 any shares of
Fleet common stock or any other class of Fleet preferred stock ranking junior to
or on a parity with the Series VI preferred unless full cumulative dividends on
all outstanding shares of the 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 any shares of the Series VI preferred unless all
outstanding shares of the Series VI preferred are simultaneously redeemed,
except pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of the Series VI preferred.
SERIES VII PREFERRED. Through April 1, 2006, the holders of the Series VII
preferred are entitled to receive dividends at the rate of 6.60% PER ANNUM
computed on the basis of the issue price of the Series VII preferred of $250 per
share, payable quarterly, before Fleet may declare or pay any dividend upon
Fleet common stock or 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, as each term is defined in the Certificate of
Designation establishing the Series VII preferred. The applicable rate PER ANNUM
for
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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 the Series VII preferred are cumulative. The amount of
dividends that will be payable in respect of the Series VII preferred will be
adjusted in the event of certain amendments to the Code in respect of the
dividends received deduction.
Fleet may redeem the Series VII preferred, 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. Fleet may also redeem the Series VII preferred prior to April
1, 2006, in whole, at Fleet's option, 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 any shares of Fleet common stock or any other class of Fleet
preferred stock ranking junior to or on a parity with the Series VII preferred,
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, Fleet may not redeem any
shares of the Series VII preferred, unless all outstanding shares of the Series
VII preferred are simultaneously redeemed, except pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
the Series VII preferred.
SERIES VIII PREFERRED. Through October 1, 2001, the holders of the Series
VIII preferred are entitled to receive dividends at the rate of 6.59% PER ANNUM,
payable quarterly, before any dividend may be declared or paid on 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, as each term is 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 the 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.
Fleet may redeem the Series VIII preferred, in whole or in part, at Fleet's
option on and after October 1, 2001, at $250 per share, plus accrued and unpaid
dividends, if any for the then-current dividend period, without accumulation of
accrued and unpaid dividends for prior dividend periods. Fleet may also redeem
the Series VIII preferred 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 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 VIII preferred unless all 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 any shares of the Series VIII preferred,
unless all outstanding shares of such class are simultaneously redeemed, except
pursuant to a purchase or exchange offer made on the same terms to holders of
all outstanding shares of the Series VIII preferred.
JUNIOR PREFERRED STOCK. As of the date of this Joint Proxy
Statement-Prospectus, there were 6 million 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 Fleet
preferred stock and will not be redeemable. Each share of junior preferred stock
will, subject to the rights of the 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, holders of junior preferred stock
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will, subject to the rights of those 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 those 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 Fleet common stock. The rights of junior preferred stock are protected by
customary antidilution provisions.
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SELECTED PROVISIONS IN THE ARTICLES OF FLEET
The following discussion sets forth material provisions of the Fleet
articles.
BUSINESS COMBINATIONS WITH RELATED PERSONS
The Fleet articles provide that neither Fleet nor any of its subsidiaries
may engage in business transactions known as "business combinations" with
persons known as "related persons" unless the transaction:
- was approved by an 80% vote of the Fleet Board prior to the time the
related person became a related person,
- is approved by a vote of 80% of the continuing directors and a majority of
the entire Fleet Board and the transaction complies with certain
conditions related to price and procedure, or
- if there is not full compliance with the preceding two bullet points, the
transaction is approved by a vote of 80% of the outstanding shares of
Fleet capital stock entitled to vote generally in the election of
directors, voting as a single class.
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
that 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.
"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 supermajority vote (80%) of the Fleet Board, a
majority vote of the continuing directors and a supermajority vote (80%) of
Fleet's stockholders is required. If the amendment is recommended to the
stockholders by a majority of the Fleet Board and not less than 80% of the
continuing directors only the vote provided under the RIBCA is required.
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DIRECTORS
The Fleet articles contain a number of additional provisions that are
intended to delay an outside party's ability to take control of the Fleet Board,
even after the outside party has obtained majority ownership of 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 by a vote of:
- the holders of 80% of the outstanding shares of Fleet stock entitled to
vote on the election of directors, voting separately as a class at a
meeting called for that purpose, or
- a majority of the continuing directors and a majority of the Fleet Board
as it exists at that time.
Vacancies on the Fleet Board, regardless of the reason, 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 Fleet Board is to consist of 13 members,
unless otherwise determined by resolution adopted by a supermajority vote (80%)
of the Fleet Board and a majority of the continuing directors. The Fleet Board
has adopted a resolution fixing the number of directors at 20. The resolution
also provides that the Fleet Board only may be increased by the affirmative vote
of 80% of the Fleet Board and a majority of the continuing directors. However,
in the event that quarterly dividends are not paid on non-voting Fleet preferred
stock, the holders of that Fleet preferred stock, voting separately as a class,
will be entitled to elect additional directors.
As required by the merger agreement, prior to the effective time, the Fleet
Board will adopt a resolution to increase the number of directors that may serve
to 22. A supermajority vote (80%) of the Fleet Board, a majority vote of the
continuing directors and a supermajority vote (80%) of the outstanding shares of
Fleet capital stock entitled to vote on the matter voting separately as a class
are required to amend any of these provisions.
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COMPARISON OF STOCKHOLDERS' RIGHTS
GENERAL
Fleet and BankBoston are incorporated in Rhode Island and Massachusetts,
respectively. BankBoston stockholders receiving Fleet common stock in connection
with the merger, whose rights as stockholders are currently governed by the
MBCL, the BankBoston articles and the BankBoston bylaws, will, upon consummation
of the merger, automatically become Fleet stockholders, and their rights will be
governed by the RIBCA, the Fleet articles and the Fleet bylaws. The following is
a summary of the material differences between the rights of holders of Fleet
common stock and the rights of holders of BankBoston common stock. The following
does not purport to be a complete description of the differences between the
rights of Fleet stockholders and BankBoston stockholders. These differences may
be determined in full by reference to the RIBCA, the MBCL, the Fleet articles,
the BankBoston articles, the Fleet bylaws and the BankBoston bylaws.
VOTING RIGHTS
REQUIRED VOTE FOR CERTAIN BUSINESS COMBINATIONS.
Fleet. The RIBCA generally requires 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 on the matter, unless otherwise provided by
statute. The RIBCA further provides that, unless the articles of incorporation
provides otherwise, the vote of the stockholders of a surviving corporation is
not required to approve a merger if: (1) the plan of merger does not amend the
corporation's articles of incorporation, and (2) 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 that would be outstanding immediately after the merger.
BankBoston. The MBCL provides that an agreement of merger or consolidation,
or a sale, lease or exchange of all or substantially all of the property and
assets of a corporation, must be approved by the holders of at least two-thirds
of the shares of each class of stock outstanding and entitled to vote on the
matter, unless a corporation's articles of organization designate a lower
percentage, but not less than a majority. The BankBoston articles and the
BankBoston bylaws do not contain provisions that require a specific lower or
higher stockholder vote for those transactions.
CONFLICT OF INTEREST TRANSACTIONS.
Fleet. 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."
BANKBOSTON. The BankBoston bylaws provide that contracts or other
transactions between BankBoston and one or more of its directors or between
BankBoston and any other corporation or other entity with respect to which any
of BankBoston's directors is a director, officer or has a financial interest,
are permitted if:
- the material facts as to the contract or transaction and the director's
relationship or interest are disclosed to the BankBoston Board or a
committee of the BankBoston Board and the BankBoston Board or a committee
of the BankBoston Board authorizes the contract in good faith by vote of a
majority of disinterested directors, even though less than a quorum,
- the material facts as to the contract or transaction and the director's
relationship or interest are disclosed to the stockholders entitled to
vote on the matter and it is approved by vote of the stockholders, or
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- the contract or transaction is fair and reasonable as to BankBoston as of
the time it is approved by the BankBoston Board, a committee of the
BankBoston Board, or the BankBoston stockholders.
CHARTER AND BYLAW AMENDMENTS.
Fleet. The RIBCA generally provides that an amendment to a corporation's
articles of incorporation requires (1) adoption by the board of directors of a
resolution submitting the proposed amendment to the stockholders, and (2)
approval by the affirmative vote of the holders of a majority of the outstanding
shares entitled to vote on the matter.
The RIBCA also provides 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 the affected class. The RIBCA also
requires separate class voting if the amendment would, among other things,
change the designations, preferences, limitations or relative rights of the
affected 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 affected class, or create
a new class of shares having rights and preferences prior and superior to the
shares of the affected class.
The Fleet articles provide that any amendment, alteration, change or repeal
of the provisions of the Fleet articles relating to directors and business
combinations requires the affirmative vote of 80% of the Fleet Board, 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.
Under the RIBCA, the board of directors' authority to adopt, amend or repeal
the bylaws of a corporation does not divest or limit the power of stockholders
to adopt, amend or repeal the bylaws. The RIBCA specifically provides that any
amendment by the board of directors to the bylaws may be subsequently changed by
the affirmative vote of holders of a majority of the shares entitled to vote on
the matter.
The Fleet bylaws may be altered, amended or repealed in whole or in part,
and new bylaws 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 on the matter.
It is a condition to the completion of the merger that the Bylaw Amendment
is approved by 80% of the Fleet Board and by a majority of the continuing
directors. At the Fleet special meeting, the Fleet stockholders will vote to
approve the Bylaw Amendment when they vote to approve the merger agreement. See
the Bylaw Amendment attached as Appendix H to this Joint Proxy
Statement-Prospectus. Once adopted and pursuant to its terms, the Bylaw
Amendment may be amended by the combined company board only by an affirmative
vote of at least 75% of the combined company board then in office or by an
affirmative vote of the holders of at least 50% of combined company common stock
entitled to vote on the matter.
BankBoston. The BankBoston bylaws generally may be amended, added to, or
repealed in whole or in part (1) by vote of the BankBoston stockholders at a
meeting where the substance of the proposed amendment is stated in the notice of
the meeting, or (2) by vote of a majority of the entire BankBoston Board.
However, the BankBoston Board may not make any amendment on any matters reserved
to the stockholders by law, by the BankBoston articles, or that changes the
provisions of the BankBoston bylaws relating to removal of directors or
amendment of the BankBoston bylaws. Except as disclosed in the next sentence,
the MBCL provides that a corporation's articles of organization may be amended
by a vote of two-thirds of each class of stock outstanding and entitled to vote
on the matter or a lesser proportion if so provided in the articles of
organization. Amendments with respect to
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a corporation's name or the amount of par value of its authorized capital stock
require a majority vote. Any of these amendments to the articles of organization
only may consist of additions or deletions that could have been added to, or
omitted from, the original articles of organization at the time of the
amendment. If any amendment could adversely affect the rights of any class or
series of stock, then the vote of that class or series also will be necessary to
authorize that amendment. The BankBoston articles do not contain a provision
concerning the amendment of the BankBoston articles.
SPECIAL MEETINGS
FLEET. The RIBCA provides that a special meeting of stockholders may be
called by the board of directors or by those persons as may be authorized by the
articles of incorporation or bylaws. The Fleet bylaws permit special meetings of
stockholders to be called by the Fleet Board pursuant to a resolution adopted by
a majority of the Fleet Board, the Chairman of Fleet, or the President of Fleet.
In addition, the Fleet bylaws 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 a meeting.
BANKBOSTON. Under the BankBoston bylaws, special meetings of stockholders
may be called by the Chairman of the BankBoston Board, the President of
BankBoston or by a majority of the directors of BankBoston, and must be called
by the Clerk of BankBoston, upon the written request of BankBoston stockholders
who hold 100% in interest of the capital stock of BankBoston entitled to vote at
the proposed meeting. BankBoston's bylaws also provide that no business may be
transacted at a stockholder meeting, except for business:
- specified in the notice of the meeting given by or at the direction of the
BankBoston Board
- brought before the meeting by or at the direction of the BankBoston Board
or by the presiding officer of the meeting, typically the Chairman of
BankBoston, or
- properly brought before the meeting by a stockholder of record that
complies with the notice procedures set forth in the BankBoston bylaws,
other than with respect to stockholder proposals included in BankBoston's
proxy statement under Rule 14a-8 under the Exchange Act.
In order to properly bring a matter before a stockholder meeting, a
stockholder's notice must be received by the Clerk of BankBoston (1) not less
than 75 nor more than 125 days prior to the anniversary date of the immediately
preceding annual meeting; or (2) in the case of special meetings, or an annual
meeting called for a date more than 75 days prior to such anniversary date, not
later than the close of business on the 20th day following the first to occur of
the mailing of the notice of the date of the meeting or the public disclosure of
the meeting date. The BankBoston bylaws set forth specific requirements as to
the content of the notice.
APPRAISAL RIGHTS
FLEET. Under the RIBCA, appraisal rights are available only in connection
with:
- a statutory merger or consolidation, unless the Rhode Island corporation
is to be the surviving corporation and no vote of its stockholders is
required to approve the merger
- acquisitions that require stockholder approval, and
- 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 articles of incorporation, no
appraisal rights are available to holders of shares of any class of stock that,
as of the date fixed to determine the stockholders entitled to receive notice of
the proposed transaction, are (1) registered on a national securities
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exchange or included as national market securities in the National Association
of Securities Dealers, Inc.'s automated quotation system, or (2) held of record
by not less than 2,000 stockholders.
There are no provisions in the Fleet articles providing for appraisal
rights. Pursuant to the RIBCA and the Fleet articles, holders of Fleet capital
stock will not have any appraisal rights in connection with the merger.
BANKBOSTON. As more fully described below, the BankBoston stockholders have
appraisal rights in connection with the merger pursuant to the MBCL. See "Rights
of Dissenting Stockholders."
PROVISIONS RELATING TO DIRECTORS
NUMBER OF DIRECTORS.
Fleet. Under the RIBCA, a corporation must have a board of directors
consisting of at least one director. The Fleet articles provide that the Fleet
Board is to consist of 13 members (exclusive of directors to be elected by
holders of any one or more series or classes of Fleet 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 an adopted resolution,
the number of directors of Fleet that may serve is currently fixed
at 20.
At the effective time, the total number of individuals serving on the
combined company board will be 22, 12 of whom will be Fleet directors and ten of
whom will be BankBoston directors, 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. Prior to the effective time, Fleet
will cause the Fleet Board to approve and adopt resolutions effecting the board
composition described in this paragraph and designating all appointed Fleet
directors and BankBoston directors as "continuing directors" for purposes of
Article Seventh and Article Ninth of the Fleet articles. See the Bylaw
Amendment, attached as Appendix H to this Joint Proxy Statement-Prospectus.
BankBoston. Under the MBCL, a corporation with more than two stockholders
must have at least three directors, although the exact number may be determined
by a corporation's articles of organization or bylaws. The BankBoston bylaws
provide that the total number of directors may be composed of not less than
three nor more than 35 directors, with the specific number within those limits
to be determined by vote of a majority of the entire BankBoston Board. The
BankBoston Board currently consists of 16 directors.
CLASSIFICATION.
Fleet. The RIBCA permits classification of the board of directors if the
corporate charter so provides. The Fleet articles and the Fleet bylaws provide
for classification of the Fleet Board into three classes as nearly equal in
number as possible, with one class being elected annually.
BankBoston. Consistent with the MBCL, the BankBoston Board is divided into
three classes and the directors of each class are elected by the stockholders to
serve staggered three-year terms.
STOCKHOLDER NOMINATIONS.
Fleet. Holders of Fleet common stock may nominate individuals for election
to the Fleet Board. The procedure for nominations is set forth in the Fleet
bylaws. The Fleet bylaws specify that nominations of individuals for election as
directors 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 on the election of
directors that complies with the requisite notice procedure. The notice
procedure requires that a stockholder's nomination of an individual for election
as a director must be made in writing and received by the Secretary
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of Fleet not less than 30 days prior to the date of the meeting of stockholders.
If, however, Fleet gives stockholders fewer than 40 days' notice or prior public
disclosure of the date of the meeting, Fleet must receive the stockholder's
nomination notice 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 bylaws 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 an individual's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected), together with the name,
address, class and number of shares of Fleet capital stock beneficially owned by
the stockholder giving the notice and by other stockholders known by that
stockholder to be supporting the nominee on the date of that stockholder's
notice.
BankBoston. The BankBoston bylaws contain procedures that must be followed
for stockholders to nominate individuals for election to the BankBoston Board.
Nominations by stockholders must be made in writing and received by the Clerk of
BankBoston not less than 75 nor more than 125 days prior to the anniversary date
of the immediately preceding annual meeting of stockholders. If, however, the
meeting is called for a date more than 75 days prior to that anniversary date,
BankBoston must receive a stockholder's nomination notice not later than the
close of business on the 20th day following the first to occur of the
publication or mailing of the notice of the meeting date. The BankBoston bylaws
set forth specific requirements as to the content of the nomination notice that
are substantially identical to those contained in the Fleet bylaws.
REMOVAL OF DIRECTORS.
Fleet. Under the RIBCA, if the articles of incorporation or bylaws so
provide, stockholders may remove a director without cause. However, in the case
of a corporation permitting cumulative voting for the election of directors,
directors may be removed without cause only if the number of shares voted
against removal would not be sufficient to elect the director if voted
cumulatively. Under the Fleet articles, directors of Fleet may only be removed
for cause. For a discussion of provisions regarding the removal of directors in
the Fleet articles, see "Selected Provisions in the Articles of Fleet."
BankBoston. In accordance with the MBCL and the BankBoston bylaws, a
director or class of directors of BankBoston may only be removed for cause and
only by the affirmative vote of the holders of a majority of the outstanding
shares of BankBoston stock entitled to vote on the election of directors. A
director may be removed for cause only after reasonable notice and an
opportunity to be heard before the stockholders.
STATE ANTI-TAKEOVER STATUTES
FLEET. Pursuant to the RIBCA, a corporation may 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:
- the board of directors of the corporation approved the business
combination or transaction prior to the date the stockholder became an
interested stockholder;
- no earlier than five years after the interested stockholder's stock
acquisition date 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 that purpose; or
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- the business combination meets each of the following conditions: (1) 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, (2) 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 (3) the
interested stockholder may not acquire additional shares of voting stock
of the corporation, except in certain specifically identified
transactions.
The restrictions prescribed by the RIBCA will not be applicable to any
business combination:
- involving a corporation that does not have a class of voting stock
registered under the Exchange Act, unless the charter provides otherwise;
- involving a corporation that did not have a class of voting stock
registered under the Exchange Act at the time the corporation's articles
of incorporation was amended to provide that the corporation is to be
subject to these statutory restriction provisions and the interested
stockholder's stock acquisition date is prior to the effective date of the
articles of incorporation amendment;
- involving a corporation whose original charter contains a provision
expressly electing not to be subject to these statutory restrictions or
that adopted an amendment expressly electing not to be subject to these
statutory restrictions either to its bylaws prior to March 31, 1991, or to
its articles of incorporation if the articles of incorporation 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
stockholder. However, this amendment to the articles of incorporation will
not be effective until 12 months after the vote of the stockholders and
will 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
- involving a corporation with an interested stockholder that became an
interested stockholder inadvertently if the interested stockholder divests
itself of that number of shares so that it is no longer the beneficial
owner of 10% of the outstanding voting stock and, but for the inadvertent
ownership, was not an interested stockholder within the five-year period
preceding the announcement of the business combination.
The Fleet articles and the Fleet bylaws do not contain any provisions opting
out of the restrictions prescribed by the statute.
BANKBOSTON. The MBCL prohibits corporations from engaging in a business
combination with an interested stockholder for a period of three years after the
date of the transaction in which the person becomes an interested stockholder,
unless:
- the interested stockholder obtains the approval of the board of directors
prior to becoming an interested stockholder,
- the interested stockholder acquires 90% of the outstanding voting stock of
the corporation (excluding shares held by certain affiliates of the
corporation) at the time that the stockholder becomes an interested
stockholder, or
- the business combination is approved by both the board of directors and
two-thirds of the outstanding voting stock of the corporation (excluding
shares held by the interested stockholder).
An "interested stockholder" is a person who, together with affiliates and
associates, owns, or at any time within the prior three years did own, 5% or
more of a corporation's voting stock. A "business
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combination" includes mergers, stock and asset sales and other transactions
resulting in a financial benefit to the stockholders.
The business combination statute does not apply to the merger agreement or
the BankBoston option agreement, or the transactions contemplated by those
agreements, because the BankBoston Board approved the merger agreement and the
BankBoston option agreement prior to their execution.
The MBCL also includes a statute concerning "control share acquisitions,"
which limits the voting rights of shares held by persons who have acquired a
certain percentage of the voting power of the corporation. Under the MBCL,
shares acquired in a control share acquisition retain the same voting rights as
all other shares of the same class or series only to the extent authorized by a
vote of the majority of all shares entitled to vote for the election of
directors, excluding the acquired shares. As permitted under the MBCL, the
BankBoston bylaws provide that the control share acquisition statute does not
apply to BankBoston.
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RIGHTS OF DISSENTING STOCKHOLDERS
FLEET
Under the RIBCA, holders of Fleet capital stock do not have any appraisal
rights in connection with the merger.
BANKBOSTON
Under the MBCL, holders of BankBoston common stock who do not vote in favor
of the merger and who follow the procedures prescribed under Massachusetts law
may require the combined company to pay the fair value of his or her shares as
determined in an appraisal proceeding brought in accordance with Sections 85
through 98 of the MBCL. The text of Sections 85 through 98 of the MBCL is set
forth in full in Appendix I attached to this document. In order to exercise
those statutory appraisal rights, strict adherence to the statutory provisions
is required, and each stockholder who may desire to exercise those rights should
carefully review and adhere to those provisions.
Under the MBCL, procedures relating to dissenters' rights are stated to be
the exclusive remedy available to a stockholder objecting to the merger, except
for objections made on the grounds that the merger will be or is illegal or
fraudulent as to that stockholder. However, under Massachusetts case law,
dissenting stockholders may not be limited to the statutory remedy of judicial
appraisal where violations of fiduciary duty are found.
A dissenting stockholder of BankBoston who desires to pursue the appraisal
rights available must:
- file a written objection to the merger with BankBoston before the taking
of the stockholders' vote on the merger, stating the intention of the
stockholder to demand payment for shares owned by the stockholder if the
merger is approved and consummated,
- refrain from voting shares owned by the stockholder in favor of the
merger, and
- within 20 days of the date of mailing of a notice by BankBoston (as it
exists after the effective time) to objecting stockholders that the merger
has become effective, make written demand to the combined company for
payment for the stockholder's shares.
The initial written objection of a dissenting stockholder of BankBoston
should be delivered to BankBoston Corporation, 100 Federal Street, Mail Stop
01-25-01, Boston, Massachusetts 02110, Attn: Gary A. Spiess, General Counsel and
Clerk. The written demand, which must be made after the effective time, should
be delivered to BankBoston Corporation (as it exists after the effective time),
c/o Fleet Boston Corporation, One Federal Street, Boston, Massachusetts 02110,
Attn: William C. Mutterperl, Secretary. It is recommended that this objection
and demand be sent by registered or certified mail, return receipt requested.
A dissenting BankBoston stockholder that filed the required written
objection with BankBoston prior to the stockholder vote need not vote against
the merger, but a vote in favor of the merger will constitute a waiver of that
stockholder's statutory appraisal rights. BankBoston stockholders should note
that returning a properly signed proxy card that does not indicate a vote or an
abstention on approval of the merger, will constitute a vote in favor of the
merger. A vote against the merger does not, alone, constitute a written
objection. Pursuant to the applicable statutory provisions, notice that the
merger has become effective will be sent to each objecting BankBoston
stockholder within ten days after the date on which the merger becomes
effective.
The combined company and the dissenting stockholder initially will determine
the value of BankBoston common stock in connection with the statutory appraisal
procedure. If, during the period of 30 days after the expiration of the period
during which the foregoing demand for payment may be made, the combined company
and the dissenting BankBoston stockholder fail to agree on an appraisal value,
either of them may file a bill in equity in the Superior Court of Suffolk
County, Massachusetts,
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<PAGE>
asking that the court determine the appraisal value. The bill in equity must be
filed within four months after the date of expiration of the 30-day period.
After a hearing, the court will enter a decree determining the fair value of the
BankBoston common stock and will order the combined company to make payment of
the value, with interest, if any, to the stockholders entitled to the payment,
upon transfer by them to the combined company of the certificate or certificates
representing the BankBoston common stock held by those stockholders.
For appraisal proceeding purposes, value is determined as of the day before
the approval of the merger by stockholders, excluding any element of value
arising from the expectation or accomplishment of the merger.
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<PAGE>
APPROVAL OF THE AMENDED AND RESTATED
1994 PERFORMANCE-BASED BONUS PLAN
FOR THE NAMED EXECUTIVE OFFICERS
Fleet is asking its stockholders to approve the Amended Bonus Plan. The
Amended Bonus Plan is the same as the 1994 Bonus Plan, except that, under the
Amended Bonus Plan, the maximum bonus formula will apply to the Chief Executive
Officer and each of the other Named Executive Officers in Fleet's future proxy
statement (together with the Chief Executive Officer, the "NAMED EXECUTIVE
OFFICERS").
It is Fleet's belief that, upon approval by the stockholders of the Amended
Bonus Plan, any amounts payable to the participants pursuant to the Amended
Bonus Plan will be fully deductible by Fleet under the provisions of Section
162(m) of the Code. It is also Fleet's belief that the Amended Bonus Plan
supports Fleet's objective of paying for performance which increases shareholder
value.
The following description of the Amended Bonus Plan is qualified in its
entirety by reference to the terms of the Amended Bonus Plan. Copies of the
Amended Bonus Plan are available upon written request from Fleet.
Pursuant to the terms of the performance-based Amended Bonus Plan, bonus
awards, which may be reduced at the discretion of the Committee, are based
solely on Fleet's yearly financial performance as measured by Return on Equity
("ROE") and net income, as adjusted for extraordinary charges. The Amended Bonus
Plan provides that if Fleet's ROE in any year equals 15%, then the maximum
amount payable to any one of the Named Executive Officers under the Amended
Bonus Plan is .24% of net income.
The Amended Bonus Plan also provides that for each .5% increase in ROE over
15%, the percentage of net income payable to any one of the Named Executive
Officers as a bonus increases by .005%. Conversely, for each .5% percentage
decrease in ROE from 15%, the percentage of net income payable to any one of the
Named Executive Officers decreases by .005%.
If the Amended Bonus Plan had been in effect in 1998, the maximum bonus
amounts payable to any one of the Named Executive Officers, which amount could
be reduced by the Board of Directors, would have been $4,334,000. No payments
will be made pursuant to the Amended Bonus Plan unless the Amended Bonus Plan is
approved by the stockholders of Fleet. The adoption of the Amended Bonus Plan
requires the affirmative vote of a majority of shares entitled to vote thereon,
present in person or by proxy at the Annual Meeting when a quorum is present.
The Fleet Board recommends a vote "FOR" approval of the Amended Bonus Plan.
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LEGAL MATTERS
The validity of the Fleet common stock to be issued in connection with the
merger will be passed upon for Fleet by Edwards & Angell LLP, 101 Federal
Street, Boston, Massachusetts 02110-1800. V. Duncan Johnson, a partner of
Edwards & Angell, is a director of Fleet National Bank, a wholly-owned
subsidiary of Fleet, and beneficially owns 8,104 shares of Fleet common stock.
EXPERTS
The consolidated financial statements of Fleet and its subsidiaries
incorporated in this Joint Proxy Statement-Prospectus by reference to Fleet's
Annual Report on Form 10-K for the year ended December 31, 1998 have been so
incorporated by reference in this document in reliance on the report with
respect to those financial statements of KPMG Peat Marwick LLP, independent
accountants, given upon the authority of that firm as experts in accounting and
auditing.
The consolidated financial statements of BankBoston and its subsidiaries
incorporated in this Joint Proxy Statement-Prospectus by reference to
BankBoston's Annual Report on Form 10-K for the year ended December 31, 1998
have been so incorporated by reference in this document in reliance on the
report with respect to those financial statements of PricewaterhouseCoopers LLP,
independent accountants, given upon the authority of that firm as experts in
accounting and auditing.
STOCKHOLDER PROPOSALS
Fleet stockholders may submit proposals to be considered for stockholder
action at the 2000 Annual Meeting of Stockholders if they do so in accordance
with applicable regulations of the SEC. Any of these proposals must be received
by the Secretary of Fleet no later than November 8, 1999 in order to be
considered for inclusion in Fleet's 2000 Annual Meeting proxy materials. If a
stockholder desires to bring business before the 2000 Annual Meeting of
Stockholders that is not a proposal submitted to Fleet for inclusion in Fleet's
proxy statement, notice must be received by the Secretary of Fleet on or before
November 8, 1999.
BankBoston will hold a 2000 Annual Meeting of Stockholders only if the
merger is not consummated before the time of the meeting. In the event that this
meeting is held, any proposals of stockholders intended to be presented at the
2000 Annual Meeting of Stockholders must be received by the Clerk of BankBoston
no later than November 17, 1999 in order to be considered for inclusion in the
BankBoston proxy materials relating to that meeting.
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<PAGE>
OTHER MATTERS
As of the date of this Joint Proxy Statement-Prospectus, the Fleet Board
knows of no matters that will be presented for consideration at the Fleet
special meeting other than as described in this Joint Proxy
Statement-Prospectus. If any other matters do properly come before the Fleet
special meeting or any adjournments or postponements of that special meeting and
are voted upon, the enclosed proxy will be deemed to confer discretionary
authority on the individuals named as proxies to vote the shares represented by
such proxy as to any of those other matters. The individuals named as proxies
intend to vote or not to vote in accordance with the recommendation of the
management of Fleet.
The BankBoston Board knows of no business which is to be presented for
consideration at the BankBoston special meeting other than as stated in the
Notice of Special Meeting of Stockholders. If other matters are properly brought
before the BankBoston special meeting, including proposals omitted in accordance
with Rule 14a-8 of the Exchange Act, it is the intention of the persons named in
the accompanying Proxy Card to vote the shares represented by the proxy on those
matters in accordance with their best judgment.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of KPMG Peat Marwick LLP will be present at the Fleet
special meeting and representatives of PricewaterhouseCoopers LLP will be
present at the BankBoston special meeting. In each case, those representatives
will have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
WHERE YOU CAN FIND MORE INFORMATION
Fleet has filed with the SEC a Registration Statement under the Securities
Act that registers the distribution to BankBoston stockholders of the shares of
Fleet common stock to be issued in connection with the merger. The Registration
Statement, including the attached exhibits and schedules, contains additional
relevant information about Fleet and Fleet common stock. The rules and
regulations of the SEC allow us to omit certain information included in the
Registration Statement from this Joint Proxy Statement-Prospectus.
In addition, Fleet and BankBoston file reports, proxy statements and other
information with the SEC under the Exchange Act. You may read and copy this
information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room Northeast Regional Office Midwest Regional Office
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, like Fleet and
BankBoston, who file electronically with the SEC. The address of that site is
HTTP://WWW.SEC.GOV.
You can also inspect reports, proxy statements and other information about
Fleet and BankBoston at the offices of the NYSE, 20 Broad Street, New York, New
York 10005.
The SEC allows Fleet and BankBoston to "incorporate by reference"
information into this Joint Proxy Statement-Prospectus. This means that the
companies can disclose important information to you by referring you to another
document filed separately with the SEC. The information incorporated by
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<PAGE>
reference is considered to be a part of this Joint Proxy Statement-Prospectus,
except for any information that is superseded by information that is included
directly in this document.
This Joint Proxy Statement-Prospectus incorporates by reference the
documents listed below that Fleet and BankBoston have previously filed with the
SEC. They contain important information about our companies and their financial
condition.
<TABLE>
<CAPTION>
FLEET SEC FILINGS PERIOD
- ------------------------------------------------------------------ ---------------------------------------------
<S> <C>
Annual Report on Form 10-K........................................ Year ended December 31, 1998,
as filed on March 26, 1999
Quarterly Report on Form 10-Q..................................... Quarter ended March 31, 1999, as filed on May
14, 1999
Items 10-13 of Fleet's Definitive Proxy Statement to Fleet's
stockholders for the 1999 Annual Meeting of Fleet
Stockholders.................................................... Filed on March 5, 1999
The description of Fleet common stock set forth in the Fleet
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
Current Reports on Form 8-K....................................... Filed:
- February 1, 1999
- March 17, 1999
- April 2, 1999
- April 20, 1999
- May 14, 1999
<CAPTION>
BANKBOSTON SEC FILINGS PERIOD
- ------------------------------------------------------------------ ---------------------------------------------
<S> <C>
Annual Report on Form 10-K, as amended............................ Year ended December 31, 1998,
as filed on March 5, 1999 (as amended on June
22, 1999)
Quarterly Report on Form 10-Q..................................... Quarter ended March 31, 1999, as filed on May
14, 1999
Items 10-13 of BankBoston's Definitive Proxy Statement to
BankBoston's stockholders for the 1999 Annual Meeting of
BankBoston Stockholders......................................... Filed on March 16, 1999
The description of BankBoston common stock, BankBoston preferred
stock, and the BankBoston preferred stock purchase rights set
forth in the BankBoston registration statements filed under
Section 12 of the Exchange Act, including any amendment or
report filed with the SEC for the purpose of updating such
description; and
Current Reports on Form 8-K....................................... Filed:
- January 22, 1999
- February 17, 1999
- March 19, 1999
- April 2, 1999
- April 16, 1999
- May 14, 1999
</TABLE>
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<PAGE>
Fleet and BankBoston incorporate by reference additional documents that
either company may file with the SEC between the date of this Joint Proxy
Statement-Prospectus and the dates of the Fleet special meeting and the
BankBoston special meeting. These documents include periodic reports, such as
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K, as well as proxy statements.
Fleet has supplied all information contained or incorporated by reference in
this Joint Proxy Statement-Prospectus relating to Fleet, as well as all pro
forma financial information, and BankBoston has supplied all relevant
information relating to BankBoston.
You can obtain any of the documents incorporated by reference in this
document through Fleet or BankBoston, as the case may be, or from the SEC
through the SEC's Internet world wide web site at the address described above.
Documents incorporated by reference are available from the companies without
charge, excluding any exhibits to those documents, unless the exhibit is
specifically incorporated by reference as an exhibit in this Joint Proxy
Statement-Prospectus. You can obtain documents incorporated by reference in this
Joint Proxy Statement-Prospectus by requesting them in writing or by telephone
from the appropriate company at the following addresses:
<TABLE>
<CAPTION>
FLEET BANKBOSTON
<S> <C>
Investor Relations Department Investor Relations
Fleet Financial Group, Inc. BankBoston Corporation
One Federal Street P.O. Box 2016, MA BOS 01-20-02
Boston, Massachusetts 02110 Boston, Massachusetts 02110
(617) 346-4000 (617) 434-7858
</TABLE>
If you would like to request documents, please do so by August 4, 1999 to
receive them before the special meetings. If you request any incorporated
documents from us, we will mail them to you by first class mail, or another
equally prompt means, within one business day after we receive your request.
We have not authorized anyone to give any information or make any
representation about the merger or our companies that is different from, or in
addition to, that contained in this Joint Proxy Statement-Prospectus or in any
of the materials that we have incorporated into this Joint Proxy
Statement-Prospectus. Therefore, if anyone does give you information of this
sort, you should not rely on it. If you are in a jurisdiction where offers to
exchange or sell, or solicitations of offers to exchange or purchase, the
securities offered by this document or the solicitation of proxies is unlawful,
or if you are a person to whom it is unlawful to direct these types of
activities, then the offer presented in this document does not extend to you.
The information contained in this document speaks only as of the date of this
document unless the information specifically indicates that another date
applies.
FORWARD-LOOKING STATEMENTS
This Joint Proxy Statement-Prospectus, including information included or
incorporated by reference in this document, contains certain forward-looking
statements with respect to the financial condition, results of operations,
plans, objectives, future performance and business of each of Fleet and
BankBoston, as well as certain information relating to the merger, including,
without limitation,
- statements relating to the cost savings and accretion to reported earnings
estimated to result from the merger,
- statements relating to revenues of the combined company after the merger,
- statements relating to the restructuring charges estimated to be incurred
in connection with the merger, and
- statements preceded by, followed by or that include the words "believes,"
"expects," "anticipates," "estimates" or similar expressions.
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<PAGE>
These forward-looking statements involve certain risks and uncertainties.
Actual results may differ materially from those contemplated by the
forward-looking statements due to, among others, the following factors:
- expected cost savings from the merger may not be fully realized or
realized within the expected time frame,
- revenues following the merger may be lower than expected,
- competitive pressures among financial services companies may increase
significantly,
- costs or difficulties related to the integration of the business of Fleet
and BankBoston may be greater than expected,
- changes in the interest rate environment may reduce interest margins,
- general economic conditions, either internationally or nationally or in
the states in which Fleet or BankBoston are doing business, may be less
favorable than expected,
- legislative or regulatory changes may adversely affect the business in
which Fleet or BankBoston is engaged,
- the negative impact of the proposed divestitures may be greater than
expected, or one or both of the Federal Reserve Board and the DOJ may seek
greater levels of divestiture,
- technological changes, including year 2000 data systems compliance issues,
may be more difficult or expensive than anticipated, and
- changes may occur in the securities markets.
See "Where You Can Find More Information."
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<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined balance sheet as of
March 31, 1999 and the unaudited pro forma condensed combined statements of
income for the three months ended March 31, 1999 and 1998 and for each of the
years in the three-year period ended December 31, 1998 give effect to the
pending merger, accounted for as a pooling of interests.
The unaudited pro forma condensed combined financial information is based on
the historical consolidated financial statements of Fleet and BankBoston under
the assumptions and adjustments set forth in the accompanying notes to the
unaudited pro forma condensed combined financial statements, and gives effect to
the merger as if the merger had been consummated at the beginning of the
earliest period presented. The unaudited pro forma condensed combined financial
statements do not give effect to the anticipated cost savings in connection with
the merger or the effects of any divestitures required by regulators.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with the consolidated historical financial statements of
Fleet and BankBoston, including the respective notes to those statements. The
pro forma information is not necessarily indicative of the combined financial
position or the results of operations in the future or of the combined financial
position or the 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 information is presented.
Pro forma per share amounts for the combined Fleet and BankBoston entity are
based on the exchange ratio.
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<PAGE>
FLEET FINANCIAL GROUP, INC. AND BANKBOSTON CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 1999
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
FLEET BANKBOSTON ADJUSTMENTS COMBINED
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
ASSETS:
Cash, due from banks and interest-bearing deposits....................... $ 4,857 $ 4,108 $ -- $ 8,965
Federal funds sold and securities purchased under agreements to resell... 5 3,655 -- 3,660
Securities............................................................... 11,059 13,882 -- 24,941
Trading assets........................................................... 670 4,213 -- 4,883
Loans and leases......................................................... 73,683 42,775 -- 116,458
Reserve for credit losses................................................ (1,724) (758) -- (2,482)
Due from brokers/dealers................................................. 2,726 101 -- 2,827
Mortgages held for resale................................................ 2,155 -- -- 2,155
Premises and equipment................................................... 1,233 1,291 -- 2,524
Mortgage servicing rights................................................ 2,098 -- -- 2,098
Intangible assets........................................................ 3,423 793 -- 4,216
Other assets............................................................. 5,981 5,648 -- 11,629
-------- ---------- --- ---------
Total assets............................................................. $106,166 $75,708 $ -- $181,874
-------- ---------- --- ---------
-------- ---------- --- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Domestic:
Noninterest-bearing.................................................. $ 16,636 $ 6,298 $ -- $ 22,934
Interest-bearing..................................................... 47,712 27,724 -- 75,436
Overseas:
Noninterest-bearing.................................................. -- 1,534 -- 1,534
Interest-bearing..................................................... 3,285 12,912 -- 16,197
-------- ---------- --- ---------
Total deposits........................................................... 67,633 48,468 -- 116,101
-------- ---------- --- ---------
Federal funds purchased and securities sold under agreements to
repurchase............................................................. 3,027 6,181 -- 9,208
Funds borrowed........................................................... 3,001 7,697 -- 10,698
Due to brokers/dealers................................................... 3,823 218 -- 4,041
Notes payable............................................................ 15,586 5,611 -- 21,197
Accrued expenses and other liabilities................................... 3,484 2,570 650(4b) 6,704
-------- ---------- --- ---------
Total liabilities........................................................ 96,554 70,745 650 167,949
-------- ---------- --- ---------
STOCKHOLDERS' EQUITY:
Preferred stock.......................................................... 691 -- -- 691
Common stock............................................................. 6 307 (304)(4a) 9
Common surplus........................................................... 3,291 1,106 (127)(4a) 4,270
Retained earnings........................................................ 5,602 3,982 (650)(4b) 8,934
Accumulated other comprehensive income................................... 58 (37) -- 21
Treasury stock, at cost.................................................. (36) (395) 431(4a) --
-------- ---------- --- ---------
Total stockholders' equity............................................... 9,612 4,963 (650) 13,925
-------- ---------- --- ---------
Total liabilities and stockholders' equity............................... $106,166 $75,708 $ -- $181,874
-------- ---------- --- ---------
-------- ---------- --- ---------
</TABLE>
See Notes To The Unaudited Pro Forma Condensed Combined Financial Statements
111
<PAGE>
FLEET FINANCIAL GROUP, INC. AND BANKBOSTON CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
FLEET BANKBOSTON ADJUSTMENTS COMBINED
---------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Interest income:
Interest and fees on loans.................................. $ 1,559 $ 1,034 $ -- $ 2,593
Interest on securities and trading assets................... 173 229 -- 402
Other....................................................... 46 109 -- 155
---------- ----------- --- -----------
Total interest income..................................... 1,778 1,372 -- 3,150
---------- ----------- --- -----------
Interest expense:
Deposits.................................................... 424 473 -- 897
Funds borrowed.............................................. 80 180 -- 260
Notes payable............................................... 201 84 -- 285
Other....................................................... 39 -- -- 39
---------- ----------- --- -----------
Total interest expense.................................... 744 737 -- 1,481
---------- ----------- --- -----------
Net interest income........................................... 1,034 635 -- 1,669
---------- ----------- --- -----------
Provision for credit losses................................... 149 70 -- 219
---------- ----------- --- -----------
Net interest income after provision for credit losses......... 885 565 -- 1,450
---------- ----------- --- -----------
Noninterest income:
Investment services revenue................................. 248 134 -- 382
Banking fees and commissions................................ 193 154 -- 347
Credit card revenue......................................... 141 21 -- 162
Venture capital revenue..................................... 41 34 -- 75
Other....................................................... 336 252 -- 588
---------- ----------- --- -----------
Total noninterest income................................ 959 595 -- 1,554
---------- ----------- --- -----------
Noninterest expense:
Employee compensation and benefits.......................... 542 473 -- 1,015
Occupancy and equipment..................................... 162 109 -- 271
Intangible asset amortization............................... 71 15 -- 86
Other....................................................... 350 209 -- 559
---------- ----------- --- -----------
Total noninterest expense............................... 1,125 806 -- 1,931
---------- ----------- --- -----------
Income before income taxes.................................... 719 354 -- 1,073
Applicable income taxes....................................... 281 131 -- 412
---------- ----------- --- -----------
Net income.................................................... $ 438 $ 223 $ -- $ 661
---------- ----------- --- -----------
---------- ----------- --- -----------
Net income applicable to common shares........................ $ 422 $ 223 $ -- $ 645
---------- ----------- --- -----------
---------- ----------- --- -----------
Weighted average common shares outstanding
(in thousands):
Basic..................................................... 568,546 295,935 -- 919,051(4d)
Diluted................................................... 588,572 298,477 -- 942,088(4d)
Per Common Share:
Basic..................................................... $ .74 $ .75 $ -- $ .70(4d)
Diluted................................................... .72 .75 -- .68(4d)
</TABLE>
See Notes To The Unaudited Pro Forma Condensed Combined Financial Statements
112
<PAGE>
FLEET FINANCIAL GROUP, INC. AND BANKBOSTON CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
FLEET BANKBOSTON ADJUSTMENTS COMBINED
---------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Interest income:
Interest and fees on loans.................................. $ 1,378 $ 1,012 $ -- $ 2,390
Interest on securities and trading assets................... 162 208 -- 370
Other....................................................... 54 117 -- 171
---------- ----------- --- -----------
Total interest income..................................... 1,594 1,337 -- 2,931
---------- ----------- --- -----------
Interest expense:
Deposits.................................................... 438 462 -- 900
Funds borrowed.............................................. 84 207 -- 291
Notes payable............................................... 89 65 -- 154
Other....................................................... 54 -- -- 54
---------- ----------- --- -----------
Total interest expense.................................... 665 734 -- 1,399
---------- ----------- --- -----------
Net interest income........................................... 929 603 -- 1,532
---------- ----------- --- -----------
Provision for credit losses................................... 92 140 -- 232
---------- ----------- --- -----------
Net interest income after provision for credit losses......... 837 463 -- 1,300
---------- ----------- --- -----------
Noninterest income:
Banking fees and commissions................................ 176 131 -- 307
Investment services revenue................................. 201 82 -- 283
Venture capital revenue..................................... 30 52 -- 82
Securities gains............................................ 51 25 -- 76
Credit card revenue......................................... 56 10 -- 66
Gains on sale of business................................... -- 165 -- 165
Other....................................................... 181 124 -- 305
---------- ----------- --- -----------
Total noninterest income................................ 695 589 -- 1,284
---------- ----------- --- -----------
Noninterest expense:
Employee compensation and benefits.......................... 445 354 -- 799
Occupancy and equipment..................................... 154 94 -- 248
Intangible asset amortization............................... 51 10 -- 61
Merger-related charges...................................... 73 -- -- 73
Other....................................................... 274 203 -- 477
---------- ----------- --- -----------
Total noninterest expense............................... 997 661 -- 1,658
---------- ----------- --- -----------
Income before income taxes.................................... 535 391 -- 926
Applicable income taxes....................................... 212 153 -- 365
---------- ----------- --- -----------
Net income.................................................... $ 323 $ 238 $ -- $ 561
---------- ----------- --- -----------
Net income applicable to common shares........................ $ 311 $ 234 $ -- $ 545
---------- ----------- --- -----------
Weighted average common shares outstanding
(in thousands):
Basic..................................................... 567,778 292,542 -- 914,265(4d)
Diluted................................................... 587,184 296,840 -- 938,761(4d)
Per Common Share:
Basic..................................................... $ .55 $ .80 $ -- $ .60(4d)
Diluted................................................... .53 .79 -- .58(4d)
</TABLE>
See Notes To The Unaudited Pro Forma Condensed Combined Financial Statements
113
<PAGE>
FLEET FINANCIAL GROUP, INC. AND BANKBOSTON CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
FLEET BANKBOSTON ADJUSTMENTS COMBINED
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Interest income:
Interest and fees on loans...................................... $ 5,878 $ 4,259 $ -- $ 10,137
Interest on securities and trading assets....................... 673 892 -- 1,565
Other........................................................... 214 426 -- 640
---------- ----------- ----------- -----------
Total interest income......................................... 6,765 5,577 -- 12,342
---------- ----------- ----------- -----------
Interest expense:
Deposits........................................................ 1,835 1,871 -- 3,706
Funds borrowed.................................................. 400 859 -- 1,259
Notes payable................................................... 448 320 -- 768
Other........................................................... 213 -- -- 213
---------- ----------- ----------- -----------
Total interest expense........................................ 2,896 3,050 -- 5,946
---------- ----------- ----------- -----------
Net interest income............................................... 3,869 2,527 -- 6,396
---------- ----------- ----------- -----------
Provision for credit losses....................................... 470 380 -- 850
---------- ----------- ----------- -----------
Net interest income after provision for credit losses............. 3,399 2,147 -- 5,546
---------- ----------- ----------- -----------
Noninterest income:
Banking fees and commissions.................................... 748 580 -- 1,328
Investment services revenue..................................... 851 388 -- 1,239
Credit card revenue............................................. 391 64 -- 455
Venture capital revenue......................................... 149 233 -- 382
Securities gains................................................ 74 41 -- 115
Gains on sales of businesses.................................... -- 254 -- 254
Other........................................................... 1,024 472 -- 1,496
---------- ----------- ----------- -----------
Total noninterest income...................................... 3,237 2,032 -- 5,269
---------- ----------- ----------- -----------
Noninterest expense:
Employee compensation and benefits.............................. 1,927 1,630 -- 3,557
Occupancy and equipment......................................... 605 398 -- 1,003
Intangible asset amortization................................... 227 47 -- 274
Merger-related charges.......................................... 73 -- -- 73
Other........................................................... 1,297 835 -- 2,132
---------- ----------- ----------- -----------
Total noninterest expense..................................... 4,129 2,910 -- 7,039
---------- ----------- ----------- -----------
Income before income taxes........................................ 2,507 1,269 -- 3,776
Applicable income taxes........................................... 975 477 -- 1,452
---------- ----------- ----------- -----------
Net income........................................................ $ 1,532 $ 792 $ -- $ 2,324
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Net income applicable to common shares............................ $ 1,481 $ 783 $ -- $ 2,264
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Weighted average common shares outstanding
(in thousands):
Basic......................................................... 568,059 293,873 -- 916,122(4d)
Diluted....................................................... 587,769 296,663 -- 939,137(4d)
Per common share:
Basic......................................................... $ 2.61 $ 2.66 $ -- $ 2.47(4d)
Diluted....................................................... 2.52 2.64 -- 2.41(4d)
</TABLE>
See Notes To The Unaudited Pro Forma Condensed Combined Financial Statements
114
<PAGE>
FLEET FINANCIAL GROUP, INC. AND BANKBOSTON CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
FLEET BANKBOSTON ADJUSTMENTS COMBINED
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Interest income:
Interest and fees on loans...................................... $ 5,357 $ 3,954 $ -- $ 9,311
Interest on securities and trading assets....................... 570 809 -- 1,379
Other........................................................... 164 401 -- 565
---------- ----------- ----------- -----------
Total interest income......................................... 6,091 5,164 -- 11,255
---------- ----------- ----------- -----------
Interest expense:
Deposits........................................................ 1,654 1,685 -- 3,339
Funds borrowed.................................................. 247 805 -- 1,052
Notes payable................................................... 338 245 -- 583
Other........................................................... 152 -- -- 152
---------- ----------- ----------- -----------
Total interest expense........................................ 2,391 2,735 -- 5,126
---------- ----------- ----------- -----------
Net interest income............................................... 3,700 2,429 -- 6,129
---------- ----------- ----------- -----------
Provision for credit losses....................................... 322 200 -- 522
---------- ----------- ----------- -----------
Net interest income after provision for credit losses............. 3,378 2,229 -- 5,607
---------- ----------- ----------- -----------
Noninterest income:
Banking fees and commissions.................................... 708 487 -- 1,195
Investment services revenue..................................... 696 294 -- 990
Venture capital revenue......................................... 71 221 -- 292
Securities gains................................................ 33 80 -- 113
Credit card revenue............................................. 62 36 -- 98
Gains on sales of businesses.................................... 175 68 -- 243
Other........................................................... 886 377 -- 1,263
---------- ----------- ----------- -----------
Total noninterest income...................................... 2,631 1,563 -- 4,194
---------- ----------- ----------- -----------
Noninterest expense:
Employee compensation and benefits.............................. 1,752 1,279 -- 3,031
Occupancy and equipment......................................... 611 350 -- 961
Intangible asset amortization................................... 169 37 -- 206
Merger-related charges.......................................... 25 -- -- 25
Other........................................................... 1,158 658 -- 1,816
---------- ----------- ----------- -----------
Total noninterest expense..................................... 3,715 2,324 -- 6,039
---------- ----------- ----------- -----------
Income before income taxes........................................ 2,294 1,468 -- 3,762
Applicable income taxes........................................... 927 589 -- 1,516
---------- ----------- ----------- -----------
Net income........................................................ $ 1,367 $ 879 $ -- $ 2,246
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Net income applicable to common shares............................ $ 1,305 $ 848 $ -- $ 2,153
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Weighted average common shares outstanding
(in thousands):
Basic......................................................... 551,956 295,918 -- 902,441(4d)
Diluted....................................................... 568,605 300,080 -- 924,020(4d)
Per common share:
Basic......................................................... $ 2.37 $ 2.86 $ -- $ 2.39(4d)
Diluted....................................................... 2.30 2.82 -- 2.33(4d)
</TABLE>
See Notes To The Unaudited Pro Forma Condensed Combined Financial Statements
115
<PAGE>
FLEET FINANCIAL GROUP, INC. AND BANKBOSTON CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
FLEET BANKBOSTON ADJUSTMENTS COMBINED
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Interest income:
Interest and fees on loans............................................. $ 5,169 $ 3,863 $ -- $ 9,032
Interest on securities and trading assets.............................. 723 724 -- 1,447
Other.................................................................. 136 306 -- 442
-------- ---------- --- ---------
Total interest income................................................ 6,028 4,893 -- 10,921
-------- ---------- --- ---------
Interest expense:
Deposits............................................................... 1,754 1,680 -- 3,434
Funds borrowed......................................................... 311 679 -- 990
Notes payable.......................................................... 390 194 -- 584
Other.................................................................. 111 -- -- 111
-------- ---------- --- ---------
Total interest expense............................................... 2,566 2,553 -- 5,119
-------- ---------- --- ---------
Net interest income...................................................... 3,462 2,340 -- 5,802
-------- ---------- --- ---------
Provision for credit losses.............................................. 213 231 -- 444
-------- ---------- --- ---------
Net interest income after provision for credit losses.................... 3,249 2,109 -- 5,358
-------- ---------- --- ---------
Noninterest income:
Banking fees and commissions........................................... 601 455 -- 1,056
Investment services revenue............................................ 634 251 -- 885
Venture capital revenue................................................ 106 209 -- 315
Credit card revenue.................................................... 59 36 -- 95
Securities gains....................................................... 43 23 -- 66
Gains on sales of businesses........................................... -- 153 -- 153
Other.................................................................. 890 217 (18)(4c) 1,089
-------- ---------- --- ---------
Total noninterest income............................................. 2,333 1,344 (18) 3,659
-------- ---------- --- ---------
Noninterest expense:
Employee compensation and benefits..................................... 1,735 1,178 -- 2,913
Occupancy and equipment................................................ 593 341 -- 934
Intangible asset amortization.......................................... 140 34 -- 174
Merger-related charges................................................. -- 180 -- 180
Other.................................................................. 1,044 587 -- 1,631
-------- ---------- --- ---------
Total noninterest expense............................................ 3,512 2,320 -- 5,832
-------- ---------- --- ---------
Income before income taxes............................................... 2,070 1,133 (18) 3,185
Applicable income taxes.................................................. 849 483 (7) 1,325
-------- ---------- --- ---------
Net income............................................................... $ 1,221 $ 650 $(11) $ 1,860
-------- ---------- --- ---------
-------- ---------- --- ---------
Net income applicable to common shares................................... $ 1,149 $ 613 $(11) $ 1,751
-------- ---------- --- ---------
-------- ---------- --- ---------
Weighted average common shares outstanding
(in thousands):
Basic................................................................ 568,896 307,058 -- 932,575(4d)
Diluted.............................................................. 580,026 312,224 -- 949,824(4d)
Per common share:
Basic................................................................ $ 2.02 $ 2.00 $ -- $ 1.88(4d)
Diluted.............................................................. 1.98 1.96 -- 1.84(4d)
</TABLE>
See Notes To The Unaudited Pro Forma Condensed Combined Financial Statements
116
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
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 company. It is
anticipated that the merger will be completed late in the third quarter or early
in the fourth quarter of 1999.
Under generally accepted accounting principles, the transaction will be
accounted for as a pooling of interests and, as such, the assets and liabilities
of BankBoston will be combined with those of Fleet at book value. In addition,
the statements of income of BankBoston will be combined with the statements of
income of Fleet as of the earliest period presented. The unaudited pro forma
condensed combined statements of income give effect to the merger as if the
merger occurred at the beginning of the earliest period presented. The unaudited
pro forma condensed combined balance sheet assumes the merger was consummated on
March 31, 1999. 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 presentation.
Fleet and BankBoston anticipate that, in order to obtain regulatory approval
for the merger, the companies will be required to divest approximately $12.5
billion of deposits, primarily in the Massachusetts and New Hampshire,
Connecticut and Rhode Island markets. No adjustment has been included, however,
in the unaudited pro forma condensed combined financial statements for the
anticipated divestitures. The reduction in net income related to those
divestitures is estimated to be $160 million post-tax.
Note 2. Accounting Policies and Financial Statement Classifications
The accounting policies of both companies are in the process of being
reviewed for consistency. As a result of this review, certain conforming
accounting adjustments may be necessary. The nature and extent of these
adjustments have not been determined but are not expected to be significant.
Transactions between Fleet and BankBoston that are not material in relation to
the pro forma financial information have not been eliminated from the pro forma
combined amounts.
Note 3. Merger- and Restructuring-Related Charges
A liability of $1 billion (pretax) has been recorded in the unaudited pro
forma condensed combined balance sheet to reflect Fleet's and BankBoston's best
estimate of merger- and restructuring-related charges in connection with the
merger. This liability resulted in a $650 million post-tax charge
117
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS (CONTINUED)
to retained earnings in the unaudited pro forma condensed combined balance
sheet. The following table provides detail of the estimated charges by type,
post-tax:
<TABLE>
<CAPTION>
ESTIMATED COSTS
(POST-TAX)
TYPE OF COST (DOLLARS IN MILLIONS)
- ------------------------------------------------------------------------ -----------------------
<S> <C>
Personnel............................................................... $ 300
Technology and operations............................................... 150
Facilities.............................................................. 75
Branches................................................................ 25
Transaction costs and other............................................. 100
-----
Total................................................................... $ 650
-----
-----
</TABLE>
Personnel-related costs consist primarily of charges related to employee
severance, termination of certain employee benefits plans and employee
assistance costs for separated employees. Technology and operations costs
include accelerated depreciation in excess of normal scheduled depreciation and
certain liabilities that will be incurred as a result of the elimination of
duplicate systems. Facilities charges consist of lease termination costs and
other facilities-related exit costs, as well as accelerated depreciation in
excess of normal depreciation, resulting from consolidation of duplicate
headquarters and operational facilities. Branch-related costs are primarily
related to the cost of exiting branches anticipated to be closed, including
lease terminations and equipment write-offs. The effect of the proposed charge
has been reflected in the unaudited pro forma condensed combined balance sheet
as of March 31, 1999. However, since the proposed charge is nonrecurring, it has
not been reflected in the unaudited pro forma condensed combined statements of
income. In addition, it is estimated that $60 million (post-tax) in other
expenses related to the merger will be recognized in future periods as they are
incurred. These charges have not been reflected in the unaudited pro forma
condensed combined balance sheet as of March 31, 1999.
Note 4. Pro Forma Adjustments
(a) Pro forma adjustments to common stock, treasury stock and common surplus
at March 31, 1999, reflect the merger accounted for as a pooling of interests,
through: (1) the exchange of 351.3 million shares of Fleet common stock (using
the exchange ratio of 1.1844) for the 296.6 million outstanding shares of
BankBoston common stock at March 31, 1999, (2) the reclassification adjustment
from surplus to common stock to reflect the $.01 par value of Fleet common
stock, and (3) an adjustment for $431 million to reflect the retirement of
BankBoston treasury stock and the reissuance of Fleet treasury stock.
(b) Pro forma adjustments to accrued expenses and other liabilities and
retained earnings reflect the $1 billion merger- and restructuring-related
charge and a $350 million reduction in the deferred tax liability for the
anticipated tax benefit of such charge. For additional information on the
merger- and restructuring-related charges see Note 3.
(c) Pro forma adjustment reflects the elimination of gains on the sale of
BankBoston common stock realized by Fleet in 1996.
(d) The pro forma combined weighted average common shares outstanding for
the three months ended March 31, 1999 and 1998 and for each of the years in the
three-year period ended December 31, 1998, reflect Fleet weighted average common
shares outstanding plus the converted BankBoston weighted average common shares
outstanding. Each share of BankBoston common stock was converted into 1.1844
shares of Fleet common stock.
118
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
FLEET FINANCIAL GROUP, INC.
AND
BANKBOSTON CORPORATION
------------------------
DATED AS OF MARCH 14, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
THE MERGER
1.1 The Merger.................................................................. A-2
1.2 Effective Time.............................................................. A-2
1.3 Effects of the Merger....................................................... A-2
1.4 Conversion of BankBoston Common Stock....................................... A-2
1.5 Fleet Capital Stock......................................................... A-3
1.6 Options..................................................................... A-3
1.7 Articles of Incorporation of Fleet.......................................... A-4
1.8 By-Laws of Fleet............................................................ A-4
1.9 Tax and Accounting Consequences............................................. A-4
1.10 Headquarters of Surviving Corporation; Name of the Surviving Corporation.... A-4
ARTICLE II
EXCHANGE OF SHARES
2.1 Fleet to Make Shares Available.............................................. A-4
2.2 Exchange of Shares.......................................................... A-5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BANKBOSTON
3.1 Corporate Organization...................................................... A-6
3.2 Capitalization.............................................................. A-7
3.3 Authority; No Violation..................................................... A-8
3.4 Consents and Approvals...................................................... A-8
3.5 Reports..................................................................... A-9
3.6 Financial Statements........................................................ A-9
3.7 Broker's Fees............................................................... A-10
3.8 Absence of Certain Changes or Events........................................ A-10
3.9 Legal Proceedings........................................................... A-10
3.10 Taxes and Tax Returns....................................................... A-10
3.11 Employees................................................................... A-11
3.12 SEC Reports................................................................. A-12
3.13 Compliance with Applicable Law.............................................. A-12
3.14 Certain Contracts........................................................... A-13
3.15 Agreements with Regulatory Agencies......................................... A-13
3.16 International Operations.................................................... A-14
3.17 Interest Rate Risk Management Instruments................................... A-14
3.18 Undisclosed Liabilities..................................................... A-14
3.19 Environmental Liability..................................................... A-14
3.20 State Takeover Laws; BankBoston Rights Agreement............................ A-14
3.21 Year 2000................................................................... A-15
3.22 Reorganization; Pooling of Interests........................................ A-15
3.23 Ownership of Company Common Stock; Affiliates and Associates................ A-15
3.24 Opinions.................................................................... A-15
3.25 BankBoston Information...................................................... A-15
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FLEET
4.1 Corporate Organization...................................................... A-16
4.2 Capitalization.............................................................. A-16
4.3 Authority, No Violation..................................................... A-17
4.4 Consents and Approvals...................................................... A-17
4.5 Reports..................................................................... A-18
4.6 Financial Statements........................................................ A-18
4.7 Broker's Fees............................................................... A-19
4.8 Absence of Certain Changes or Events........................................ A-19
4.9 Legal Proceedings........................................................... A-19
4.10 Taxes and Tax Returns....................................................... A-19
4.11 Employees................................................................... A-20
4.12 SEC Reports................................................................. A-21
4.13 Compliance with Applicable Law.............................................. A-21
4.14 Certain Contracts........................................................... A-21
4.15 Agreements with Regulatory Agencies......................................... A-22
4.16 International Operations.................................................... A-22
4.17 Interest Rate Risk Management Instruments................................... A-22
4.18 Undisclosed Liabilities..................................................... A-23
4.19 Environmental Liability..................................................... A-23
4.20 State Takeover Laws; Article Ninth of Fleet Articles; Fleet Rights
Agreement................................................................... A-23
4.21 Year 2000................................................................... A-23
4.22 Reorganization; Pooling of Interests........................................ A-24
4.23 Ownership of BankBoston Common Stock; Affiliates and Associates............. A-24
4.24 Opinions.................................................................... A-24
4.25 Fleet Information........................................................... A-24
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Businesses Prior to the Effective Time........................... A-24
5.2 Forbearances................................................................ A-24
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Regulatory Matters.......................................................... A-26
6.2 Access to Information....................................................... A-27
6.3 Stockholders' Approvals..................................................... A-28
6.4 Legal Conditions to Merger.................................................. A-28
6.5 Affiliates; Publication of Combined Financial Results....................... A-28
6.6 Stock Exchange Listing...................................................... A-29
6.7 Employee Benefit Plans...................................................... A-29
6.8 Indemnification; Directors' and Officers' Insurance......................... A-29
6.9 Additional Agreements....................................................... A-30
6.10 Advice of Changes........................................................... A-30
6.11 Dividends................................................................... A-30
6.12 Restructuring Efforts....................................................... A-30
6.13 Executive Officers, Succession.............................................. A-30
6.14 Post-Merger Board of Directors and Committees............................... A-31
6.15 Exemption from Liability Under Section 16(b)................................ A-31
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation To Effect the Merger.................. A-32
7.2 Conditions to Obligations of Fleet.......................................... A-33
7.3 Conditions to Obligations of BankBoston..................................... A-33
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination................................................................. A-34
8.2 Effect of Termination....................................................... A-34
8.3 Amendment................................................................... A-34
8.4 Extension; Waiver........................................................... A-35
ARTICLE IX
GENERAL PROVISIONS
9.1 Closing..................................................................... A-35
9.2 Nonsurvival of Representations, Warranties and Agreements................... A-35
9.3 Expenses.................................................................... A-35
9.4 Notices..................................................................... A-35
9.5 Interpretation.............................................................. A-36
9.6 Counterparts................................................................ A-36
9.7 Entire Agreement............................................................ A-36
9.8 Governing Law............................................................... A-36
9.9 Publicity................................................................... A-36
9.10 Assignment; Third Party Beneficiaries....................................... A-36
9.11 Certain Agreements of Surviving Corporation................................. A-36
</TABLE>
iii
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE NO.
-------------
<S> <C>
Agreement............................................................................................... 1
Articles of Merger...................................................................................... 2
BankBoston.............................................................................................. 1
BankBoston Articles..................................................................................... 8
BankBoston Benefit Plans................................................................................ 14
BankBoston Capital Stock................................................................................ 13
BankBoston Common Stock................................................................................. 2
BankBoston Contract..................................................................................... 16
BankBoston Director..................................................................................... 40
BankBoston Disclosure Schedule.......................................................................... 12
BankBoston DRIP......................................................................................... 9
BankBoston ERISA Affiliate.............................................................................. 14
BankBoston Option Agreement............................................................................. 1
BankBoston Preferred Stock.............................................................................. 8
BankBoston Regulatory Agreement......................................................................... 17
BankBoston Reports...................................................................................... 15
BankBoston Rights....................................................................................... 9
BankBoston Rights Agreement............................................................................. 3
BankBoston Stock Plans.................................................................................. 4
BankBoston Stockholder Rights........................................................................... 2
BankBoston 1998 10-K.................................................................................... 12
BHC Act................................................................................................. 8
Bylaw Amendment......................................................................................... 5
CERCLA.................................................................................................. 18
CEO Succession Date..................................................................................... 39
Certificate............................................................................................. 3
Chairmanship Succession Date............................................................................ 39
Code.................................................................................................... 1
Confidentiality Agreement............................................................................... 35
Dissenting Shares....................................................................................... 3
Distribution Date....................................................................................... 26
DPC Shares.............................................................................................. 3
Effective Time.......................................................................................... 2
ERISA................................................................................................... 14
Exchange Act............................................................................................ 12
Exchange Agent.......................................................................................... 5
Exchange Fund........................................................................................... 5
Exchange Ratio.......................................................................................... 3
Fleet................................................................................................... 1
Fleet Articles.......................................................................................... 5
Fleet Articles.......................................................................................... 20
Fleet Benefit Plans..................................................................................... 25
Fleet Capital Stock..................................................................................... 4
Fleet Common Stock...................................................................................... 3
Fleet Contract.......................................................................................... 27
Fleet Director.......................................................................................... 40
Fleet Disclosure Schedule............................................................................... 20
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
PAGE NO.
-------------
<S> <C>
Fleet DRIP.............................................................................................. 21
Fleet ERISA Affiliate................................................................................... 25
Fleet Option Agreement.................................................................................. 1
Fleet Purchase Rights................................................................................... 21
Fleet Preferred Stock................................................................................... 4
Fleet Regulatory Agreement.............................................................................. 28
Fleet Reports........................................................................................... 26
Fleet Rights............................................................................................ 21
Fleet Rights Agreement.................................................................................. 3
Fleet Stock Plans....................................................................................... 20
Fleet Stockholder Rights................................................................................ 3
Fleet 1998 Financial Information........................................................................ 23
Fleet Warrants.......................................................................................... 21
Regulatory Agencies..................................................................................... 11
Requisite Regulatory Approvals.......................................................................... 41
Restated By-Laws........................................................................................ 9
Rhode Island Secretary.................................................................................. 2
RIBCA................................................................................................... 2
Safety and Soundness Guidelines Concerning the Year 2000 Business....................................... 26
SBA..................................................................................................... 11
SEC..................................................................................................... 10
Securities Act.......................................................................................... 15
SRO..................................................................................................... 11
State and Foreign Approvals............................................................................. 10
State Regulator......................................................................................... 11
Surviving Corporation................................................................................... 1
S-4..................................................................................................... 10
Tax..................................................................................................... 20
Trust Account Shares.................................................................................... 3
Year 2000 Issues........................................................................................ 26
</TABLE>
v
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 14, 1999 (this "Agreement"),
by and between BankBoston Corporation, a Massachusetts corporation
("BankBoston"), and Fleet Financial Group, Inc., a Rhode Island corporation
("Fleet").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of BankBoston and Fleet 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 in which BankBoston will, subject to the terms and
conditions set forth herein, merge with and into Fleet (the "Merger"), so that
Fleet is the surviving corporation (hereinafter sometimes referred to in such
capacity as the "Surviving Corporation") in the Merger; and
WHEREAS, as a condition to, and immediately after, the execution of this
Agreement, and as a condition to the execution of the BankBoston Option
Agreement, BankBoston and Fleet are entering into a Fleet stock option agreement
(the "Fleet Option Agreement") in the form attached hereto as Exhibit A; and
WHEREAS, as a condition to, and immediately after, the execution of this
Agreement, and as a condition to the execution of the Fleet Option Agreement,
BankBoston and Fleet are entering into a BankBoston stock option agreement (the
"BankBoston Option Agreement;" and together with the Fleet Option Agreement, the
"Option Agreements") in the form attached hereto as Exhibit B; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"), and this Agreement is
intended to be and is adopted as a plan of reorganization for purposes of
Sections 354, 361 and 368 of the Code; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
A-1
<PAGE>
ARTICLE I
THE MERGER
1.1 THE MERGER. (a) Subject to the terms and conditions of this Agreement,
in accordance with the Massachusetts Business Corporation Law (the "MBCL") and
the Rhode Island Business Corporation Act (the "RIBCA"), at the Effective Time,
BankBoston shall merge with and into Fleet. Fleet shall be the Surviving
Corporation in the Merger, and shall continue its corporate existence under the
laws of the State of Rhode Island. Upon consummation of the Merger, the separate
corporate existence of BankBoston shall terminate.
(b) Fleet may at any time change the method of effecting the combination
with BankBoston (including by providing for the merger of a wholly owned
subsidiary of Fleet with and into BankBoston or the merger of a wholly owned
subsidiary of BankBoston with and into Fleet) if and to the extent Fleet deems
such change to be desirable; PROVIDED, HOWEVER, that no such change shall (i)
alter or change the amount or kind of consideration to be issued to holders of
the capital stock of BankBoston as provided for in this Agreement (the "Merger
Consideration"), except for appropriate adjustments in the event of a merger
described in the preceding parenthetical (which shall in no event result in a
change in the relative interests in the Surviving Corporation of the parties'
respective holders of capital stock from the relative interests contemplated by
this Agreement as currently structured) (ii) adversely affect the tax treatment
of BankBoston's stockholders as a result of receiving the Merger Consideration
or (iii) materially impede or delay consummation of the transactions
contemplated by this Agreement.
1.2 EFFECTIVE TIME. The Merger shall become effective as set forth in the
respective articles of merger (the "Articles of Merger") which shall be filed
with the Secretary of State of the State of Rhode Island (the "Rhode Island
Secretary") and the Secretary of Commonwealth of the Commonwealth of
Massachusetts (the "Massachusetts Secretary") on the Closing Date. The term
"Effective Time" shall be the date and time when the Merger becomes effective,
as set forth in the Articles of Merger.
1.3 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
shall have the effects set forth in Section 7-1.1-69 of the RIBCA and Section 80
of the MBCL.
1.4 CONVERSION OF BANKBOSTON COMMON STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of Fleet, BankBoston or
the holder of any of the following securities:
(a) Subject to Section 2.2(e), each share of the common stock, par value
$1.00 per share, of BankBoston issued and outstanding immediately prior to the
Effective Time (together with the rights (the "BankBoston Stockholder Rights")
attached thereto issued pursuant to that certain Rights Agreement, dated June
28, 1990, as amended, as it may be further amended, supplemented, restated or
replaced from time to time, between BankBoston and BankBoston, N.A., as Rights
Agent (the "BankBoston Rights Agreement"), the "BankBoston Common Stock") except
for Dissenting Shares (as defined below), shares of BankBoston Common Stock
owned by BankBoston as treasury stock or owned, directly or indirectly, by
BankBoston or Fleet or any of their respective wholly-owned subsidiaries (other
than shares of BankBoston Common Stock held, directly or indirectly, in trust
accounts, managed accounts and the like, or otherwise held in a fiduciary
capacity, that are beneficially owned by third parties (any such shares of
BankBoston Common Stock or Fleet Common Stock which are similarly held, whether
held directly or indirectly by BankBoston or Fleet, as the case may be, being
referred to herein as "Trust Account Shares") and other than any shares of
BankBoston Common Stock held by BankBoston or Fleet or any of their respective
Subsidiaries in respect of a debt previously contracted (any such shares of
BankBoston Common Stock, and shares of Fleet Common Stock which are similarly
held, whether held directly or indirectly by BankBoston or Fleet or any of their
respective Subsidiaries, being referred to herein as "DPC Shares")), shall be
converted into the right to receive 1.1844 shares (the "Exchange Ratio") of the
common stock, par value $0.01 per share, of Fleet (together with the number of
preferred stock purchase rights (the "Fleet Stockholder Rights") attached
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thereto pursuant to that certain Rights Agreement, dated as of November 21,
1988, as amended (as such may be further amended, supplemented, restated or
replaced from time to time), between Fleet and Fleet National Bank, as Rights
Agent (the "Fleet Rights Agreement"), the "Fleet Common Stock").
(b) All of the shares of BankBoston Common Stock converted into the right to
receive Fleet Common Stock pursuant to this Article I shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist as of
the Effective Time, and each certificate (each a "Certificate") previously
representing any such shares of BankBoston Common Stock shall thereafter
represent only the right to receive (i) a certificate representing the number of
whole shares of Fleet Common Stock and (ii) cash in lieu of fractional shares
into which the shares of BankBoston Common Stock represented by such Certificate
have been converted pursuant to this Section 1.4 and Section 2.2(e).
Certificates previously representing shares of BankBoston Common Stock shall be
exchanged for certificates representing whole shares of Fleet Common Stock and
cash in lieu of fractional shares issued in consideration therefor upon the
surrender of such Certificates in accordance with Section 2.2, without any
interest thereon. If, prior to the Effective Time, the outstanding shares of
Fleet Common Stock or BankBoston Common Stock shall have been increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities as a result of a reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, or other similar change in
capitalization, an appropriate and proportionate adjustment shall be made to the
Exchange Ratio.
(c) Notwithstanding anything in the Agreement to the contrary, at the
Effective Time, all shares of BankBoston Common Stock that are owned, directly
or indirectly, by BankBoston or Fleet or any of their respective wholly owned
Subsidiaries (other than Trust Account Shares and DPC Shares) shall be cancelled
and shall cease to exist and no stock of Fleet or other consideration shall be
delivered in exchange therefor.
(d) Notwithstanding anything in this Agreement to the contrary, shares of
BankBoston Common Stock that are outstanding immediately prior to the Effective
Time, the holders of which shall have delivered to BankBoston a written demand
for appraisal of such shares in the manner provided in Sections 86 and 89 of the
MBCL ("Dissenting Shares"), shall not be converted into the right to receive, or
be exchangeable for, the shares of Fleet Common Stock otherwise issuable in
exchange for such shares of BankBoston Common Stock pursuant to this Section 1.4
but, instead, the holders thereof shall be entitled to payment of the appraised
value of such Dissenting Shares in accordance with the provisions of Section 89
of the MBCL; PROVIDED, HOWEVER, that (i) if any holder of Dissenting Shares
shall subsequently deliver a written withdrawal of his demand for appraisal of
such shares (with the written approval of the Surviving Corporation if such
withdrawal is not tendered within 60 days after the Effective Time), or (ii) if
any holder fails to establish his entitlement to appraisal rights under the
MBCL, such holder or holders (as the case may be) shall forfeit the right to
appraisal of such shares of BankBoston Common Stock and each of such shares
shall thereupon be deemed to have been converted into the right to receive, and
to have become exchangeable for, as of the Effective Time, the shares of Fleet
Common Stock otherwise issuable in exchange for such shares of BankBoston Common
Stock pursuant to this Section 1.4, without any interest thereon.
1.5 FLEET CAPITAL STOCK. At and after the Effective Time, each share of
Fleet Common Stock and each share of preferred stock, par value $1.00 per share,
of Fleet ("Fleet Preferred Stock," and together with the Fleet Common Stock, the
"Fleet Capital Stock") issued and outstanding immediately prior to the Effective
Time shall remain an issued and outstanding share of common stock of the
Surviving Corporation and shall not be affected by the Merger.
1.6 OPTIONS. (a) At the Effective Time, each option granted by BankBoston
to purchase shares of BankBoston Common Stock which is outstanding and
unexercised immediately prior thereto shall cease to represent a right to
acquire shares of BankBoston Common Stock and shall be converted automatically
into an option to purchase shares of Fleet Common Stock in an amount and at an
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exercise price determined as provided below (and otherwise subject to the terms
of the BankBoston 1982 Stock Option Plan, as amended, the BankBoston 1986 Stock
Option Plan, as amended, the BankBoston 1991 Long-Term Incentive Plan, the
BankBoston 1996 Long-Term Incentive Plan, the BankBoston 1997 Stock Option Plan
for Non-Employee Directors, the Society for Savings 1993 Stock Incentive Plan,
the Multibank 1982 Employee Stock Option Plan, the Boston Bancorp Stock Option
Plan, or the 1988 Stock Option Plan for Key Employees of BayBanks, Inc. and
Affiliates, as amended, BankBoston Shared Opportunities Program, BankBoston 1998
Shared Opportunities Program, 1998 Stock Option Plan for Employees of BancBoston
Robertson Stephens Inc. (collectively, the "BankBoston Stock Plans"), and the
agreements evidencing grants thereunder):
(i) The number of shares of Fleet Common Stock to be subject to the new
option shall be equal to the product of the number of shares of BankBoston
Common Stock subject to the original option and the Exchange Ratio, provided
that any fractional shares of Fleet Common Stock resulting from such
multiplication shall be rounded down to the nearest whole share; and
(ii) The exercise price per share of Fleet Common Stock under the new
option shall be equal to the exercise price per share of BankBoston Common
Stock under the original option divided by the Exchange Ratio, provided that
such exercise price shall be rounded up to the nearest whole cent.
(b) The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Code) shall be and
is intended to be effected in a manner which is consistent with Section 424(a)
of the Code. The duration and other terms of the new option shall be the same as
the original option except that all references to BankBoston shall be deemed to
be references to Fleet.
1.7 ARTICLES OF INCORPORATION OF FLEET. At the Effective Time, the
Restated Articles of Incorporation of Fleet ("Fleet Articles"), as in effect at
the Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation, except to the extent otherwise contemplated by Section 1.10 below.
1.8 BY-LAWS OF FLEET. At the Effective Time, the By-Laws of Fleet, as in
effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation until thereafter amended in accordance with applicable
law; PROVIDED, HOWEVER, that Fleet shall cause the Bylaws of Fleet to be amended
as provided in Schedule A (the "Bylaw Amendment") effective as of the Effective
Time.
1.9 TAX AND ACCOUNTING CONSEQUENCES. It is intended that the Merger shall
constitute a "reorganization" within the meaning of Section 368(a) of the Code,
that this Agreement shall constitute a "plan of reorganization" for the purposes
of Sections 354, 361 and 368 of the Code and that the Merger shall be accounted
for as a "pooling of interests" under generally accepted accounting principles
("GAAP").
1.10 HEADQUARTERS OF SURVIVING CORPORATION; NAME OF THE SURVIVING
CORPORATION. From and after the Effective Time, the location of the
headquarters and principal executive offices of the Surviving Corporation shall
be Boston, Massachusetts, and the name of the Surviving Corporation shall be
"FLEET BOSTON CORPORATION"; PROVIDED that the parties shall consult and
undertake such studies and analyses as they shall consider necessary or
desirable to determine the most suitable name for the Surviving Corporation.
ARTICLE II
EXCHANGE OF SHARES
2.1 FLEET TO MAKE SHARES AVAILABLE. At or prior to the Effective Time,
Fleet shall deposit, or shall cause to be deposited, with a Subsidiary of Fleet,
or another bank or trust company reasonably acceptable to each of BankBoston and
Fleet (the "Exchange Agent"), for the benefit of the holders of Certificates,
for exchange in accordance with this Article II, certificates representing the
shares of Fleet Common Stock, and cash in lieu of any fractional shares (such
cash and certificates for shares of Fleet
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Common Stock, together with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund"), to be issued pursuant to
Section 1.4 and paid pursuant to Section 2.2(a) in exchange for outstanding
shares of BankBoston Common Stock.
2.2 EXCHANGE OF SHARES. (a) As soon as practicable after the Effective
Time, and in no event later than five business days thereafter, the Exchange
Agent shall mail to each holder of record of one or more Certificates a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing the
shares of Fleet Common Stock and any cash in lieu of fractional shares into
which the shares of BankBoston Common Stock represented by such Certificate or
Certificates shall have been converted pursuant to this Agreement. Upon proper
surrender of a Certificate or Certificates for exchange and cancellation to the
Exchange Agent, together with such properly completed letter of transmittal,
duly executed, the holder of such Certificate or Certificates shall be entitled
to receive in exchange therefor, as applicable, (i) a certificate representing
that number of whole shares of Fleet Common Stock to which such holder of
BankBoston Common Stock shall have become entitled pursuant to the provisions of
Article I and (ii) a check representing the amount of any cash in lieu of
fractional shares which such holder has the right to receive in respect of the
Certificate or Certificates surrendered pursuant to the provisions of this
Article II, and the Certificate or Certificates so surrendered shall forthwith
be cancelled. No interest will be paid or accrued on any cash in lieu of
fractional shares or on any unpaid dividends and distributions payable to
holders of Certificates.
(b) No dividends or other distributions declared with respect to Fleet
Common Stock shall be paid to the holder of any unsurrendered Certificate until
the holder thereof shall surrender such Certificate in accordance with this
Article II. After the surrender of a Certificate in accordance with this Article
II, the record holder thereof shall be entitled to receive any such dividends or
other distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Fleet Common Stock represented by such
Certificate.
(c) If any certificate representing shares of Fleet Common Stock is to be
issued in a name other than that in which the Certificate or Certificates
surrendered in exchange therefor is or are registered, it shall be a condition
of the issuance thereof that the Certificate or Certificates so surrendered
shall be properly endorsed (or accompanied by an appropriate instrument of
transfer) and otherwise in proper form for transfer, and that the person
requesting such exchange shall pay to the Exchange Agent in advance any transfer
or other taxes required by reason of the issuance of a certificate representing
shares of Fleet Common Stock in any name other than that of the registered
holder of the Certificate or Certificates surrendered, or required for any other
reason, or shall establish to the satisfaction of the Exchange Agent that such
tax has been paid or is not payable.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of BankBoston of the shares of BankBoston Capital Stock that were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such shares are presented for transfer
to the Exchange Agent, they shall be cancelled and exchanged for certificates
representing shares of Fleet Common Stock as provided in this Article II.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of Fleet Common Stock shall
be issued upon the surrender for exchange of Certificates, no dividend or
distribution with respect to Fleet Common Stock shall be payable on or with
respect to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a stockholder of
Fleet. In lieu of the issuance of any such fractional share, Fleet shall pay to
each former stockholder of BankBoston who otherwise would be entitled to receive
such fractional share an amount in cash determined by multiplying (i) the
average of the closing-sale prices of Fleet Common Stock on the New York Stock
Exchange, Inc. (the "NYSE") as reported by The Wall Street Journal for the five
trading days immediately preceding the date of the
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Effective Time by (ii) the fraction of a share (rounded to the nearest
thousandth when expressed in decimal form) of Fleet Common Stock to which such
holder would otherwise be entitled to receive pursuant to Section 1.4.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of BankBoston for 12 months after the Effective Time shall be paid
to Fleet. Any former stockholders of BankBoston who have not theretofore
complied with this Article II shall thereafter look only to Fleet for payment of
the shares of Fleet Common Stock, cash in lieu of any fractional shares and any
unpaid dividends and distributions on the Fleet Common Stock deliverable in
respect of each share of BankBoston Common Stock, as the case may be, such
stockholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon. Notwithstanding the foregoing, none of Fleet,
BankBoston, the Exchange Agent or any other person shall be liable to any former
holder of shares of BankBoston Common Stock for any amount delivered in good
faith to a public official pursuant to applicable abandoned property, escheat or
similar laws.
(g) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if reasonably required by
Fleet, the posting by such person of a bond in such amount as Fleet may
determine is reasonably necessary as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed Certificate the shares of Fleet
Common Stock and any cash in lieu of fractional shares deliverable in respect
thereof pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BANKBOSTON
Except as disclosed in the BankBoston disclosure schedule delivered to Fleet
concurrently herewith (the "BankBoston Disclosure Schedule"), BankBoston hereby
represents and warrants to Fleet as follows:
3.1 CORPORATE ORGANIZATION. (a) BankBoston is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts. BankBoston has the corporate power and authority
to own or lease all of its properties and assets and to carry on its business as
it is now being conducted, and is duly licensed or qualified to do business in
each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified would not, either individually or in the aggregate, have a
Material Adverse Effect on BankBoston. As used in this Agreement, the term
"Material Adverse Effect" means, with respect to Fleet, BankBoston or the
Surviving Corporation, as the case may be, a material adverse effect on (i) the
business, results of operations or financial condition of such party and its
Subsidiaries taken as a whole or (ii) the ability of such party to timely
consummate the transactions contemplated hereby; PROVIDED, HOWEVER, that
Material Adverse Effect shall not be deemed to include the impact of (a) changes
in banking and similar laws, rules or regulations of general applicability or
interpretations thereof by courts or governmental authorities, (b) changes in
generally accepted accounting principles or regulatory accounting requirements
applicable to banks or savings associations and their holding companies
generally, (c) actions or omissions of Fleet or BankBoston taken with the prior
written consent of the other in contemplation of the transactions contemplated
hereby, (d) any changes in general economic conditions affecting banks, savings
associations or their holding companies generally and (e) the effects of the
Merger and compliance by either party with the provisions of this Agreement on
the business, financial condition or results of operations of such party and its
Subsidiaries, or the other party and its Subsidiaries, as the case may be. As
used in this Agreement, the word "Subsidiary" when used with respect to any
party, means any bank, corporation, partnership, limited liability company, or
other organization, whether incorporated or unincorporated, which is
consolidated with such
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party for financial reporting purposes. BankBoston is duly registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended (the "BHC
Act"). True and complete copies of the BankBoston Articles and By-Laws of
BankBoston, as in effect as of the date of this Agreement, have previously been
made available by BankBoston to Fleet.
(b) Each BankBoston Subsidiary (i) is duly organized and validly existing
under the laws of its jurisdiction of organization, (ii) is duly qualified to do
business and in good standing in all jurisdictions (whether federal, state,
local or foreign) where its ownership or leasing of property or the conduct of
its business requires it to be so qualified and in which the failure to be so
qualified would have a Material Adverse Effect on BankBoston and (iii) has all
requisite corporate power and authority to own or lease its properties and
assets and to carry on its business as now conducted.
3.2 CAPITALIZATION. (a) The authorized capital stock of BankBoston
consists of (i) 500,000,000 shares of BankBoston Common Stock, of which, as of
March 11, 1999, 296,508,437 shares were issued and outstanding and 10,560,550
shares were held in treasury, and (ii) 10,000,000 shares of preferred stock,
without par value (the "BankBoston Preferred Stock" and together with the
BankBoston Common Stock, the "BankBoston Capital Stock"), of which no shares are
issued or outstanding as of the date hereof. All of the issued and outstanding
shares of BankBoston Common Stock have been duly authorized and validly issued
and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. As of the date of this
Agreement, except as described in this Section 3.2(a) and except pursuant to the
terms of (i) the BankBoston Option Agreement, (ii) options issued pursuant to
the BankBoston Stock Plans and (iii) the BankBoston Rights Agreement, BankBoston
does not have and is not bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of BankBoston Capital Stock or any other
equity securities of BankBoston or any securities representing the right to
purchase or otherwise receive any shares of BankBoston Capital Stock
(collectively, including the items contemplated by clauses (i) through (iii) of
this sentence, the "BankBoston Rights"). As of March 11, 1999, no shares of
BankBoston Capital Stock were reserved for issuance, except for 59,005,178
shares of BankBoston Common Stock reserved for issuance upon exercise of the
BankBoston Option Agreement, 12,311,154 shares of BankBoston Common Stock
reserved for issuance in connection with the BankBoston Automatic Dividend
Reinvestment and Common Stock Purchase Plan (the "BankBoston DRIP"), 68,175,454
shares of BankBoston Common Stock reserved for issuance upon the exercise of
stock options pursuant to the BankBoston Stock Plans and in respect of the
employee and director savings, compensation and deferred compensation plans
described in Section 3.11(a) of the BankBoston Disclosure Schedule and 200,000
shares of BankBoston Junior Participating Preferred Stock, Series D, reserved
for issuance in connection with the BankBoston Rights Agreement. Since March 11,
1999, BankBoston has not issued any shares of its capital stock or any
securities convertible into or exercisable for any shares of its capital stock,
other than as permitted by Section 5.2(b). BankBoston has previously provided
Fleet with a list of (i) the aggregate number of options outstanding under the
BankBoston Stock Plans as of March 11, 1999 (other than under the Shared
Opportunities Program) and the weighted average exercise price for such options
and (ii) the aggregate number of options outstanding under the Shared
Opportunities Program as of March 11, 1999 and the weighted average exercise
price for such options. In no event will the aggregate number of shares of
BankBoston Common Stock outstanding immediately prior to the Effective Time
(including all shares of BankBoston Common Stock subject to BankBoston Rights
other than the BankBoston Option Agreement) exceed the number specified in
Section 3.2(a) of the BankBoston Disclosure Schedule.
(b) BankBoston owns, directly or indirectly, all of the issued and
outstanding shares of capital stock or other equity ownership interests of each
of the BankBoston Subsidiaries, free and clear of any liens, pledges, charges,
encumbrances and security interests whatsoever ("Liens"), and all of such shares
or equity ownership interests are duly authorized and validly issued and are
fully paid, nonassessable (subject to 12 U. S. C. SectionSection55) and free of
preemptive rights, with no personal liability attaching to the
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ownership thereof. No BankBoston Subsidiary has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of capital stock or
any other equity security of such Subsidiary or any securities representing the
right to purchase or otherwise receive any shares of capital stock or any other
equity security of such Subsidiary. Section 3.2(b) of the BankBoston Disclosure
Schedule sets forth a list of the material investments of BankBoston in
corporations, joint ventures, partnerships, limited liability companies and
other entities other than its Subsidiaries (each a "Non-Subsidiary Affiliate").
3.3 AUTHORITY; NO VIOLATION. (a) BankBoston has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of BankBoston. The Board of Directors
of BankBoston has directed that this Agreement and the transactions contemplated
hereby be submitted to BankBoston's stockholders for adoption at a meeting of
such stockholders and, except for the approval of this Agreement and the
transactions contemplated hereby by the affirmative vote of the holders of
two-thirds of the outstanding shares of BankBoston Common Stock, no other
corporate proceedings on the part of BankBoston are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by BankBoston and (assuming due
authorization, execution and delivery by Fleet) constitutes a valid and binding
obligation of BankBoston, enforceable against BankBoston in accordance with its
terms (except as may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the rights of creditors generally and
the availability of equitable remedies).
(b) Neither the execution and delivery of this Agreement by BankBoston nor
the consummation by BankBoston of the transactions contemplated hereby, nor
compliance by BankBoston with any of the terms or provisions hereof, will (i)
violate any provision of the BankBoston Articles or By-Laws or (ii) assuming
that the consents and approvals referred to in Section 3.4 are duly obtained,
(x) violate any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to BankBoston, any of its Subsidiaries or
Non-Subsidiary Affiliates or any of their respective properties or assets or (y)
violate, conflict with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any Lien upon any of the respective
properties or assets of BankBoston, any of its Subsidiaries or Non-Subsidiary
Affiliates under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which BankBoston, any of its Subsidiaries or its
Non-Subsidiary Affiliates is a party, or by which they or any of their
respective properties or assets may be bound or affected, except (in the case of
clause (y) above) for such violations, conflicts, breaches or defaults which,
either individually or in the aggregate, will not have a Material Adverse Effect
on BankBoston.
3.4 CONSENTS AND APPROVALS. Except for (i) the filing of applications and
notices, as applicable, with the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the BHC Act and the Federal Reserve
Act, as amended, and approval of such applications and notices, (ii) the filing
of any required applications or notices with any state or foreign agencies and
approval of such applications and notices (the "State and Foreign Approvals"),
(iii) the filing with the Securities and Exchange Commission (the "SEC") of a
joint proxy statement in definitive form relating to the meetings of
BankBoston's and Fleet's stockholders to be held in connection with this
Agreement and the transactions contemplated hereby (the "Joint Proxy
Statement"), and of the registration statement on Form S-4 (the "S-4") in which
the Joint Proxy Statement will be included as a prospectus, (iv) the filing of
the Articles of Merger with the Rhode Island Secretary pursuant to the RIBCA and
the filing of the Articles of Merger with the Secretary of Commonwealth of the
Commonwealth of Massachusetts pursuant to the MBCL, (v) any notices to or
filings with the Small Business Administration ("SBA"),
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(vi) any consents, authorizations, approvals, filings or exemptions in
connection with compliance with the applicable provisions of federal and state
securities laws relating to the regulation of broker-dealers, investment
advisers or transfer agents, and federal commodities laws relating to the
regulation of futures commission merchants and the rules and regulations
thereunder and of any applicable industry self-regulatory organization ("SRO"),
and the rules of the NYSE, or which are required under consumer finance,
mortgage banking and other similar laws, (vii) such filings and approvals as are
required to be made or obtained under the securities or "Blue Sky" laws of
various states in connection with the issuance of the shares of Fleet Capital
Stock pursuant to this Agreement, and (viii) the approval of this Agreement by
the requisite vote of stockholders of BankBoston, no consents or approvals of or
filings or registrations with any court, administrative agency or commission or
other governmental authority or instrumentality (each a "Governmental Entity")
are necessary in connection with (A) the execution and delivery by BankBoston of
this Agreement and (B) the consummation by BankBoston of the Merger and the
other transactions contemplated hereby.
3.5 REPORTS. BankBoston and each of its Subsidiaries have timely filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that they were required to file since January 1,
1996 with (i) the Federal Reserve Board, (ii) the Federal Deposit Insurance
Corporation, (iii) any state regulatory authority (each a "State Regulator"),
(iv) the Office of the Comptroller of the Currency (the "OCC"), (v) the SEC (vi)
any foreign regulatory authority and (vii) any SRO (collectively "Regulatory
Agencies"), and all other reports and statements required to be filed by them
since January 1, 1996, including, without limitation, any report or statement
required to be filed pursuant to the laws, rules or regulations of the United
States, any state, any foreign entity, or any Regulatory Agency, and have paid
all fees and assessments due and payable in connection therewith, except where
the failure to file such report, registration or statement or to pay such fees
and assessments, either individually or in the aggregate, will not have a
Material Adverse Effect on BankBoston. Except for normal examinations conducted
by a Regulatory Agency in the ordinary course of the business of BankBoston and
its Subsidiaries, no Regulatory Agency has initiated or has pending any
proceeding or, to the best knowledge of BankBoston, investigation into the
business or operations of BankBoston or any of its Subsidiaries since January 1,
1996, except where such proceedings or investigation will not, either
individually or in the aggregate, have a Material Adverse Effect on BankBoston.
There (i) is no unresolved violation, criticism, or exception by any Regulatory
Agency with respect to any report or statement relating to any examinations or
inspections of BankBoston or any of its Subsidiaries and (ii) has been no formal
or informal inquiries by, or disagreements or disputes with, any Regulatory
Agency with respect to the business, operations policies or procedures of
BankBoston since January 1, 1997, which, in the reasonable judgment of
BankBoston, will, either individually or in the aggregate, have a Material
Adverse Effect on BankBoston.
3.6 FINANCIAL STATEMENTS. BankBoston has previously made available to
Fleet copies of the consolidated balance sheet of BankBoston and its
Subsidiaries as of December 31, for the fiscal years 1997 and 1998, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the fiscal years 1996 through 1998, inclusive, as reported in
BankBoston's Annual Report on Form 10-K for the fiscal year ended December 31,
1998 (the "BankBoston 1998 10-K") filed with the SEC under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in each case accompanied
by the audit report of PricewaterhouseCoopers LLP, independent public
accountants with respect to BankBoston. The December 31, 1998 consolidated
balance sheet of BankBoston (including the related notes, where applicable)
fairly presents in all material respects the consolidated financial position of
BankBoston and its Subsidiaries as of the date thereof, and the other financial
statements referred to in this Section 3.6 (including the related notes, where
applicable) fairly present in all material respects the results of the
consolidated operations and changes in stockholders' equity and consolidated
financial position of BankBoston and its Subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth; each of such statements
(including the related notes, where applicable) complies in all material
respects with applicable accounting requirements and with the
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published rules and regulations of the SEC with respect thereto; and each of
such statements (including the related notes, where applicable) has been
prepared in all material respects in accordance with GAAP consistently applied
during the periods involved, except, in each case, as indicated in such
statements or in the notes thereto. The books and records of BankBoston and its
Subsidiaries have been, and are being, maintained in all material respects in
accordance with GAAP and any other applicable legal and accounting requirements
and reflect only actual transactions.
3.7 BROKER'S FEES. Neither BankBoston nor any BankBoston Subsidiary nor
any of their respective officers or directors has employed any broker or finder
or incurred any liability for any broker's fees, commissions or finder's fees in
connection with the Merger or related transactions contemplated by this
Agreement or the Option Agreements.
3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. (a) Except as publicly disclosed
in BankBoston Reports filed prior to the date hereof, since December 31, 1998,
no event or events have occurred that have had, either individually or in the
aggregate, a Material Adverse Effect on BankBoston.
(b) Except as publicly disclosed in BankBoston Reports filed prior to the
date hereof, since December 31, 1998, BankBoston and its Subsidiaries have
carried on their respective businesses in all material respects in the ordinary
course.
(c) Since December 31, 1998, neither BankBoston nor any of its Subsidiaries
has (i) except for normal increases for employees (other than officers subject
to the reporting requirements of Section 16(a) of the Exchange Act) made in the
ordinary course of business consistent with past practice or as required by
applicable law, increased the wages, salaries, compensation, pension, or other
fringe benefits or perquisites payable to any executive officer, employee, or
director from the amount thereof in effect as of December 31, 1998, granted any
severance or termination pay, entered into any contract to make or grant any
severance or termination pay, or paid any bonus other than the customary
year-end bonuses for fiscal 1998 and 1999 in amounts consistent with past
practice, (ii) granted any stock appreciation rights or granted any rights to
acquire any shares of its capital stock to any executive officer, director or
employee other than grants to employees (other than officers subject to the
reporting requirements of Section 16(a) of the Exchange Act) made in the
ordinary course of business consistent with past practice under the BankBoston
Stock Plans and except as permitted by Section 5.2(b)(iii) or (iii) suffered any
strike, work stoppage, slow-down, or other labor disturbance.
3.9 LEGAL PROCEEDINGS. (a) Neither BankBoston nor any of its Subsidiaries
is a party to any, and there are no pending or, to the best of BankBoston's
knowledge, threatened, legal, administrative, arbitral or other proceedings,
claims, actions or governmental or regulatory investigations of any nature
against BankBoston or any of its Subsidiaries or challenging the validity or
propriety of the transactions contemplated by this Agreement or the BankBoston
Option Agreement as to which, in any such case, there is a reasonable
probability of an adverse determination and which, if adversely determined,
will, either individually or in the aggregate, have a Material Adverse Effect on
BankBoston.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction (other than those of general application that apply to similarly
situated bank holding companies or their subsidiaries) imposed upon BankBoston,
any of its Subsidiaries or the assets of BankBoston or any of its Subsidiaries
that has had, or will have, either individually or in the aggregate, a Material
Adverse Effect on BankBoston or the Surviving Corporation.
3.10 TAXES AND TAX RETURNS. (a) Each of BankBoston and its Subsidiaries
has duly filed all federal, state, foreign and local information returns and tax
returns required to be filed by it on or prior to the date hereof (all such
returns being accurate and complete in all material respects) and has duly paid
or made provisions for the payment of all Taxes and other governmental charges
which have been incurred or are due or claimed to be due from it by federal,
state, 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 (i) Taxes or other charges
which are not yet delinquent or are
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being contested in good faith and have not been finally determined, or (ii)
information returns, tax returns, Taxes or other governmental charges as to
which the failure to file, pay or make provision for will not, either
individually or in the aggregate, have a Material Adverse Effect on BankBoston.
The federal income tax returns of BankBoston and its Subsidiaries have been
examined by the Internal Revenue Service (the "IRS") for all years to and
including 1992 and any liability with respect thereto has been satisfied or any
liability with respect to deficiencies asserted as a result of such examination
is covered by adequate reserves. To the best of BankBoston's knowledge, there
are no material disputes pending, or claims asserted for, Taxes or assessments
upon BankBoston or any of its Subsidiaries for which BankBoston does not have
adequate reserves.
(b) As used in this Agreement, the term "Tax" or "Taxes" means all federal,
state, local, and foreign income, excise, gross receipts, gross income, ad
valorem, profits, gains, property, capital, sales, transfer, use, payroll,
employment, severance, withholding, duties, intangibles, franchise, backup
withholding, and other taxes, charges, levies or like assessments together with
all penalties and additions to tax and interest thereon.
(c) No disallowance of a deduction under Section 162(m) of the Code for
employee remuneration of any amount paid or payable by BankBoston or any of its
Subsidiaries under any contract, plan, program, arrangement or understanding
would be reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on BankBoston.
3.11 EMPLOYEES. (a) The BankBoston Disclosure Schedule sets forth a true
and complete list of each material employee or director benefit or compensation
plan, arrangement or agreement, and any material bonus, incentive, deferred
compensation, vacation, stock purchase, stock option, severance, employment,
change of control or fringe benefit plan, program or agreement that is
maintained, or contributed to, as of the date of this Agreement (the "BankBoston
Benefit Plans") by BankBoston, any of its Subsidiaries or by any trade or
business, whether or not incorporated (an "BankBoston ERISA Affiliate"), all of
which together with BankBoston would be deemed a "single employer" within the
meaning of Section 4001 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA").
(b) BankBoston has heretofore made available to Fleet true and complete
copies of each of the BankBoston Benefit Plans and certain related documents,
including, but not limited to, (i) the actuarial report for such BankBoston
Benefit Plan (if applicable) for each of the last two years and (ii) the most
recent determination letter from the IRS (if applicable) for such BankBoston
Benefit Plan.
(c) (i) Each of the BankBoston Benefit Plans has been operated and
administered in all material respects in compliance with applicable laws,
including, but not limited to, ERISA and the Code, (ii) each of the BankBoston
Benefit Plans intended to be "qualified" within the meaning of Section 401 (a)
of the Code is so qualified, and there are no existing circumstances or any
events that have occurred that will adversely affect the qualified status of any
such BankBoston Benefit Plan, (iii) with respect to each BankBoston Benefit Plan
that is subject to Title IV of ERISA, the present value of accrued benefits
under such BankBoston Benefit Plan, based upon the actuarial assumptions used
for funding purposes in the most recent actuarial report prepared by such
BankBoston Benefit Plan's actuary with respect to such BankBoston Benefit Plan,
did not, as of its latest valuation date, exceed the then current value of the
assets of such BankBoston Benefit Plan allocable to such accrued benefits, (iv)
no BankBoston Benefit Plan provides benefits, including, without limitation,
death or medical benefits (whether or not insured), with respect to current or
former employees or directors of BankBoston or its Subsidiaries beyond their
retirement or other termination of service, other than (A) coverage mandated by
applicable 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 BankBoston or its
Subsidiaries or (D) benefits the full cost of which is borne by the current or
former employee or director (or his beneficiary), (v) no liability under Title
IV of ERISA has been incurred by BankBoston, its Subsidiaries or any BankBoston
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ERISA Affiliate that has not been satisfied in full, and no condition exists
that presents a material risk to BankBoston, its Subsidiaries or any BankBoston
ERISA Affiliate of incurring a liability thereunder, (vi) no BankBoston Benefit
Plan is a "multiemployer pension plan" (as such term is defined in Section 3(37)
of ERISA), (vii) all contributions or other amounts payable by BankBoston or its
Subsidiaries as of the Effective Time with respect to each BankBoston Benefit
Plan in respect of current or prior plan years have been paid or accrued in
accordance with GAAP and Section 412 of the Code, (viii) none of BankBoston, its
Subsidiaries or any other person, including any fiduciary, has engaged in a
transaction in connection with which BankBoston, its Subsidiaries or any
BankBoston Benefit Plan will be subject to either a material civil penalty
assessed pursuant to Section 409 or 502(i) of ERISA or a material tax imposed
pursuant to Section 4975 or 4976 of the Code, and (ix) to the best knowledge of
BankBoston there are no pending, threatened or anticipated claims (other than
routine claims for benefits) by, on behalf of or against any of the BankBoston
Benefit Plans or any trusts related thereto that will have, either individually
or in the aggregate, a Material Adverse Effect on BankBoston.
(d) 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 BankBoston or any of
its affiliates from BankBoston or any of its affiliates under any BankBoston
Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under
any BankBoston Benefit Plan or (iii) result in any acceleration of the time of
payment or vesting of any such benefits. Prior to the execution and delivery of
this Agreement, BankBoston amended the BankBoston, N.A. Cash Balance Retirement
Plan (and any related trust) to provide that the transactions contemplated by
this Agreement shall not constitute a "change in control" as that term is
defined in each such plan.
3.12 SEC REPORTS. BankBoston has previously made available to Fleet an
accurate and complete copy of each (a) final registration statement, prospectus,
report, schedule and definitive proxy statement filed since January 1, 1996 by
BankBoston with the SEC pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act (the "BankBoston Reports") and prior to
the date hereof and (b) communication mailed by BankBoston to its stockholders
since January 1, 1996 and prior to the date hereof, and no such BankBoston
Report or communication, as of the date thereof, contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading, except that information
as of a later date (but before the date hereof) shall be deemed to modify
information as of an earlier date. Since January 1, 1996, as of their respective
dates, all BankBoston Reports filed under the Securities Act and the Exchange
Act complied in all material respects with the published rules and regulations
of the SEC with respect thereto.
3.13 COMPLIANCE WITH APPLICABLE LAW. (a) BankBoston and each of its
Subsidiaries hold all material licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses under and
pursuant to each, and have complied in all material respects with and are not in
default in any material respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relating to
BankBoston or any of its Subsidiaries, except where the failure to hold such
license, franchise, permit or authorization or such noncompliance or default
will not, either individually or in the aggregate, have a Material Adverse
Effect on BankBoston.
(b) Except as will not have, either individually or in the aggregate, a
Material Adverse Effect on BankBoston, BankBoston and each BankBoston Subsidiary
have properly administered all accounts for which it acts as a fiduciary,
including accounts for which it serves as a trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor, in accordance with
the terms of the governing documents, applicable state and federal law and
regulation and common law. None of BankBoston, any BankBoston Subsidiary, or any
director, officer or employee of BankBoston or of any
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BankBoston Subsidiary, has committed any breach of trust with respect to any
such fiduciary account that will have a Material Adverse Effect on BankBoston,
and the accountings for each such fiduciary account are true and correct in all
material respects and accurately reflect the assets of such fiduciary account.
3.14 CERTAIN CONTRACTS. (a) Neither BankBoston nor any of its Subsidiaries
is a party to or bound by any contract, arrangement, commitment or understanding
(whether written or oral) (i) with respect to the employment of any directors,
officers or employees, other than in the ordinary course of business consistent
with past practice, (ii) which, upon the consummation or stockholder approval of
the transactions contemplated by this Agreement will (either alone or upon the
occurrence of any additional acts or events) result in any payment (whether of
severance pay or otherwise) becoming due from Fleet, BankBoston, the Surviving
Corporation, or any of their respective Subsidiaries to any officer or employee
thereof, (iii) which is a "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this
Agreement that has not been filed or incorporated by reference in the BankBoston
Reports, (iv) which materially restricts the conduct of any line of business by
BankBoston or upon consummation of the Merger will materially restrict the
ability of the Surviving Corporation to engage in any line of business in which
a bank holding company may lawfully engage, (v) with or to a labor union or
guild (including any collective bargaining agreement) or (vi) (including any
stock option plan, stock appreciation rights plan, restricted stock plan or
stock purchase plan) any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
stockholder approval or the consummation 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. BankBoston has previously made available to Fleet true and correct
copies of all employment and deferred compensation agreements which are in
writing and to which BankBoston or any of its Subsidiaries is a party. Each
contract, arrangement, commitment or understanding of the type described in this
Section 3.14(a), whether or not set forth in the BankBoston Disclosure Schedule,
is referred to herein as a "BankBoston Contract," and neither BankBoston nor any
of its Subsidiaries knows of, or has received notice of, any violation of the
above by any of the other parties thereto which, either individually or in the
aggregate, will have a Material Adverse Effect on BankBoston.
(b) (i) Each BankBoston Contract is valid and binding on BankBoston or any
of its Subsidiaries, as applicable, and in full force and effect, (ii)
BankBoston and each of its Subsidiaries has in all material respects performed
all obligations required to be performed by it to date under each BankBoston
Contract, except where such noncompliance, either individually or in the
aggregate, will not have a Material Adverse Effect on BankBoston, and (iii) no
event or condition exists which constitutes or, after notice or lapse of time or
both, will constitute, a material default on the part of BankBoston or any of
its Subsidiaries under any such BankBoston Contract, except where such default,
either individually or in the aggregate, will not have a Material Adverse Effect
on BankBoston.
3.15 AGREEMENTS WITH REGULATORY AGENCIES. Neither BankBoston nor any of
its Subsidiaries is subject to any cease-and-desist or other order or
enforcement action 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
has been ordered to pay any civil money penalty by, or has been since January 1,
1996, a recipient of any supervisory letter from, or since January 1, 1996, has
adopted any policies, procedures or board resolutions at the request or
suggestion of any Regulatory Agency or other Governmental Entity that currently
restricts in any material respect the conduct of its business or that in any
material manner relates to its capital adequacy, its ability to pay dividends,
its credit or risk management policies, its management or its business (each
item in this sentence, whether or not set forth in the BankBoston Disclosure
Schedule, a "BankBoston Regulatory Agreement"), nor has BankBoston or any of its
Subsidiaries been advised since January 1, 1996, by any Regulatory Agency or
other Governmental Entity that it is considering issuing, initiating, ordering,
or requesting any such BankBoston Regulatory Agreement.
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3.16 INTERNATIONAL OPERATIONS. All non-U.S. banking, consumer finance and
securities operations have been conducted in compliance with the requirements of
all applicable federal and foreign laws, statutes, orders, rules, regulations or
policies and guidelines of any Regulatory Agency or Governmental Entity, except
for such noncompliance as would not have a Material Adverse Effect on
BankBoston. Neither BankBoston nor any Subsidiary is subject to any Regulatory
Agreement with any non-U.S. Regulatory Agency or Governmental Entity, nor has
BankBoston or any of its Subsidiaries been advised that any such authority or
entity is considering issuing or requesting any such agreement. There (i) is no
unresolved violation, criticism or exception by any non-U.S. Regulatory Agency
or Governmental Entity relating to any examinations or inspections of BankBoston
or any Subsidiary and (ii) has been no formal or informal inquiries by, or
disagreements or disputes with, any non-U.S. Regulatory Agency or Governmental
Entity with respect to the business, operations, policies and procedures of
BankBoston or any of its Subsidiaries since January 1, 1997.
3.17 INTEREST RATE RISK MANAGEMENT INSTRUMENTS. All interest rate swaps,
caps, floors and option agreements and other interest rate risk management
arrangements, whether entered into for the account of BankBoston or for the
account of a customer of BankBoston or one of its Subsidiaries, were entered
into in the ordinary course of business and, to BankBoston's knowledge, in
accordance with prudent banking practice and applicable rules, regulations and
policies of any Regulatory Authority and with counterparties believed to be
financially responsible at the time and are legal, valid and binding obligations
of BankBoston or one of its Subsidiaries enforceable in accordance with their
terms (except as may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the rights of creditors generally and
the availability of equitable remedies), and are in full force and effect.
BankBoston and each of its Subsidiaries have duly performed in all material
respects all of their material obligations thereunder to the extent that such
obligations to perform have accrued; and, to BankBoston's knowledge, there are
no material breaches, violations or defaults or allegations or assertions of
such by any party thereunder.
3.18 UNDISCLOSED LIABILITIES. Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of BankBoston
included in the BankBoston 1998 Form 10-K and for liabilities incurred in the
ordinary course of business consistent with past practice, since December 31,
1998, neither BankBoston nor any of its Subsidiaries has incurred any liability
of any nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether due or to become due) that, either individually or in the aggregate, has
had or will have a Material Adverse Effect on BankBoston.
3.19 ENVIRONMENTAL LIABILITY. There are no legal, administrative, arbitral
or other proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that could reasonably result in the imposition, on
BankBoston of any liability or obligation arising under common law or under any
local, state or federal environmental statute, regulation or ordinance
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), pending or
threatened against BankBoston, which liability or obligation will, either
individually or in the aggregate, have a Material Adverse Effect on BankBoston.
To the knowledge of BankBoston, there is no reasonable basis for any such
proceeding, claim, action or governmental investigation that would impose any
liability or obligation that will, individually or in the aggregate, have a
Material Adverse Effect on BankBoston. BankBoston is not subject to any
agreement, order, judgment, decree, letter or memorandum by or with any court,
governmental authority, regulatory agency or third party imposing any liability
or obligation with respect to the foregoing that will have, either individually
or in the aggregate, a Material Adverse Effect on BankBoston.
3.20 STATE TAKEOVER LAWS; BANKBOSTON RIGHTS AGREEMENT. (a) Assuming the
accuracy of the representations of Fleet set forth in Section 4.23, the Board of
Directors of BankBoston has approved the transactions contemplated by this
Agreement and the Option Agreements for purposes of Ch. 110F of the
Massachusetts General Laws such that the provisions of Ch. 110F of the
Massachusetts General
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Laws will not apply to this Agreement or the Option Agreements or any of the
transactions contemplated hereby or thereby.
(b) BankBoston has taken all action, if any, necessary or appropriate so
that the entering into of this Agreement and the Option Agreements, and the
consummation of the transactions contemplated hereby and thereby do not and will
not result in the ability of any person to exercise any BankBoston Stockholder
Rights under the BankBoston Rights Agreement or enable or require the BankBoston
Stockholder Rights to separate from the shares of BankBoston Common Stock to
which they are attached or to be triggered or become exercisable. No
"Distribution Date" or "Stock Acquisition Date" (as such terms are defined in
the BankBoston Rights Agreement) has occurred.
3.21 YEAR 2000. None of BankBoston or any of the BankBoston Subsidiaries
has received, or reasonably expects to receive, a "Year 2000 Deficiency
Notification Letter" (as such term is employed in the Federal Reserve's
Supervision and Regulation Letter No. SR 98-3(SUP), dated March 4, 1998).
BankBoston has disclosed to Fleet a complete and accurate copy of BankBoston's
plan, including an estimate of the anticipated associated costs, for addressing
the issues ("Year 2000 Issues") set forth in the interagency statements of the
Federal Financial Institutions Examination Council addressed to the boards of
directors and chief executive officers of all federally supervised financial
institutions regarding Year 2000 safety and soundness for insured depository
institutions. Between the date of this Agreement and the Effective Time,
BankBoston shall use commercially practicable efforts to implement such plan.
BankBoston and its Subsidiaries has complied in all material respects with the
"Interagency Guidelines Establishing Year 2000 Standards for Safety and
Soundness" issued pursuant to section 39 of the Federal Deposit Insurance Act
and effective October 15, 1998.
3.22 REORGANIZATION; POOLING OF INTERESTS. As of the date of this
Agreement, BankBoston has no reason to believe that the Merger will not qualify
as a "reorganization" within the meaning of Section 368(a) of the Code and as a
"pooling of interests" for accounting purposes.
3.23 OWNERSHIP OF FLEET COMMON STOCK; AFFILIATES AND ASSOCIATES. Except
with respect to the Fleet Option Agreement and this Agreement, as of the date
hereof, neither BankBoston nor any of its affiliates or associates (as such
terms are defined under the Exchange Act) (i) beneficially owns, directly or
indirectly, or (ii) is a party to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares of
capital stock of Fleet (other than Trust Account Shares and DPC Shares).
3.24 OPINIONS. Prior to the execution of this Agreement, BankBoston has
received an opinion from each of Morgan Stanley & Co. Incorporated and Merrill
Lynch, Pierce, Fenner & Smith Incorporated to the effect that as of the date
thereof and based upon and subject to the matters set forth therein, the
Exchange Ratio is fair to the stockholders of BankBoston from a financial point
of view. Such opinions have not been amended or rescinded as of the date of this
Agreement.
3.25 BANKBOSTON INFORMATION. The information relating to BankBoston and
its Subsidiaries which is provided by BankBoston or its representatives for
inclusion in the Joint Proxy Statement and the S-4, or in any other document
filed with any other regulatory agency in connection herewith, will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they are made, not misleading. The Joint Proxy Statement (except for such
portions thereof that relate only to Fleet or any of its Subsidiaries) will
comply with the provisions of the Exchange Act and the rules and regulations
thereunder.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FLEET
Except as disclosed in the Fleet disclosure schedule delivered to BankBoston
concurrently herewith (the "Fleet Disclosure Schedule") Fleet represents and
warrants to BankBoston as follows:
4.1 CORPORATE ORGANIZATION. (a) Fleet is a corporation duly organized,
validly existing and in good standing under the laws of the State of Rhode
Island. Fleet has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not, either individually or in the aggregate, have a Material Adverse
Effect on Fleet. Fleet is duly registered as a bank holding company under the
BHC Act. True and complete copies of the Restated Articles of Incorporation (the
"Fleet Articles") and By-Laws of Fleet, as in effect as of the date of this
Agreement, have previously been made available by Fleet to BankBoston.
(b) Each Fleet Subsidiary (i) is duly organized and validly existing under
the laws of its jurisdiction of organization, (ii) is duly qualified to do
business and in good standing in all jurisdictions (whether Federal, state,
local or foreign) where its ownership or leasing of property or the conduct of
its business requires it to be so qualified and in which the failure to be so
qualified would have a Material Adverse Effect on Fleet, and (iii) has all
requisite corporate power and authority to own or lease its properties and
assets and to carry on its business as now conducted.
4.2 CAPITALIZATION. (a) The authorized capital stock of Fleet consists of
1,200,000,000 shares of Fleet Common Stock, of which, as of March 11, 1999, no
more than 568,482,000 shares were issued and outstanding, and 16,000,000 shares
of preferred stock, $1.00 par value, of which (i) 500,000 shares were
designated, issued and outstanding as Fleet 9.35% Cumulative Preferred, (ii)
765,010 shares were designated, issued and outstanding as Fleet Series V 7.25%
Perpetual Preferred, (iii) 600,000 shares were designated, issued and
outstanding as Fleet Series VI 6.75% Perpetual Preferred, (iv) 700,000 shares
were designated, issued and outstanding as Fleet Series VII Fixed/Adjustable
Rate Cumulative Preferred, (v) 200,000 shares were designated, issued and
outstanding as Fleet Series VIII Fixed/ Adjustable Rate Noncumulative Preferred
and (vi) 6,000,000 shares were designated and no shares were issued or
outstanding as Cumulative Participating Junior Preferred Stock. As of March 11,
1999, no more than 2,736,000 shares of Fleet Common Stock were held in Fleet's
treasury. As of the date hereof, no shares of Fleet Common Stock or Fleet
Preferred Stock were reserved for issuance, except as described in this Section
4.2(a) and except for (i) the shares of Fleet Common Stock issuable pursuant to
the Fleet Option Agreement, (ii) 47,000,000 shares reserved for issuance upon
exercise of options issued pursuant to employee and director stock plans of
Fleet in effect as of the date hereof (the "Fleet Stock Plans"), (iii) 1,927,328
shares reserved for issuance pursuant to the Fleet Dividend Reinvestment Plan
(the "Fleet DRIP"), (iv) 17,891,282 shares reserved for issuance pursuant to
outstanding warrants to purchase Fleet Common Stock (the "Fleet Warrants"), (v)
13,000,000 shares reserved for issuance pursuant to outstanding rights to
purchase Fleet Common Stock (the "Fleet Purchase Rights"), (vi) 6,000,000 shares
of Cumulative Participating Junior Preferred Stock, $1.00 par value, reserved
for issuance pursuant to the Fleet Rights Agreement. All of the issued and
outstanding shares of Fleet Capital Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. As of the date of this
Agreement, except for this Agreement, the Fleet Option Agreement, the Fleet
Stock Plans, the Fleet Warrants, the Fleet Purchase Rights and the Fleet Rights
Agreement, Fleet does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of Fleet Capital
Stock or any other equity securities of Fleet or any securities representing the
right to purchase or otherwise receive any shares of Fleet Capital Stock
(collectively, "Fleet Rights"). Since March 11, 1999, Fleet has
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not issued any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock, other than as permitted by
Section 5.2(b) and pursuant to (A) the exercise of employee stock options
granted prior to such date, (B) the Fleet DRIP, (C) the Fleet Warrants, (D) the
Fleet Purchase Rights and (E) pursuant to the Fleet Option Agreement. Fleet has
previously provided BankBoston with a list of the aggregate number of options
outstanding under the Fleet Stock Plans as of March 11, 1999 and the weighted
average exercise price for such options. In no event will the aggregate number
of shares of Fleet Common Stock outstanding at the Effective Time (including all
shares of Fleet Common Stock subject to then-outstanding Fleet Rights other than
the Fleet Option Agreement) exceed the number specified in Section 4.2(a) of the
Fleet Disclosure Schedule.
(b) Fleet owns, directly or indirectly, all of the issued and outstanding
shares of capital stock or other equity ownership interests of each of the Fleet
Subsidiaries, free and clear of any Liens, and all of such shares or equity
ownership interests are duly authorized and validly issued and are fully paid,
nonassessable (subject to 12 U.S.C. SectionSection 55) and free of preemptive
rights, with no personal liability attaching to the ownership thereof. No Fleet
Subsidiary has or is bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of any shares of capital stock or any other equity security of such
Subsidiary or any securities representing the right to purchase or otherwise
receive any shares of capital stock or any other equity security of such
Subsidiary. Section 4.2(b) of the Fleet Disclosure Schedule sets forth a list of
the material investments of Fleet in Non-Subsidiary Affiliates.
4.3 AUTHORITY, NO VIOLATION. (a) Fleet has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of Fleet. The Board of Directors of
Fleet has directed that this Agreement and the transactions contemplated hereby
be submitted to Fleet's stockholders for adoption at a meeting of such
stockholders and, except for the adoption of this Agreement by the affirmative
vote of the holders of a majority of the outstanding shares of Fleet Common
Stock, no other corporate proceedings on the part of Fleet are necessary to
approve this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Fleet and
(assuming due authorization, execution and delivery by BankBoston) constitutes a
valid and binding obligation of Fleet, enforceable against Fleet in accordance
with its terms (except as may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the rights of creditors generally and
the availability of equitable remedies).
(b) Neither the execution and delivery of this Agreement by Fleet, nor the
consummation by Fleet of the transactions contemplated hereby, nor compliance by
Fleet with any of the terms or provisions hereof, will (i) violate any provision
of the Fleet Articles or By-Laws, or (ii) assuming that the consents and
approvals referred to in Section 4.4 are duly obtained, (x) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Fleet, any of its Subsidiaries or Non-Subsidiary Affiliates or any
of their respective properties or assets or (y) violate, conflict with, result
in a breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of Fleet, any of its Subsidiaries or its Non-Subsidiary Affiliates under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Fleet, any of its Subsidiaries or Non-Subsidiary Affiliates
is a party, or by which they or any of their respective properties or assets may
be bound or affected, except (in the case of clause (y) above) for such
violations, conflicts, breaches or defaults which either individually or in the
aggregate will not have a Material Adverse Effect on Fleet.
4.4 CONSENTS AND APPROVALS. Except for (i) the filing of applications and
notices, as applicable, with the Federal Reserve Board under the BHC Act and the
Federal Reserve Act, as amended, and
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approval of such applications and notices, (ii) the State and Foreign Approvals,
(iii) the filing with the SEC of the Joint Proxy Statement and the filing and
declaration of effectiveness of the S-4, (iv) the filing of the Articles of
Merger with the Rhode Island Secretary pursuant to the RIBCA and the issuance by
the Rhode Island Secretary of a Certificate of Merger and the filing of the
Articles of Merger with the Secretary of Commonwealth of the Commonwealth of
Massachusetts pursuant to the MBCL, (v) any notices to or filings with the SBA,
(vi) any consents, authorizations, approvals, filings or exemptions in
connection with compliance with the applicable provisions of federal and state
securities laws relating to the regulation of broker-dealers, investment
advisers or transfer agents, and federal commodities laws relating to the
regulation of futures commission merchants and the rules and regulations
thereunder and of any applicable SRO, and the rules of the NYSE, or which are
required under consumer finance, mortgage banking and other similar laws, (vii)
such filings and approvals as are required to be made or obtained under the
securities or "Blue Sky" laws of various states in connection with the issuance
of the shares of Fleet Capital Stock pursuant to this Agreement and (viii) the
approval of this Agreement by the requisite vote of the stockholders of Fleet,
no consents or approvals of or filings or registrations with any Governmental
Entity are necessary in connection with (A) the execution and delivery by Fleet
of this Agreement and (B) the consummation by Fleet of the Merger and the other
transactions contemplated hereby.
4.5 REPORTS. Fleet and each of its Subsidiaries have timely filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that they were required to file since January 1,
1996 with the Regulatory Agencies, and all other reports and statements required
to be filed by them since January 1, 1996, including, without limitation, any
report or statement required to be filed pursuant to the laws, rules or
regulations of the United States, any state, any foreign entity or any
Regulatory Agency, and have paid all fees and assessments due and payable in
connection therewith, except where the failure to file such report, registration
or statement or to pay such fees and assessments, either individually or in the
aggregate, will not have a Material Adverse Effect on Fleet. Except for normal
examinations conducted by a Regulatory Agency in the ordinary course of the
business of Fleet and its Subsidiaries, no Regulatory Agency has initiated or
has pending any proceeding or, to the best knowledge of Fleet, investigation
into the business or operations of Fleet or any of its Subsidiaries since
January 1, 1996, except where such proceedings or investigation will not have,
either individually or in the aggregate, a Material Adverse Effect on Fleet.
There (i) is no unresolved violation, criticism, or exception by any Regulatory
Agency with respect to any report or statement relating to any examinations or
inspections of Fleet or any of its Subsidiaries, and (ii) has been no formal or
informal inquiries by, or disagreements or disputes with, any Regulatory Agency
with respect to the business, operations, policies or procedures of Fleet since
January 1, 1997, which, in the reasonable judgment of Fleet, will have, either
individually or in the aggregate, a Material Adverse Effect on Fleet.
4.6 FINANCIAL STATEMENTS. Fleet has previously provided to BankBoston
copies of the audited consolidated balance sheets of Fleet and its Subsidiaries
as of December 31, for the fiscal years 1997 and 1998, and the related audited
consolidated statements of income, changes in stockholders' equity and cash
flows for the fiscal years 1996 through 1998, inclusive (the "Fleet 1998
Financial Information"), in each case accompanied by the audit report of KPMG
LLP, independent public accountants with respect to Fleet. The December 31, 1998
consolidated balance sheet of Fleet (including the related notes, where
applicable) fairly presents in all material respects the consolidated financial
position of Fleet and its Subsidiaries as of the date thereof, and the other
financial statements referred to in this Section 4.6 (including the related
notes, where applicable) fairly present in all material respects the results of
the consolidated operations and changes in stockholders' equity and consolidated
financial position of Fleet and its Subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth, subject to normal
year-end audit adjustments in the case of unaudited statements; each of such
statements (including the related notes, where applicable) complies in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with
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respect thereto; and each of such statements (including the related notes, where
applicable) has been prepared in all material respects in accordance with GAAP
consistently applied during the periods involved, except in each case as
indicated in such statements or in the notes thereto. The books and records of
Fleet and its Subsidiaries have been, and are being, maintained in all material
respects in accordance with GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions.
4.7 BROKER'S FEES. Neither Fleet nor any Fleet Subsidiary nor any of their
respective officers or directors has employed any broker or finder or incurred
any liability for any brokers fees, commissions or finder's fees in connection
with the Merger or related transactions contemplated by this Agreement or the
Option Agreements.
4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. (a) Except as publicly disclosed
in Fleet Reports filed prior to the date hereof, since December 31, 1998, no
event or events have occurred which has had, individually or in the aggregate, a
Material Adverse Effect on Fleet.
(b) Except as publicly disclosed in Fleet Reports filed prior to the date
hereof, since December 31, 1998, Fleet and its Subsidiaries have carried on
their respective businesses in all material respects in the ordinary course.
(c) Since December 31, 1998, neither Fleet nor any of its Subsidiaries has
(i) except for normal increases for employees (other than officers subject to
the reporting requirements of Section 16(a) of the Exchange Act) made in the
ordinary course of business consistent with past practice or as required by
applicable law, increased the wages, salaries, compensation, pension, or other
fringe benefits or perquisites payable to any executive officer, employee, or
director from the amount thereof in effect as of December 31, 1998, granted any
severance or termination pay, entered into any contract to make or grant any
severance or termination pay, or paid any bonus other than the customary
year-end bonuses for fiscal 1998 and 1999 in amounts consistent with past
practice, (ii) granted any stock appreciation rights or granted any rights to
acquire any shares of its capital stock to any executive officer, director or
employee other than grants to employees (other than officers subject to the
reporting requirements of Section 16(a) of the Exchange Act) made in the
ordinary course of business consistent with past practice under the Fleet Stock
Plans and except as permitted by Section 5.2(b)(ii) or (iii) suffered any
strike, work stoppage, slow-down, or other labor disturbance.
4.9 LEGAL PROCEEDINGS. (a) Neither Fleet nor any of its Subsidiaries is a
party to any, and there are no pending or, to the best of Fleet's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against Fleet
or any of its Subsidiaries or challenging the validity or propriety of the
transactions contemplated by this Agreement or the Fleet Option Agreement as to
which, in any such case, there is a reasonable probability of an adverse
determination and which, if adversely determined, will have, either individually
or in the aggregate, a Material Adverse Effect on Fleet.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction (other than those of general application that apply to similarly
situated bank holding companies or their subsidiaries) imposed upon Fleet, any
of its Subsidiaries or the assets of Fleet or any of its Subsidiaries that has
had or will have, either individually or in the aggregate, a Material Adverse
Effect on Fleet or the Surviving Corporation.
4.10 TAXES AND TAX RETURNS. Each of Fleet and its Subsidiaries has duly
filed all federal, state, foreign and local information returns and tax returns
required to be filed by it on or prior to the date hereof (all such returns
being accurate and complete in all material respects) and has duly paid or made
provisions for the payment of all Taxes and other governmental charges which
have been incurred or are due or claimed to be due from it by federal, state,
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 (i) Taxes or other charges
which are not yet delinquent or are being contested in
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good faith and have not been finally determined, or (ii) information returns,
tax returns, Taxes or other governmental charges as to which the failure to
file, pay or make provision for will not have, either individually or in the
aggregate, a Material Adverse Effect on Fleet. The federal income tax returns of
Fleet and its Subsidiaries have been examined by the IRS through 1990 and any
liability with respect thereto has been satisfied or any liability with respect
to deficiencies asserted as a result of such examination is covered by adequate
reserves. To the best of Fleet's knowledge, there are no material disputes
pending, or claims asserted for, Taxes or assessments upon Fleet or any of its
Subsidiaries for which Fleet does not have adequate reserves.
(b) No disallowance of a deduction under Section 162(m) of the Code for
employee remuneration of any amount paid or payable by Fleet or any of its
Subsidiaries under any contract, plan, program, arrangement or understanding
would be reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Fleet.
4.11 EMPLOYEES. (a) The Fleet Disclosure Schedule sets forth a true and
complete list of each material employee benefit or compensation plan,
arrangement or agreement and any material bonus, incentive, deferred
compensation, vacation, stock purchase, stock option, severance, employment,
change of control or fringe benefit plan, program or agreement that is
maintained, or contributed to, as of the date of this Agreement (the "Fleet
Benefit Plans") by Fleet, any of its Subsidiaries or by any trade or business,
whether or not incorporated (a "Fleet ERISA Affiliate"), all of which together
with Fleet would be deemed a "single employer" within the meaning of Section
4001 of ERISA.
(b) Fleet has heretofore made available to BankBoston true and complete
copies of each of the Fleet Benefit Plans and certain related documents,
including, but not limited to, (i) the actuarial report for such Fleet Benefit
Plan (if applicable) for each of the last two years, and (ii) the most recent
determination letter from the IRS (if applicable) for such Fleet Benefit Plan.
(c) (i) Each of the Fleet Benefit Plans has been operated and administered
in all material respects in compliance with applicable laws, including, but not
limited to, ERISA and the Code, (ii) each of the Fleet Benefit Plans intended to
be "qualified" within the meaning of Section 401 (a) of the Code is so
qualified, and there are no existing circumstances or any events that have
occurred that will adversely affect the qualified status of any such Fleet
Benefit Plan, (iii) with respect to each Fleet Benefit Plan which is subject to
Title IV of ERISA, the present value of accrued benefits under such Fleet
Benefit Plan, based upon the actuarial assumptions used for funding purposes in
the most recent actuarial report prepared by such Fleet Benefit Plan's actuary
with respect to such Fleet Benefit Plan, did not, as of its latest valuation
date, exceed the then current value of the assets of such Fleet Benefit Plan
allocable to such accrued benefits, (iv) no Fleet Benefit Plan provides
benefits, including, without limitation, death or medical benefits (whether or
not insured), with respect to current or former employees or directors of Fleet
or its Subsidiaries beyond their retirement or other termination of service,
other than (A) coverage mandated by applicable 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 Fleet or its Subsidiaries or (D) benefits the full
cost of which is borne by the current or former employee or director (or his
beneficiary), (v) no liability under Title IV of ERISA has been incurred by
Fleet, its Subsidiaries or any Fleet ERISA Affiliate that has not been satisfied
in full, and no condition exists that presents a risk to Fleet, its Subsidiaries
or any Fleet ERISA Affiliate of incurring a material liability thereunder, (vi)
no Fleet Benefit Plan is a "multiemployer pension plan" (as such term is defined
in Section 3(37) of ERISA), (vii) all contributions or other amounts payable by
Fleet or its Subsidiaries as of the Effective Time with respect to each Fleet
Benefit Plan in respect of current or prior plan years have been paid or accrued
in accordance with GAAP and Section 412 of the Code, (viii) none of Fleet, its
Subsidiaries or any other person, including any fiduciary, has engaged in a
transaction in connection with which Fleet, its Subsidiaries or any Fleet
Benefit Plan will be subject to either a material civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to
Section 4975 or 4976 of the Code, and (ix) to the best knowledge of Fleet there
are no pending, threatened or
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anticipated claims (other than routine claims for benefits) by, on behalf of or
against any of the Fleet Benefit Plans or any trusts related thereto which will
have, either individually or in the aggregate, a Material Adverse Effect on
Fleet.
(d) 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 Fleet or any of its
affiliates from Fleet or any of its affiliates under any Fleet Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any Fleet Benefit
Plan or (iii) result in any acceleration of the time of payment or vesting of
any such benefits.
4.12 SEC REPORTS. Fleet has previously made available to BankBoston an
accurate and complete copy of each (a) final registration statement, prospectus,
report, schedule and definitive proxy statement filed since January 1, 1996 by
Fleet with the SEC pursuant to the Securities Act or the Exchange Act (the
"Fleet Reports") and prior to the date hereof and (b) communication mailed by
Fleet to its stockholders since January 1, 1996 and prior to the date hereof,
and no such Fleet Report or communication, as of the date thereof, contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading,
except that information as of a later date (but before the date hereof) shall be
deemed to modify information as of an earlier date. Since January 1, 1996, as of
their respective dates, all Fleet Reports filed under the Securities Act and the
Exchange Act complied in all material respects with the published rules and
regulations of the SEC with respect thereto.
4.13 COMPLIANCE WITH APPLICABLE LAW. (a) Fleet and each of its
Subsidiaries hold all material licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses under and
pursuant to each, and have complied in all material respects with and are not in
default in any material respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relating to Fleet
or any of its Subsidiaries, except where the failure to hold such license,
franchise, permit or authorization or such noncompliance or default will not,
either individually or in the aggregate, have a Material Adverse Effect on
Fleet.
(b) Except as will not have, either individually or in the aggregate, a
Material Adverse Effect on Fleet, Fleet and each Fleet Subsidiary have properly
administered all accounts for which it acts as a fiduciary, including accounts
for which it serves as a trustee, agent, custodian, personal representative,
guardian, conservator or investment advisor, in accordance with the terms of the
governing documents, applicable state and federal law and regulation and common
law. None of Fleet, any Fleet Subsidiary, or any director, officer or employee
of Fleet or of any Fleet Subsidiary, has committed any breach of trust with
respect to any such fiduciary account that will have a Material Adverse Effect
on Fleet, and the accountings for each such fiduciary account are true and
correct in all material respects and accurately reflect the assets of such
fiduciary account.
4.14 CERTAIN CONTRACTS. (a) Neither Fleet nor any of its Subsidiaries is a
party to or bound by any contract, arrangement, commitment or understanding
(whether written or oral) (i) with respect to the employment of any directors,
officers or employees other than in the ordinary course of business consistent
with past practice, (ii) which, upon the consummation or stockholder approval of
the transactions contemplated by this Agreement will (either alone or upon the
occurrence of any additional acts or events) result in any payment (whether of
severance pay or otherwise) becoming due from Fleet, BankBoston, the Surviving
Corporation, or any of their respective Subsidiaries to any officer or employee
thereof, (iii) which is a "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this
Agreement that has not been filed or incorporated by reference in the Fleet
Reports, (iv) which materially restricts the conduct of any line of business by
Fleet or upon consummation of the Merger will materially restrict the ability of
the
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Surviving Corporation to engage in any line of business in which a bank holding
company may lawfully engage, (v) with or to a labor union or guild (including
any collective bargaining agreement) or (vi) (including any stock option plan,
stock appreciation rights plan, restricted stock plan or stock purchase plan)
any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any stockholder approval or
the consummation 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. Fleet has previously made
available to BankBoston true and correct copies of all employment and deferred
compensation agreements which are in writing and to which Fleet or any of its
Subsidiaries is a party. Each contract, arrangement, commitment or understanding
of the type described in this Section 4.14(a), whether or not set forth in the
Fleet Disclosure Schedule, is referred to herein as a "Fleet Contract," and
neither Fleet nor any of its Subsidiaries knows of, or has received notice of,
any violation of the above by any of the other parties thereto which will have,
individually or in the aggregate, a Material Adverse Effect on Fleet.
(b) (i) Each Fleet Contract is valid and binding on Fleet and/or one of its
Subsidiaries, as applicable, and in full force and effect, (ii) Fleet and each
of its Subsidiaries has in all material respects performed all obligations
required to be performed by it to date under each Fleet Contract, except where
such noncompliance, either individually or in the aggregate, will not have a
Material Adverse Effect on Fleet, and (iii) no event or condition exists which
constitutes or, after notice or lapse of time or both, will constitute, a
material default on the part of Fleet or any of its Subsidiaries under any such
Fleet Contract, except where such default, either individually or in the
aggregate, will not have a Material Adverse Effect on Fleet.
4.15 AGREEMENTS WITH REGULATORY AGENCIES. Neither Fleet nor any of its
Subsidiaries is subject to any cease-and-desist or other order or enforcement
action 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 has been
since January 1, 1996, a recipient of any supervisory letter from, or has been
ordered to pay any civil money penalty by, or since January 1, 1996, has adopted
any policies, procedures or board resolutions at the request of any Regulatory
Agency or other Governmental Entity that currently restricts in any material
respect the conduct of its business or that in any material manner relates to
its capital adequacy, its ability to pay dividends, its credit or risk
management policies, its management or its business (each, whether or not set
forth in the Fleet Disclosure Schedule, a "Fleet Regulatory Agreement"), nor has
Fleet or any of its Subsidiaries been advised since January 1, 1996, by any
Regulatory Agency or other Governmental Entity that it is considering issuing,
initiating, ordering or requesting any such Fleet Regulatory Agreement.
4.16 INTERNATIONAL OPERATIONS. All non-U.S. banking, consumer finance and
securities operations have been conducted in compliance with the requirements of
all applicable federal and foreign laws, statutes, orders, rules, regulations or
policies and guidelines of any Regulatory Agency or Governmental Entity, except
for such noncompliance as would not have a Material Adverse Effect on Fleet.
Neither Fleet nor any Subsidiary is subject to any Regulatory Agreement with any
non-U.S. Regulatory Agency or Governmental Entity, nor has Fleet or any of its
Subsidiaries been advised that any such authority or entity is considering
issuing or requesting any such agreement. There (i) is no unresolved violation,
criticism or exception by any non-U.S. Regulatory Agency or Governmental Entity
relating to any examinations or inspections of Fleet or any Subsidiary and (ii)
has been no formal or informal inquiries by, or disagreements or disputes with,
any non-U.S. Regulatory Agency or Governmental Entity with respect to the
business, operations, policies and procedures of Fleet or any of its
Subsidiaries since January 1, 1997.
4.17 INTEREST RATE RISK MANAGEMENT INSTRUMENTS. All interest rate swaps,
caps, floors and option agreements and other interest rate risk management
arrangements, whether entered into for the account of Fleet or for the account
of a customer of Fleet or one of its Subsidiaries, were entered into
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in the ordinary course of business and, to Fleet's knowledge, in accordance with
prudent banking practice and applicable rules, regulations and policies of any
Regulatory Authority and with counterparties believed to be financially
responsible at the time and are legal, valid and binding obligations of Fleet or
one of its Subsidiaries enforceable in accordance with their terms (except as
may be limited by bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors generally and the availability of
equitable remedies), and are in full force and effect. Fleet and each of its
Subsidiaries have duly performed in all material respects all of their material
obligations thereunder to the extent that such obligations to perform have
accrued; and to Fleet's knowledge, there are no material breaches, violations or
defaults or allegations or assertions of such by any party thereunder.
4.18 UNDISCLOSED LIABILITIES. Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of Fleet
included in the Fleet 1998 Financial Information and for liabilities incurred in
the ordinary course of business consistent with past practice, since December
31, 1998, neither Fleet nor any of its Subsidiaries has incurred any liability
of any nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether due or to become due) that, either individually or in the aggregate, has
had or will have, a Material Adverse Effect on Fleet.
4.19 ENVIRONMENTAL LIABILITY. There are no legal, administrative, arbitral
or other proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that reasonably could result in the imposition, on
Fleet of any liability or obligation arising under common law or under any
local, state or federal environmental statute, regulation or ordinance
including, without limitation, CERCLA, pending or threatened against Fleet,
which liability or obligation will have, either individually or in the
aggregate, a Material Adverse Effect on Fleet. To the knowledge of Fleet, there
is no reasonable basis for any such proceeding, claim, action or governmental
investigation that would impose any liability or obligation that will have,
either individually or in the aggregate, a Material Adverse Effect on Fleet.
Fleet is not subject to any agreement, order, judgment, decree, letter or
memorandum by or with any court, governmental authority, regulatory agency or
third party imposing any liability or obligation with respect to the foregoing
that will have, either individually or in the aggregate, a Material Adverse
Effect on Fleet.
4.20 STATE TAKEOVER LAWS; ARTICLE NINTH OF FLEET ARTICLES; FLEET RIGHTS
AGREEMENT. (a) Assuming the accuracy of the representations of BankBoston set
forth in Section 3.23, the Board of Directors of Fleet has approved the
transactions contemplated by this Agreement and the Option Agreements for
purposes of Section 7-5.2-4 of the RIBCA such that the provisions of Business
Combination Act of Rhode Island and Article Ninth of Fleet's Articles of
Incorporation will not apply to this Agreement or the Option Agreements or any
of the transactions contemplated hereby or thereby.
(b) Fleet has taken all action, if any, necessary or appropriate so that the
entering into of this Agreement and the Option Agreements, and the consummation
of the transactions contemplated hereby and thereby do not and will not result
in the ability of any person to exercise any Fleet Stockholder Rights under the
Fleet Rights Agreement or enable or require the Fleet Stockholder Rights to
separate from the shares of Fleet Common Stock to which they are attached or to
be triggered or become exercisable. No "Distribution Date" or "Stock Acquisition
Date" (as such terms are defined in the Fleet Rights Agreement) has occurred.
4.21 YEAR 2000. None of Fleet or any of the Fleet Subsidiaries has
received, or reasonably expects to receive, a Year 2000 Deficiency Notification
Letter. Fleet has disclosed to BankBoston a complete and accurate copy of
Fleet's plan, including an estimate of the anticipated associated costs, for
addressing Year 2000 Issues as such issues affect Fleet and its Subsidiaries.
Between the date of this Agreement and the Effective Time, Fleet shall use all
commercially reasonable efforts to implement such plan. Fleet and its
Subsidiaries has complied in all material respects with the "Interagency
Guidelines Establishing Year 2000 Standards for Safety and Soundness" issued
pursuant to section 39 of the Federal Deposit Insurance Act and effective
October 15, 1998.
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4.22 REORGANIZATION; POOLING OF INTERESTS. As of the date of this
Agreement, Fleet has no reason to believe that the Merger will not qualify as a
"reorganization" within the meaning of Section 368(a) of the Code and as a
"pooling of interests" for accounting purposes.
4.23 OWNERSHIP OF BANKBOSTON COMMON STOCK; AFFILIATES AND ASSOCIATES. As
of the date hereof, except for the BankBoston Option Agreement and this
Agreement, neither Fleet nor any of its affiliates or associates (as such terms
are defined under the Exchange Act) (i) beneficially owns, directly or
indirectly, or (ii) is a party to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares of
capital stock of BankBoston (other than Trust Account Shares and DPC Shares).
4.24 OPINIONS. Prior to the execution of this Agreement, Fleet has
received an opinion from each of Goldman, Sachs & Co. and Donaldson, Lufkin &
Jenrette Securities Corporation to the effect that as of the date thereof and
based upon and subject to the matters set forth therein, the Exchange Ratio
pursuant to this Agreement is fair from a financial point of view to Fleet and
its shareholders. Such opinions have not been amended or rescinded as of the
date of this Agreement.
4.25 FLEET INFORMATION. The information relating to Fleet and its
Subsidiaries to be contained in the Joint Proxy Statement and the S-4, or the
information relating to Fleet and its Subsidiaries that is provided by Fleet or
its representatives for inclusion in any other document filed with any other
regulatory agency in connection herewith, will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances in which they are made, not
misleading. The Joint Proxy Statement (except for such portions thereof that
relate only to BankBoston or any of its Subsidiaries) will comply with the
provisions of the Exchange Act and the rules and regulations thereunder. The S-4
will comply with the provisions of the Securities Act and the rules and
regulations thereunder.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME. During the period
from the date of this Agreement to the Effective Time, except as expressly
contemplated or permitted by this Agreement (including the BankBoston Disclosure
Schedule and the Fleet Disclosure Schedule) or the Option Agreements, each of
Fleet and BankBoston shall, and shall cause each of their respective
Subsidiaries to, (a) conduct its business in the ordinary course, (b) use
reasonable best efforts to maintain and preserve intact its business
organization, employees and advantageous business relationships and retain the
services of its key officers and key employees and (c) take no action which
would adversely affect or delay the ability of either Fleet or BankBoston to
obtain any necessary approvals of any Regulatory Agency or other Governmental
Entity required for the transactions contemplated hereby or to perform its
covenants and agreements under this Agreement or the Option Agreements or to
consummate the transactions contemplated hereby or thereby.
5.2 FORBEARANCES. During the period from the date of this Agreement to the
Effective Time, except as set forth in the Fleet Disclosure Schedule or the
BankBoston Disclosure Schedule, as the case may be, and, except as expressly
contemplated or permitted by this Agreement or the Option Agreements, neither
Fleet nor BankBoston shall, and neither Fleet nor BankBoston shall permit any of
their respective Subsidiaries to, without the prior written consent of the other
party to this Agreement:
(a) other than in the ordinary course of business, incur any indebtedness
for borrowed money (other than short-term indebtedness incurred to refinance
short-term indebtedness and indebtedness of BankBoston or any of its
wholly-owned Subsidiaries to BankBoston or any of its Subsidiaries, on the one
hand, or of Fleet or any of its Subsidiaries to Fleet or any of its wholly-owned
Subsidiaries, on the
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other hand), assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other individual, corporation or other
entity, or make any loan or advance (it being understood and agreed that
incurrence of indebtedness in the ordinary course of business shall include,
without limitation, the creation of deposit liabilities, purchases of Federal
funds, sales of certificates of deposit and entering into repurchase
agreements);
(b) (i) adjust, split, combine or reclassify any capital stock;
(ii) make, declare or pay any dividend, or make any other distribution
on, or directly or indirectly redeem, purchase or otherwise acquire, any
shares of its capital stock or any securities or obligations convertible
(whether currently convertible or convertible only after the passage of time
or the occurrence of certain events) into or exchangeable for any shares of
its capital stock (except (A) in the case of BankBoston, for regular
quarterly cash dividends at a rate not in excess of $0.32 per share of
BankBoston Common Stock, (B) in the case of Fleet, for regular quarterly
cash dividends on Fleet Common Stock at a rate not in excess of $0.27 per
share of Fleet Common Stock and regular quarterly cash dividends on the
Fleet Preferred Stock outstanding as of the date hereof at the rates
required by the terms thereof, (C) dividends paid by any of the Subsidiaries
of each of Fleet and BankBoston to Fleet or BankBoston or any of their
Subsidiaries, respectively, and dividends paid in the ordinary course of
business consistent with past practice by any subsidiaries (whether or not
wholly owned) of each of Fleet and BankBoston) and (D) the acceptance of
shares of BankBoston Common Stock or Fleet Common Stock, as the case may be,
as payment for the exercise price of stock options or for withholding taxes
incurred in connection with the exercise of stock options or the vesting of
restricted stock, in each case in accordance with past practice and the
terms of the applicable award agreements;
(iii) grant any stock appreciation rights or grant any individual,
corporation or other entity any right to acquire any shares of its capital
stock, other than (A) pursuant to the Fleet Rights Agreement or the
BankBoston Rights Agreement or any renewal or replacement of either of them
and (B) pursuant to the BankBoston Stock Plans or the Fleet Stock Plans, as
the case may be, in the ordinary course of business; or
(iv) issue any additional shares of capital stock except (A) pursuant to
the exercise of stock options outstanding as of the date hereof or issued in
compliance with Section 5.2(b)(iii), (B) pursuant to the Option Agreements,
(C) pursuant to the BankBoston Rights Agreement or the Fleet Rights
Agreement or any renewal or replacement of either of them or (D) in the
ordinary course of business and consistent with past practice in connection
with the BankBoston DRIP, the BankBoston Stock Plans, the Fleet Stock Plans
and the Fleet DRIP;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of its
material properties or assets to any individual, corporation or other entity
other than a Subsidiary, or cancel, release or assign any indebtedness to any
such person or any claims held by any such person, in each case other than in
the ordinary course of business or pursuant to contracts or agreements in force
at the date of this Agreement;
(d) except for transactions in the ordinary course of business or pursuant
to contracts or agreements in force at the date of or permitted by this
Agreement, make any material investment either by purchase of stock or
securities, contributions to capital, property transfers, or purchase of any
property or assets of any other individual, corporation or other entity other
than a Subsidiary thereof;
(e) except for transactions in the ordinary course of business, terminate,
or waive any material provision of, any BankBoston Contract or Fleet Contract,
as the case may be, or make any change in any instrument or agreement governing
the terms of any of its securities, or material lease or contract, other than
normal renewals of contracts and leases without material adverse changes of
terms;
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(f) increase in any manner the compensation or fringe benefits of any of its
employees or pay any pension or retirement allowance not required by any
existing plan or agreement to any such employees or become a party to, amend or
commit itself to any pension, retirement, profit-sharing or welfare benefit plan
or agreement or employment agreement with or for the benefit of any employee
other than in the ordinary course of business, or accelerate the vesting of, or
the lapsing of restrictions with respect to, any stock options or other
stock-based compensation;
(g) solicit or encourage from any third party or enter into any
negotiations, discussions or agreement in respect of, or authorize any
individual, corporation or other entity to solicit or encourage from any third
party or enter into any negotiations, discussions or agreements in respect of,
or provide or cause to be provided any confidential information in connection
with, any inquiries or proposals relating to the disposition of all or
substantially all of its business or assets, or the acquisition of its voting
securities, or the merger of it or any of its Subsidiaries with any corporation
or other entity, other than as provided by this Agreement (and each party shall
promptly notify the other of all of the relevant details relating to all
inquiries and proposals which it may receive relating to any of such matters);
(h) settle any material claim, action or proceeding involving money damages,
except in the ordinary course of business;
(i) knowingly take any action that would prevent or impede the Merger from
qualifying (i) for "pooling of interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368 of the Code; provided, however,
that nothing contained herein shall limit the ability of Fleet or BankBoston to
exercise its rights under the Fleet Option Agreement or the BankBoston Option
Agreement, as the case may be;
(j) amend its articles of incorporation, its bylaws or comparable governing
documents, or amend, or redeem the rights issued under, the Fleet Rights
Agreement or the BankBoston Rights Agreement, as the case may be (except as
required hereunder), or otherwise take any action to exempt any person or entity
(other than BankBoston or its Subsidiaries or Fleet or its Subsidiaries, as the
case may be) or any action taken by such person or entity from the Fleet Rights
Agreement or the BankBoston Rights Agreement, as the case may be, or any
Takeover Statute or similarly restrictive provisions of such party's
organizational documents;
(k) other than in prior consultation with the other party to this Agreement,
restructure or materially change its investment securities portfolio or its gap
position, through purchases, sales or otherwise, or the manner in which the
portfolio is classified or reported;
(l) take any action that is intended or expected to result in any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect at any time prior to the Effective Time, or in
any of the conditions to the Merger set forth in Article VII not being satisfied
or in a violation of any provision of this Agreement, except, in every case, as
may be required by applicable law;
(m) implement or adopt any change in its accounting principles, practices or
methods, other than as may be required by GAAP or regulatory guidelines; or
(n) agree to take, make any commitment to take, or adopt any resolutions of
its board of directors in support of, any of the actions prohibited by this
Section 5.2.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 REGULATORY MATTERS. (a) Fleet and BankBoston shall promptly prepare
and file with the SEC the Joint Proxy Statement and Fleet shall promptly prepare
and file with the SEC the S-4, in which the
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Joint Proxy Statement will be included as a prospectus. Each of Fleet and
BankBoston shall use their reasonable best efforts to have the S-4 declared
effective under the Securities Act as promptly as practicable after such filing,
and Fleet and BankBoston shall thereafter mail or deliver the Joint Proxy
Statement to their respective stockholders. Fleet shall also use its reasonable
best efforts to obtain all necessary state securities law or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement, and BankBoston shall furnish all information concerning BankBoston
and the holders of BankBoston Capital Stock as may be reasonably requested in
connection with any such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including, without limitation, the Merger), and to comply with the
terms and conditions of all such permits, consents, approvals and authorizations
of all such Governmental Entities. Fleet and BankBoston shall have the right to
review in advance, and, to the extent practicable, each will consult the other
on, in each case subject to applicable laws relating to the exchange of
information, all the information relating to BankBoston or Fleet, as the case
may be, and any of their respective Subsidiaries, which appear in any filing
made with, or written materials submitted to, any third party or any
Governmental Entity in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the parties hereto shall
act reasonably and as promptly as practicable. The parties hereto agree that
they will consult with each other with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and Governmental
Entities necessary or advisable to consummate the transactions contemplated by
this Agreement and each party will keep the other apprised of the status of
matters relating to completion of the transactions contemplated herein.
(c) Fleet and BankBoston shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with the Joint Proxy Statement, the S-4 or any other statement,
filing, notice or application made by or on behalf of Fleet, BankBoston or any
of their respective Subsidiaries to any Governmental Entity in connection with
the Merger and the other transactions contemplated by this Agreement.
(d) Fleet and BankBoston shall promptly advise each other upon receiving any
communication from any Governmental Entity whose consent or approval is required
for consummation of the transactions contemplated by this Agreement that causes
such party to believe that there is a reasonable likelihood that any Requisite
Regulatory Approval will not be obtained or that the receipt of any such
approval will be materially delayed.
6.2 ACCESS TO INFORMATION. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, each of Fleet and
BankBoston, for the purposes of verifying the representations and warranties of
the other and preparing for the Merger and the other matters contemplated by
this Agreement, shall, and shall cause each of their respective Subsidiaries to,
afford to the officers, employees, accountants, counsel and other
representatives of the other party, access, during normal business hours during
the period prior to the Effective Time, to all its properties, books, contracts,
commitments and records, and, during such period, each of Fleet and BankBoston
shall, and shall cause their respective Subsidiaries to, make available to the
other party (i) a copy of each report, schedule, registration statement and
other document filed or received by it during such period pursuant to the
requirements of federal securities laws or federal or state banking laws (other
than reports or documents which Fleet or BankBoston, as the case may be, is not
permitted to disclose under applicable law) and (ii) all other information
concerning its business, properties and personnel as such party may reasonably
request. Neither Fleet nor BankBoston nor any of their respective Subsidiaries
shall be
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required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of Fleet's or BankBoston's, as
the case may be, customers, jeopardize the attorney-client privilege of the
institution in possession or control of such information or contravene any law,
rule, regulation, order, judgment, decree, fiduciary duty or binding agreement
entered into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(b) Each of Fleet and BankBoston shall hold all information furnished by or
on behalf of the other party or any of such party's Subsidiaries or
representatives pursuant to Section 6.2(a) in confidence to the extent required
by, and in accordance with, the provisions of the confidentiality agreement,
dated February 19, 1999, between Fleet and BankBoston (the "Confidentiality
Agreement").
(c) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.
6.3 STOCKHOLDERS' APPROVALS. Each of Fleet and BankBoston shall call a
meeting of its stockholders to be held as soon as reasonably practicable for the
purpose of voting upon the requisite stockholder approvals required in
connection with this Agreement and the Merger (including approval of the Bylaw
Amendment by the stockholders of Fleet), and each shall use its reasonable best
efforts to cause such meetings to occur as soon as reasonably practicable and on
the same date. The Board of Directors of each of BankBoston and Fleet shall use
its reasonable best efforts to obtain from the stockholders of BankBoston and
Fleet, as the case may be, the vote in favor of the adoption of this Agreement
required by the RIBCA and in favor of the adoption of the Bylaw Amendment
required by the RIBCA and the Fleet Articles, in the case of Fleet, and the
votes in favor of the adoption of this Agreement required by the MBCL, in the
case of BankBoston, in each case to consummate the transactions contemplated
hereby.
6.4 LEGAL CONDITIONS TO MERGER. Each of Fleet and BankBoston shall, and
shall cause its Subsidiaries to, use their reasonable best efforts (a) to take,
or cause to be taken, all actions necessary, proper or advisable to comply
promptly with all legal requirements that may be imposed on such party or its
Subsidiaries with respect to the Merger and, subject to the conditions set forth
in Article VII hereof, to consummate the transactions contemplated by this
Agreement, and (b) to obtain (and to cooperate with the other party to obtain)
any material consent, authorization, order or approval of, or any exemption by,
any Governmental Entity and any other third party that is required to be
obtained by BankBoston or Fleet or any of their respective Subsidiaries in
connection with the Merger and the other transactions contemplated by this
Agreement.
6.5 AFFILIATES; PUBLICATION OF COMBINED FINANCIAL RESULTS. (a) Each of
Fleet and BankBoston shall use its reasonable best efforts to cause each
director, executive officer and other person who is an "affiliate" (for purposes
of Rule 145 under the Securities Act and for purposes of qualifying the Merger
for "pooling of interests" accounting treatment) of such party to deliver to the
other party hereto, as soon as practicable after the date of this Agreement, and
prior to the date of the stockholders' meetings called by Fleet and BankBoston
to approve this Agreement, a written agreement, in the form of Exhibit 6.5(a)(1)
or (2), as applicable, hereto, providing that such person will not sell, pledge,
transfer or otherwise dispose of any shares of Fleet Capital Stock, or
BankBoston Capital Stock held by such "affiliate" and, in the case of the
"affiliates" of BankBoston, the shares of Fleet Capital Stock to be received by
such "affiliate" in the Merger.
(b) The Surviving Corporation shall use its best efforts to publish as
promptly as reasonably practical, but in no event 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.
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6.6 STOCK EXCHANGE LISTING. Fleet shall cause the shares of Fleet Common
Stock, to be issued in the Merger to be approved for listing on the NYSE,
subject to official notice of issuance, prior to the Effective Time.
6.7 EMPLOYEE BENEFIT PLANS. (a) From and after the Effective Time, unless
otherwise mutually determined, the BankBoston Benefit Plans and Fleet Benefit
Plans in effect as of the date of this Agreement shall remain in effect with
respect to employees of BankBoston and Fleet (and their respective
Subsidiaries), respectively, covered by such plans at the Effective Time until
such time as the Surviving Corporation shall, subject to applicable law, the
terms of this Agreement and the terms of such plans, adopt new benefit plans
with respect to employees of the Surviving Corporation and its Subsidiaries (the
"New Benefit Plans"). Prior to the Closing Date, BankBoston and Fleet shall
cooperate in reviewing, evaluating and analyzing the Fleet Benefit Plans and
BankBoston Benefit Plans with a view towards developing appropriate New Benefit
Plans for the employees covered thereby.
(b) The foregoing notwithstanding, the Surviving Corporation agrees to honor
in accordance with their terms all benefits vested as of the date hereof under
the Fleet Benefit Plans or the BankBoston Benefit Plans or under other
contracts, arrangements, commitments, or understandings described in the Fleet
Disclosure Schedule and the BankBoston Disclosure Schedule.
(c) Nothing in this Section 6.7 shall be interpreted as preventing the
Surviving Corporation from amending, modifying or terminating any Fleet Benefit
Plans, BankBoston Benefit Plans, or other contracts, arrangements, commitments
or understandings, in accordance with their terms and applicable law.
(d) Prior to the Effective Time, BankBoston shall use its reasonable best
efforts to take all actions necessary, including securing the consent of award
holders, to amend the terms of the BankBoston Stock Plans and the award
agreements thereunder to provide that any stock appreciation rights, performance
shares or other equity-based awards, the terms of which provide for the
settlement of such award in cash, shall be settled in stock with a fair market
value equal to the cash that would otherwise have been payable thereunder. The
pro-rata bonuses payable to employees of BankBoston and its Subsidiaries (or, on
or after the Effective Time, Surviving Corporation) in connection with a change
in control of BankBoston, including without limitation the pro-rata bonuses
payable under the Performance Recognition Opportunity Plan and any incentive
bonus plans of a business unit, shall be determined in accordance with the terms
of such plans and consistent with past practice. In no event shall the aggregate
amount required to be contributed to the trusts (as identified in Section 3.11
of the BankBoston Disclosure Schedule) upon a change in control of BankBoston
exceed the amount set forth in Section 6.7(d) of the BankBoston Disclosure.
(e) Prior to the Effective Time, Fleet shall enter into employment
agreements and other employment arrangements on the terms set forth in Exhibit
6.7 hereto.
6.8 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. (a) In the event
of any threatened or actual claim, action, suit, proceeding or investigation,
whether civil, criminal or administrative, including, without limitation, any
such claim, action, suit, proceeding or investigation in which any individual
who is now, or has been at any time prior to the date of this Agreement, or who
becomes prior to the Effective Time, a director or officer or employee of
BankBoston or any of its Subsidiaries, including any entity specified in the
BankBoston Disclosure Schedule (the "Indemnified Parties"), is, or is threatened
to be, made a party based in whole or in part on, or arising in whole or in part
out of, or pertaining to (i) the fact that he is or was a director, officer or
employee of BankBoston or any of its Subsidiaries or (ii) this Agreement, the
Option Agreements or any of the transactions contemplated hereby or thereby,
whether in any case asserted or arising before or after the Effective Time, the
parties hereto agree to cooperate and use their best efforts to defend against
and respond thereto. It is understood and agreed that after the Effective Time,
Fleet shall indemnify and hold harmless, as and to the fullest extent permitted
by law, each such Indemnified Party against any losses, claims, damages,
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liabilities, costs, expenses (including reasonable attorney's fees and expenses
in advance of the final disposition of any claim, suit, proceeding or
investigation to each Indemnified Party to the fullest extent permitted by law
upon receipt of any undertaking required by applicable law), judgments, fines
and amounts paid in settlement in connection with any such threatened or actual
claim, action, suit, proceeding or investigation.
(b) Fleet shall use its reasonable best efforts to cause the individuals
serving as officers and directors of BankBoston or any of its Subsidiaries
immediately prior to the Effective Time to be covered for a period of six (6)
years from the Effective Time (or the period of the applicable statute of
limitations, if longer) by the directors' and officers' liability insurance
policy maintained by BankBoston (provided that Fleet may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are not less advantageous than such policy) with respect to
acts or omissions occurring prior to the Effective Time which were committed by
such officers and directors in their capacity as such.
(c) In the event Fleet or any of its successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger, or (ii)
transfers or conveys all or substantially all of its properties and assets to
any person, then, and in each such case, to the extent necessary, proper
provision shall be made so that the successors and assigns of Fleet assume the
obligations set forth in this Section 6.8.
(d) The provisions of this Section 6.8 shall survive the Effective Time and
are intended to be for the benefit of, and shall be enforceable by, each
Indemnified Party and his or her heirs and representatives.
6.9 ADDITIONAL AGREEMENTS. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement (including, without limitation, any merger between a Subsidiary of
Fleet, on the one hand, and a Subsidiary of BankBoston, on the other) or to vest
the Surviving Corporation with full title to all properties, assets, rights,
approvals, immunities and franchises of any of the parties to the Merger, the
proper officers and directors of each party to this Agreement and their
respective Subsidiaries shall take all such necessary action as may be
reasonably requested by, and at the sole expense of, Fleet.
6.10 ADVICE OF CHANGES. Fleet and BankBoston shall each promptly advise
the other party of any change or event (i) having a Material Adverse Effect on
it or (ii) which it believes would or would be reasonably likely to cause or
constitute a material breach of any of its representations, warranties or
covenants contained herein.
6.11 DIVIDENDS. After the date of this Agreement, each of Fleet and
BankBoston shall coordinate with the other the declaration of any dividends in
respect of Fleet Common Stock and BankBoston Common Stock and the record dates
and payment dates relating thereto, it being the intention of the parties hereto
that holders of BankBoston Common Stock shall not receive two dividends, or fail
to receive one dividend, for any quarter with respect to their shares of
BankBoston Common Stock and any shares of Fleet Common Stock any such holder
receives in exchange therefor in the Merger.
6.12 RESTRUCTURING EFFORTS. If either BankBoston or Fleet shall have
failed to obtain the requisite vote or votes of its shareholders for the
consummation of the transactions contemplated by this Agreement at a duly held
meeting of its shareholders or at any adjournment or postponement thereof, each
of the parties shall in good faith use its reasonable best efforts to negotiate
a restructuring of the transaction provided for herein for the purpose of
resubmitting the transaction to their respective shareholders for approval.
6.13 EXECUTIVE OFFICERS, SUCCESSION. In accordance with the terms hereof
and of the employment agreement between Fleet and Charles K. Gifford entered
into in connection with this Agreement, (i) at the Effective Time and until
December 31, 2001 (the "CEO Succession Date"), Mr. Murray shall serve
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as Chairman of the Board of Directors and Chief Executive Officer of Fleet, and
from and after the CEO Succession Date, Mr. Murray shall cease to serve as Chief
Executive Officer but shall continue to serve as Chairman of the Board of Fleet
until December 31, 2002 (the "Chairmanship Succession Date"), and (ii) at the
Effective Time and until the CEO Succession Date, Mr. Gifford shall serve as
President and Chief Operating Officer of Fleet, and from and after the CEO
Succession Date, Mr. Gifford shall cease to serve as President and Chief
Operating Officer and shall be Chief Executive Officer of Fleet. In addition,
from and after the Chairmanship Succession Date, Mr. Gifford shall be the
Chairman of the Board of Fleet. If, for any reason, Mr. Murray ceases to serve
as Chief Executive Officer of Fleet prior to the CEO Succession Date and/or as
Chairman of the Board of Fleet prior to the Chairmanship Succession Date and at
such time Mr. Gifford is then serving as President of Fleet, or Chief Executive
Officer of Fleet, Mr. Gifford shall at such time become Chief Executive Officer
and/or Chairman of the Board, as the case may be, of Fleet. Except for the
succession contemplated by the previous sentence, if either of such persons is
unable or unwilling to hold such offices for the period set forth herein and in
his employment agreement, his successor shall be selected by the Board of
Directors of Fleet in the manner set forth in the bylaws of the Surviving
Corporation.
6.14 POST-MERGER BOARD OF DIRECTORS AND COMMITTEES. (a) At the Effective
Time, the total number of persons serving on the Board of Directors of Fleet
shall be twenty-two (22), twelve (12) of whom shall be Fleet Directors and ten
(10) of whom shall be BankBoston Directors (as such terms are defined in
subsection (c) below). The 12 persons to serve initially on the Board of
Directors of Fleet as of the Effective Time who are Fleet Directors shall be
selected by the Board of Directors of Fleet prior to the Effective Time; and the
10 persons to serve on the Board of Directors of Fleet as of the Effective Time
who are BankBoston Directors shall be selected by the Board of Directors of
BankBoston prior to the Effective Time. Four Fleet Directors shall be assigned
to each of the three classes of the Board of Directors of Fleet from and after
the Effective Time, and the ten BankBoston Directors shall be assigned to the
three classes of the Board of Directors of Fleet so that two of such classes
contain three BankBoston Directors and one class contains four BankBoston
Directors. In the event that, prior to the Effective Time, any person so
selected to serve on the Board of Directors of Fleet after the Effective Time is
unable or unwilling to serve in such position, the Board of Directors which
selected such person shall designate another of its members to serve in such
person's stead in accordance with the provisions of the immediately preceding
sentence. Prior to the Effective Time, Fleet shall cause its Board of Directors
to approve and adopt resolutions effecting the Board composition contemplated by
this Section 6.14 and designating all such Fleet Directors and BankBoston
Directors as "Continuing Directors" for purposes of Article Seventh and Article
Ninth of the Fleet Articles.
(b) From and after the Effective Time, each of the committees of the Board
of Directors of Fleet shall be comprised of an equal number of Fleet Directors
and BankBoston Directors and the respective chairmen of such committees shall be
drawn equally from the Fleet Directors and the BankBoston Directors, the
identity of the members of such committees and such chairmen to otherwise be as
mutually determined by Mr. Murray and Mr. Gifford.
(c) The term "Fleet Director" means (i) any person serving as a Director of
Fleet on the date of this Agreement who continues as a Director of Fleet at the
Effective Time and (ii) any person who becomes a Director of Fleet and who is
designated as such by the Fleet Directors prior to his or her election; and the
term "BankBoston Director" means (i) any person serving as a Director of
BankBoston on the date of this Agreement who becomes a Director of Fleet at the
Effective Time and (ii) any person who becomes a Director of Fleet and who is
designated as such by the BankBoston Directors prior to his or her election.
6.15 EXEMPTION FROM LIABILITY UNDER SECTION 16(B). Assuming that
BankBoston delivers to Fleet the Section 16 Information in a timely fashion, the
Board of Directors of Fleet, or a committee of Non-Employee Directors thereof
(as such term is defined for purposes of Rule 16b-3(d) under the Exchange Act),
shall adopt a resolution providing that the receipt by the BankBoston Insiders
of Fleet
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Common Stock in exchange for shares of BankBoston Common Stock, and of options
on Fleet Common Stock upon conversion of options on BankBoston Common Stock, in
each case pursuant to the transactions contemplated hereby and to the extent
such securities are listed in the Section 16 Information, are intended to be
exempt from liability pursuant to Section 16(b) under the Exchange Act. "Section
16 Information" shall mean information accurate in all respects regarding the
BankBoston Insiders, the number of shares of BankBoston Common Stock held by
each such BankBoston Insider and expected to be exchanged for Fleet Common Stock
in the Merger, and the number and description of the options on BankBoston
Common Stock held by each such BankBoston Insider and expected to be converted
into options on Fleet Common Stock in connection with the Merger. "BankBoston
Insiders" shall mean those officers and directors of BankBoston who are subject
to the reporting requirements of Section 16(a) of the Exchange Act and who are
listed in the Section 16 Information.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of the parties to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement shall have been adopted by the
requisite affirmative vote of the holders of Fleet Common Stock entitled to vote
thereon and by the requisite affirmative votes of the holders of BankBoston
Common Stock entitled to vote thereon.
(b) NYSE LISTING. The shares of Fleet Common Stock which shall be issued
to the stockholders of Fleet upon consummation of the Merger shall have been
authorized for listing on the NYSE, subject to official notice of issuance.
(c) OTHER APPROVALS. All regulatory approvals required to consummate the
transactions contemplated hereby shall have been obtained and shall remain in
full force and effect and all statutory waiting periods in respect thereof shall
have expired (all such approvals and the expiration of all such waiting periods
being referred to herein as the "Requisite Regulatory Approvals").
(d) S-4. The S-4 shall have become effective under the Securities Act and
no stop order suspending the effectiveness of the S-4 shall have been issued and
no proceedings for that purpose shall have been initiated or threatened by the
SEC.
(e) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger or any of the other transactions contemplated by this Agreement shall be
in effect. No statute, rule, regulation, order, injunction or decree shall have
been enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits, materially restricts or makes illegal consummation of the Merger.
(f) FEDERAL TAX OPINION. The parties hereto shall have received the
opinions of their respective counsel, Wachtell, Lipton, Rosen & Katz, and
Skadden, Arps, Slate, Meagher & Flom LLP, in form and substance reasonably
satisfactory to Fleet and BankBoston, as the case may be, dated as of the
Closing Date, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in each such opinion which are
consistent with the state of facts existing at the Effective Time, the Merger
will be treated as a reorganization within the meaning of Section 368(a) of the
Code. In rendering such opinions, counsel may require and rely upon
representations contained in certificates of officers of Fleet, BankBoston and
others, reasonably satisfactory in form and substance to such counsel.
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<PAGE>
(g) POOLING OF INTERESTS. Fleet and BankBoston shall each have received a
letter from their respective independent accountants addressed to BankBoston or
Fleet, as the case may be, to the effect that the Merger will qualify for
"pooling of interests" accounting treatment.
7.2 CONDITIONS TO OBLIGATIONS OF FLEET. The obligation of Fleet to effect
the Merger is also subject to the satisfaction, or waiver by Fleet, at or prior
to the Effective Time, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
BankBoston set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date; provided, however, that for
purposes of this paragraph, such representations and warranties (other than the
representation set forth in the last sentence of Section 3.2(a)) shall be deemed
to be true and correct unless the failure or failures of such representations
and warranties to be so true and correct, either individually or in the
aggregate, and without giving effect to any qualification as to materiality or
Material Adverse Effect set forth in such representations or warranties, will
have a Material Adverse Effect on BankBoston or the Surviving Corporation. Fleet
shall have received a certificate signed on behalf of BankBoston by the Chief
Executive Officer and the Chief Financial Officer of BankBoston to the foregoing
effect.
(b) PERFORMANCE OF OBLIGATIONS OF BANKBOSTON. BankBoston shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Fleet shall have
received a certificate signed on behalf of BankBoston by the Chief Executive
Officer and the Chief Financial Officer of BankBoston to such effect.
(c) FLEET DIVESTITURES. No contract, agreement, arrangement or commitment
to sell or divest a significant amount of the branch deposits of Fleet located
within either the State of Connecticut or the State of Rhode Island shall have
been entered into or contemplated.
7.3 CONDITIONS TO OBLIGATIONS OF BANKBOSTON. The obligation of BankBoston
to effect the Merger is also subject to the satisfaction or waiver by BankBoston
at or prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Fleet set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, PROVIDED, HOWEVER, that for
purposes of this paragraph, such representations and warranties (other than the
representation set forth in the last sentence of Section 4.2(a)) shall be deemed
to be true and correct unless the failure or failures of such representations
and warranties to be so true and correct, either individually or in the
aggregate, and without giving effect to any qualification as to materiality or
Material Adverse Effect set forth in such representations or warranties, will
have a Material Adverse Effect on Fleet. BankBoston shall have received a
certificate signed on behalf of Fleet by the Chief Executive Officer and the
Chief Financial Officer of Fleet to the foregoing effect.
(b) PERFORMANCE OF OBLIGATIONS OF FLEET. Fleet shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and BankBoston shall have received a
certificate signed on behalf of Fleet by the Chief Executive Officer and the
Chief Financial Officer of Fleet to such effect.
(c) BANKBOSTON DIVESTITURES. No contract, agreement, arrangement or
commitment to sell or divest a significant amount of the branch deposits of
BankBoston located within the Commonwealth of Massachusetts shall have been
entered into or contemplated.
(d) BYLAW AMENDMENT/BOARD RESOLUTIONS. Fleet shall have taken all such
actions as shall be necessary so that (i) the Bylaw Amendment shall have been
adopted by the Board of Directors and the
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stockholders of Fleet effective not later than the Effective Time and (ii) the
resolutions contemplated by Section 6.14 of this Agreement shall have been
adopted by the Board of Directors of Fleet effective not later than the
Effective Time.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of Fleet or BankBoston:
(a) by mutual consent of Fleet and BankBoston in a written instrument, if
the Board of Directors of each so determines by a vote of a majority of the
members of its entire Board;
(b) by either the Board of Directors of Fleet or the Board of Directors of
BankBoston if any Governmental Entity that must grant a Requisite Regulatory
Approval has denied approval of the Merger and such denial has become final and
nonappealable or any Governmental Entity of competent jurisdiction shall have
issued a final nonappealable order permanently enjoining or otherwise
prohibiting the consummation of the transactions contemplated by this Agreement;
(c) by either the Board of Directors of Fleet or the Board of Directors of
BankBoston if the Merger shall not have been consummated on or before the first
anniversary of the date of this Agreement, unless the failure of the Closing to
occur by such date shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe the covenants and agreements of such party
set forth herein;
(d) by either the Board of Directors of Fleet or the Board of Directors of
BankBoston (provided that the terminating party is not then in breach of any
representation, warranty, covenant or other agreement contained herein) if there
shall have been a breach of any of the covenants or agreements or any of the
representations or warranties set forth in this Agreement on the part of
BankBoston, in the case of a termination by Fleet, or Fleet, in the case of a
termination by BankBoston, which breach, either individually or in the
aggregate, would constitute, if occurring or continuing on the Closing Date, the
failure of the conditions set forth in Section 7.2 or 7.3, as the case may be,
and which is not cured within 45 days following written notice to the party
committing such breach or by its nature or timing cannot be cured prior to the
Closing Date; or
(e) by either BankBoston or Fleet, if its Board of Directors determines in
good faith by a majority vote that the other party has substantially engaged in
bad faith in breach of its obligations under Section 6.12 of this Agreement.
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either Fleet or BankBoston as provided in Section 8.1, this Agreement shall
forthwith become void and have no effect, and none of Fleet, BankBoston, any of
their respective Subsidiaries or any of the officers or directors of any of them
shall have any liability of any nature whatsoever hereunder, or in connection
with the transactions contemplated hereby, except that (i) Sections 6.2(b), 8.2,
9.2 and 9.3 shall survive any termination of this Agreement, and (ii)
notwithstanding anything to the contrary contained in this Agreement, neither
Fleet nor BankBoston shall be relieved or released from any liabilities or
damages arising out of its willful breach of any provision of this Agreement.
8.3 AMENDMENT. Subject to compliance with applicable law and Section
1.1(b), this Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any time before or after
approval of the matters presented in connection with Merger by the stockholders
of Fleet and BankBoston; PROVIDED, HOWEVER, that after any approval of the
transactions contemplated by this Agreement by the respective stockholders of
Fleet or BankBoston, there may not be, without further approval of such
stockholders, any amendment of this Agreement that changes the amount or the
form of the consideration to be delivered hereunder to the holders of BankBoston
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<PAGE>
Common Stock, other than as contemplated by this Agreement. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein; PROVIDED, HOWEVER,
that after any approval of the transactions contemplated by this Agreement by
the respective stockholders of Fleet or BankBoston, there may not be, without
further approval of such stockholders, any extension or waiver of this Agreement
or any portion thereof which reduces the amount or changes the form of the
consideration to be delivered to the holders of Fleet Common Stock hereunder,
other than as contemplated by this Agreement. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth in
a written instrument signed on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 CLOSING. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. on a date
and at a place to be specified by the parties, which shall be no later than five
business days after the satisfaction or waiver (subject to applicable law) of
the latest to occur of the conditions set forth in Article VII hereof, unless
extended by mutual agreement of the parties (the "Closing Date").
9.2 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement (other than the Option
Agreements and the Confidentiality Agreement, which shall terminate in
accordance with their terms) shall survive the Effective Time, except for
Section 6.8 and for those other covenants and agreements contained herein and
therein which by their terms apply in whole or in part after the Effective Time.
9.3 EXPENSES. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense, PROVIDED, HOWEVER, that the costs and expenses of
printing and mailing the Joint Proxy Statement, and all filing and other fees
paid to the SEC in connection with the Merger, shall be borne equally by Fleet
and BankBoston.
9.4 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Fleet, to:
Fleet Financial Group, Inc.
One Federal Street
Boston, Massachusetts 02110
Attention: General Counsel
Telecopier: (617) 346-3185
and
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<PAGE>
(b) if to BankBoston, to:
BankBoston Corporation
100 Federal Street
25(th) Floor
Boston, Massachusetts 02110
Attention: General Counsel
Telecopier: (617) 434-6525
9.5 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation".
9.6 COUNTERPARTS. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
9.7 ENTIRE AGREEMENT. This Agreement (including the documents and the
instruments referred to herein) together with the Option Agreements and the
Confidentiality Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
9.8 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Rhode Island, without regard to any
applicable conflicts of law principles.
9.9 PUBLICITY. Except as otherwise required by applicable law or the rules
of the NYSE, neither Fleet nor BankBoston shall, or shall permit any of its
Subsidiaries to, issue or cause the publication of any press release or other
public announcement with respect to, or otherwise make any public statement
concerning, the transactions contemplated by this Agreement without the consent
of BankBoston, in the case of a proposed announcement or statement by Fleet, or
Fleet, in the case of a proposed announcement or statement by BankBoston, which
consent shall not be unreasonably withheld.
9.10 ASSIGNMENT; THIRD PARTY BENEFICIARIES. Neither this Agreement nor any
of the rights, interests or obligations shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns. Except as otherwise specifically
provided in Section 6.8, this Agreement (including the documents and instruments
referred to herein) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
9.11 CERTAIN AGREEMENTS OF SURVIVING CORPORATION. The Surviving
Corporation agrees that it may be sued in the Commonwealth of Massachusetts for
any prior obligation of Fleet or BankBoston and any obligation incurred by the
Surviving Corporation after the Effective Time, so long as any liability remains
outstanding against any such entity in the Commonwealth of Massachusetts, and
the Surviving Corporation irrevocably appoints the State Secretary of the
Commonwealth of Massachusetts as its agent to accept service of process in any
action for the enforcement of any such obligation, including taxes, in the
manner provided in Chapter 181 of the General Laws of the Commonwealth of
Massachusetts.
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<PAGE>
IN WITNESS WHEREOF, Fleet Financial Group, Inc. and BankBoston Corporation
have caused this Agreement to be executed under seal by their respective
officers thereunto duly authorized as of the date first above written.
<TABLE>
<S> <C> <C>
BANKBOSTON CORPORATION
By: /s/ PETER J. MANNING
-----------------------------------------
Name: Peter J. Manning
Title: Executive Vice President
By: /s/ SUSANNAH M. SWIHART
-----------------------------------------
Name: Susannah M. Swihart
Title: Vice Chairman, Chief Financial
Officer and Treasurer
FLEET FINANCIAL GROUP, INC.
By: /s/ H. JAY SARLES
-----------------------------------------
Name: H. Jay Sarles
Title: Vice Chairman and Chief
Administrative Officer
By: /s/ EUGENE M. MCQUADE
-----------------------------------------
Name: Eugene M. McQuade
Title: Vice Chairman and Chief Financial
Officer
</TABLE>
[Agreement and Plan of Merger]
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<PAGE>
APPENDIX B
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 March 14, 1999, between Fleet Financial Group,
Inc., a Rhode Island corporation ("Issuer"), and BankBoston Corporation, a
Massachusetts corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to this Stock Option Agreement
(the "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 113,127,918 fully
paid and nonassessable shares of Issuer's Common Stock, par value $0.01 per
share ("Common Stock"), at a price of $44.75 per share (the "Option Price");
PROVIDED, HOWEVER, 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 without giving effect to any shares subject
to or issued pursuant to the Option. 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 either (i)
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement) or (ii) redeemed, repurchased, retired or
otherwise cease to be outstanding after the date of this Agreement, the number
of shares of Common Stock subject to the Option shall be increased or decreased,
as appropriate, so that, after such issuance, such number 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 (as
defined in the Merger Agreement) of the Merger; (ii) termination of the Merger
Agreement in accordance with the provisions thereof if such termination occurs
prior to the occurrence of an Initial Triggering Event except a termination by
Grantee pursuant to Section 8.1(d) of the Merger Agreement (unless the breach by
Issuer giving rise to such right of termination is non-volitional); or (iii) the
passage of 12 months after termination of the Merger Agreement if such
termination follows the occurrence of an Initial Triggering Event or is a
termination by Grantee pursuant to Section 8.1(d)
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<PAGE>
of the Merger Agreement (unless the breach by Issuer giving rise to such right
of termination is non-volitional). 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 with any person other than Grantee or a Subsidiary
of Grantee. 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 or assumption of all or a
substantial portion of the assets or deposits 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 (z) any
substantially similar transaction; PROVIDED, HOWEVER, that in no event shall
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 that 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 intention 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 in anticipation of engaging in an Acquisition Transaction;
(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 Agreement
having the meaning assigned thereto in Section 13(d) of the 1934 Act, and
the rules and regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary shall have
made a BONA FIDE proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Grantee to terminate the Merger Agreement and
(y) shall not have been cured prior to the Notice Date (as defined below);
or
(vi) Any person other than Grantee or any Grantee Subsidiary, other than
in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Federal
Reserve Board, or other federal or state bank regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
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<PAGE>
(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
paragraph (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 of which it has notice
(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 this Agreement and a letter agreeing that the Holder
will not offer to sell or otherwise dispose of such shares in violation of
applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof
and Issuer and to resale restrictions arising under the Securities Act of
1933, as amended. A copy of such agreement is on file at the principal
office of Issuer and will be provided to the holder hereof without charge
upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the
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<PAGE>
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. Section 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to the Federal
Reserve Board or to any state regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board or such state regulatory authority as they may require) in order to permit
the Holder to exercise the Option and Issuer duly and effectively to issue
shares of Common Stock pursuant hereto; and (iv) promptly to take all action
provided herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to
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adjustment from time to time as provided in this Section 5. In the event of any
change in, or distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions on or in respect of the Common
Stock that would be prohibited under the terms of the Merger Agreement, or the
like, the type and number of shares of Common Stock purchasable upon exercise
hereof and the Option Price shall be appropriately adjusted in such manner as
shall fully preserve the economic benefits provided hereunder and proper
provision shall be made in any agreement governing any such transaction to
provide for such proper adjustment and the full satisfaction of the Issuer's
obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to
an Exercise Termination Event, Issuer shall, at the request of Grantee delivered
within 90 days of such Subsequent Triggering Event (whether on its own behalf or
on behalf of any subsequent holder of this Option (or part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly prepare, file and
keep current a shelf registration 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;
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 practicable 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 secondary
offering 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
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Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the Market/Offer Price multiplied by
the number of Option Shares so designated. The term "Market/Offer Price" shall
mean the highest of (i) the price per share of Common Stock at which a tender
offer or exchange offer therefor has been made, (ii) the price per share of
Common Stock to be paid by any third party pursuant to an agreement with Issuer,
(iii) the highest closing price for shares of Common Stock within the six-month
period immediately preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the required repurchase
of Option Shares, as the case may be, or (iv) in the event of a sale of all or a
substantial portion of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to the
Issuer, 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,
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, if any, 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, in each case 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.
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(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 provisos to Section 2(b)(i) hereof or (ii) upon the acquisition by any
person of beneficial ownership of 50% or more of the then outstanding shares of
Common Stock, provided that no such event shall constitute a Repurchase Event
unless a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event. The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall not terminate
upon the occurrence of an Exercise Termination Event unless no Subsequent
Triggering Event shall have occurred prior to the occurrence of an Exercise
Termination Event.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding voting shares and voting share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(A) "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.
(B) "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
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Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to 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, 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
the Highest Closing Price multiplied by the number of Substitute Shares so
designated. 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, in either case, 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 following a
request for repurchase pursuant to this Section 9 shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner and thereafter
deliver or cause to be
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delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five business days after the date on which the Substitute
Option Issuer is no longer so prohibited; PROVIDED, HOWEVER, that if the
Substitute Option Issuer is at any time after delivery of a notice of repurchase
pursuant to subsection (b) of this Section 9 prohibited under applicable law or
regulation from delivering to the Substitute Option Holder and/or the Substitute
Share Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the Substitute
Option Issuer shall use its best efforts to obtain all required regulatory and
legal approvals, in each case 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 Common 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.
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12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly executed and
delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the 1933 Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this 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. (a) Grantee may, at any time during which Issuer would be required to
repurchase the Option or any Option Shares pursuant to Section 7, surrender the
Option (together with any Option Shares issued to and then owned by Grantee) to
Issuer in exchange for a cash fee equal to the Surrender Price (as defined
below); PROVIDED, HOWEVER, that Grantee may not exercise its rights pursuant to
this Section 15 if Issuer has repurchased the Option (or any portion thereof) or
any Option Shares pursuant to Section 7. The "Surrender Price" shall be equal to
(i) $560 million, plus (ii) if applicable, the aggregate purchase price
previously paid pursuant hereto by Grantee with respect to any Option Shares,
minus (iii) if applicable, the sum of (A) the excess of (1) the net cash
amounts, if any, received by Grantee pursuant to the arms' length sale of Option
Shares (or any other securities into which such Option Shares were converted or
exchanged) to any party not affiliated with Grantee, over (2) the aggregate
purchase price previously paid pursuant hereto by Grantee with respect to such
Option Shares and (B) the net cash amounts, if any, received by Grantee pursuant
to an arms' length sale of a portion of the Option to any party not affiliated
with Grantee.
(b) Grantee may exercise its right to surrender the Option and any Option
Shares pursuant to this Section 15 by surrendering to Issuer, at its principal
office, this Agreement together with certificates for Option Shares, if any,
accompanied by a written notice stating (i) that Grantee elects to surrender the
Option and Option Shares, if any, in accordance with the provisions of this
Section 15 and (ii) the
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Surrender Price. The Surrender Price shall be payable in immediately available
funds on or before the second business day following receipt of such notice by
Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from paying the Surrender Price to Grantee in full, Issuer shall
immediately so notify Grantee and thereafter deliver or cause to be delivered,
from time to time, to Grantee, the portion of the Surrender Price that Issuer is
no longer prohibited from paying, 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 surrender pursuant to paragraph (b) of
this Section 15 is prohibited under applicable law or regulation from paying to
Grantee the Surrender Price in full (i) Issuer shall (A) use its reasonable best
efforts to obtain all required regulatory and legal approvals and to file any
required notices as promptly as practicable in order to make such payments, (B)
within five days of the submission or receipt of any documents relating to any
such regulatory and legal approvals, provide Grantee with copies of the same,
and (C) keep Grantee advised of both the status of any such request for
regulatory and legal approvals, as well as any discussions with any relevant
regulatory or other third party reasonably related to the same and (ii) Grantee
may revoke such notice of surrender by delivery of a notice of revocation to
Issuer and, upon delivery of such notice of revocation, the Exercise Termination
Date shall be extended to a date six months from the date on which the Exercise
Termination Date would have occurred if not for the provisions of this Section
15(c) (during which period Grantee may exercise any of its rights hereunder,
including any and all rights pursuant to this Section 15).
(d) Grantee shall have rights substantially identical to those set forth in
paragraphs (a), (b) and (c) of this Section 15 with respect to the Substitute
Option and the Substitute Option Issuer during any period in which the
Substitute Option Issuer would be required to repurchase the Substitute Option
pursuant to Section 9.
16. 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.
17. 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.
18. 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.
19. 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 (except to the
extent that mandatory provisions of federal or state law apply).
20. This Agreement may be executed in two counterparts, each of which shall
be deemed to be an original, but all of which shall constitute one and the same
agreement.
21. 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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hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
22. 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 and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
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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.
<TABLE>
<S> <C> <C>
FLEET FINANCIAL GROUP, INC.
BY: /S/ H. JAY SARLES
-----------------------------------------
Name: H. Jay Sarles
Title: Vice Chairman and Chief
Administrative Officer
BANKBOSTON CORPORATION
By: /s/ PETER J. MANNING
-----------------------------------------
Name: Peter J. Manning
Title: Executive Vice President
</TABLE>
[Fleet Option Agreement]
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APPENDIX C
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 March 14, 1999, between BankBoston
Corporation, a Massachusetts corporation ("Issuer"), and Fleet Financial Group,
Inc., a Rhode Island corporation ("Grantee").
W I T N E S S E T H :
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to this Stock Option Agreement
(the "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 59,005,179 fully
paid and non-assessable shares of Issuer's Common Stock, par value $1.00 per
share ("Common Stock"), at a price of $46.938 per share (the "Option Price");
provided, however, 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 without giving effect to any shares subject
to or issued pursuant to the Option. 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 either (i)
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement) or (ii) redeemed, repurchased, retired or
otherwise cease to be outstanding after the date of this Agreement, the number
of shares of Common Stock subject to the Option shall be increased or decreased,
as appropriate, so that, after such issuance, such number 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
(as defined in the Merger Agreement) of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event except a
termination by Grantee pursuant to Section 8.1(d) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination is
non-volitional); or (iii) the passage of 12 months after termination of the
Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a termination by Grantee pursuant to Section 8.1(d)
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of the Merger Agreement (unless the breach by Issuer giving rise to such right
of termination is non-volitional). 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 with any person other than Grantee or a subsidiary
of Grantee. 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 or assumption of all or a
substantial portion of the assets or deposits 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 (z) any
substantially similar transaction; provided, however, that in no event shall
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 that 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 intention 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 in anticipation of engaging in an Acquisition Transaction;
(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 Agreement
having the meaning assigned thereto in Section 13(d) of the 1934 Act, and
the rules and regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary shall have
made a BONA FIDE proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Grantee to terminate the Merger Agreement and
(y) shall not have been cured prior to the Notice Date (as defined below);
or
(vi) Any person other than Grantee or any Grantee Subsidiary, other than
in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Federal
Reserve Board, or other federal or state bank regulatory authority,
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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
paragraph (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 of which it has notice
(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 this Agreement and a letter agreeing that the Holder
will not offer to sell or otherwise dispose of such shares in violation of
applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof
and Issuer and to resale restrictions arising under the Securities Act of
1933, as amended. A copy of such agreement is on file at the principal
office of Issuer and will be provided to the holder hereof without charge
upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer,
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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. Section 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to the Federal
Reserve Board or to any state regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board or such state regulatory authority as they may require) in order to permit
the Holder to exercise the Option and Issuer duly and effectively to issue
shares of Common Stock pursuant hereto; and (iv) promptly to take all action
provided herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to
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adjustment from time to time as provided in this Section 5. In the event of any
change in, or distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions on or in respect of the Common
Stock that would be prohibited under the terms of the Merger Agreement, or the
like, the type and number of shares of Common Stock purchasable upon exercise
hereof and the Option Price shall be appropriately adjusted in such manner as
shall fully preserve the economic benefits provided hereunder and proper
provision shall be made in any agreement governing any such transaction to
provide for such proper adjustment and the full satisfaction of the Issuer's
obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to
an Exercise Termination Event, Issuer shall, at the request of Grantee delivered
within 90 days of such Subsequent Triggering Event (whether on its own behalf or
on behalf of any subsequent holder of this Option (or part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly prepare, file and
keep current a shelf registration 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;
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 practicable 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 secondary
offering 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
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Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the Market/Offer Price multiplied by
the number of Option Shares so designated. The term "Market/Offer Price" shall
mean the highest of (i) the price per share of Common Stock at which a tender
offer or exchange offer therefor has been made, (ii) the price per share of
Common Stock to be paid by any third party pursuant to an agreement with Issuer,
(iii) the highest closing price for shares of Common Stock within the six-month
period immediately preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the required repurchase
of Option Shares, as the case may be, or (iv) in the event of a sale of all or a
substantial portion of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to the
Issuer, 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,
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, if any, 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, in each case 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.
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(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 provisos to Section 2(b)(i) hereof or (ii) upon the acquisition by any
person of beneficial ownership of 50% or more of the then outstanding shares of
Common Stock, provided that no such event shall constitute a Repurchase Event
unless a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event. The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall not terminate
upon the occurrence of an Exercise Termination Event unless no Subsequent
Triggering Event shall have occurred prior to the occurrence of an Exercise
Termination Event.
8. 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:
(A) "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.
(B) "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
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Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. At the request of the holder of the Substitute Option (the "Substitute
Option Holder"), the Substitute Option Issuer shall repurchase the Substitute
Option from the Substitute Option Holder at a price (the "Substitute Option
Repurchase Price") equal to 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, 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
the Highest Closing Price multiplied by the number of Substitute Shares so
designated plus. 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, in either case, 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 following a
request for repurchase pursuant to this Section 9 shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner and thereafter
deliver or cause to be
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<PAGE>
delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five business days after the date on which the Substitute
Option Issuer is no longer so prohibited; PROVIDED, HOWEVER, that if the
Substitute Option Issuer is at any time after delivery of a notice of repurchase
pursuant to subsection (b) of this Section 9 prohibited under applicable law or
regulation from delivering to the Substitute Option Holder and/or the Substitute
Share Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the Substitute
Option Issuer shall use its best efforts to obtain all required regulatory and
legal approvals, in each case 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 Common 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, non-assessable, 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.
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<PAGE>
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly executed and
delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the 1933 Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this 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. (a) Grantee may, at any time during which Issuer would be required to
repurchase the Option or any Option Shares pursuant to Section 7, surrender the
Option (together with any Option Shares issued to and then owned by Grantee) to
Issuer in exchange for a cash fee equal to the Surrender Price (as defined
below); PROVIDED, HOWEVER, that Grantee may not exercise its rights pursuant to
this Section 15 if Issuer has repurchased the Option (or any portion thereof) or
any Option Shares pursuant to Section 7. The "Surrender Price" shall be equal to
(i) $560 million, plus (ii) if applicable, the aggregate purchase price
previously paid pursuant hereto by Grantee with respect to any Option Shares,
minus (iii) if applicable, the sum of (A) the excess of (1) the net cash
amounts, if any, received by Grantee pursuant to the arms' length sale of Option
Shares (or any other securities into which such Option Shares were converted or
exchanged) to any party not affiliated with Grantee, over (2) the aggregate
purchase price previously paid pursuant hereto by Grantee with respect to such
Option Shares and (B) the net cash amounts, if any, received by Grantee pursuant
to an arms' length sale of a portion of the Option to any party not affiliated
with Grantee.
(b) Grantee may exercise its right to surrender the Option and any Option
Shares pursuant to this Section 15 by surrendering to Issuer, at its principal
office, this Agreement together with certificates for Option Shares, if any,
accompanied by a written notice stating (i) that Grantee elects to surrender the
Option and Option Shares, if any, in accordance with the provisions of this
Section 15 and (ii) the
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<PAGE>
Surrender Price. The Surrender Price shall be payable in immediately available
funds on or before the second business day following receipt of such notice by
Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from paying the Surrender Price to Grantee in full, Issuer shall
immediately so notify Grantee and thereafter deliver or cause to be delivered,
from time to time, to Grantee, the portion of the Surrender Price that Issuer is
no longer prohibited from paying, 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 surrender pursuant to paragraph (b) of
this Section 15 is prohibited under applicable law or regulation from paying to
Grantee the Surrender Price in full (i) Issuer shall (A) use its reasonable best
efforts to obtain all required regulatory and legal approvals and to file any
required notices as promptly as practicable in order to make such payments, (B)
within five days of the submission or receipt of any documents relating to any
such regulatory and legal approvals, provide Grantee with copies of the same,
and (C) keep Grantee advised of both the status of any such request for
regulatory and legal approvals, as well as any discussions with any relevant
regulatory or other third party reasonably related to the same and (ii) Grantee
may revoke such notice of surrender by delivery of a notice of revocation to
Issuer and, upon delivery of such notice of revocation, the Exercise Termination
Date shall be extended to a date six months from the date on which the Exercise
Termination Date would have occurred if not for the provisions of this Section
15(c) (during which period Grantee may exercise any of its rights hereunder,
including any and all rights pursuant to this Section 15).
(d) Grantee shall have rights substantially identical to those set forth in
paragraphs (a),(b) and (c) of this Section 15 with respect to the Substitute
Option and the Substitute Option Issuer during any period in which the
Substitute Option Issuer would be required to repurchase the Substitute Option
pursuant to Section 9.
16. 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.
17. 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.
18. 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.
19. 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 (except to the
extent that mandatory provisions of federal or state law apply).
20. This Agreement may be executed in two counterparts, each of which shall
be deemed to be an original, but all of which shall constitute one and the same
agreement.
21. 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.
22. 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 and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
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<PAGE>
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.
<TABLE>
<S> <C> <C>
BANKBOSTON CORPORATION
By: /s/ PETER J. MANNING
-----------------------------------------
Name: Peter J. Manning
Title: Executive Vice President
FLEET FINANCIAL GROUP, INC.
By: /s/ H. JAY SARLES
-----------------------------------------
H. Jay Sarles
Title: Vice Chairman and Chief
Administrative Officer
</TABLE>
[BankBoston Option Agreement]
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<PAGE>
APPENDIX D
[LETTERHEAD OF DONALDSON, LUFKIN & JENRETTE]
As of July 8, 1999
Board of Directors
Fleet Financial Group, Inc.
One Federal Street
Boston, MA 02110
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of common stock, $0.01 par value per share ("Company Common
Stock"), of Fleet Financial Group, Inc. ("Fleet" or the "Company") of the
Exchange Ratio (as defined below) pursuant to the terms of the Agreement and
Plan of Merger, dated as of March 14, 1999 (the "Agreement"), by and between the
Company and BankBoston Corporation ("BankBoston") pursuant to which BankBoston
will be merged (the "Merger") with and into Fleet.
Pursuant to the Agreement, each share of common stock, par value $1.00 per
share, of BankBoston ("BankBoston Common Stock") will be converted into the
right to receive 1.1844 shares (the "Exchange Ratio") of Company Common Stock.
In arriving at our opinion, we have reviewed the Agreement. We also have
reviewed financial and other information that was publicly available or
furnished to us by the Company and BankBoston including I/B/E/S International,
Inc. earnings estimates and information provided during discussions with their
respective managements. Included in the information provided during discussions
with the respective managements were certain assumptions with respect to
financial projections of BankBoston and the Company provided by the management
of Fleet, including certain cost savings and operating synergies, and the impact
of certain divestitures, anticipated by management of the Company and BankBoston
to result from the Merger. In addition, we have compared certain financial and
securities data of the Company and BankBoston with data for various other
companies whose securities are traded in public markets, reviewed the historical
stock prices and trading volumes of the BankBoston Common Stock and the Company
Common Stock, reviewed prices and premiums paid in certain other business
combinations and conducted such other financial studies, analyses and
investigations as we deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company, BankBoston or
their respective representatives, or that was otherwise reviewed by us and have
assumed that the Company is not aware of any information prepared by it or its
other advisors that might be material to our opinion that has not been made
available to us. In particular, we have relied upon the estimates of the
management of the Company of the cost savings and operating synergies achievable
as a result of the Merger and the impact of anticipated divestitures and upon
our discussion of such cost savings, operating synergies and divestitures with
the management of the Company and BankBoston. With respect to the financial
projections (including cost savings and operating synergies and the impact of
divestitures) reviewed by us, we have assumed that they have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the management of the Company and BankBoston as to the future
operating and financial performance of the Company, BankBoston, and the combined
company, respectively. We are not experts in the evaluation of loan and lease
portfolios for purposes of assessing the adequacy of the allowances for losses
with
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<PAGE>
respect thereto and have assumed, with your consent, that such allowances for
each of the Company and BankBoston are in the aggregate adequate to cover all
such losses. In addition, we have not reviewed individual credit files nor have
we made an independent evaluation or appraisal of the assets and liabilities
(including any hedge or derivative positions) of the Company or BankBoston or
any of their subsidiaries and we have not been furnished with any such
evaluation or appraisal. We have not assumed any responsibility for making any
independent evaluation of any assets or liabilities or for making any
independent verification of any of the information reviewed by us. We have
assumed that the Merger will qualify as a "pooling-of-interests" transaction
under generally accepted accounting principles. We have also assumed that the
transaction will qualify as a tax-free reorganization for United States federal
income tax purposes and that all material governmental, regulatory or other
consents and approvals necessary for the consummation of the Merger will be
obtained without any adverse effect, other than the impact of the anticipated
divestitures, on the Company, BankBoston or on the anticipated benefits of the
Merger.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
prices at which Company Common Stock will actually trade at any time. Our
opinion does not address the relative merits of the Merger and the other
business strategies being considered by the Company's Board of Directors, nor
does it address the Board's decision to proceed with the Merger. Our opinion
does not constitute a recommendation to any stockholder as to how such
stockholder should vote on the proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking business, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. In the ordinary course of our
business, we and our affiliates actively trade the securities of the Company and
BankBoston for our own account and for the accounts of our customers, and,
accordingly, may at any time hold a long or short position in such securities.
DLJ has performed investment banking and other services for the Company and
BankBoston in the past and has been compensated for such services.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Exchange Ratio is fair from a financial point of view to
the holders of Company Common Stock.
<TABLE>
<S> <C> <C>
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Richard J. Barrett
-----------------------------------------
Richard J. Barrett
MANAGING DIRECTOR
</TABLE>
D-2
<PAGE>
APPENDIX E
[LETTERHEAD OF GOLDMAN, SACHS & CO.]
PERSONAL AND CONFIDENTIAL
July 8, 1999
Board of Directors
Fleet Financial Group, Inc.
One Federal Street
Boston, MA 02110-2010
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 $1.00
per share (the "Shares"), of Fleet Financial Group, Inc. ("Fleet") of the
exchange ratio of 1.1844 Shares to be exchanged (the "Exchange Ratio") for each
share of Common Stock, par value $1.00 per share (the "BankBoston Common
Stock"), of BankBoston Corporation ("BankBoston") pursuant to the Agreement and
Plan of Merger, dated as of March 14, 1999, by and between Fleet and BankBoston
(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 Fleet having provided certain investment banking services to Fleet
from time to time, including having acted as its financial advisor in connection
with the disposition of the Fleet Automotive Division in September 1997 and the
acquisition of Sanwa Business Credit Corporation in February 1999, having acted
as agent on Fleet's medium term note program, dealer on Fleet's commercial paper
program, manager of a public offering of $500,000,000 of 6 7/8% Subordinated
Debentures due 2028 in October 1997, manager of a public offering of 10,750,000
Shares in December 1997, and manager of a public offering of $250,000,000 of
Floating Rate Capital Securities of Fleet Capital Trust V in September 1998, and
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 BankBoston from time to
time, including having acted as its financial advisor in connection with the
disposition of BankBoston's Domestic Institutional Trust & Custody Business in
October 1998, having acted as agent on BankBoston's medium term note program,
and having acted as manager of a public offering of $200,000,000 of 7.375%
Subordinated Notes of BankBoston in September 1996 and as manager of a public
offering of $250,000,000 of 8.25% Capital Securities of BankBoston Capital Trust
I in November 1996. 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 Fleet and BankBoston for its own account and
for the accounts of customers.
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<PAGE>
Fleet Financial Group, Inc.
July 8, 1999
Page Two
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Proxy Statement relating to the Special Meeting of Stockholders
of the Company to be held in connection with the Agreement; Annual Reports to
Stockholders of Fleet and BankBoston for the five years ended December 31, 1998;
Annual Reports on Form 10-K of Fleet for the five years ended December 31, 1998;
Annual Reports on Form 10-K of BankBoston for the five years ended December 31,
1998; certain interim reports to stockholders and Quarterly Reports on Form 10-Q
of Fleet and BankBoston; certain other communications from Fleet and BankBoston
to their respective stockholders; and certain internal financial analyses and
forecasts for Fleet and BankBoston prepared by the managements of Fleet and
BankBoston, including certain cost savings, operating synergies, and the impact
of certain divestitures (the "Divestitures") projected by the management of
Fleet to result from the transaction contemplated by the Agreement (the
"Synergies"). We also have held discussions with members of the senior
management of Fleet and BankBoston 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 BankBoston Common Stock, compared
certain financial and stock market information for Fleet and BankBoston 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 commercial banking industry specifically and in other
industries generally and performed such other studies and analyses as we
considered appropriate.
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. In that regard, we have
assumed with your consent that the financial forecasts for Fleet and BankBoston,
including, without limitation, the Synergies and projections regarding
under-performing and non-performing assets and net charge-offs, in each case
prepared by management of Fleet have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of Fleet, and
that such forecasts and Synergies will be realized in the amounts and time
periods contemplated thereby. We are not experts in the evaluation of loan and
lease portfolios for purposes of assessing the adequacy of the allowances for
losses with respect thereto and have assumed, with your consent, that such
allowances for each of Fleet and BankBoston are in the aggregate adequate to
cover all such losses. In addition, we have not reviewed individual credit files
nor have we made an independent evaluation or appraisal of the assets and
liabilities (including any hedge or derivative positions) of Fleet or BankBoston
or any of their subsidiaries and we have not been furnished with any such
evaluation or appraisal. We also have assumed with your consent that the
transaction contemplated by the Agreement will be accounted for as a pooling of
interests under generally accepted accounting principles. We also have assumed
all material governmental, regulatory or other consents and approvals necessary
for the consummation of the transaction contemplated by the Agreement will be
obtained without any adverse effect, other than the impact of the Divestitures
as reflected in the forecasts, on Fleet or BankBoston or on the contemplated
benefits of the transaction contemplated by the Agreement.
Our advisory services and the opinion expressed herein are provided for the
information and assistance of the Board of Directors of Fleet 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.
E-2
<PAGE>
Fleet Financial Group, Inc.
July 8, 1999
Page Three
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 the Shares.
Very truly yours,
/s/ Goldman, Sachs & Co.
____________________________
(GOLDMAN, SACHS & CO.)
E-3
<PAGE>
APPENDIX F
[LETTERHEAD OF MERRILL LYNCH]
July 8, 1999
Board of Directors
BankBoston Corporation
100 Federal Street
Boston, MA 02110
Members of the Board:
BankBoston Corporation ("BankBoston") and Fleet Financial Group, Inc.
("Fleet") have entered into an Agreement and Plan of Merger, dated as of March
14, 1999 (the "Agreement"), pursuant to which BankBoston is to be merged with
and into Fleet with Fleet being the surviving corporation of the transaction
(the "Merger"). Pursuant to the Merger, and as set forth more fully in the
Agreement, upon the merger of BankBoston and Fleet, each outstanding share of
BankBoston common stock, par value $1.00 per share (the "BankBoston Shares"),
will be converted into the right to receive 1.1844 shares (the "Exchange Ratio")
of the common stock, par value $0.01 per share, of Fleet (the "Fleet Shares").
You have asked us whether, in our opinion, the Exchange Ratio is fair from a
financial point of view to the shareholders of BankBoston.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to BankBoston and Fleet that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating to
the respective businesses, earnings, assets, liabilities and prospects of
BankBoston and Fleet furnished to us by senior management of BankBoston
and Fleet, as well as the amount and timing of the cost savings, revenue
enhancements and related expenses expected to result from the Merger (the
"Expected Synergies") furnished to us by senior management of BankBoston
and Fleet;
(3) Conducted discussions with members of senior management and
representatives of BankBoston and Fleet concerning the matters described
in clauses (1) and (2) above, as well as their respective businesses and
prospects before and after giving effect to the Merger and the Expected
Synergies;
(4) Reviewed the market prices and valuation multiples for the BankBoston
Shares and the Fleet Shares and compared them with those of certain
publicly traded companies that we deemed to be relevant;
(5) Reviewed the respective publicly reported financial conditions and
results of operations of BankBoston and Fleet and compared them with
those of certain publicly traded companies that we deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions that we deemed to be relevant;
(7) Participated in certain discussions and negotiations among
representatives of BankBoston and Fleet and their financial and legal
advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed the Agreement and the related stock option agreements; and
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<PAGE>
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of the assets or liabilities
of BankBoston or Fleet or been furnished with any such evaluation or appraisal.
We are not experts in the evaluation of allowances for loan losses, and we have
neither made an independent evaluation of the adequacy of the allowances for
loan losses of BankBoston or Fleet, nor have we reviewed any individual credit
files of BankBoston or Fleet or been requested to conduct such a review, and, as
a result, we have assumed that the aggregate allowance for loan losses for both
BankBoston and Fleet is adequate to cover such losses and will be adequate on a
pro forma basis for the combined entity. In addition, we have not assumed any
obligation to conduct, nor have we conducted, any physical inspection of the
properties or facilities of BankBoston or Fleet. With respect to the financial
and operating forecast information and the Expected Synergies furnished to or
discussed with us by BankBoston and Fleet, we have assumed that they have been
reasonably prepared and reflect the best currently available estimates and
judgments of the senior management of BankBoston and Fleet as to the future
financial and operating performance of BankBoston, Fleet or the combined entity,
as the case may be, and the Expected Synergies. We have further assumed that the
Merger will be accounted for as a pooling-of-interests under generally accepted
accounting principles and that it will qualify as a tax-free reorganization for
U.S. federal income tax purposes.
Our opinion is necessarily based upon market, economic and other conditions
as in effect, and on the information made available to us as of the date hereof.
For the purposes of rendering this opinion, we have assumed that the Merger will
be consummated substantially in accordance with the terms set forth in the
Agreement, including in all respects material to our analysis, that the
representations and warranties of each party in the Agreement and all related
documents and instruments (collectively, the "Documents") contained therein are
true and correct, that each party to the Documents will perform all of the
covenants and agreements required to be performed by such party under such
Documents, and that all conditions to the consummation of the Merger will be
satisfied without waiver thereof. We have also assumed that, in the course of
obtaining the necessary regulatory or other consents or approvals (contractual
or otherwise) for the Merger, no restrictions, including any divestiture
requirements or amendment or modifications, will be imposed that will have a
material adverse effect on the future results of operations or financial
condition of the combined entity or the contemplated benefits of the Merger,
including the Expected Synergies.
We have been retained by the Board of Directors of BankBoston to act as
financial advisor to BankBoston in connection with the Merger and will receive a
fee for our services, a significant portion of which is contingent upon the
consummation of the Merger. In addition, BankBoston has agreed to indemnify us
for certain liabilities arising out of our engagement. We have in the past two
years provided financial advisory, investment banking and other services to
BankBoston and Fleet and may continue to do so and have received fees for the
rendering of such services. In addition, in the ordinary course of our business,
we also may actively trade the BankBoston Shares and other securities of
BankBoston and its affiliates and the Fleet Shares and other securities of Fleet
and its affiliates for our own account and for the accounts of our customers,
and, accordingly, may at any time hold a long or short position in such
securities.
This opinion is for the use and benefit of the Board of Directors of
BankBoston. Our opinion does not address the merits of the underlying decision
by BankBoston to engage in the Merger and does not constitute a recommendation
to any shareholder of BankBoston as to how such shareholder should vote on the
proposed Merger or any other matter related thereto.
We are not expressing any opinion herein as to the prices at which
BankBoston Shares or Fleet Shares will trade following the announcement of the
consummation of the Merger.
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On the basis of and subject to the foregoing, we are of the opinion that, as
of the date hereof, the Exchange Ratio is fair from a financial point of view to
the shareholders of BankBoston.
Very truly yours,
/s/ Merrill Lynch, Pierce, Fenner &
Smith Incorporated
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
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APPENDIX G
[LETTERHEAD OF MORGAN STANLEY DEAN WITTER]
July 8, 1999
Board of Directors
BankBoston Corporation
100 Federal Street
Boston, Massachusetts 02110
Members of the Board:
We understand that BankBoston Corporation ("BankBoston") and Fleet Financial
Group, Inc. ("Fleet") have entered into an Agreement and Plan of Merger, dated
as of March 14, 1999 (the "Merger Agreement"), which provides, among other
things, for the merger (the "Merger") of BankBoston with and into Fleet. Each
outstanding share of common stock, par value $1 per share (the "BankBoston
Common Stock"), other than shares held in treasury or held by Fleet or any
affiliate of Fleet, will be converted into the right to receive 1.1844 shares
(the "Exchange Ratio") of common stock, par value $.01 per share, of Fleet (the
"Fleet Common Stock"). The terms and conditions of the Merger are more fully set
forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to
the Merger Agreement is fair from a financial point of view to the holders of
shares of BankBoston Common Stock (other than Fleet and its affiliates).
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of BankBoston and Fleet, respectively;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning BankBoston and Fleet prepared by the
managements of BankBoston and Fleet, respectively;
(iii) discussed the past and current operations and financial condition and
the prospects of BankBoston and Fleet with senior executives of
BankBoston and Fleet, respectively;
(iv) reviewed the reported prices and trading activity for the BankBoston
Common Stock and the Fleet Common Stock;
(v) compared the financial performance of BankBoston and Fleet and the
prices and trading activity of the BankBoston Common Stock and the Fleet
Common Stock with that of certain other comparable publicly-traded
companies and their securities;
(vi) discussed the results of regulatory examinations of BankBoston and
Fleet and recent discussions with regulators regarding the Merger with
senior management of the respective companies;
(vii) discussed with senior managements of BankBoston and Fleet the strategic
objectives of the Merger and their estimates of the synergies and other
benefits of the Merger for the combined company;
(viii) analyzed the pro forma impact of the Merger on the combined Company's
earnings per share, consolidated capitalization and financial ratios;
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(ix) reviewed the financial terms, to the extent publicly available, of
certain comparable merger transactions;
(x) participated in discussions and negotiations among representatives of
BankBoston and Fleet and their financial and legal advisors;
(xi) reviewed the Merger Agreement and certain related documents; and
(xii) performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial forecasts, including the synergies
and other benefits expected to result from the Merger, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of BankBoston and
Fleet. We have not made any independent valuation or appraisal of the assets or
liabilities of BankBoston or Fleet, nor have we been furnished with any such
appraisals and we have not examined any individual loan files of BankBoston or
Fleet. In addition, we have assumed the Merger will substantially be consummated
in accordance with the terms set forth in the Merger Agreement. In addition, we
have assumed that in connection with the receipt of all necessary regulatory
approvals for the Merger, including any divestiture requirements or amendments
or modifications, no restrictions will be imposed that would have material
adverse effect on the consolidated benefits expected to be derived in the
Merger. Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof.
We have acted as financial advisor to the Board of Directors of BankBoston
in connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for BankBoston and have received fees
for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of BankBoston. This opinion may be included in its entirety in any
filing with the Securities and Exchange Commission in connection with the
Merger. In addition, we express no opinion or recommendation as to how the
holders of the BankBoston Common Stock should vote at the stockholders' meeting
held in connection with the Merger.
Based on the foregoing, we are of the opinion on the date hereof that the
Exchange Ratio pursuant to the Merger Agreement is fair from a financial point
of view to the holders of shares of BankBoston Common Stock (other than Fleet
and its affiliates).
<TABLE>
<S> <C> <C>
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Donald A. Moore, Jr.
--------------------------------------
Donald A. Moore, Jr.
MANAGING DIRECTOR
</TABLE>
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APPENDIX H
FLEET BYLAW ON CEO SUCCESSION AND BOARD COMPOSITION
The Bylaws of Fleet as of the Effective Time shall be amended to include the
following new Article 6, Section 6.14:
Section 6.14. CEO AND CHAIRMAN SUCCESSION; BOARD COMPOSITION. The
Board of Directors has resolved that Mr. Charles K. Gifford shall be the
successor to Mr. Terrence Murray as the Chief Executive Officer of the
Corporation, with such succession to become effective on the CEO Succession
Date (as defined below), and that Mr. Gifford shall be the successor to Mr.
Murray as the Chairman of the Corporation, with such succession to become
effective on the Chairman Succession Date (as defined below). Until
immediately prior to the commencement of the first annual meeting of
stockholders of the Corporation following the Chairman Succession Date, (i)
the ratio of Continuing Fleet Directors to Continuing BankBoston Directors
shall be maintained at 12 to 10 and all vacancies on the Board of Directors
created by the cessation of service of a Continuing Fleet Director shall be
filled by a nominee selected by a majority of the Continuing Fleet Directors
and all vacancies on the Board created by the cessation of service of a
Continuing BankBoston Director shall be filled by a nominee selected by a
majority of the Continuing BankBoston Directors and (ii) the Continuing
Fleet Directors and the Continuing BankBoston Directors shall be apportioned
among the three classes of the Board of Directors such that the ratio of
Continuing Fleet Directors to Continuing BankBoston Directors is 4 to 3 in
two of such classes and 4 to 4 in the remaining class. The provisions of
this Section 6.14 may be modified, amended or repealed, and any By-law
provision inconsistent with the provisions of this Section 6.14 may only be
adopted, by an affirmative vote of at least 75 percent of the entire Board
of Directors then in office and any action taken by the Board of Directors
with respect to the subject matter of this Section 6.14 may only be taken at
a meeting at which 66 2/3% of the directors then in office are in attendance
in person or by telephone. In the event of any inconsistency between any
other provision of these By-laws and any provision of this Section 6.14, the
provisions of this Section 6.14 shall control. The resolutions adopted by
the Board of Directors nominating any person for election to the Board of
Directors in accordance with the prior sentences will designate such person
as a "Continuing Director" for purposes of Article Seventh and Article Ninth
of the Corporation's Restated Articles of Incorporation. Until the Chairman
Succession Date, the removal of Mr. Gifford from any of the positions
specifically provided for in this Section 6.14 and in the employment
agreement between the Corporation and Mr. Gifford (the "Employment
Agreement"), and any amendment to or termination of the Employment Agreement
shall require the affirmative vote of at least 75 percent of the entire
Board of Directors then in office.
The "CEO Succession Date" shall mean December 31, 2001 or any such
earlier date as of which Mr. Murray ceases for any reason to serve in the
position of Chief Executive Officer of the Corporation.
The "Chairman Succession Date" shall mean December 31, 2002 or any such
earlier date as of which Mr. Murray ceases for any reason to serve in the
position of Chairman of the Corporation.
"Continuing Fleet Directors" shall mean the directors of Fleet as of the
[Closing Date of the Merger] who were selected to be directors of Fleet by
the Board of Directors of Fleet prior to the Effective Time of the Merger
and any additional directors of the Corporation who take office after the
Effective Time who are nominated by a majority of the Continuing Fleet
Directors.
"Continuing BankBoston Directors" shall mean the directors of Fleet as
of the [Closing Date of the Merger] who were selected to be directors of
Fleet by the Board of Directors of BankBoston prior to the Effective Time of
the Merger and any additional directors of the Corporation who take office
after the Effective Time who are nominated by a majority of the Continuing
BankBoston Directors.
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APPENDIX I
TEXT OF SECTIONS 85 TO 98 OF CHAPTER 156B OF THE
MASSACHUSETTS BUSINESS CORPORATION LAW
SECTION 85. DISSENTING STOCKHOLDER; RIGHT TO DEMAND PAYMENT FOR STOCK; EXCEPTION
A stockholder in any corporation organized under the laws of Massachusetts
which shall have duly voted to consolidate or merge with another corporation or
corporations under the provisions of sections seventy-eight or seventy-nine who
objects to such consolidation or merger may demand payment for his stock from
the resulting or surviving corporation and an appraisal in accordance with the
provisions of sections eighty-six to ninety-eight, inclusive, and such
stockholder and the resulting or surviving corporation shall have the rights and
duties and follow the procedure set forth in those sections. This section shall
not apply to the holders of any shares of stock of a constituent corporation
surviving a merger if, as permitted by subsection (c) of section seventy-eight,
the merger did not require for its approval a vote of the stockholders of the
surviving corporation.
SECTION 86. SELECTIONS APPLICABLE TO APPRAISAL; PREREQUISITES
If a corporation proposes to take a corporate action as to which any section
of this chapter provides that a stockholder who objects to such action shall
have the right to demand payment for his shares and an appraisal thereof,
sections eighty-seven to ninety-eight, inclusive, shall apply except as
otherwise specifically provided in any section of this chapter. Except as
provided in sections eighty-two and eighty-three, no stockholder shall have such
right unless (1) he files with the corporation before the taking of the vote of
the shareholders on such corporate action, written objection to the proposed
action stating that he intends to demand payment for his shares if the action is
taken and (2) his shares are not voted in favor of the proposed action.
SECTION 87. STATEMENT OF RIGHTS OF OBJECTING STOCKHOLDERS IN NOTICE OF MEETING;
FORM
The notice of the meeting of stockholders at which the approval of such
proposed action is to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting and
effected by the corporation, any stockholder (1) who files with the corporation
before the taking of the vote on the approval of such action, written objection
to the proposed action stating that he intends to demand payment for his shares
if the action is taken and (2) whose shares are not voted in favor of such
action has or may have the right to demand in writing from the corporation (OR,
IN THE CASE OF A CONSOLIDATION OR MERGER, THE NAME OF THE RESULTING OR SURVIVING
CORPORATION SHALL BE INSERTED), within twenty days after the date of mailing to
him of notice in writing that the corporate action has become effective, payment
for his shares and an appraisal of the value thereof. Such corporation and any
such stockholder shall in such cases have the rights and duties and shall follow
the procedure set forth in sections 88 to 98, inclusive, of chapter 156B of the
General Laws of Massachusetts."
SECTION 88. NOTICE OF EFFECTIVENESS OF ACTION OBJECTED TO
The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed a written objection meeting the requirements of section
eighty-six and whose shares were not voted in favor of the approval of such
action, that the action
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approved at the meeting of the corporation of which he is a stockholder has
become effective. The giving of such notice shall not be deemed to create any
rights in any stockholder receiving the same to demand payment for his stock.
The notice shall be sent by registered or certified mail, addressed to the
stockholder at his last known address as it appears in the records of the
corporation.
SECTION 89. DEMAND FOR PAYMENT; TIME FOR PAYMENT
If within twenty days after the date of mailing of a notice under subsection
(e) of section eighty-two, subsection (f) of section eighty-three, or section
eighty-eight, any stockholder to whom the corporation was required to give such
notice shall demand in writing from the corporation taking such action, or in
the case of a consolidation or merger from the resulting or surviving
corporation, payment for his stock, the corporation upon which such demand is
made shall pay to him the fair value of his stock within thirty days after the
expiration of the period during which such demand may be made.
SECTION 90. DEMAND FOR DETERMINATION OF VALUE; BILL IN EQUITY; VENUE
If during the period of thirty days provided for in section eighty-nine the
corporation upon which such demand is made and any such objecting stockholder
fail to agree as to the value of such stock, such corporation or any such
stockholder may within four months after the expiration of such thirty-day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior court in the county where
the corporation in which such objecting stockholder held stock had or has its
principal office in the commonwealth.
SECTION 91. PARTIES TO SUIT TO DETERMINE VALUE; SERVICE
If the bill is filed by the corporation, it shall name as parties respondent
all stockholders who have demanded payment for their shares and with whom the
corporation has not reached agreement as to the value thereof. If the bill is
filed by a stockholder, he shall bring the bill in his own behalf and in behalf
of all other stockholders who have demanded payment for their shares and with
whom the corporation has not reached agreement as to the value thereof, and
service of the bill shall be made upon the corporation by subpoena with a copy
of the bill annexed. The corporation shall file with its answer a duly verified
list of all such other stockholders, and such stockholders shall thereupon be
deemed to have been added as parties to the bill. The corporation shall give
notice in such form and returnable on such date as the court shall order to each
stockholder party to the bill by registered or certified mail, addressed to the
last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty-nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice.
SECTION 92. DECREE DETERMINING VALUE AND ORDERING PAYMENT; VALUATION DATE
After hearing the court shall enter a decree determining the fair value of
the stock of those stockholders who have become entitled to the valuation of and
payment for their shares, and shall order the corporation to make payment of
such value, together with interest, if any, as hereinafter provided, to the
stockholders entitled thereto upon the transfer by them to the corporation of
the certificates representing such stock if certificated or, if uncertificated,
upon receipt of an instruction transferring such stock to the corporation. For
this purpose, the value of the shares shall be determined as of the day
preceding the date of the vote approving the proposed corporate action and shall
be exclusive of any element of value arising from the expectation or
accomplishment of the proposed corporate action.
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SECTION 93. REFERENCE TO SPECIAL MASTER
The court in its discretion may refer the bill or any question arising
thereunder to a special master to hear the parties, make findings and report the
same to the court, all in accordance with the usual practice in suits in equity
in the superior court.
SECTION 94. NOTATION ON STOCK CERTIFICATES OF PENDENCY OF BILL
On motion the court may order stockholder parties to the bill to submit
their certificates of stock to the corporation for the notation thereon of the
pendency of the bill and may order the corporation to note such pendency in its
records with respect to any uncertificated shares held by such stockholder
parties, and may on motion dismiss the bill as to any stockholder who fails to
comply with such order.
SECTION 95. COSTS; INTEREST
The costs of the bill, including the reasonable compensation and expenses of
any master appointed by the court, but exclusive of fees of counsel or of
experts retained by any party, shall be determined by the court and taxed upon
the parties to the bill, or any of them, in such manner as appears to be
equitable, except that all costs of giving notice to stockholders as provided in
this chapter shall be paid by the corporation. Interest shall be paid upon any
award from the date of the vote approving the proposed corporate action, and the
court may on application of any interested party determine the amount of
interest to be paid in the case of any stockholder.
SECTION 96. DIVIDENDS AND VOTING RIGHTS AFTER DEMAND FOR PAYMENT
Any stockholder who has demanded payment for his stock as provided in this
chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled to
the payment of dividends or other distribution on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the date of the vote approving the proposed corporate action) unless:
(1) A bill shall not be filed within the time provided in section ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the corporation, or in
the case of a consolidation or merger, the resulting or surviving
corporation, deliver to it a written withdrawal of his objections to and an
acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
SECTION 97. STATUS OF SHARES PAID FOR
The shares of the corporation paid for by the corporation pursuant to the
provisions of this chapter shall have the status of treasury stock, or in the
case of a consolidation or merger the shares or the securities of the resulting
or surviving corporation into which the shares of such objecting stockholder
would have been converted had he not objected to such consolidation or merger
shall have the status of treasury stock or securities.
SECTION 98. EXCLUSIVE REMEDY; EXCEPTION
The enforcement by a stockholder of his right to receive payment for his
shares in the manner provided in this chapter shall be an exclusive remedy
except that this chapter shall not exclude the right of such stockholder to
bring or maintain an appropriate proceeding to obtain relief on the ground that
such corporate action will be or is illegal or fraudulent as to him.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's bylaws 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 bylaws, 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 bylaws 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>
<S> <C> <C>
2 -- Agreement and Plan of Reorganization dated as of March 14, 1999, by and between
Fleet Financial Group, Inc. ("Fleet") and BankBoston Corporation (included in Part
I as Exhibit A to the Joint Proxy Statement-Prospectus included in this
Registration Statement)
3(i) -- Restated Articles of Incorporation of the Registrant (incorporated by reference to
Exhibit 3(a) of Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1995)
3(ii) -- Bylaws of the Registrant, as amended (incorporated by reference to Exhibit 3(b) of
Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1995)
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), 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) and as further amended by a Fourth Amendment to Rights
Agreement date as of March 14, 1999 (incorporated by reference to Fleet's Form
8-A/A dated May 5, 1999)
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)
</TABLE>
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<TABLE>
<S> <C> <C>
5 -- Opinion of Edwards & Angell as to legality
8 -- Form of Opinion of Wachtell, Lipton, Rosen & Katz as to U.S. federal income tax
matters
10(a) -- Employment Agreement, dated as of March 14, 1999, by and between Charles K. Gifford
and the Registrant
10(b) -- Employment Agreement, dated as of March 14, 1999, by and between Henrique C.
Meirelles and the Registrant
10(c) -- Employment Agreement, dated as of March 14, 1999, by and between Paul F. Hogan and
the Registrant
10(d) -- Employment Agreement, dated as of March 14, 1999, by and between Bradford H. Warner
and the Registrant
23(a) -- Consent of KPMG LLP
23(b) -- Consent of PricewaterhouseCoopers LLP
23(c) -- Consent of Edwards & Angell (included in Exhibit 5)
23(d) -- Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8)
99(a) -- Form of Proxy for Fleet
99(b) -- Form of Proxy for BankBoston
99(c) -- Fleet Stock Option Agreement dated March 14, 1999 between Fleet and BankBoston
(included in Part I as Exhibit B to the Joint Proxy Statement-Prospectus included
in this Registration Statement)
99(d) -- BankBoston Stock Option Agreement dated March 14, 1999 between BankBoston and Fleet
(included in Part I as Exhibit C to the Joint Proxy Statement-Prospectus)
99(e) -- Consent of Donaldson, Lufkin & Jenrette Securities Corporation
99(f) -- Consent of Goldman, Sachs & Co.
99(g) -- Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated
99(h) -- Consent of Morgan Stanley & Co. Incorporated
</TABLE>
(b) Financial Statement Schedules.
Not Applicable.
(c) Fairness Opinions.
Included in Part I as Exhibits D, E, F and G to the Joint Proxy
Statement-Prospectus included in this Registration Statement.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement (notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
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volume and price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the
effective registration statement); and (iii) to include any material information
with respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) 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 therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(6) That every prospectus (i) that is filed pursuant to paragraph (5) above,
or (ii) that purports to meet the requirements of Section 10(a)(3) of the
Securities Act of 1933 and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to this
registration statement and will not be used until such amendment has become
effective, and that for the purpose of determining liabilities under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(7) 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 the foregoing provisions, 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 public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(8) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(9) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in this registration statement when it
became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has duly caused this Form S-4 Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boston, Commonwealth of Massachusetts, on July 8, 1999.
FLEET FINANCIAL GROUP, INC.
By: /s/ TERRENCE MURRAY
-----------------------------------------
Terrence Murray
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Each person whose signature appears below hereby constitutes and appoints
the Chairman and Chief Executive Officer, the Vice Chairman and Chief Financial
Officer or the Secretary, or any of them, acting alone, as his true and lawful
attorney-in-fact, with full power and authority to execute in the name, place
and stead of each such person in any and all capacities and to file, an
amendment or amendments to the Registration Statement (and all exhibits thereto)
and any documents relating thereto, which amendments may make such changes in
the Registration Statement as said officer or officers so acting deem(s)
advisable.
Pursuant to the requirements of the Securities Act of 1933, this Form S-4
Registration Statement has been signed by the following persons in the
capacities indicated on July 8, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ TERRENCE MURRAY Chairman, Chief Executive Officer And Director
-------------------------------------------
Terrence Murray
/s/ EUGENE M. MCQUADE Vice Chairman And Chief Financial Officer
-------------------------------------------
Eugene M. McQuade
/s/ ROBERT C. LAMB, JR. Controller
-------------------------------------------
Robert C. Lamb, Jr.
/s/ JOEL ALVORD Director
-------------------------------------------
Joel Alvord
/s/ WILLIAM BARNET, III Director
-------------------------------------------
William Barnet, III
/s/ BRADFORD R. BOSS Director
-------------------------------------------
Bradford R. Boss
/s/ STILLMAN B. BROWN Director
-------------------------------------------
Stillman B. Brown
/s/ PAUL J. CHOQUETTE, JR. Director
-------------------------------------------
Paul J. Choquette, Jr.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ KIM B. CLARK Director
-------------------------------------------
Kim B. Clark
/s/ JOHN T. COLLINS Director
-------------------------------------------
John T. Collins
/s/ JAMES F. HARDYMON Director
-------------------------------------------
James F. Hardymon
/s/ MARIAN L. HEARD Director
-------------------------------------------
Marian L. Heard
/s/ ROBERT M. KAVNER Director
-------------------------------------------
Robert M. Kavner
/s/ ROBERT J. MATURA Director
-------------------------------------------
Robert J. Matura
/s/ ARTHUR C. MILOT Director
-------------------------------------------
Arthur C. Milot
/s/ THOMAS D. O'CONNOR, SR. Director
-------------------------------------------
Thomas D. O'Connor, Sr.
/s/ MICHAEL B. PICOTTE Director
-------------------------------------------
Michael B. Picotte
/s/ THOMAS C. QUICK Director
-------------------------------------------
Thomas C. Quick
/s/ LOIS D. RICE Director
-------------------------------------------
Lois D. Rice
/s/ THOMAS M. RYAN Director
-------------------------------------------
Thomas M. Ryan
/s/ SAMUEL O. THIER, M.D. Director
-------------------------------------------
Samuel O. Thier, M.D.
/s/ PAUL R. TREGURTHA Director
-------------------------------------------
Paul R. Tregurtha
</TABLE>
II-5
<PAGE>
EXHIBIT 5
<PAGE>
EXHIBIT 5
[LETTERHEAD OF EDWARDS & ANGELL, LLP]
July 8, 1999
Fleet Financial Group, Inc.
One Federal Street
Boston, MA 02110
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-4 (the
"Registration Statement") to be filed by Fleet Financial Group, Inc. (the
"Company") with the Securities and Exchange Commission on July 8, 1999 in
connection with the registration under the Securities Act of 1933, as
amended, of up to 373,086,000 shares of common stock, $.01 par value (the
"Common Stock").
We have served as counsel for the Company and, as such, assisted in the
organization thereof under the laws of the State of Rhode Island and are
familiar with all corporate proceedings since its organization. We have
examined the following documents and records:
1. The Restated Articles of Incorporation of the Company;
2. The By-Laws of the Company;
3. The Agreement and Plan of Merger dated as of March 14, 1999 (the
"Merger Agreement"); and
4. All corporation minutes and proceedings of the Company relating to
the issuance of the Common Stock of the Company being registered
under the Registration Statement.
We have also examined such further documents, records and proceedings as
we have deemed pertinent in connection with the issuance of said Common
Stock. We also are familiar with the additional proceedings proposed to be
taken by the Company in connection with the authorization, registration,
issuance and sale of the Common Stock.
<PAGE>
Fleet Financial Group, Inc.
Page 2
July 8, 1999
Based upon such examination, it is our opinion that, subject to the
proposed additional proceedings being duly taken and completed as now
contemplated by the Company prior to the issuance of the Common Stock, the
Common Stock being registered by the Registration Statement, when issued
pursuant to the Merger Agreement upon consummation of the Merger contemplated
therein, will be validly issued, fully paid and nonassessable.
V. Duncan Johnson, a partner of Edwards & Angell, is a director of Fleet
National Bank, a subsidiary of the Company and beneficially owns 8,104 shares
of Common Stock of the Company.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to our firm in the Joint Proxy
Statement-Prospectus which is part of the Registration Statement.
Very truly yours,
/s/ EDWARDS & ANGELL, LLP
EDWARDS & ANGELL, LLP
<PAGE>
EXHIBIT 8
<PAGE>
EXHIBIT 8
[Letterhead of Wachtell, Lipton, Rosen & Katz]
[Form of Tax Opinion]
, 1999
--------- -----
Fleet Financial Group, Inc.
One Federal Street
Boston, Massachusetts 02110
Ladies/Gentlemen:
We have acted as special counsel to Fleet Financial Group, Inc., a
Rhode Island corporation ("Fleet"), in connection with the proposed merger (the
"Merger") of BankBoston Corporation, a Massachusetts corporation ("BankBoston"),
with and into Fleet, pursuant to the Agreement and Plan of Merger, dated as of
March 14, 1999, by and between BankBoston and Fleet (the "Merger Agreement"). At
your request, in connection with the filing of the Registration Statement on
Form S-4 filed with the Securities and Exchange Commission in connection with
the Merger (the "Registration Statement"), we are rendering our opinion pursuant
to Item 601(b)(8) of Regulation S-K.
For purposes of the opinion set forth below, we have relied, with the
consent of BankBoston and the consent of Fleet, upon the accuracy and
completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in the certificates of the officers of BankBoston and Fleet dated
the date hereof, and have assumed that such statements and representations will
be complete and accurate as of the Effective Time. With respect to the
certificates described in the immediately preceding sentence, we have relied
only on factual statements and representations contained therein and, to the
extent that such certificates also contain legal conclusions, we have not relied
upon such conclusions. We have also relied upon the accuracy of the Registration
Statement and the Joint Proxy Statement-Prospectus of BankBoston and Fleet (the
"Joint Proxy Statement-Prospectus")
<PAGE>
Fleet Financial Group, Inc.
, 1999
- -------- ----
Page 2
included therein. Any capitalized term used and not defined herein has the
meaning given to it in the Joint Proxy Statement-Prospectus or the appendices
thereto (including the Merger Agreement).
We have also assumed that the transactions contemplated by the Merger
Agreement will be consummated in accordance therewith and as described in the
Joint Proxy Statement-Prospectus.
Based upon and subject to the foregoing, it is our opinion that, under
currently applicable United States federal income tax law, the Merger will be
treated as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended and, accordingly:
1. Neither Fleet nor BankBoston will recognize any gain or loss as a
result of the Merger;
2. BankBoston stockholders who exchange all of their BankBoston Common
Stock solely for Fleet Common Stock pursuant to the Merger will recognize no
gain or loss (except with respect to cash received in lieu of a fractional share
interest in Fleet Common Stock);
3. The aggregate tax basis of the shares of Fleet Common Stock received
by BankBoston stockholders (including fractional shares deemed received and
redeemed) will equal the aggregate tax basis of the shares of BankBoston Common
Stock surrendered in exchange for that Fleet Common Stock; and
4. The holding period of a share of Fleet Common Stock received in the
Merger (including a fractional share deemed received and redeemed) will include
the holder's holding period in the BankBoston Common Stock surrendered in
exchange for that Fleet Common Stock.
5. Cash received by a BankBoston stockholder in lieu of a fractional
share interest in Fleet Common Stock will be treated as received in redemption
of the fractional share interest, and a BankBoston stockholder will recognize
capital gain or loss for U.S. federal income tax purposes measured by the
difference between the amount of cash received and the portion of the tax basis
of the share of BankBoston Common Stock allocable to that fractional share
interest, if the deemed redemption meaningfully reduces the BankBoston
stockholder's interest in Fleet, taking into account the constructive ownership
rules of the Code. This capital gain or loss will be a long-term capital gain or
loss if the holding period for that share of BankBoston Common Stock is greater
than one year at the effective time. A common stockholder that owns an extremely
small percentage of the stock of BankBoston, exercises no control over the
affairs of Fleet or BankBoston, and does not actually or constructively own any
<PAGE>
Fleet Financial Group, Inc.
, 1999
- -------- ----
Page 3
shares of Fleet stock other than those received in the Merger, will be treated
as experiencing a meaningful reduction in interest.
We express no opinion as to the United States federal income tax
consequences of the Merger to stockholders subject to special treatment under
United States federal income tax law (including, for example, foreign persons,
financial institutions, dealers in securities, traders in securities who elect
to apply a mark-to-market method of accounting, insurance companies, tax-exempt
entities, holders who do not hold their shares of BankBoston Common Stock as
capital assets, holders who acquired their shares of BankBoston Common Stock
pursuant to the exercise of an employee stock option or right or otherwise as
compensation, and holders who hold BankBoston Common Stock as part of a "hedge,"
"straddle" or "conversion transaction"). In addition, no opinion is expressed
with respect to the tax consequences of the Merger under applicable foreign,
state or local laws or under any federal tax laws other than those pertaining to
the income tax.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
references to us under the caption "THE MERGER -- Certain Federal Income Tax
Consequences" and elsewhere in the Joint Proxy Statement-Prospectus. In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended.
Very truly yours,
<PAGE>
EXHIBIT 10(a)
<PAGE>
EXHIBIT 10(a)
EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between Fleet Financial Group, Inc., a Rhode
Island corporation (the "Company"), and Charles K. Gifford (the "Executive"),
dated as of the 14th day of March, 1999.
W I T N E S S E T H
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of March
14, 1999 (the "Merger Agreement"), among the Company and BankBoston Corporation,
a Massachusetts corporation ("BKB"), BKB shall, as of the Effective Time (as
defined in the Merger Agreement), merge with and into the Company, so that the
Company is the Surviving Corporation (as defined in the Merger Agreement); and
WHEREAS, the Executive is currently party to a severance agreement
entered into with BKB, dated as of June 25, 1998 (the "Prior Agreement"); and
WHEREAS, the Company wishes to provide for the orderly succession of
the management of the Company following the Effective Time; and
WHEREAS, the Company further wishes to provide for the employment by
the Company of the Executive, and the Executive wishes to serve the Company, in
the capacities and on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. EMPLOYMENT PERIOD. The Company shall employ the Executive, and the
Executive shall serve the Company, on the terms and conditions set forth in this
Agreement, for an initial period (the "Initial Period"), a second period (the
"Interim Period"), and a third period (the "Final Period") (the Initial Period,
the Interim Period and the Final Period are hereinafter collectively referred to
as the "Employment Period"). The Initial Period shall commence on the date (the
"Effective Date") on which occurs the Effective Time and end on (a) January 1,
2002; or (b) such earlier date as the Chief Executive Officer of the Company as
of the date
<PAGE>
hereof (the "Initial CEO") ceases to be Chief Executive Officer of the Company
for any reason. The Interim Period shall begin at the end of the Initial Period
and end on the first anniversary of the end of the Initial Period or such
earlier date as the Chairman of the Board of Directors of the Company (the
"Board") as of the date hereof ceases to be Chairman of the Board for any
reason. The Final Period shall begin at the end of the Interim Period and end on
January 1, 2003 or, if earlier, upon the termination of the Executive's
employment hereunder (as of the Date of Termination, as defined in Section
4(d)). This Agreement shall be null and void if the Effective Time does not
occur.
2. POSITION AND DUTIES. (a) During the Initial Period, the Executive
shall serve as the President and Chief Operating Officer of the Company. During
the Interim Period, the Executive shall serve as the Chief Executive Officer of
the Company and during the Final Period the Executive shall serve as both the
Chief Executive Officer of the Company and as Chairman of the Board; in each
case with such duties and responsibilities as are customarily assigned to such
positions, and such other duties and responsibilities not inconsistent therewith
as may from time to time be assigned to him by the Board. The Board shall
appoint the Executive to the positions specified above at the times specified
above throughout the Employment Period. During the Employment Period, the
Company shall cause the Executive to be included in the slate of persons
nominated to serve as directors on the Board and shall use its best efforts
(including, without limitation, the solicitation of proxies) to have the
Executive elected and reelected to the Board for the duration of the Employment
Period. The Executive shall be a member of the Company's Executive Committee at
all times during the Employment Period.
(b) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive shall devote
reasonable attention and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive under this Agreement, use the
Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, industry, civic or charitable
boards or committees, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement, provided that the Executive may
continue to participate and engage in activities not associated with the Company
consistent with the Executive's past practices at BKB.
2
<PAGE>
(c) The Company's headquarters shall be located in Boston,
Massachusetts, and the Executive shall be based and reside in the general
area of Boston, except for such reasonable travel obligations as do not
materially exceed the Executive's travel obligations immediately prior to the
Effective Date.
(d) Effective as of the Effective Date, the Company and the Executive
shall enter into an agreement concerning the Executive's rights and duties in
the event of a "change in control" of the Company, which shall be the same in
form and substance as that of the Initial CEO. Any benefits to which the
Executive becomes entitled under such agreement shall not be in addition to, but
shall be reduced by, the Severance Payments, as defined in Section 6.1 of the
Prior Agreement and as referred to in Section 5(a)(i)(A).
3. COMPENSATION. The Executive's compensation during the Employment
Period shall be determined by the Board upon the recommendation of the committee
of the Board having responsibility for approving the compensation of senior
executives (the "Compensation Committee"), subject to the provisions of Sections
3(a)-(f).
(a) BASE SALARY. During the Initial Period and the Interim Period,
commencing on the Effective Date, the Executive shall receive an annual base
salary ("Annual Base Salary") at a rate of not less than 100% of the rate of
annual base salary paid to the Initial CEO. The Annual Base Salary shall be
payable in accordance with the Company's regular payroll practice for its
senior executives, as in effect from time to time. During the Employment Period,
the Annual Base Salary shall be reviewed by the Compensation Committee for
possible increase at least annually. Any increase in the Annual Base Salary
shall not limit or reduce any other obligation of the Company under this
Agreement. The Annual Base Salary shall not be reduced after any such increase,
and the term "Annual Base Salary" shall thereafter refer to the Annual Base
Salary as so increased.
(b) ANNUAL BONUS. With respect to each fiscal year ending during the
Initial Period, the Executive shall receive an annual bonus ("Annual Bonus") of
not less than 9/10 of the annual bonus earned by the Initial CEO with respect
that year. With respect to each fiscal year ending during the Interim Period,
the Executive shall receive such Annual Bonus as shall be determined by the
Board upon recommendation of the Compensation Committee, provided that such
Annual Bonus shall not be less than 10/9 of the annual bonus earned by the
Initial CEO with respect to such fiscal year. The Annual Bonus shall be payable
in accordance with
3
<PAGE>
the Company's regular payroll practice for its senior executives, as in effect
from time to time.
(c) OTHER INCENTIVE COMPENSATION. (i) During the Employment Period, the
Executive shall be eligible to participate in short-term incentive compensation
plans and long-term incentive compensation plans (the latter to consist of plans
offering stock options, restricted stock and/or other long-term incentive
compensation, as adopted and approved by the Board or the Compensation Committee
from time to time).
(ii) Without limiting the generality of the foregoing, as of the
Effective Date, the Company shall make an award to the Executive of 300,000
restricted shares (the "Restricted Stock Grant") of the Company's common stock
("Common Shares"). 75,000 of such restricted shares (the "Donated Shares"), less
the number of shares necessary to pay the Tax Amount (as defined hereinbelow),
shall be donated to the Chad and Anne Gifford Fund at The Old Colony Charitable
Foundation or such other charitable organization as the Executive may choose,
provided that such organization is qualified under Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended (the "Code"). Subject to the
provisions of Section 5 and subject to the attainment of the performance
criteria previously agreed upon, all restrictions with respect to the Restricted
Stock Grant shall lapse, with respect to one-sixth of the shares subject to such
grant (including one-sixth of the Donated Shares), at the close of the first
full fiscal quarter of the Company following the Effective Date; with respect to
one-third of the shares subject to such grant (including one-third of the
Donated Shares), on each of December 31, 2000 and December 2001; and with
respect to one-sixth of the shares subject to such grant (including one-sixth of
the Donated Shares), on December 31, 2002. For purposes of this Agreement, the
"Tax Amount" shall mean any federal, state and local income and employment taxes
imposed upon the Executive in connection with a donation hereunder, taking into
account any limitations on the deductibility of the donated amount under federal
income tax laws, and shall be determined by the independent auditor of BKB
immediately prior to the Effective Date (the "Auditor"). The Tax Amount shall be
withheld by the Company and paid to the appropriate tax authorities in
accordance with applicable law. If the Executive's employment shall be
terminated prior to the lapse of restrictions with respect to all or a
portion of the Common Shares subject to a Restricted Stock Grant, including
the Donated Shares (the "Unvested Shares"), the Unvested Shares shall be
forfeited if the termination of employment is by the Company for Cause or by
the Executive other than for Good Reason and shall become fully vested if the
termination of employment is for any
4
<PAGE>
other reason. Subject to the foregoing provisions of this Section 3(c)(ii), the
terms of the Restricted Stock Grant shall be consistent with the terms of the
BankBoston 1996 Long-Term Incentive Plan (the "BKB Stock Plan").
(iii) Without limiting the generality of the foregoing, as of the
Effective Date and as of each of the first two anniversaries thereof, the
Company shall make awards to the Executive of a nonqualified option, with an
initial term of 10 years, to purchase 300,000 Common Shares (the "Option
Grants"). Subject to the provisions of Section 5, each of the Option Grants
shall vest and become exercisable as determined by the Board of Directors of the
Company (or the compensation committee of the Board of Directors), provided that
at least one-third of the shares subject to each Option Grant shall vest and
become exercisable on each of the first three anniversaries of the date of
grant. Subject to the foregoing provisions of this Section 3(c)(iii), the terms
of the Option Grants shall be consistent with the terms of the BKB Stock Plan.
(iv) Prior to the date of grant of each of the Restricted Stock
Grants and Option Grants, the Company shall register, on a Form S-8 or other
appropriate form, the Common Shares subject to the Restricted Stock Grant
(including the Donated Shares) and the Option Grant.
(d) SERP. During the Employment Period, the Executive shall continue to
participate in BKB's supplemental retirement plans or any successor thereto or
substitute therefor, or, if more favorable to the Executive, in the
supplemental retirement plans in which the Initial CEO participates during
the Initial Period, with credit thereunder for his years of service with the
BKB, provided that the aggregate annual defined benefit retirement income
(including retirement income from tax-qualified defined benefit retirement
plans), expressed as a single life annuity, to which the Executive shall be
entitled upon his termination of employment with the Company for any reason
shall not be less than (but may be more than) $1.25 million, unreduced for
any reason (including early retirement). Upon the death of the Executive, if
his spouse survives him, his spouse shall be entitled to an aggregate annual
defined benefit retirement income for her life of not less than 75% of the
amount set forth in the immediately preceding sentence. The benefit provided
under this Section 3(d) (the "SERP Benefit") shall be distributed in the same
form as the benefits to which the Executive is entitled under the BankBoston
Cash Balance Retirement Plan or any successor thereto. This Section 3(d)
shall not expire or terminate upon the expiration or termination for any
reason of this Agreement and shall continue in full force and effect upon
such expiration or termination.
5
<PAGE>
(e) FRINGE BENEFITS. During the Employment Period, the Executive shall
be entitled to receive fringe benefits on a basis not less favorable than the
basis on which such benefits are provided to the Initial CEO during the Initial
Period. Without limiting the generality of the foregoing, during the Employment
Period, the Executive shall be provided with the use of a Company airplane and
Company automobile, with driver, on a basis no less favorable to the Executive
than provided to the Executive immediately prior to the Effective Date.
(f) OTHER BENEFITS. During the Employment Period, (i) the Executive
shall participate in all applicable savings and retirement plans, practices,
policies and programs of the Company on a basis not less favorable than the
basis on which such benefits are provided to the Initial CEO during the Initial
Period, and (ii) the Executive and/or the Executive's eligible dependents, as
the case may be, shall be eligible for participation in, and shall receive all
benefits under, all applicable welfare benefit plans, practices, policies and
programs provided by the Company, including, without limitation, medical,
prescription, dental, disability, salary continuance, employee life insurance,
group life insurance (but not split-dollar insurance), accidental death and
travel accident insurance plans and programs on the same basis and subject to
the same terms, conditions, cost-sharing requirements and the like as the
Initial CEO during the Initial Period.
4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's
employment shall terminate automatically upon the Executive's death. The Company
shall be entitled to terminate the Executive's employment because of the
Executive's Disability during the Employment Period. "Disability" means that (i)
the Executive has been unable, for the period specified in the Company's
disability plan for senior executives, but not less than a period of 180
consecutive business days, to perform the Executive's duties under this
Agreement, as a result of physical or mental illness or injury, and (ii) a
physician selected by the Company or its insurers, and acceptable to the
Executive or the Executive's legal representative, has determined that the
Executive is disabled within the meaning of the applicable disability plan for
senior executives. A termination of the Executive's employment by the Company
for Disability shall be communicated to the Executive by written notice, and
shall be effective on the 30th day after receipt of such notice by the Executive
(the "Disability Effective Date"), unless the Executive returns to full-time
performance of the Executive's duties before the Disability Effective Date.
6
<PAGE>
(b) TERMINATION BY THE COMPANY. (i) The Company may terminate the
Executive's employment for Cause or without Cause. "Cause" means (A) the
conviction of the Executive for the commission of a felony from which all final
appeals have been taken, or (B) willful gross misconduct by the Executive in
connection with his employment by the Company, in either case that results in
material and demonstrable financial harm to the Company. No act or failure to
act on the part of the Executive shall be considered "willful" unless it is
done, or omitted to be done, by the Executive in bad faith or without reasonable
belief that the Executive's action or omission was in the best interests of the
Company. Any act or failure to act that is based upon authority given pursuant
to a resolution duly adopted by the Board, or the advice of counsel for the
Company, shall be conclusively presumed to be done, or omitted to be done, by
the Executive in good faith and in the best interests of the Company. In the
event of a dispute concerning the application of this provision, no claim by the
Company that Cause exists shall be given effect unless the Company establishes
to the Board by clear and convincing evidence that Cause exists.
(ii) A termination of the Executive's employment for Cause shall
not be effective unless it is accomplished in accordance with the following
procedures. The Company shall give the Executive written notice ("Notice of
Termination for Cause") of its intention to terminate the Executive's employment
for Cause, setting forth in reasonable detail the specific conduct of the
Executive that it considers to constitute Cause and the specific provisions of
this Agreement on which it relies, and stating the date, time and place of the
Special Board Meeting for Cause. The "Special Board Meeting for Cause" means a
meeting of the Board called and held specifically and exclusively for the
purpose of considering the Executive's termination for Cause, that takes place
not less than twenty nor more than thirty business days after the Executive
receives the Notice of Termination for Cause. The Executive shall be given an
opportunity, together with counsel, to be heard at the Special Board Meeting for
Cause. The Executive's termination for Cause shall be effective when and if a
resolution is duly adopted at the Special Board Meeting for Cause by affirmative
vote of three-quarters of the entire membership of the Board stating that, in
the good faith opinion of the Board, the Executive is guilty of the conduct
described in the Notice of Termination for Cause and that such conduct
constitutes Cause under this Agreement.
(c) GOOD REASON. (i) The Executive may terminate employment for Good
Reason or without Good Reason. "Good Reason" means:
7
<PAGE>
A. the failure of the Company to appoint the Executive to the
position of Chief Executive Officer of the Company upon the expiration of
the Initial Period;
B. the failure of the Company to cause the Executive to be
elected to the Board or to be appointed to the Company's Executive
Committee;
C. the failure of the Executive to be appointed as Chairman
of the Board upon the expiration of the Interim Period;
D. any requirement by the Company that the Executive's
services be rendered primarily at a location or locations other than Boston,
Massachusetts;
E. the failure by the Company to enter into the agreement
prescribed in Section 2(d) of this Agreement;
F. the assignment to the Executive of any duties or
responsibilities inconsistent in any respect with those customarily
associated with the positions (including status, offices, titles and
reporting requirements) to be held by the Executive during the applicable
period pursuant to this Agreement, the appointment of any other Executive to
perform any of the duties or responsibilities customarily associated with
the positions to be held by the Executive during the applicable period
pursuant to this Agreement, or any other action by the Company that results
in a diminution or other material adverse change in the Executive's
position, authority, duties or responsibilities, other than an isolated,
insubstantial and inadvertent action that is not taken in bad faith and is
remedied by the Company promptly after receipt of notice thereof from the
Executive;
G. any failure by the Company to comply with any provision of
Section 3 of this Agreement, other than an isolated, insubstantial and
inadvertent failure that is not taken in bad faith and is remedied by the
Company promptly after receipt of notice thereof from the Executive;
H. any failure by the Company to comply with Section 10(c) of
this Agreement; or
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I. any other material breach of this Agreement by the Company
that is not remedied by the Company promptly after receipt of notice thereof
from the Executive.
(ii) For purposes of this Section 4(c), any good faith
determination of "Good Reason" made by the Executive shall be conclusive. A
termination of employment by the Executive for Good Reason shall be effectuated
by giving the Company written notice ("Notice of Termination for Good Reason")
of the termination, setting forth in reasonable detail the specific conduct of
the Company that constitutes Good Reason and the specific provision(s) of this
Agreement on which the Executive relies. A termination of employment by the
Executive for Good Reason shall be effective on the fifth business day following
the date when the Notice of Termination for Good Reason is given, unless the
notice sets forth a later date (which date shall in no event be later than 30
days after the notice is given).
(iii) The failure to set forth any fact or circumstance in a
Notice of Termination for Good Reason shall not constitute a waiver of the right
to assert, and shall not preclude the party giving notice from asserting, such
fact or circumstance in an attempt to enforce any right under or provision of
this Agreement.
(iv) A termination of the Executive's employment by the Executive
without Good Reason shall be effected by giving the Company written notice of
the termination.
(d) DATE OF TERMINATION. The "Date of Termination" means the date of
the Executive's death, the Disability Effective Date, or the date on which the
termination of the Executive's employment by the Company for Cause or without
Cause or by the Executive for Good Reason or without Good Reason is effective,
as the case may be.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) OTHER THAN FOR
CAUSE; FOR GOOD REASON; DEATH OR DISABILITY. If, during the Employment Period,
the Company terminates the Executive's employment for Disability or any other
reason, other than Cause; or the Executive terminates employment for Good
Reason; or the Executive's employment is terminated by reason of his death; the
Company shall
(i) pay to the Executive (or, in the event of termination of
employment by reason of the Executive's death, as provided in Section 10(a)),
in a lump
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sum, in cash, within five business days after the Date of Termination, or as
otherwise provided in this Section 5(a)(i),
(A) the "Severance Payments" as defined in Section 6.1 of the
Prior Agreement (including without limitation payment to the Executive on
account of the items described in paragraph (C) of such Section 6.1),
representing the amounts and benefits to which the Executive would have been
entitled under the Prior Agreement, as determined by the Auditor no later
than 30 days after the execution of this Agreement, plus interest from the
Effective Date to the date of the payment of such Severance Payments, at an
annual rate equal to the "prime" rate as in effect on the Date of
Termination, compounded daily (the "New Severance Payment"), provided that
the Executive may elect to reduce the Severance Payments by the amount
described in paragraph (B) of Section 6.1 of the Prior Agreement and, in
lieu thereof, receive for a period of three years following the Date of
Termination the continuation of the benefits described in Section 3(f)(ii);
and
(B) the sum of the following amounts (the "Accrued
Obligations"): (1) any portion of the Executive's Annual Base Salary through
the Date of Termination that has not yet been paid; (2) an amount equal to
the product of (A) the maximum annual bonus that the Executive would have
been eligible to earn for the year during which such termination occurs, and
(B) a fraction, the numerator of which is the number of days in such year
through the Date of Termination, and the denominator of which is 365; and
(3) the SERP Benefit and all compensation and benefits payable to the
Executive under the terms of the Company's compensation and benefit plans,
programs or arrangements as in effect immediately prior to the Date of
Termination, provided that the form of the SERP Benefit shall be determined
pursuant to Section 3(d) (the "SERP Procedure") and the form of other
benefits described in this clause (B)(3) shall be determined in accordance
with the aforesaid plans, programs and arrangements; and
(ii) cause the Restricted Stock Grant, to the extent then unvested
or forfeitable, to become immediately and fully vested and the Option Grants, to
the extent then not exercisable, to become immediately and fully exercisable;
and for purposes of any post-termination exercise period associated with such
awards, consider the Executive to have remained employed through January 1,
2003; and
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(iii) if termination is by the Company other than for Cause or by
the Executive for Good Reason, at its expense, provide the Executive with
outplacement services suitable to the Executive's position for three years
following the Date of Termination or, if earlier, until the first acceptance by
the Executive of an offer of employment; and
(iv) if the Executive terminates his employment for the event of
Good Reason described in Section 4(c)(i)(A) or 4(c)(i)(C) or if the Company
terminates the Executive's employment other than for Cause prior to the date on
which the Executive is entitled pursuant to this Agreement to become Chairman
of the Board, pay to the Chad and Anne Gifford Fund at The Old Colony Charitable
Foundation or such other charitable organization as the Executive may choose,
provided that such organization is qualified under Section 501(c)(3) of the
Code, in a lump sum, in cash, within five business days after the Date of
Termination, $15,000,000, reduced by the Tax Amount (as defined in Section
3(c)), such Tax Amount to be determined by the Auditor and to be withheld by the
Company and paid to the appropriate tax authorities in accordance with
applicable law.
(b) BY THE EXECUTIVE OTHER THAN FOR GOOD REASON; UPON TERMINATION
FOLLOWING EXPIRATION OF THE AGREEMENT. If the Executive voluntarily terminates
employment, other than for Good Reason, during the Employment Period or if the
Executive's employment terminates for any reason after January 1, 2003, the
Company shall pay to the Executive (1) in a lump sum in cash within 30 days of
the Date of Termination, the New Severance Payment and any portion of the
Executive's Annual Base Salary through the Date of Termination that has not
been paid; and (2) the SERP Benefit in accordance with the SERP Procedure and
all compensation and benefits payable to the Executive under the terms of the
Company's compensation and benefit plans, programs or arrangements as in effect
immediately prior to the Date of Termination.
(c) BY THE COMPANY FOR CAUSE. If the Executive's employment is
terminated by the Company for Cause on or prior to January 1, 2003, the Company
shall pay to the Executive (1) any portion of the Executive's Annual Base Salary
through the Date of Termination that has not been paid; and (2) the SERP Benefit
in accordance with the SERP Procedure and all compensation and benefits payable
to the Executive under the terms of the Company's compensation and benefit
plans, program or arrangements as in effect immediately prior to the Date of
Termination.
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(d) EXCISE TAX PAYMENT. (i) In the event that any payment or benefit
received or to be received by the Executive pursuant to the terms of this
agreement (the "Contract Payments") or of any other plan, arrangement or
agreement of the Company (or any affiliate) (together with the Contract
Payments, the "Total Payments") would be subject to the excise tax (the "Excise
Tax") imposed by section 4999 of the Code as determined as provided below, then,
subject to the provisions of Section 5(d)(ii), the Company shall pay to the
Executive, at the time specified in Section 5(d)(iii) below, an additional
amount (the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of the Excise Tax on Total Payments and any federal,
state and local income and employment taxes and the Excise Tax upon the Gross-Up
Payment, and any interest, penalties or additions to tax payable by the
Executive with respect thereto, shall be equal to the total present value (using
the applicable federal rate (as defined in section 1274(d) of the Code in such
calculation) of the Total Payments at the time such Total Payments are to be
made. For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amounts of such Excise Tax, (A) the total
amount of the Total Payments shall be treated as "parachute payments" within the
meaning of section 280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax, except to the extent that, in the opinion of the Auditor,
such amount (in whole or in part) does not constitute a "parachute payment"
within the meaning of section 280G(b)(2) of the Code, or such "excess parachute
payments" (in whole or in part) are not subject to the Excise Tax, (B) the
amount of the Total Payments that shall be treated as subject to the Excise Tax
shall be equal to the lesser of (1) the total amount of the Total Payments or
(2) the amount of "excess parachute payments" within the meaning of section
280G(b)(1) of the Code (after applying clause (A) hereof), and (C) the value of
any noncash benefits or any deferred payment or benefit shall be determined by
the Auditor in accordance with the principles of sections 280G(d)(3) and (4) of
the Code. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation applicable to individuals in the calendar year
in which the Gross-Up Payment is to be made and state and local income taxes at
the highest marginal rates of taxation applicable to individuals as are in
effect in the state and locality of the Executive's residence in the calendar
year in which the Gross-Up Payment is to be made, net of the maximum reduction
in federal income taxes that can be obtained from deduction of such state and
local taxes, taking into account any limitations applicable to individuals
subject to federal income tax at the highest marginal rate.
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(ii) In the event that, after giving effect to any
redeterminations described in Section 5(d)(iv), the sum of the Total Payments
and the Gross-Up Payment (in each case after deduction of the net amount of
federal, state and local income and employment taxes and the amount of Excise
Tax to which the Executive would be subject in respect of such Total Payments
and the Gross-Up Payment) does not equal or exceed 110% of the largest amount of
Total Payments that would result in no portion of the Total Payments being
subject to the Excise Tax (after deduction of the net amount of federal, state
and local income and employment taxes on such reduced Total Payments), then
Section 5(d)(i) shall not apply and, to the extent necessary to ensure that no
portion of the Total Payments is subject to the Excise Tax, the cash Contract
Payments shall first be reduced (if necessary, to zero), and the noncash
Contract Payments shall thereafter be reduced (if necessary, to zero); provided,
however, that the Executive may elect to have the noncash Contract Payments
reduced (or eliminated) prior to any reduction of the cash Contract Payments.
(iii) The Gross-Up Payments provided for in Section 5(d)(i) shall
be made upon the earlier of (i) ten days following termination of the
Executive's employment or (ii) ten days following the imposition upon the
Executive or payment by the Executive of any Excise Tax.
(iv) If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the opinion of the Auditor
that the Excise Tax is less than the amount taken into account under Section
5(d)(i) , the Executive shall repay to the Company within thirty (30) days of
the Executive's receipt of notice of such final determination or opinion the
portion of the Gross-Up Payment attributable to such reduction (plus the portion
of the Gross-Up Payment attributable to the Excise Tax and federal, state and
local income and employment taxes imposed on the Gross-Up Payment being repaid
by the Executive if such repayment results in a reduction in Excise Tax or a
federal, state or local income or employment tax deduction) plus any interest
received by the Executive on the amount of such repayment. If it is established
pursuant to a final determination of a court or an Internal Revenue Service
proceeding or the opinion of the Auditor that the Excise Tax exceeds the amount
taken into account hereunder (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment, plus any interest and
penalties, in respect of such excess within thirty (30) days of the Company's
receipt of notice of such final determination or opinion.
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(v) All fees and expenses of the Auditor incurred in connection
with this agreement shall be borne by the Company.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies for which the Executive may qualify, nor shall anything in this
Agreement limit or otherwise affect such rights as the Executive may have under
any contract or agreement with the Company or any of its affiliated companies.
Vested benefits and other amounts that the Executive is otherwise entitled to
receive under any plan, policy, practice or program of, or any contract of
agreement with, the Company or any of its affiliated companies on or after the
Date of Termination shall be payable in accordance with the terms of each such
plan, policy, practice, program, contract or agreement, as the case may be,
except as explicitly modified by this Agreement.
7. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in, and otherwise to perform its obligations under, this Agreement
shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action that the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced, regardless of whether the Executive obtains other employment.
8. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies and
their respective businesses that the Executive obtains during the Executive's
employment by the Company or any of its affiliated companies and that is not
public knowledge (other than as a result of the Executive's violation of this
Section 8) ("Confidential Information"). The Executive shall not communicate,
divulge or disseminate Confidential Information at any time during or after the
Executive's employment with the Company, except with the prior written consent
of the Company or as otherwise required by law or legal process.
9. INDEMNIFICATION; ATTORNEYS' FEES. The Company shall pay or indemnify
the Executive to the full extent permitted by law and the by-laws of the Company
for all expenses, costs, liabilities and legal fees which the Executive may
incur in the discharge of his duties hereunder. The Company also agrees to pay,
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<PAGE>
as incurred, to the fullest extent permitted by law, or indemnify Executive if
such payment is not legally permitted, for all legal fees and expenses that the
Executive may in good faith incur as a result of any contest (regardless of the
outcome) by the Company, the Executive or others of the validity or
enforceability of or liability under, or otherwise involving, any provision of
this Agreement, together with interest on any delayed payment at the applicable
federal rate provided for in Section 7872(f)(2)(A) of the Code.
10. SUCCESSORS. (a) This Agreement is personal to the Executive and,
without the prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "the Company" shall mean
both the Company as defined above and any such successor that assumes and agrees
to perform this Agreement, by operation of law or otherwise.
11. MISCELLANEOUS. (a) This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Massachusetts,
without reference to its principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified except by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications under this Agreement shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
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If to the Executive:
Charles K. Gifford
107 Summer Street
Manchester, MA 01944
If to the Company:
Fleet Financial Group, Inc.
One Federal Street
Boston, MA 02110
or to such other address as either party furnishes to the other in writing in
accordance with this Section 11(b). Notices and communications shall be
effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the Company
may withhold from amounts payable under this Agreement all federal, state, local
and foreign taxes that are required to be withheld by applicable laws or
regulations.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provisions of, or to assert, any right under, this Agreement
(including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to paragraph (c) of Section 4) shall not be
deemed to be a waiver of such provision or right or of any other provision of or
right under this Agreement.
(f) The Executive and the Company acknowledge that this Agreement
supersedes any other agreement, including the Prior Agreement (except to the
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extent the Prior Agreement is referenced in Section 5(a)(i)), between them
concerning the subject matter hereof.
(g) The rights and benefits of the Executive under this Agreement may
not be anticipated, assigned, alienated or subject to attachment, garnishment,
levy, execution or other legal or equitable process except as required by law.
Any attempt by the Executive to anticipate, alienate, assign, sell, transfer,
pledge, encumber or charge the same shall be void. Payments hereunder shall not
be considered assets of the Executive in the event of insolvency or bankruptcy.
(h) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute but
one and the same instrument.
(i) The obligations of the Company and the Executive under Sections 5
(including without limitation Section 5(b)), 6, 7, 8, 9 and 10 (in addition to
those under Section 3(d)) shall survive the expiration or termination for any
reason of this Agreement.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board, the Company has caused this
Agreement to be executed in its name on its behalf, all as of the day and year
first above written.
FLEET FINANCIAL GROUP, INC.
By: /s/ William C. Mutterperl
--------------------------------
Title: Executive Vice
President &
General Counsel
/s/ Charles K. Gifford
-----------------------------------
EXECUTIVE
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EXHIBIT 10(b)
<PAGE>
EXHIBIT 10(b)
EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between Fleet Financial Group, Inc., a Rhode
Island corporation (the "Company"), and Henrique de Campos Meirelles (the
"Executive"), dated as of the 14th day of March, 1999.
W I T N E S S E T H
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of March
14, 1999 (the "Merger Agreement"), among the Company and BankBoston Corporation,
a Massachusetts corporation ("BKB"), BKB shall, as of the Effective Time (as
defined in the Merger Agreement), merge with and into the Company, so that the
Company is the Surviving Corporation (as defined in the Merger Agreement); and
WHEREAS, the Executive is currently party to a severance agreement
entered into with BKB, dated as of June 25, 1998 (the "Prior Agreement"); and
WHEREAS, the Company wishes to provide for the employment by the
Company of the Executive, and the Executive wishes to serve the Company, on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. EMPLOYMENT PERIOD. The Company shall employ the Executive, and the
Executive shall serve the Company, on the terms and conditions set forth in this
Agreement, for a period (the "Employment Period") commencing on the date (the
"Effective Date") on which occurs the Effective Time and ending on January 1,
2003 or, if earlier, upon the termination of the Executive's employment
hereunder (as of the Date of Termination, as defined in Section 4(d)). This
Agreement shall be null and void if the Effective Time does not occur.
2. POSITION AND DUTIES. (a) During the Employment Period, the Executive
shall serve as the Company's President, Global Banking and Financial Services,
with responsibility for international investment management including management
of the chief investment officer, Fleet Investment Advisors, institutional
<PAGE>
investment, institutional sales, retirement products, non-for-profits, regional
investment policy, private banking, Columbia Asset Management, internet
strategy, Galaxy Funds and Quick & Reilly; large corporation and investment
banking, including debt capital markets, specialized industries, Robertson
Stephens, private equity and multinationals; and foreign exchange, with such
additional duties and responsibilities as are customarily assigned to such
position, and such other duties and responsibilities not inconsistent therewith
as may from time to time be assigned to him by the Chief Executive Officer of
the Company. During the Employment Period, the Company shall cause the Executive
to be included in the slate of persons nominated to serve as directors on the
Board of Directors of the Company (the "Board") and shall use its best efforts
(including, without limitation, the solicitation of proxies) to have the
Executive elected and reelected to the Board for the duration of the Employment
Period. The Executive shall be a member of the Company's Executive Committee at
all times during the Employment Period.
(b) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive shall devote
reasonable attention and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive under this Agreement, use the
Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, industry, civic or charitable
boards or committees, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement, provided that the Executive may
continue to participate and engage in activities not associated with the Company
consistent with the Executive's past practices at BKB, including without
limitation the activities listed on Exhibit A hereto.
(c) The Company's headquarters shall be located in Boston,
Massachusetts, and the Executive shall be based and reside in the general area
of Boston, except for travel outside the Boston area in connection with the
business of the Company to such extent as the Executive shall determine is
appropriate, subject to the reasonable approval of the Company with respect to
any travel in excess of 100 business days per year.
(d) Effective as of the Effective Date, the Company and the Executive
shall enter into an agreement concerning the Executive's rights and duties in
the event of a "change in control" of the Company, which shall be the same in
form and
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substance as that of the Chief Executive Officer of the Company on the Effective
Date (the "Initial CEO"). Any benefits to which the Executive becomes entitled
under such agreement shall not be in addition, but shall be reduced by, the
Severance Payments, as defined in Section 6.1 of the Prior Agreement and as
referred to in Section 5(a)(i)(A).
3. COMPENSATION. The Executive's compensation during the Employment
Period shall be determined by the Board upon the recommendation of the committee
of the Board having responsibility for approving the compensation of senior
executives (the "Compensation Committee"), subject to the provisions of Sections
3(a)-(f).
(a) BASE SALARY. During the Employment Period, commencing on the
Effective Date, the Executive shall receive an annual base salary ("Annual Base
Salary") at a rate of not less than $800,000. The Annual Base Salary shall be
payable in accordance with the Company's regular payroll practice for its senior
executives, as in effect from time to time. During the Employment Period, the
Annual Base Salary shall be reviewed by the Compensation Committee for possible
increase at least annually. Any increase in the Annual Base Salary shall not
limit or reduce any other obligation of the Company under this Agreement. The
Annual Base Salary shall not be reduced after any such increase, and the term
"Annual Base Salary" shall thereafter refer to the Annual Base Salary as so
increased.
(b) ANNUAL BONUS. With respect to each fiscal year ending during the
Employment Period, and any partial fiscal year occurring but not ending during
the Employment Period, the Executive shall receive an annual bonus ("Annual
Bonus") of not less than 70% of the annual bonus earned by the Chief Executive
Officer of the Company, with appropriate prorating for any such partial fiscal
year. The Annual Bonus shall be payable in accordance with the Company's regular
payroll practice for its senior executives, as in effect from time to time.
(c) OTHER INCENTIVE COMPENSATION. (i) During the Employment Period, the
Executive shall be eligible to participate in short-term incentive compensation
plans and long-term incentive compensation plans (the latter to consist of plans
offering stock options, restricted stock and/or other long-term incentive
compensation, as adopted and approved by the Board or the Compensation Committee
from time to time).
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(ii) Without limiting the generality of the foregoing, the Company
shall grant to the Executive, as of the Effective Date, 300,000 restricted
shares (the "Restricted Stock Grant") of the Company's common stock ("Common
Shares"). Subject to the provisions of Section 5 and subject to the attainment
of the performance criteria previously agreed upon, all restrictions with
respect to the Restricted Stock Grant shall lapse, with respect to one-sixth of
the shares subject to such grant, at the close of the first full fiscal quarter
of the Company following the Effective Date; with respect to one-third of the
shares subject to such grant, on each of December 31, 2000 and December 31,
2001; and with respect to one-sixth of the shares subject to such grant, on
December 31, 2002. If the Executive's employment shall be terminated prior to
the lapse of restrictions with respect to all or a portion of the Common Shares
subject to the Restricted Stock Grant (the "Unvested Shares"), the Unvested
Shares shall be forfeited if the termination of employment is by the Company for
Cause or by the Executive other than for Good Reason and shall become fully
vested if the termination of employment is for any other reason. Subject to the
foregoing provisions of this Section 3(c)(ii), the terms of the Restricted Stock
Grant shall be consistent with the terms of the BankBoston 1996 Long-Term
Incentive Plan (the "BKB Stock Plan").
(iii) Without limiting the generality of the foregoing, as of the
Effective Date and as of each of the first two anniversaries of the Effective
Date, the Company shall make awards to the Executive of a nonqualified option,
with an initial term of 10 years, to purchase 200,000 Common Shares (the "Option
Grants"). Subject to the provisions of Section 5, each of the Option Grants
shall vest and become exercisable as determined by the Board of Directors of the
combined company (or the compensation committee of the Board of Directors),
provided that at least one-third of the shares subject to each Option Grant
shall vest and become exercisable on each of the first three anniversaries of
the date of grant. Subject to the foregoing provisions of this Section
3(c)(iii), the terms of the Option Grants shall be consistent with the terms of
the BKB Stock Plan.
(iv) Prior to the date of grant of each of the Restricted Stock
Grants and Option Grants, the Company shall register, on a Form S-8 or other
appropriate form, the Common Shares subject to the Restricted Stock Grant and
the Option Grant.
(d) SERP. During the Employment Period, the Executive shall continue to
participate in BKB's supplemental retirement plans or any successor thereto or
substitute therefor, or, if more favorable to the Executive, in the supplemental
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retirement plans in which the Initial CEO participates, with credit thereunder
for his years of service with the BKB, provided that the aggregate annual
defined benefit retirement income (including retirement income from
tax-qualified defined benefit retirement plans), expressed as a single life
annuity, to which the Executive shall be entitled upon his termination of
employment with the Company for any reason shall not be less than (but may be
more than) $750,000, unreduced for any reason, including early retirement. Upon
the death of the Executive, if his spouse survives him, his spouse shall be
entitled to an aggregate annual defined benefit retirement income for her life
of not less than 75% of the amount set forth in the immediately preceding
sentence. The benefit provided under this Section 3(d) (the "SERP Benefit")
shall be distributed in the same form as the benefits to which the Executive is
entitled under the BankBoston Cash Balance Retirement Plan or any successor
thereto. This Section 3(d) shall not expire or terminate upon the expiration or
termination for any reason of this Agreement and shall continue in full force
and effect upon such expiration or termination.
(e) FRINGE BENEFITS. During the Employment Period, the Executive shall
be entitled to receive fringe benefits on a basis not less favorable than
provided to similarly situated senior executives of the Company. Without
limiting the foregoing, the Company shall provide the Executive with (i)
continuation of the interest-free loan made to the Executive by BKB, on the
same terms and conditions; (ii) during the Employment Period, the use for
business purposes only of an airplane capable of traveling non-stop from Boston
throughout the United States, Western Europe and Brazil and the use of a Company
automobile, with driver, on a basis no less favorable to the Executive than
immediately prior to the Effective Date, provided that, notwithstanding the
provisions of clause C of Section 4(c)(i), a failure to comply with this Section
3(e)(ii) will not constitute Good Reason unless there is a pattern of such
noncompliance; and (iii) personal security satisfactory to the Executive while
the Executive or any member of his immediate family is in Brazil during the
period that the Executive is an employee of the Company and following
termination of his employment for any reason for an Additional Period (as
defined below in this Section 3(e)), subject to the cost limitations set forth
below in this Section 3(e). "Additional Period" shall mean (x), as of the
Effective Date, one year following termination of employment , (y) as of the
second anniversary of the Effective Date, if the Executive is an employee of the
Company on such second anniversary, two years following termination of
employment, and (z) as of the fourth anniversary of the Effective Date, if the
Executive is an employee of the Company on such fourth anniversary, three years
following termination of employment . The cost of providing such personal
security following termination of the Executive's employment shall
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not exceed an annual rate of $700,000 for each year following termination of
employment.
(f) OTHER BENEFITS. During the Employment Period, (i) the Executive
shall participate in all applicable savings and retirement plans, practices,
policies and programs of the Company on a basis not less favorable than provided
to similarly situated senior executives of the Company; and (ii) the Executive
and/or the Executive's eligible dependents, as the case may be, shall be
eligible for participation in, and shall receive all benefits under, all
applicable welfare benefit plans, practices, policies and programs provided by
the Company, including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life insurance, group life insurance,
accidental death and travel accident insurance plans and programs on the same
basis and subject to the same terms, conditions, cost-sharing requirements and
the like as provided to similarly situated senior executives of the Company.
4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's
employment shall terminate automatically upon the Executive's death. The Company
shall be entitled to terminate the Executive's employment because of the
Executive's Disability during the Employment Period. "Disability" means that (i)
the Executive has been unable, for the period specified in the Company's
disability plan for senior executives, but not less than a period of 180
consecutive business days, to perform the Executive's duties under this
Agreement, as a result of physical or mental illness or injury, and (ii) a
physician selected by the Company or its insurers, and acceptable to the
Executive or the Executive's legal representative, has determined that the
Executive is disabled within the meaning of the applicable disability plan for
senior executives. A termination of the Executive's employment by the Company
for Disability shall be communicated to the Executive by written notice, and
shall be effective on the 30th day after receipt of such notice by the Executive
(the "Disability Effective Date"), unless the Executive returns to full-time
performance of the Executive's duties before the Disability Effective Date.
(b) TERMINATION BY THE COMPANY. (i) The Company may terminate the
Executive's employment for Cause or without Cause. "Cause" means (A) the
conviction of the Executive for the commission of a felony from which all final
appeals have been taken, or (B) willful gross misconduct by the Executive in
connection with his employment by the Company, in either case that results in
material and demonstrable financial harm to the Company. No act or failure to
act
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on the part of the Executive shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best interests of the
Company. Any act or failure to act that is based upon authority given pursuant
to a resolution duly adopted by the Board, or the advice of counsel for the
Company, shall be conclusively presumed to be done, or omitted to be done, by
the Executive in good faith and in the best interests of the Company. In the
event of a dispute concerning the application of this provision, no claim by the
Company that Cause exists shall be given effect unless the Company establishes
to the Board by clear and convincing evidence that Cause exists.
(ii) A termination of the Executive's employment for Cause shall
not be effective unless it is accomplished in accordance with the following
procedures. The Company shall give the Executive written notice ("Notice of
Termination for Cause") of its intention to terminate the Executive's employment
for Cause, setting forth in reasonable detail the specific conduct of the
Executive that it considers to constitute Cause and the specific provisions of
this Agreement on which it relies, and stating the date, time and place of the
Special Board Meeting for Cause. The "Special Board Meeting for Cause" means a
meeting of the Board called and held specifically and exclusively for the
purpose of considering the Executive's termination for Cause, that takes place
not less than twenty nor more than thirty business days after the Executive
receives the Notice of Termination for Cause. The Executive shall be given an
opportunity, together with counsel, to be heard at the Special Board Meeting for
Cause. The Executive's termination for Cause shall be effective when and if a
resolution is duly adopted at the Special Board Meeting for Cause by affirmative
vote of three-quarters of the entire membership of the Board stating that, in
the good faith opinion of the Board, the Executive is guilty of the conduct
described in the Notice of Termination for Cause and that such conduct
constitutes Cause under this Agreement.
(c) GOOD REASON. (i) The Executive may terminate employment for Good
Reason or without Good Reason. "Good Reason" means:
A. the failure of the Company to cause the Executive to be
elected to the Board or to be appointed to the Company's Executive
Committee;
B. the assignment to the Executive of any duties or
responsibilities inconsistent in any respect with those customarily
associated
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with the position (including status, offices, titles and reporting
requirements) to be held by the Executive during the Employment Period
pursuant to this Agreement, the appointment of any other Executive to
perform any of the duties or responsibilities customarily associated with
such position, or any other action by the Company that results in a
diminution or other material adverse change in the Executive's position,
authority, duties or responsibilities, other than an isolated,
insubstantial and inadvertent action that is not taken in bad faith and is
remedied by the Company promptly after receipt of notice thereof from the
Executive;
C. any failure by the Company to comply with any provision of
Section 3 of this Agreement, other than an isolated, insubstantial and
inadvertent failure that is not taken in bad faith and is remedied by the
Company promptly after receipt of notice thereof from the Executive;
D. any requirement by the Company that the Executive's
services be rendered primarily at a location or locations other than that
provided for in Section 2(c) of this Agreement;.
E. any failure by the Company to comply with Section 10(c) of
this Agreement; or
F. any other material breach of this Agreement by the Company
that is not remedied by the Company promptly after receipt of notice thereof
from the Executive.
(ii) For purposes of this Section 4(c), any good faith
determination of "Good Reason" made by the Executive shall be conclusive. A
termination of employment by the Executive for Good Reason shall be effectuated
by giving the Company written notice ("Notice of Termination for Good Reason")
of the termination, setting forth in reasonable detail the specific conduct of
the Company that constitutes Good Reason and the specific provision(s) of this
Agreement on which the Executive relies. A termination of employment by the
Executive for Good Reason shall be effective on the fifth business day following
the date when the Notice of Termination for Good Reason is given, unless the
notice sets forth a later date (which date shall in no event be later than 30
days after the notice is given).
(iii) The failure to set forth any fact or circumstance in a
Notice of Termination for Good Reason shall not constitute a waiver of the right
to assert, and
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<PAGE>
shall not preclude the party giving notice from asserting, such fact or
circumstance in an attempt to enforce any right under or provision of this
Agreement.
(iv) A termination of the Executive's employment by the Executive
without Good Reason shall be effected by giving the Company written notice of
the termination.
(d) DATE OF TERMINATION. The "Date of Termination" means the date of
the Executive's death, the Disability Effective Date, or the date on which the
termination of the Executive's employment by the Company for Cause or without
Cause or by the Executive for Good Reason or without Good Reason is effective,
as the case may be.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) OTHER THAN FOR
CAUSE; FOR GOOD REASON; DEATH OR DISABILITY. If, during the Employment Period,
the Company terminates the Executive's employment for Disability or any other
reason other than Cause; or the Executive terminates employment for Good Reason;
or the Executive's employment is terminated by reason of his death; the Company
shall
(i) pay to the Executive (or, in the event of termination of
employment by reason of the Executive's death, as provided in Section 10(a)),
in a lump sum, in cash, within five business days after the Date of
Termination, or as otherwise provided in this Section 5(a)(i),
(A) the "Severance Payments" as defined in Section 6.1 of
the Prior Agreement (including without limitation payment to the
Executive on account of the items described in paragraph (C) of such
Section 6.1), representing the amounts and benefits to which the
Executive would have been entitled under the Prior Agreement, as
determined by the Auditor (as defined in Section 5 (d)) no later than 30
days after the execution of this Agreement, plus interest from the
Effective Date to the date of the payment of such Severance Payments, at
an annual rate equal to the "prime" rate as in effect on the Date of
Termination, compounded daily (the "New Severance Payment"), provided
that the Executive may elect to reduce the Severance Payments by the
amount described in paragraph (B) of Section 6.1 of the Prior Agreement
and, in lieu thereof, receive for a period of three years following the
Date of Termination the continuation of the benefits described in Section
3(f)(ii); and
9
<PAGE>
(B) the sum of the following amounts (the "Accrued
Obligations"): (1) any portion of the Executive's Annual Base Salary through
the Date of Termination that has not yet been paid; (2) an amount equal to
the product of (A) the maximum annual bonus that the Executive would have
been eligible to earn for the year during which such termination occurs, and
(B) a fraction, the numerator of which is the number of days in such year
through the Date of Termination, and the denominator of which is 365; and
(3) the SERP Benefit and all compensation and benefits payable to the
Executive under the terms of the Company's compensation and benefit plans,
programs or arrangements as in effect immediately prior to the Date of
Termination, provided that the form of the SERP Benefit shall be determined
pursuant to Section 3(d) (the "SERP Procedure") and the form of other
benefits described in this clause (B)(3) shall be determined in accordance
with the aforesaid plans, programs and arrangements; and
(ii) cause the Restricted Stock Grant, to the extent then unvested
or forfeitable, to become immediately and fully vested, and the Option Grants,
to the extent then not exercisable, to become immediately and fully exercisable;
and for purposes of any post-termination exercise period associated with such
awards, consider the Executive to have remained employed through January 1,
2003; and
(iii) unless termination of employment is by reason of death, at
its expense, provide the Executive with outplacement services suitable to the
Executive's position three years following the Date of Termination or, if
earlier, until the first acceptance by the Executive of an offer of employment.
(b) BY THE EXECUTIVE OTHER THAN FOR GOOD REASON; UPON TERMINATION
FOLLOWING EXPIRATION OF THE AGREEMENT. If the Executive voluntarily terminates
employment, other than for Good Reason, during the Employment Period or if the
Executive's employment terminates for any reason following January 1, 2003, the
Company shall pay to the Executive (1) in a lump sum in cash within 30 days of
the Date of Termination, the New Severance Payment and any portion of the
Executive's Annual Base Salary through the Date of Termination that has not been
paid; and (2) the SERP Benefit in accordance with the SERP Procedure and all
compensation and benefits payable to the Executive under the terms of the
Company's compensation and benefit plans, programs or arrangements as in effect
immediately prior to the Date of Termination.
10
<PAGE>
(c) BY THE COMPANY FOR CAUSE. If the Executive's employment is
terminated by the Company for Cause on or prior to January 1, 2003, the Company
shall pay to the Executive (1) any portion of the Executive's Annual Base Salary
through the Date of Termination that has not been paid; and (2) the SERP Benefit
in accordance with the SERP Procedure and all compensation and benefits payable
to the Executive under the terms of the Company's compensation and benefit
plans, program or arrangements as in effect immediately prior to the Date of
Termination.
(d) EXCISE TAX PAYMENT. (i) In the event that any payment or benefit
received or to be received by the Executive pursuant to the terms of this
agreement (the "Contract Payments") or of any other plan, arrangement or
agreement of the Company (or any affiliate) (together with the Contract
Payments, the "Total Payments") would be subject to the excise tax (the "Excise
Tax") imposed by section 4999 of the Code as determined as provided below, then,
subject to the provisions of Section5(d)(ii), the Company shall pay to the
Executive, at the time specified in Section 5(d)(iii) below, an additional
amount (the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of the Excise Tax on Total Payments and any federal,
state and local income and employment taxes and the Excise Tax upon the Gross-Up
Payment, and any interest, penalties or additions to tax payable by the
Executive with respect thereto, shall be equal to the total present value (using
the applicable federal rate (as defined in section 1274(d) of the Code in such
calculation) of the Total Payments at the time such Total Payments are to be
made. For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amounts of such Excise Tax, (A) the total
amount of the Total Payments shall be treated as "parachute payments" within the
meaning of section 280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax, except to the extent that, in the opinion of the independent
auditor of BKB immediately prior to the Effective Date (the "Auditor"), such
amount (in whole or in part) does not constitute a "parachute payment" within
the meaning of section 280G(b)(2) of the Code, or such "excess parachute
payments" (in whole or in part) are not subject to the Excise Tax, (B) the
amount of the Total Payments that shall be treated as subject to the Excise Tax
shall be equal to the lesser of (1) the total amount of the Total Payments or
(2) the amount of "excess parachute payments" within the meaning of section
280G(b)(1) of the Code (after applying clause (A) hereof), and (C) the value of
any noncash benefits or any deferred payment or benefit shall be determined by
the Auditor in accordance with the principles of sections 280G(d)(3) and (4) of
the Code. For purposes of determining the amount of the Gross-Up
11
<PAGE>
Payment, the Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation applicable to individuals in
the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rates of taxation applicable to
individuals as are in effect in the state and locality of the Executive's
residence in the calendar year in which the Gross-Up Payment is to be made, net
of the maximum reduction in federal income taxes that can be obtained from
deduction of such state and local taxes, taking into account any limitations
applicable to individuals subject to federal income tax at the highest marginal
rate.
(ii) In the event that, after giving effect to any
redeterminations described in Section 5(d)(iv), the sum of the Total Payments
and the Gross-Up Payment (in each case after deduction of the net amount of
federal, state and local income and employment taxes and the amount of Excise
Tax to which the Executive would be subject in respect of such Total Payments
and the Gross-Up Payment) does not equal or exceed 110% of the largest amount of
Total Payments that would result in no portion of the Total Payments being
subject to the Excise Tax (after deduction of the net amount of federal, state
and local income and employment taxes on such reduced Total Payments), then
Section 5(d)(i) shall not apply and, to the extent necessary to ensure that no
portion of the Total Payments is subject to the Excise Tax, the cash Contract
Payments shall first be reduced (if necessary, to zero), and the noncash
Contract Payments shall thereafter be reduced (if necessary, to zero); provided,
however, that the Executive may elect to have the noncash Contract Payments
reduced (or eliminated) prior to any reduction of the cash Contract Payments.
(iii) The Gross-Up Payments provided for in Section 5(d)(i) shall
be made upon the earlier of (i) ten days following termination of the
Executive's employment or (ii) ten days following the imposition upon the
Executive or payment by the Executive of any Excise Tax.
(iv) If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the opinion of the Auditor
that the Excise Tax is less than the amount taken into account under Section
5(d)(i) , the Executive shall repay to the Company within thirty (30) days of
the Executive's receipt of notice of such final determination or opinion the
portion of the Gross-Up Payment attributable to such reduction (plus the portion
of the Gross-Up Payment attributable to the Excise Tax and federal, state and
local income and employment taxes imposed on the Gross-Up Payment being repaid
by the Executive if such repayment results in
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<PAGE>
a reduction in Excise Tax or a federal, state or local income or employment tax
deduction) plus any interest received by the Executive on the amount of such
repayment. If it is established pursuant to a final determination of a court or
an Internal Revenue Service proceeding or the opinion of the Auditor that the
Excise Tax exceeds the amount taken into account hereunder (including by reason
of any payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment,
plus any interest and penalties, in respect of such excess within thirty (30)
days of the Company's receipt of notice of such final determination or opinion.
(v) All fees and expenses of the Auditor incurred in connection
with this agreement shall be borne by the Company.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies for which the Executive may qualify, nor shall anything in this
Agreement limit or otherwise affect such rights as the Executive may have under
any contract or agreement with the Company or any of its affiliated companies.
Vested benefits and other amounts that the Executive is otherwise entitled to
receive under any plan, policy, practice or program of, or any contract of
agreement with, the Company or any of its affiliated companies on or after the
Date of Termination shall be payable in accordance with the terms of each such
plan, policy, practice, program, contract or agreement, as the case may be,
except as explicitly modified by this Agreement.
7. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in, and otherwise to perform its obligations under, this Agreement
shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action that the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced, regardless of whether the Executive obtains other employment.
8. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies and
their respective businesses that the Executive obtains during the Executive's
employment by the Company or any of its affiliated companies and that is not
public
13
<PAGE>
knowledge (other than as a result of the Executive's violation of this Section
8) ("Confidential Information"). The Executive shall not communicate, divulge or
disseminate Confidential Information at any time during or after the Executive's
employment with the Company, except with the prior written consent of the
Company or as otherwise required by law or legal process.
9. INDEMNIFICATION; ATTORNEYS' FEES. The Company shall pay or indemnify
the Executive to the full extent permitted by law and the by-laws of the Company
for all expenses, costs, liabilities and legal fees which the Executive may
incur in the discharge of his duties hereunder. The Company also agrees to pay,
as incurred, to the fullest extent permitted by law, or indemnify Executive if
such payment is not legally permitted, for all legal fees and expenses that the
Executive may in good faith incur as a result of any contest (regardless of the
outcome) by the Company, the Executive or others of the validity or
enforceability of or liability under, or otherwise involving, any provision of
this Agreement, together with interest on any delayed payment at the applicable
federal rate provided for in Section 7872(f)(2)(A) of the Code.
10. SUCCESSORS. (a) This Agreement is personal to the Executive and,
without the prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "the Company" shall mean
both the Company as defined above and any such successor that assumes and agrees
to perform this Agreement, by operation of law or otherwise.
11. MISCELLANEOUS. (a) This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Massachusetts,
without reference to its principles of conflict of laws. The captions of this
Agreement
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<PAGE>
are not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified except by a written agreement executed
by the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications under this Agreement shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Henrique de Campos Meirelles
c/o Chairman's Office
100 Federal Street
Boston, MA 02110
Mail Code: MA BOS 01-25-14
If to the Company:
Fleet Financial Group, Inc.
One Federal Street
Boston, MA 02110
or to such other address as either party furnishes to the other in writing in
accordance with this Section 11(b). Notices and communications shall be
effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the Company
may withhold from amounts payable under this Agreement all federal, state, local
and foreign taxes that are required to be withheld by applicable laws or
regulations.
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(e) The Executive's or the Company's failure to insist upon strict
compliance with any provisions of, or to assert, any right under, this Agreement
(including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to paragraph (c) of Section 4) shall not be
deemed to be a waiver of such provision or right or of any other provision of or
right under this Agreement.
(f) The Executive and the Company acknowledge that this Agreement
supersedes any other agreement, including the Prior Agreement (except to the
extent the Prior Agreement is referenced in Section 5(a)(i) hereof) between them
concerning the subject matter hereof.
(g) The rights and benefits of the Executive under this Agreement may
not be anticipated, assigned, alienated or subject to attachment, garnishment,
levy, execution or other legal or equitable process except as required by law.
Any attempt by the Executive to anticipate, alienate, assign, sell, transfer,
pledge, encumber or charge the same shall be void. Payments hereunder shall not
be considered assets of the Executive in the event of insolvency or bankruptcy.
(h) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute but
one and the same instrument.
(i) The obligations of the Company and the Executive under Sections 3
(e), 5 (including without limitation Section 5(b)), 6, 7, 8, 9 and 10 (in
addition to those under Section 3(d)) shall survive the expiration or
termination for any reason of this Agreement.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board, the Company has caused this
Agreement to be executed in its name on its behalf, all as of the day and year
first above written.
FLEET FINANCIAL GROUP, INC.
By: /s/ William C. Mutterperl
--------------------------------
Title: Executive Vice President
& General Counsel
-------------------------
/s/ Henrique de Campos Meirelles
-----------------------------------
EXECUTIVE
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EXHIBIT A
OUTSIDE ACTIVITIES AS OF DATE OF AGREEMENT
Mr. Meirelles is a member of the Board of Directors of Champion
International Corporation, Raytheon Corporation, Bestfoods (formerly known as
CPC International Inc.), the New England Conservatory, Accion International and
the Public Broadcasting System in Sao Paulo, Brazil. Mr. Meirelles is also a
member of the Advisory Council of the Harvard Business School Initiative on
Global Corporate Governance, the Boston College Carroll School of Management,
the Adolfo Ibanez University in Santiago, Chile, and Dean of the Advisory Board
of the MIT Sloan School of Management. He is the founding President of the Latin
American Leasing Federation, Chairman Emeritus of the Brazilian Association of
International Banks, Chairman of the Society for the Revitalization of the City
of Sao Paulo, and Chairman of the Travessia Foundation. In addition, Mr.
Meirelles is an Executive Committee Member of the U.S. Brazilian Business
Council and of the American Chamber of Commerce in Sao Paulo, Brazil.
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EXHIBIT 10(c)
<PAGE>
Exhibit 10(c)
EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between Fleet Financial Group, Inc., a
Rhode Island corporation (the "Company"), and Paul F. Hogan (the "Executive"),
dated as of the 14th day of March, 1999.
W I T N E S S E T H
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as
of March 14, 1999 (the "Merger Agreement"), between the Company and BankBoston
Corporation, a Massachusetts corporation ("BKB"), BKB shall, as of the Effective
Time (as defined in the Merger Agreement), merge with and into the Company, so
that the Company is the Surviving Corporation (as defined in the Merger
Agreement); and
WHEREAS, the Executive is currently party to a severance
agreement entered into with BKB, dated as of June 25, 1998 (the "Prior
Agreement"); and
WHEREAS, the Company wishes to provide for the employment by
the Company of the Executive, and the Executive wishes to serve the Company, on
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. EMPLOYMENT PERIOD. The Company shall employ the Executive,
and the Executive shall serve the Company, on the terms and conditions set forth
in this Agreement, for a period (the "Employment Period") commencing on the date
(the "Effective Date") on which occurs the Effective Time and ending on January
1, 2003 or, if earlier, upon the termination of the Executive's employment
hereunder (as of the Date of Termination, as defined in Section 4(d)). This
Agreement shall be null and void if the Effective Time does not occur.
2. POSITION AND DUTIES. (a) During the Employment Period,
the Executive shall serve as Vice Chairman of the Company, with
responsibility for the matters set forth on Exhibit A hereto, with such
additional duties and responsibilities as are customarily assigned to such
position, and such other duties and responsi-
<PAGE>
bilities not inconsistent therewith as may from time to time be assigned to
him by Chief Executive Officer of the Company.
(b) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive shall
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive under this Agreement, use the
Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, industry, civic or charitable
boards or committees, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement, provided that the Executive may
continue to participate and engage in activities not associated with the Company
consistent with the Executive's past practices at BKB.
(c) The Company's headquarters shall be located in Boston,
Massachusetts, and the Executive shall be based and reside in the general area
of Boston, except for such reasonable travel obligations as do not materially
exceed the Executive's travel obligations immediately prior to the Effective
Date.
(d) Effective as of the Effective Date, the Company and the
Executive shall enter into an agreement concerning the Executive's rights and
duties in the event of a "change in control" of the Company, which shall be the
same in form and substance as that of the Chief Executive Officer of the Company
on the Effective Date. Any benefits to which the Executive becomes entitled
under such agreement shall not be in addition, but shall be reduced by, the
Severance Payments, as defined in Section 6.1 of the Prior Agreement and as
referred to in Section 5(a)(i)(A).
3. COMPENSATION. The Executive's compensation during the
Employment Period shall be determined by the Board upon the recommendation of
the committee of the Board having responsibility for approving the compensation
of senior executives (the "Compensation Committee"), subject to the provisions
of Sections 3(a) - (d).
(a) BASE SALARY. During the Employment Period, commencing on
the Effective Date, the Executive shall receive an annual base salary ("Annual
Base Salary") at a rate of not less than $525,000. The Annual Base Salary shall
be payable in accordance with the Company's regular payroll practice for its
senior
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executives, as in effect from time to time. During the Employment Period, the
Annual Base Salary shall be reviewed by the Compensation Committee for possible
increase at least annually. Any increase in the Annual Base Salary shall not
limit or reduce any other obligation of the Company under this Agreement. The
Annual Base Salary shall not be reduced after any such increase, and the term
"Annual Base Salary" shall thereafter refer to the Annual Base Salary as so
increased.
(b) ANNUAL BONUS. With respect to 1999, the Company shall pay
the Executive an annual bonus ("Annual Bonus") of not less than the highest
annual bonus paid to the Executive in respect of the three preceding years,
reduced by any amount paid to the Executive in respect of 1999 under the
BankBoston Performance Recognition Opportunity Plan. The Annual Bonus shall be
payable in accordance with the Company's regular payroll practice for its senior
executives, as in effect from time to time.
(c) OTHER INCENTIVE COMPENSATION. (i) During the Employment
Period, the Executive shall be eligible to participate in short-term incentive
compensation plans and long-term incentive compensation plans (the latter to
consist of plans offering stock options, restricted stock and/or other long-term
incentive compensation, as adopted and approved by the Board or the Compensation
Committee from time to time).
(ii) Without limiting the generality of the
foregoing, the Company shall grant to the Executive, as of the Effective Date,
100,000 restricted shares (the "Restricted Stock Grant") of the Company's common
stock ("Common Shares"). Subject to the provisions of Section 5 and subject to
the attainment of the performance criteria previously agreed upon, all
restrictions with respect to the Restricted Stock Grant shall lapse, with
respect to one-sixth of the shares subject to such grant, at the close of the
first full fiscal quarter of the Company following the Effective Date; with
respect to one-third of the shares subject to such grant, on each of December
31, 2000 and December 31, 2001; and with respect to one-sixth of the shares
subject to such grant, on December 31, 2002. If the Executive's employment shall
be terminated prior to the lapse of restrictions with respect to all or a
portion of the Common Shares subject to the Restricted Stock Grant (the
"Unvested Shares"), the Unvested Shares shall be forfeited if the termination of
employment is by the Company for Cause or by the Executive other than for Good
Reason and shall become fully vested if the termination of employment is for any
other reason. Subject to the foregoing provisions of this Section 3(c)(ii), the
terms of the Restricted
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Stock Grant shall be consistent with the terms of the BankBoston 1996 Long-Term
Incentive Plan (the "BKB Stock Plan").
(iii) Prior to the date of grant of the Restricted
Stock Grant, the Company shall register, on a Form S-8 or other appropriate
form, the Common Shares subject to the Restricted Stock Grant.
(d) OTHER BENEFITS. During the Employment Period, (i) the
Executive shall participate in all applicable savings and retirement plans,
practices, policies and programs of the Company on a basis not less favorable
than provided to similarly situated senior executives of the Company; (ii) the
Executive and/or the Executive's eligible dependents, as the case may be, shall
be eligible for participation in, and shall receive all benefits under, all
applicable welfare benefit plans, practices, policies and programs provided by
the Company, including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life insurance, group life insurance,
accidental death and travel accident insurance plans and programs on the same
basis and subject to the same terms, conditions, cost-sharing requirements and
the like as similarly situated senior executives of the Company; and (iii) the
Executive shall be entitled to receive fringe benefits on a basis not less
favorable than provided to similarly situated senior executive officers of the
Company. In particular, commencing on January 1, 2000, the Executive shall
become a participant in the Company's supplemental retirement plan(s) on a basis
no less favorable than similarly situated senior executives of the Company but
shall receive no service credit thereunder for service with BKB.
4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's death.
The Company shall be entitled to terminate the Executive's employment because of
the Executive's Disability during the Employment Period. "Disability" means that
(i) the Executive has been unable, for the period specified in the Company's
disability plan for senior executives, but not less than a period of 180
consecutive business days, to perform the Executive's duties under this
Agreement, as a result of physical or mental illness or injury, and (ii) a
physician selected by the Company or its insurers, and acceptable to the
Executive or the Executive's legal representative, has determined that the
Executive is disabled within the meaning of the applicable disability plan for
senior executives. A termination of the Executive's employment by the Company
for Disability shall be communicated to the Executive by written notice, and
shall be effective on the 30th day after receipt of such notice
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by the Executive (the "Disability Effective Date"), unless the Executive returns
to full-time performance of the Executive's duties before the Disability
Effective Date.
(b) TERMINATION BY THE COMPANY. (i) The Company may terminate
the Executive's employment for Cause or without Cause. "Cause" means (A) the
conviction of the Executive for the commission of a felony from which all final
appeals have been taken, or (B) willful gross misconduct by the Executive in
connection with his employment by the Company, in either case that results in
material and demonstrable financial harm to the Company. No act or failure to
act on the part of the Executive shall be considered "willful" unless it is
done, or omitted to be done, by the Executive in bad faith or without reasonable
belief that the Executive's action or omission was in the best interests of the
Company. Any act or failure to act that is based upon authority given pursuant
to a resolution duly adopted by the Board, or the advice of counsel for the
Company, shall be conclusively presumed to be done, or omitted to be done, by
the Executive in good faith and in the best interests of the Company. In the
event of a dispute concerning the application of this provision, no claim by the
Company that Cause exists shall be given effect unless the Company establishes
to the Board by clear and convincing evidence that Cause exists.
(ii) A termination of the Executive's employment for Cause
shall not be effective unless it is accomplished in accordance with the
following procedures. The Company shall give the Executive written notice
("Notice of Termination for Cause") of its intention to terminate the
Executive's employment for Cause, setting forth in reasonable detail the
specific conduct of the Executive that it considers to constitute Cause and the
specific provisions of this Agreement on which it relies, and stating the date,
time and place of the Special Board Meeting for Cause. The "Special Board
Meeting for Cause" means a meeting of the Board called and held specifically and
exclusively for the purpose of considering the Executive's termination for
Cause, that takes place not less than twenty nor more than thirty business days
after the Executive receives the Notice of Termination for Cause. The Executive
shall be given an opportunity, together with counsel, to be heard at the Special
Board Meeting for Cause. The Executive's termination for Cause shall be
effective when and if a resolution is duly adopted at the Special Board Meeting
for Cause by affirmative vote of three-quarters of the entire membership of the
Board stating that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in the Notice of Termination for Cause and that
such conduct constitutes Cause under this Agreement.
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(c) GOOD REASON. (i) The Executive may terminate employment
for Good Reason or without Good Reason. "Good Reason" means:
A. the assignment to the Executive of any duties or
responsibilities inconsistent in any respect with those set forth in
Exhibit A hereto or those customarily associated with the position
(including status, offices, titles and reporting requirements) to be
held by the Executive during the Employment Period pursuant to this
Agreement, or any other action by the Company that results in a
diminution or other material adverse change in the Executive's
position, authority, duties or responsibilities as set forth in Exhibit
A hereto, other than an isolated, insubstantial and inadvertent action
that is not taken in bad faith and is remedied by the Company promptly
after receipt of notice thereof from the Executive;
B. any failure by the Company to comply with any
provision of Section 3 of this Agreement, other than an isolated,
insubstantial and inadvertent failure that is not taken in bad faith
and is remedied by the Company promptly after receipt of notice thereof
from the Executive;
C. any requirement by the Company that the
Executive's services be rendered primarily at a location or locations
other than Boston, Massachusetts;
D. any failure by the Company to comply with Section
10(c) of this Agreement; or
E. any other material breach of this Agreement by the
Company that is not remedied by the Company promptly after receipt of
notice thereof from the Executive.
(ii) For purposes of this Section 4(c), any good faith
determination of "Good Reason" made by the Executive shall be conclusive. A
termination of employment by the Executive for Good Reason shall be effectuated
by giving the Company written notice ("Notice of Termination for Good Reason")
of the termination, setting forth in reasonable detail the specific conduct of
the Company that constitutes Good Reason and the specific provision(s) of this
Agreement on which the Executive relies. A termination of employment by the
Executive for Good Reason shall be effective on the fifth business day following
the date when the
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Notice of Termination for Good Reason is given, unless the notice sets forth a
later date (which date shall in no event be later than 30 days after the notice
is given).
(iii) The failure to set forth any fact or circumstance in a
Notice of Termination for Good Reason shall not constitute a waiver of the right
to assert, and shall not preclude the party giving notice from asserting, such
fact or circumstance in an attempt to enforce any right under or provision of
this Agreement.
(iv) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company written
notice of the termination.
(d) DATE OF TERMINATION. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, or the date on
which the termination of the Executive's employment by the Company for Cause or
without Cause or by the Executive for Good Reason or without Good Reason is
effective, as the case may be.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) OTHER THAN
FOR CAUSE; FOR GOOD REASON; DEATH OR DISABILITY. If, during the Employment
Period, the Company terminates the Executive's employment for Disability or any
other reason other than Cause; or the Executive terminates employment for Good
Reason; or the Executive's employment is terminated by reason of his death; the
Company shall
(i) pay to the Executive (or, in the event of termination of
employment by reason of the Executive's death, as provided in Section 10(a)),
in a lump sum in cash, within five business days after the Date of Termination,
or as otherwise provided in this Section 5(a)(i),
(A) the "Severance Payments" as defined in Section 6.1 of the
Prior Agreement (including without limitation payment to the Executive
on account of the items described in paragraph (C) of such Section
6.1), representing the amounts and benefits to which the Executive
would have been entitled under the Prior Agreement, as determined by
the Auditor (as defined in Section 5(d)) no later than 30 days after
the execution of this Agreement, plus interest from the Effective Date
to the date of the payment of such Severance Payments, at an annual
rate equal to the "prime" rate as in effect on the Date of Termination,
compounded daily (the "New Severance Pay-
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ment"), provided that the Executive may elect to reduce the
Severance Payments by the amount described in paragraph (B) of
Section 6.1 of the Prior Agreement and, in lieu thereof, receive for
a period of three years following the Date of Termination the
continuation of the benefits described in Section 3(d)(ii); and
(B) the sum of the following amounts (the "Accrued
Obligations"): (1) any portion of the Executive's Annual Base Salary
through the Date of Termination that has not yet been paid; (2) an
amount equal to the product of (A) the maximum annual bonus that the
Executive would have been eligible to earn for the year during which
such termination occurs, and (B) a fraction, the numerator of which is
the number of days in such year through the Date of Termination, and
the denominator of which is 365; and (3)all compensation and benefits
payable to the Executive under the terms of the Company's compensation
and benefit plans, programs or arrangements as in effect immediately
prior to the Date of Termination, provided that the form of the
benefits described in this clause (B)(3) shall be determined in
accordance with the aforesaid plans, programs and arrangements; and
(ii) cause the Restricted Stock Grant, to the extent then
unvested or forfeitable, to become immediately and fully vested; and
(iii) unless termination of employment is by reason of death,
at its expense, provide the Executive with outplacement services suitable to the
Executive's position for three years following the Date of Termination or, if
earlier, until the first acceptance by the Executive of an offer of employment.
(b) BY THE EXECUTIVE OTHER THAN FOR GOOD REASON; UPON
TERMINATION FOLLOWING EXPIRATION OF THE AGREEMENT. If the Executive voluntarily
terminates employment, other than for Good Reason, during the Employment Period
or if the Executive's employment terminates for any reason following January 1,
2003, the Company shall pay to the Executive (1) in a lump sum in cash within 30
days of the Date of Termination, the New Severance Payment and any portion of
the Executive's Annual Base Salary through the Date of Termination that has not
been paid; and (2) all compensation and benefits payable to the Executive under
the terms of the Company's compensation and benefit plans, programs or
arrangements as in effect immediately prior to the Date of Termination.
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<PAGE>
(c) BY THE COMPANY FOR CAUSE. If the Executive's employment
is terminated by the Company for Cause on or prior to January 1, 2003, the
Company shall pay to the Executive (1) any portion of the Executive's Annual
Base Salary through the Date of Termination that has not been paid; and (2) all
compensation and benefits payable to the Executive under the terms of the
Company's compensation and benefit plans, program or arrangements as in effect
immediately prior to the Date of Termination.
(d) EXCISE TAX PAYMENT. (i) In the event that any payment or
benefit received or to be received by the Executive pursuant to the terms of
this agreement (the "Contract Payments") or of any other plan, arrangement or
agreement of the Company (or any affiliate) (together with the Contract
Payments, the "Total Payments") would be subject to the excise tax (the "Excise
Tax") imposed by section 4999 of the Code as determined as provided below, then,
subject to the provisions of Section5(d)(ii), the Company shall pay to the
Executive, at the time specified in Section 5(d)(iii) below, an additional
amount (the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of the Excise Tax on Total Payments and any federal,
state and local income and employment taxes and the Excise Tax upon the Gross-Up
Payment, and any interest, penalties or additions to tax payable by the
Executive with respect thereto, shall be equal to the total present value (using
the applicable federal rate (as defined in section 1274(d) of the Code in such
calculation) of the Total Payments at the time such Total Payments are to be
made. For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amounts of such Excise Tax, (A) the total
amount of the Total Payments shall be treated as "parachute payments" within the
meaning of section 280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax, except to the extent that, in the opinion of the independent
auditor of BKB immediately prior to the Effective Date (the "Auditor"), such
amount (in whole or in part) does not constitute a "parachute payment" within
the meaning of section 280G(b)(2) of the Code, or such "excess parachute
payments" (in whole or in part) are not subject to the Excise Tax, (B) the
amount of the Total Payments that shall be treated as subject to the Excise Tax
shall be equal to the lesser of (1) the total amount of the Total Payments or
(2) the amount of "excess parachute payments" within the meaning of section
280G(b)(1) of the Code (after applying clause (A) hereof), and (C) the value of
any noncash benefits or any deferred payment or benefit shall be determined by
the Auditor in accordance with the principles of sections 280G(d)(3) and (4) of
the Code. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest
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<PAGE>
marginal rate of federal income taxation applicable to individuals in the
calendar year in which the Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rates of taxation applicable to individuals
as are in effect in the state and locality of the Executive's residence in the
calendar year in which the Gross-Up Payment is to be made, net of the maximum
reduction in federal income taxes that can be obtained from deduction of such
state and local taxes, taking into account any limitations applicable to
individuals subject to federal income tax at the highest marginal rate.
(ii) In the event that, after giving effect to any
redeterminations described in Section 5(d)(iv), the sum of the Total Payments
and the Gross-Up Payment (in each case after deduction of the net amount of
federal, state and local income and employment taxes and the amount of Excise
Tax to which the Executive would be subject in respect of such Total Payments
and the Gross-Up Payment) does not equal or exceed 110% of the largest amount of
Total Payments that would result in no portion of the Total Payments being
subject to the Excise Tax (after deduction of the net amount of federal, state
and local income and employment taxes on such reduced Total Payments), then
Section 5(d)(i) shall not apply and, to the extent necessary to ensure that no
portion of the Total Payments is subject to the Excise Tax, the cash Contract
Payments shall first be reduced (if necessary, to zero), and the noncash
Contract Payments shall thereafter be reduced (if necessary, to zero); provided,
however, that the Executive may elect to have the noncash Contract Payments
reduced (or eliminated) prior to any reduction of the cash Contract Payments.
(iii) The Gross-Up Payments provided for in Section 5(d)(i)
shall be made upon the earlier of (i) ten days following termination of the
Executive's employment or (ii) ten days following the imposition upon the
Executive or payment by the Executive of any Excise Tax.
(iv) If it is established pursuant to a final determination of
a court or an Internal Revenue Service proceeding or the opinion of the Auditor
that the Excise Tax is less than the amount taken into account under Section
5(d)(i) , the Executive shall repay to the Company within thirty (30) days of
the Executive's receipt of notice of such final determination or opinion the
portion of the Gross-Up Payment attributable to such reduction (plus the portion
of the Gross-Up Payment attributable to the Excise Tax and federal, state and
local income and employment taxes imposed on the Gross-Up Payment being repaid
by the Executive if such repayment results in a reduction in Excise Tax or a
federal, state or local income or employment tax
10
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deduction) plus any interest received by the Executive on the amount of such
repayment. If it is established pursuant to a final determination of a court or
an Internal Revenue Service proceeding or the opinion of the Auditor that the
Excise Tax exceeds the amount taken into account hereunder (including by reason
of any payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment,
plus any interest and penalties, in respect of such excess within thirty (30)
days of the Company's receipt of notice of such final determination or opinion.
(v) All fees and expenses of the Auditor incurred in
connection with this agreement shall be borne by the Company.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies for which the Executive may qualify, nor shall anything in this
Agreement limit or otherwise affect such rights as the Executive may have under
any contract or agreement with the Company or any of its affiliated companies.
Vested benefits and other amounts that the Executive is otherwise entitled to
receive under any plan, policy, practice or program of, or any contract of
agreement with, the Company or any of its affiliated companies on or after the
Date of Termination shall be payable in accordance with the terms of each such
plan, policy, practice, program, contract or agreement, as the case may be,
except as explicitly modified by this Agreement.
7. FULL SETTLEMENT. The Company's obligation to make the
payments provided for in, and otherwise to perform its obligations under, this
Agreement shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action that the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced, regardless of whether the Executive obtains other
employment.
8. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies and their respective businesses that the Executive obtains during the
Executive's employment by the Company or any of its affiliated companies and
that is not public knowledge (other than as a result of the Executive's
violation of this Section 8)
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("Confidential Information"). The Executive shall not communicate, divulge or
disseminate Confidential Information at any time during or after the
Executive's employment with the Company, except with the prior written
consent of the Company or as otherwise required by law or legal process.
9. INDEMNIFICATION; ATTORNEYS' FEES. The Company shall pay or
indemnify the Executive to the full extent permitted by law and the by-laws of
the Company for all expenses, costs, liabilities and legal fees which the
Executive may incur in the discharge of his duties hereunder. The Company also
agrees to pay, as incurred, to the fullest extent permitted by law, or indemnify
Executive if such payment is not legally permitted, for all legal fees and
expenses that the Executive may in good faith incur as a result of any contest
(regardless of the outcome) by the Company, the Executive or others of the
validity or enforceability of or liability under, or otherwise involving, any
provision of this Agreement, together with interest on any delayed payment at
the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code.
10. SUCCESSORS. (a) This Agreement is personal to the
Executive and, without the prior written consent of the Company, shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "the Company" shall mean
both the Company as defined above and any such successor that assumes and agrees
to perform this Agreement, by operation of law or otherwise.
11. MISCELLANEOUS. (a) This Agreement shall be governed by,
and construed in accordance with, the laws of the Commonwealth of Massachusetts,
without reference to its principles of conflict of laws. The captions of this
Agree ment are not part of the provisions hereof and shall have no force or
effect. This
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Agreement may not be amended or modified except by a written agreement executed
by the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Paul F. Hogan
41 Windsor Road
Milton, MA 02186
If to the Company:
Fleet Financial Group, Inc.
One Federal Street
Boston, MA 02110
or to such other address as either party furnishes to the other in writing in
accordance with this Section 11(b). Notices and communications shall be
effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be held
invalid or unenforceable in part, the remaining portion of such provision,
together with all other provisions of this Agreement, shall remain valid and
enforceable and continue in full force and effect to the fullest extent
consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by applicable
laws or regulations.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provisions of, or to assert, any right under, this
Agreement (including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to paragraph (c) of Section 4)
shall not be deemed to be a
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waiver of such provision or right or of any other provision of or right under
this Agreement.
(f) The Executive and the Company acknowledge that this
Agreement supersedes any other agreement, including the Prior Agreement
(except to the extent the Prior Agreement is referenced in Section 5(a)(i)
hereof) between them concerning the subject matter hereof.
(g) The rights and benefits of the Executive under this
Agreement may not be anticipated, assigned, alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process except as
required by law. Any attempt by the Executive to anticipate, alienate, assign,
sell, transfer, pledge, encumber or charge the same shall be void. Payments
hereunder shall not be considered assets of the Executive in the event of
insolvency or bankruptcy.
(h) This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument.
(i) The obligations of the Company and the Executive under
Sections 5 (including without limitation Section 5(b)), 6, 7, 8, 9 and 10 shall
survive the expiration or termination for any reason of this Agreement.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board, the Company has caused this
Agreement to be executed in its name on its behalf, all as of the day and year
first above written.
FLEET FINANCIAL GROUP, INC.
By: /s/ William C. Mutterperl
---------------------------------
Title: Executive Vice President
& General Counsel
---------------------------
/s/ Paul F. Hogan
------------------------------------
EXECUTIVE
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EXHIBIT A
HEAD OF INSTITUTIONAL AND INVESTMENT BANKING
Top executive of the Institutional and Investment Banking unit within the Global
Banking and Financial Services Group; reports to President, Global Banking and
Financial Services.
Responsible for identifying, articulating and implementing the business strategy
and execution plan for providing full array of investment and commercial banking
services and products to Bank's institutional customers. Areas of responsibility
include all debt and equity investment banking for the entire corporation,
including institutional distribution and private client services brokerage
through Robertson Stephens; management of corporate relationship units in
existing targeted industries as well as those that may be identified in the
future; private equity; multinational banking; Europe; and domestic/global
financial institutions.
Develops and recommends annual and long-range objectives, policies and plans for
Institutional and Investment Banking units. Establishes overall and business
unit financial targets in accordance with overall organizational goals; manages
and coordinates activities and performance of businesses to achieve targets.
Directs risk management within reporting businesses in accordance with overall
corporate Risk Management guidelines.
Designs and creates business organization required to fulfill business strategy
and meet financial targets. Has direct managerial responsibility for senior
executives managing businesses described above, including accountability for
selection, definition of assignments and job content, and compensation.
Provides leadership as a member of Bank executive management team; participates
in Bankwide or Group bodies which are involved in institution-wide policy
making.
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EXHIBIT 10(d)
<PAGE>
Exhibit 10(d)
EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between Fleet Financial Group, Inc.,
a Rhode Island corporation (the "Company"), and Bradford H. Warner (the
"Executive"), dated as of the 14th day of March, 1999.
W I T N E S S E T H
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as
of March 14, 1999 (the "Merger Agreement"), between the Company and BankBoston
Corporation, a Massachusetts corporation ("BKB"), BKB shall, as of the Effective
Time (as defined in the Merger Agreement), merge with and into the Company, so
that the Company is the Surviving Corporation (as defined in the Merger
Agreement); and
WHEREAS, the Executive is currently party to a severance
agreement entered into with BKB, dated as of June 25, 1998 (the "Prior
Agreement"); and
WHEREAS, the Company wishes to provide for the employment by
the Company of the Executive, and the Executive wishes to serve the Company, on
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. EMPLOYMENT PERIOD. The Company shall employ the Executive,
and the Executive shall serve the Company, on the terms and conditions set forth
in this Agreement, for a period (the "Employment Period") commencing on the date
(the "Effective Date") on which occurs the Effective Time and ending on January
1, 2003 or, if earlier, upon the termination of the Executive's employment
hereunder (as of the Date of Termination, as defined in Section 4(d)). This
Agreement shall be null and void if the Effective Time does not occur.
2. POSITION AND DUTIES. (a) During the Employment Period, the
Executive shall serve as Vice Chairman of the Company, with responsibility for
investment management including management of the chief investment officer,
Fleet Investment Advisors, institutional investment, institutional sales,
retirement prod-
<PAGE>
ucts, non-for-profits, regional investment policy, private banking, Columbia
Asset Management, Galaxy Funds and Quick & Reilly, with such additional duties
and responsibilities as are customarily assigned to such position, and such
other duties and responsibilities not inconsistent therewith as may from time to
time be assigned to him by Chief Executive Officer of the Company.
(b) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive shall
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive under this Agreement, use the
Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, industry, civic or charitable
boards or committees, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement, provided that the Executive may
continue to participate and engage in activities not associated with the Company
consistent with the Executive's past practices at BKB.
(c) The Company's headquarters shall be located in Boston,
Massachusetts, and the Executive shall be based and reside in the general area
of Boston, except for such reasonable travel obligations as do not materially
exceed the Executive's travel obligations immediately prior to the Effective
Date.
(d) Effective as of the Effective Date, the Company and the
Executive shall enter into an agreement concerning the Executive's rights and
duties in the event of a "change in control" of the Company, which shall be the
same in form and substance as that of the Chief Executive Officer of the Company
on the Effective Date. Any benefits to which the Executive becomes entitled
under such agreement shall not be in addition, but shall be reduced by, the
Severance Payments, as defined in Section 6.1 of the Prior Agreement and as
referred to in Section 5(a)(i)(A).
3. COMPENSATION. The Executive's compensation during the
Employment Period shall be determined by the Board upon the recommendation of
the committee of the Board having responsibility for approving the compensation
of senior executives (the "Compensation Committee"), subject to the provisions
of Sections 3(a) - (d).
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(a) BASE SALARY. During the Employment Period, commencing on
the Effective Date, the Executive shall receive an annual base salary ("Annual
Base Salary") at a rate of not less than $525,000. The Annual Base Salary shall
be payable in accordance with the Company's regular payroll practice for its
senior executives, as in effect from time to time. During the Employment Period,
the Annual Base Salary shall be reviewed by the Compensation Committee for
possible increase at least annually. Any increase in the Annual Base Salary
shall not limit or reduce any other obligation of the Company under this
Agreement. The Annual Base Salary shall not be reduced after any such increase,
and the term "Annual Base Salary" shall thereafter refer to the Annual Base
Salary as so increased.
(b) ANNUAL BONUS. With respect to 1999, the Company shall pay
the Executive an annual bonus ("Annual Bonus") of not less than the highest
annual bonus paid to the Executive in respect of the three preceding years,
reduced by any amount paid to the Executive in respect of 1999 under the
BankBoston Performance Recognition Opportunity Plan. The Annual Bonus shall be
payable in accordance with the Company's regular payroll practice for its senior
executives, as in effect from time to time.
(c) OTHER INCENTIVE COMPENSATION. (i) During the Employment
Period, the Executive shall be eligible to participate in short-term incentive
compensation plans and long-term incentive compensation plans (the latter to
consist of plans offering stock options, restricted stock and/or other long-term
incentive compensation, as adopted and approved by the Board or the Compensation
Committee from time to time).
(ii) Without limiting the generality of the
foregoing, the Company shall grant to the Executive, as of the Effective Date,
100,000 restricted shares (the "Restricted Stock Grant") of the Company's common
stock ("Common Shares"). Subject to the provisions of Section 5 and subject to
the attainment of the performance criteria previously agreed upon, all
restrictions with respect to the Restricted Stock Grant shall lapse, with
respect to one-sixth of the shares subject to such grant, at the close of the
first full fiscal quarter of the Company following the Effective Date; with
respect to one-third of the shares subject to such grant, on each of December
31, 2000 and December 31, 2001; and with respect to one-sixth of the shares
subject to such grant, on December 31, 2002. If the Executive's employment shall
be terminated prior to the lapse of restrictions with respect to all or a
portion of the Common Shares subject to the Restricted Stock Grant (the
"Unvested Shares"), the Unvested Shares shall be forfeited if the termination of
employment is by the
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Company for Cause or by the Executive other than for Good Reason and shall
become fully vested if the termination of employment is for any other reason.
Subject to the foregoing provisions of this Section 3(c)(ii), the terms of the
Restricted Stock Grant shall be consistent with the terms of the BankBoston 1996
Long-Term Incentive Plan (the "BKB Stock Plan").
(iii) Prior to the date of grant of the Restricted
Stock Grant, the Company shall register, on a Form S-8 or other appropriate
form, the Common Shares subject to the Restricted Stock Grant.
(d) OTHER BENEFITS. During the Employment Period, (i) the
Executive shall participate in all applicable savings and retirement plans,
practices, policies and programs of the Company on a basis not less favorable
than provided to similarly situated senior executives of the Company; (ii) the
Executive and/or the Executive's eligible dependents, as the case may be, shall
be eligible for participation in, and shall receive all benefits under, all
applicable welfare benefit plans, practices, policies and programs provided by
the Company, including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life insurance, group life insurance,
accidental death and travel accident insurance plans and programs on the same
basis and subject to the same terms, conditions, cost-sharing requirements and
the like as similarly situated senior executives of the Company; and (iii) the
Executive shall be entitled to receive fringe benefits on a basis not less
favorable than provided to similarly situated senior executive officers of the
Company. In particular, commencing on January 1, 2000, the Executive shall
become a participant in the Company's supplemental retirement plan(s) on a basis
no less favorable than similarly situated senior executives of the Company. The
Executive shall not be entitled to receive service credit for purposes of such
supplemental retirement plans for his service with BKB, provided that at any
given date (the "testing date") the benefits payable to the Executive thereunder
(together with any supplemental retirement benefits payable to the Executive
under the BKB supplemental retirement benefit plans) shall be no less, whether
stated as annual annuities or as present values, than the aggregate benefits
that the Executive would have been entitled to receive under the BKB
supplemental retirement plans as existing on the date of execution of this
Agreement if the Executive had continued to be a participant in said BKB plans
until the testing date.
4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's death.
The Company shall be entitled to terminate the Executive's
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employment because of the Executive's Disability during the Employment Period.
"Disability" means that (i) the Executive has been unable, for the period
specified in the Company's disability plan for senior executives, but not less
than a period of 180 consecutive business days, to perform the Executive's
duties under this Agreement, as a result of physical or mental illness or
injury, and (ii) a physician selected by the Company or its insurers, and
acceptable to the Executive or the Executive's legal representative, has
determined that the Executive is disabled within the meaning of the applicable
disability plan for senior executives. A termination of the Executive's
employment by the Company for Disability shall be communicated to the Executive
by written notice, and shall be effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), unless the Executive
returns to full-time performance of the Executive's duties before the Disability
Effective Date.
(b) TERMINATION BY THE COMPANY. (i) The Company may terminate
the Executive's employment for Cause or without Cause. "Cause" means (A) the
conviction of the Executive for the commission of a felony from which all final
appeals have been taken, or (B) willful gross misconduct by the Executive in
connection with his employment by the Company, in either case that results in
material and demonstrable financial harm to the Company. No act or failure to
act on the part of the Executive shall be considered "willful" unless it is
done, or omitted to be done, by the Executive in bad faith or without reasonable
belief that the Executive's action or omission was in the best interests of the
Company. Any act or failure to act that is based upon authority given pursuant
to a resolution duly adopted by the Board, or the advice of counsel for the
Company, shall be conclusively presumed to be done, or omitted to be done, by
the Executive in good faith and in the best interests of the Company. In the
event of a dispute concerning the application of this provision, no claim by the
Company that Cause exists shall be given effect unless the Company establishes
to the Board by clear and convincing evidence that Cause exists.
(ii) A termination of the Executive's employment for Cause
shall not be effective unless it is accomplished in accordance with the
following procedures. The Company shall give the Executive written notice
("Notice of Termination for Cause") of its intention to terminate the
Executive's employment for Cause, setting forth in reasonable detail the
specific conduct of the Executive that it considers to constitute Cause and the
specific provisions of this Agreement on which it relies, and stating the date,
time and place of the Special Board Meeting for Cause. The "Special Board
Meeting for Cause" means a meeting of the Board called and held specifically and
exclusively for the purpose of considering the Executive's termina-
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tion for Cause, that takes place not less than twenty nor more than
thirty business days after the Executive receives the Notice of Termination for
Cause. The Executive shall be given an opportunity, together with counsel, to
be heard at the Special Board Meeting for Cause. The Executive's termination for
Cause shall be effective when and if a resolution is duly adopted at the Special
Board Meeting for Cause by affirmative vote of three-quarters of the entire
membership of the Board stating that, in the good faith opinion of the Board,
the Executive is guilty of the conduct described in the Notice of Termination
for Cause and that such conduct constitutes Cause under this Agreement.
(c) GOOD REASON. (i) The Executive may terminate employment
for Good Reason or without Good Reason. "Good Reason" means:
A. the assignment to the Executive of any duties or
responsibilities inconsistent in any respect with those customarily
associated with the position (including status, offices, titles and
reporting requirements) to be held by the Executive during the
Employment Period pursuant to this Agreement, or any other action by
the Company that results in a diminution or other material adverse
change in the Executive's position, authority, duties or
responsibilities, other than an isolated, insubstantial and inadvertent
action that is not taken in bad faith and is remedied by the Company
promptly after receipt of notice thereof from the Executive;
B. any failure by the Company to comply with any
provision of Section 3 of this Agreement, other than an isolated,
insubstantial and inadvertent failure that is not taken in bad faith
and is remedied by the Company promptly after receipt of notice thereof
from the Executive;
C. any requirement by the Company that the
Executive's services be rendered primarily at a location or locations
other than Boston, Massachusetts;
D. any failure by the Company to comply with Section
10(c) of this Agreement; or
E. any other material breach of this Agreement by the
Company that is not remedied by the Company promptly after receipt of
notice thereof from the Executive.
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(ii) For purposes of this Section 4(c), any good faith
determination of "Good Reason" made by the Executive shall be conclusive. A
termination of employment by the Executive for Good Reason shall be effectuated
by giving the Company written notice ("Notice of Termination for Good Reason")
of the termination, setting forth in reasonable detail the specific conduct of
the Company that constitutes Good Reason and the specific provision(s) of this
Agreement on which the Executive relies. A termination of employment by the
Executive for Good Reason shall be effective on the fifth business day following
the date when the Notice of Termination for Good Reason is given, unless the
notice sets forth a later date (which date shall in no event be later than 30
days after the notice is given).
(iii) The failure to set forth any fact or circumstance in a
Notice of Termination for Good Reason shall not constitute a waiver of the right
to assert, and shall not preclude the party giving notice from asserting, such
fact or circumstance in an attempt to enforce any right under or provision of
this Agreement.
(iv) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company written
notice of the termination.
(d) DATE OF TERMINATION. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, or the date on
which the termination of the Executive's employment by the Company for Cause or
without Cause or by the Executive for Good Reason or without Good Reason is
effective, as the case may be.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) OTHER THAN
FOR CAUSE; FOR GOOD REASON; DEATH OR DISABILITY. If, during the Employment
Period, the Company terminates the Executive's employment for Disability or any
other reason other than Cause; or the Executive terminates employment for Good
Reason; or the Executive's employment is terminated by reason of his death; the
Company shall
(i) pay to the Executive (or, in the event of termination of
employment by reason of the Executive's death, as provided in Section 10(a)),
in a lump sum in cash, within five business days after the Date of Termination,
or as otherwise provided in this Section 5(a)(i),
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(A) the "Severance Payments" as defined in Section 6.1 of the
Prior Agreement (including without limitation payment to the Executive
on account of the items described in paragraph (C) of such Section
6.1), representing the amounts and benefits to which the Executive
would have been entitled under the Prior Agreement, as determined by
the Auditor (as defined in Section 5(d)) no later than 30 days after
the execution of this Agreement, plus interest from the Effective Date
to the date of the payment of such Severance Payments, at an annual
rate equal to the "prime" rate as in effect on the Date of Termination,
compounded daily (the "New Severance Payment"), provided that the
Executive may elect to reduce the Severance Payments by the amount
described in paragraph (B) of Section 6.1 of the Prior Agreement and,
in lieu thereof, receive for a period of three years following the Date
of Termination the continuation of the benefits described in Section
3(d)(ii); and
(B) the sum of the following amounts (the "Accrued
Obligations"): (1) any portion of the Executive's Annual Base Salary
through the Date of Termination that has not yet been paid; (2) an
amount equal to the product of (A) the maximum annual bonus that the
Executive would have been eligible to earn for the year during which
such termination occurs, and (B) a fraction, the numerator of which is
the number of days in such year through the Date of Termination, and
the denominator of which is 365; and (3)all compensation and benefits
payable to the Executive under the terms of the Company's compensation
and benefit plans, programs or arrangements as in effect immediately
prior to the Date of Termination, provided that the form of the
benefits described in this clause (B)(3) shall be determined in
accordance with the aforesaid plans, programs and arrangements; and
(ii) cause the Restricted Stock Grant, to the extent then
unvested or forfeitable, to become immediately and fully vested; and
(iii) unless termination of employment is by reason of death,
at its expense, provide the Executive with outplacement services suitable to the
Executive's position for three years following the Date of Termination or, if
earlier, until the first acceptance by the Executive of an offer of employment.
(b) BY THE EXECUTIVE OTHER THAN FOR GOOD REASON; UPON
TERMINATION FOLLOWING EXPIRATION OF THE AGREEMENT. If the Executive voluntarily
terminates employment, other than for Good Reason,
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<PAGE>
during the Employment Period or if the Executive's employment terminates for any
reason following January 1, 2003, the Company shall pay to the Executive (1) in
a lump sum in cash within 30 days of the Date of Termination, the New Severance
Payment and any portion of the Executive's Annual Base Salary through the Date
of Termination that has not been paid; and (2) all compensation and benefits
payable to the Executive under the terms of the Company's compensation and
benefit plans, programs or arrangements as in effect immediately prior to the
Date of Termination.
(c) BY THE COMPANY FOR CAUSE. If the Executive's employment
is terminated by the Company for Cause on or prior to January 1, 2003, the
Company shall pay to the Executive (1) any portion of the Executive's Annual
Base Salary through the Date of Termination that has not been paid; and (2) all
compensation and benefits payable to the Executive under the terms of the
Company's compensation and benefit plans, program or arrangements as in effect
immediately prior to the Date of Termination.
(d) EXCISE TAX PAYMENT. (i) In the event that any payment or
benefit received or to be received by the Executive pursuant to the terms of
this agreement (the "Contract Payments") or of any other plan, arrangement or
agreement of the Company (or any affiliate) (together with the Contract
Payments, the "Total Payments") would be subject to the excise tax (the "Excise
Tax") imposed by section 4999 of the Code as determined as provided below, then,
subject to the provisions of Section5(d)(ii), the Company shall pay to the
Executive, at the time specified in Section 5(d)(iii) below, an additional
amount (the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of the Excise Tax on Total Payments and any federal,
state and local income and employment taxes and the Excise Tax upon the Gross-Up
Payment, and any interest, penalties or additions to tax payable by the
Executive with respect thereto, shall be equal to the total present value (using
the applicable federal rate (as defined in section 1274(d) of the Code in such
calculation) of the Total Payments at the time such Total Payments are to be
made. For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amounts of such Excise Tax, (A) the total
amount of the Total Payments shall be treated as "parachute payments" within the
meaning of section 280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax, except to the extent that, in the opinion of the independent
auditor of BKB immediately prior to the Effective Date (the "Auditor"), such
amount (in whole or in part) does not constitute a "parachute payment" within
the meaning of section 280G(b)(2) of the Code, or such "excess parachute
payments" (in whole or in part)
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are not subject to the Excise Tax, (B) the amount of the Total Payments that
shall be treated as subject to the Excise Tax shall be equal to the lesser of
(1) the total amount of the Total Payments or (2) the amount of "excess
parachute payments" within the meaning of section 280G(b)(1) of the Code
(after applying clause (A) hereof), and (C) the value of any noncash benefits
or any deferred payment or benefit shall be determined by the Auditor in
accordance with the principles of sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, the Executive
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation applicable to individuals in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at
the highest marginal rates of taxation applicable to individuals as are in
effect in the state and locality of the Executive's residence in the calendar
year in which the Gross-Up Payment is to be made, net of the maximum
reduction in federal income taxes that can be obtained from deduction of such
state and local taxes, taking into account any limitations applicable to
individuals subject to federal income tax at the highest marginal rate.
(ii) In the event that, after giving effect to any
redeterminations described in Section 5(d)(iv), the sum of the Total Payments
and the Gross-Up Payment (in each case after deduction of the net amount of
federal, state and local income and employment taxes and the amount of Excise
Tax to which the Executive would be subject in respect of such Total Payments
and the Gross-Up Payment) does not equal or exceed 110% of the largest amount of
Total Payments that would result in no portion of the Total Payments being
subject to the Excise Tax (after deduction of the net amount of federal, state
and local income and employment taxes on such reduced Total Payments), then
Section 5(d)(i) shall not apply and, to the extent necessary to ensure that no
portion of the Total Payments is subject to the Excise Tax, the cash Contract
Payments shall first be reduced (if necessary, to zero), and the noncash
Contract Payments shall thereafter be reduced (if necessary, to zero); provided,
however, that the Executive may elect to have the noncash Contract Payments
reduced (or eliminated) prior to any reduction of the cash Contract Payments.
(iii) The Gross-Up Payments provided for in Section 5(d)(i)
shall be made upon the earlier of (i) ten days following termination of the
Executive's employment or (ii) ten days following the imposition upon the
Executive or payment by the Executive of any Excise Tax.
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(iv) If it is established pursuant to a final determination of
a court or an Internal Revenue Service proceeding or the opinion of the Auditor
that the Excise Tax is less than the amount taken into account under Section
5(d)(i) , the Executive shall repay to the Company within thirty (30) days of
the Executive's receipt of notice of such final determination or opinion the
portion of the Gross-Up Payment attributable to such reduction (plus the portion
of the Gross-Up Payment attributable to the Excise Tax and federal, state and
local income and employment taxes imposed on the Gross-Up Payment being repaid
by the Executive if such repayment results in a reduction in Excise Tax or a
federal, state or local income or employment tax deduction) plus any interest
received by the Executive on the amount of such repayment. If it is established
pursuant to a final determination of a court or an Internal Revenue Service
proceeding or the opinion of the Auditor that the Excise Tax exceeds the amount
taken into account hereunder (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment, plus any interest and
penalties, in respect of such excess within thirty (30) days of the Company's
receipt of notice of such final determination or opinion.
(v) All fees and expenses of the Auditor incurred in
connection with this agreement shall be borne by the Company.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies for which the Executive may qualify, nor shall anything in this
Agreement limit or otherwise affect such rights as the Executive may have under
any contract or agreement with the Company or any of its affiliated companies.
Vested benefits and other amounts that the Executive is otherwise entitled to
receive under any plan, policy, practice or program of, or any contract of
agreement with, the Company or any of its affiliated companies on or after the
Date of Termination shall be payable in accordance with the terms of each such
plan, policy, practice, program, contract or agreement, as the case may be,
except as explicitly modified by this Agreement.
7. FULL SETTLEMENT. The Company's obligation to make the
payments provided for in, and otherwise to perform its obligations under, this
Agreement shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action that the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive
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under any of the provisions of this Agreement and such amounts shall not be
reduced, regardless of whether the Executive obtains other employment.
8. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies and their respective businesses that the Executive obtains during the
Executive's employment by the Company or any of its affiliated companies and
that is not public knowledge (other than as a result of the Executive's
violation of this Section 8) ("Confidential Information"). The Executive shall
not communicate, divulge or disseminate Confidential Information at any time
during or after the Executive's employment with the Company, except with the
prior written consent of the Company or as otherwise required by law or legal
process.
9. INDEMNIFICATION; ATTORNEYS' FEES. The Company shall pay or
indemnify the Executive to the full extent permitted by law and the by-laws of
the Company for all expenses, costs, liabilities and legal fees which the
Executive may incur in the discharge of his duties hereunder. The Company also
agrees to pay, as incurred, to the fullest extent permitted by law, or indemnify
Executive if such payment is not legally permitted, for all legal fees and
expenses that the Executive may in good faith incur as a result of any contest
(regardless of the outcome) by the Company, the Executive or others of the
validity or enforceability of or liability under, or otherwise involving, any
provision of this Agreement, together with interest on any delayed payment at
the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code.
10. SUCCESSORS. (a) This Agreement is personal to the
Executive and, without the prior written consent of the Company, shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would
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have been required to perform it if no such succession had taken place. As used
in this Agreement, "the Company" shall mean both the Company as defined above
and any such successor that assumes and agrees to perform this Agreement, by
operation of law or otherwise.
11. MISCELLANEOUS. (a) This Agreement shall be governed by,
and construed in accordance with, the laws of the Commonwealth of Massachusetts,
without reference to its principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified except by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Bradford H. Warner
19 Kress Farm Road
Hingham, MA 02043
If to the Company:
Fleet Financial Group, Inc.
One Federal Street
Boston, MA 02110
or to such other address as either party furnishes to the other in writing in
accordance with this Section 11(b). Notices and communications shall be
effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be held
invalid or unenforceable in part, the remaining portion of such provision,
together with all other provisions of this Agreement, shall remain valid and
enforceable and continue in full force and effect to the fullest extent
consistent with law.
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(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by applicable
laws or regulations.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provisions of, or to assert, any right under, this
Agreement (including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to paragraph (c) of Section 4)
shall not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement.
(f) The Executive and the Company acknowledge that this
Agreement supersedes any other agreement, including the Prior Agreement
(except to the extent the Prior Agreement is referenced in Section 5(a)(i)
hereof) between them concerning the subject matter hereof.
(g) The rights and benefits of the Executive under this
Agreement may not be anticipated, assigned, alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process except as
required by law. Any attempt by the Executive to anticipate, alienate, assign,
sell, transfer, pledge, encumber or charge the same shall be void. Payments
hereunder shall not be considered assets of the Executive in the event of
insolvency or bankruptcy.
(h) This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument.
(i) The obligations of the Company and the Executive under
Sections 5 (including without limitation Section 5(b)), 6, 7, 8, 9 and 10 shall
survive the expiration or termination for any reason of this Agreement.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board, the Company has caused this
Agreement to be executed in its name on its behalf, all as of the day and year
first above written.
FLEET FINANCIAL GROUP, INC.
By: /s/ William C. Mutterperl
-------------------------------
Title: Executive Vice President
& General Counsel
-------------------------
/s/ Bradford H. Warner
----------------------------------
EXECUTIVE
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EXHIBIT 23(a)
<PAGE>
EXHIBIT 23(a)
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Directors
Fleet Financial Group, Inc.:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Boston, Massachusetts
July 8, 1999
<PAGE>
EXHIBIT 23(b)
<PAGE>
EXHIBIT 23(b)
[LOGO OF PRICEWATERHOUSE COOPERS LLP]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Fleet Financial Group, Inc. of our report dated January
21, 1999 relating to the consolidated financial statements of BankBoston
Corporation, which appear in BankBoston Corporation's 1998 Annual Report to
Stockholders and in Exhibit 13 to the Corporation's 1998 Annual Report on Form
10-K. We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
July 8, 1999
<PAGE>
EXHIBIT 99(a)
<PAGE>
EXHIBIT 99(a)
FLEET FINANCIAL GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE SPECIAL
MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 11, 1999, OR ANY ADJOURNMENTS
THEREOF. THE SHARES REPRESENTED HEREBY WILL BE VOTED AS DIRECTTED BY THE
STOCKHOLDER(S).
PROXY
The undersigned hereby appoints John T. Collins, Marian L. Heard and Samuel
O. Thier, jointly and severally with full power of substitution to each, as
proxies for and on behalf of the undersigned, to attend the Special Meeting
of Stockholders of Fleet Financial Group, Inc., to be held at World Trade
Center Boston, 164 Northern Avenue, Boston, Massachusetts, on August 11, 1999
at 11:00 a.m., or any adjournments thereof, and to vote as directed below all
stock of this Company which the undersigned would be entitled to vote if
personally present.
By acceptance, the proxies named above agree that this Proxy will be voted in
the manner directed by the stockholder giving this Proxy. If no directions
are specified, the Proxy will be voted FOR the approval of the Agreement and
Plan of Merger, dated as of March 14, 1999 by and between the Company and
BankBoston Corporation, a Massachusetts corporation, and the consummation of
the transactions contemplated by the merger agreement, FOR the adoption of an
amendment to the Company's articles to increase the number of authorized
shares of the Company's common stock from 1.2 billion to 2 billion, and FOR the
approval of the Amended and Restated 1994 Performance-Based Bonus Plan for
the Chief Executive Officer and certain other named executive officers, all
as set forth on the reverse. Discretionary authority is hereby conferred as
to all other matters which may properly come before the meeting or any
adjournments thereof. This Proxy, if properly executed and delivered, will
revoke all other Proxies.
PLEASE MARK YOUR VOTE ON THE REVERSE SIDE, SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
DETACH AND RETURN PROXY CARD
<PAGE>
Please mark your CLEAR AREA 2373
[X] votes as in this
example
The Proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this Proxy will be
voted FOR Proposals 1, 2, and 3
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
1. PROPOSAL to approve the Agreement and FOR AGAINST ABSTAIN
Plan of Merger, dated as of March 14, 1999, / / / / / /
by and between BankBoston Corporation,
a Massachusetts corporation, and the Company
and the consummation of the transactions
contemplated by the merger agreement, pursuant
to which, among other things, (a) BankBoston
will merge with and into the Company upon the
terms and subject to the conditions set forth in
the merger agreement, (b) the Company's restated
articles of incorporation, as amended, will be
amended to change the name of the Company to
"Fleet Boston Corporation" and (c) the Company's
bylaws will be amended to add a new provision
related to the succession of the Company's current
Chief Executive Officer and Chairman of the Board
and the composition of the Board of Directors of
the combined company.
2. PROPOSAL to adopt an amendment to the FOR AGAINST ABSTAIN
Company's articles to increase the number of / / / / / /
authorized shares of Company common stock
from 1.2 billion to 2 billion.
3. PROPOSAL to approve the Amended and Restated FOR AGAINST ABSTAIN
1994 Performance-Based Bonus Plan for the Chief / / / / / /
Executive Officer and certain other named
executive officers.
(SEE REVERSE SIDE)
- ----------------------------------------
PLEASE DATE, SIGN AND MAIL THIS PROXY
CARD IN THE ACCOMPANYING ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
Please sign EXACTLY as name(s) appear
hereon. When signing as administrator,
attorney, guardian or trustee, please
give full title. If signer is a
corporation or partnership, sign full
corporate or partnership name by any
authorized person. If shares are held
jointly, each joint owner must sign.
Receipt of Notice of the Annual
Meeting and Proxy Statement is hereby
acknowledged.
--------------------------------------
--------------------------------------
SIGNATURE(S) DATE
- -------------------------------------------------------------------------------
DETACH AND RETURN PROXY CARD
FLEET FINANCIAL GROUP, INC.
SPECIAL MEETING OF THE STOCKHOLDERS
AUGUST 11, 1999
WORLD TRADE CENTER BOSTON
164 NORTHERN AVENUE
BOSTON, MASSACHUSETTS
11:00 A.M.
<PAGE>
EXHIBIT 99.b
<PAGE>
Exhibit 99(b)
PROXY
BANKBOSTON CORPORATION
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF
BANKBOSTON CORPORATION
The undersigned, revoking all previous proxies relating to these shares,
hereby acknowledges receipt of the Notice and Joint Proxy
Statement-Prospectus in connection with the Special Meeting of Stockholders
to be held at 10:30 a.m. on August 11, 1999 in the Auditorium of The Federal
Reserve Bank of Boston and hereby appoints Frank L. Farwell, J. Donald Monan,
and Gary A. Spiess, and each of them (with full power to act alone), the
attorneys and proxies of the undersigned, with power of substitution to each,
to vote all shares of the Common Stock of BANKBOSTON CORPORATION registered
in the name provided herein which the undersigned is entitled to vote at the
Special Meeting of Stockholders, and at any adjournment or adjournments
thereof, with all the powers the undersigned would have if personally
present. Without limiting the general authorization hereby given, said
proxies are, and each of them is, instructed to vote or act as follows on the
proposal referred to on the reverse side of this proxy.
THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE IS SPECIFIED, FOR
THE APPROVAL OF THE AGREEMENT AND PLAN OF MERGER, DATED AS OF MARCH 14, 1999,
BY AND BETWEEN BANKBOSTON CORPORATION AND FLEET FINANCIAL GROUP, INC., AND
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THAT AGREEMENT, AND IN
ACCORDANCE WITH THE PROXYHOLDERS' JUDGMENT WITH RESPECT TO ANY OTHER MATTERS
WHICH PROPERLY COME BEFORE THE MEETING.
SEE REVERSE SEE REVERSE
SIDE SIDE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
[X] Please mark
votes as in
this example
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF BANKBOSTON
CORPORATION.
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL.
- -------------------------------------------------------------------------------
1. Approval of the Agreement and Plan of FOR AGAINST ABSTAIN
Merger, dated as of March 14, 1999, by and
between BankBoston Corporation and Fleet --- --- ---
Financial Group, Inc., and the consummation of the transactions
contemplated by that agreement.
- -------------------------------------------------------------------------------
Mark Here for ___ Mark Here if you ____
Address Change and Plan to Attend
Note at Left the Meeting
Please sign exactly as your name appears hereon.
Joint owners should each sign. When signing
as attorney, executor, administrator, trustee
or guardian, please give full title as such.
Signature:_____________________ Date:__________
Signature:_____________________ Date:__________
<PAGE>
EXHIBIT 99(e)
<PAGE>
Exhibit 99(e)
DONALDSON, LUFKIN & JENRETTE
Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue, New York, New York 10172 (212) 892-3000
CONSENT OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
We hereby consent to (i) the inclusion of our opinion letter, dated
July 8, 1999 to the Board of Directors of Fleet Financial Group, Inc. (the
"Company") as Appendix D to the Joint Proxy Statement/Prospectus of the Company
relating to the merger of BankBoston Corporation ("BankBoston") with and into
the Company pursuant to the Agreement and Plan of Merger, dated as of March 14,
1999 between the Company and BankBoston and (ii) all references to DLJ in the
sections captioned "Summary--Our Financial Advisors Believe the Exchange Ratio
Is Fair to Stockholders", "The Merger--Background of the Merger", "The
Merger--Recommendations of the Fleet Board and Reasons for the Merger" and "The
Merger--Opinions of Fleet's Financial Advisors" of the Joint Proxy
Statement/Prospectus which forms a part of this Registration Statement on Form
S-4. In giving such consent, we do not admit that we come within the category of
persons whose consent is required under, and we do not admit that we are
"experts" for purposes of, the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ RICHARD J. BARRETT
--------------------------
Richard J. Barrett
Managing Director
New York, New York
July 8, 1999
<PAGE>
EXHIBIT 99(f)
<PAGE>
Exhibit 99(f)
[LETTERHEAD OF GOLDMAN, SACHS & CO.]
PERSONAL AND CONFIDENTIAL
July 8, 1999
Board of Directors
Fleet Financial Group, Inc.
One Federal Street
Boston, MA 02110-2010
Re: Registration Statement of Fleet Financial Group, Inc.
Ladies and Gentlemen:
Reference is made to our opinion letter dated July 8, 1999 with respect to
fairness from a financial point of view to the holders of the outstanding shares
of common stock, par value $1.00 per share (the "Shares"), of Fleet Financial
Group, Inc. ("Fleet") of the exchange ratio of 1.1844 Shares to be exchanged for
each share of common stock, par value $1.00 per share, of BankBoston Corporation
("BankBoston") pursuant to the Agreement and Plan of Merger, dated as of March
14, 1999 between Fleet and BankBoston.
The foregoing opinion letter was provided for the information and assistance of
the Board of Directors of Fleet 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 Fleet has determined to include our opinion
in the above-referenced Registration Statement.
In that regard, we hereby consent to the reference to the opinion of our Firm
under the "Summary--Our Financial Advisors Believe the Exchange Ratio Is Fair
to Stockholders", "The Merger--Background of the Merger", "The
Merger--Recommendations of the Fleet Board and Reasons for the Merger" and "The
Merger--Opinions of Fleet's Financial Advisors" and to the inclusion of the
foregoing opinion in the Joint Proxy Statement/Prospectus included in the
<PAGE>
Fleet Financial Group, Inc.
July 8, 1999
Page Two
above-mentioned Registration Statement. In giving such consent, we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
- -------------------------
(GOLDMAN, SACHS & CO.)
<PAGE>
EXHIBIT 99(g)
<PAGE>
Exhibit 99(g)
[LETTERHEAD OF MERRILL LYNCH]
July 8, 1999
BankBoston Corporation
100 Federal Street
Boston, MA 02110
Members of the Board:
We hereby consent to the use of our opinion letter to the Board of Directors
of BankBoston Corporation, included as Appendix F to the Prospectus/Joint
Proxy Statement which forms a part of the Registration Statement on Form S-4
relating to the proposed merger of BankBoston with Fleet Financial Group,
Inc., and to the references to such opinion in such Prospectus/Joint Proxy
Statement under the captions "Summary," "THE MERGER--Background of the
Merger," "--Recommendation of the BankBoston Board and Reasons for the
Merger" and "--Opinions of BankBoston's Financial Advisors." In giving such
consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange
Commission thereunder, nor do we thereby admit that we are experts with
respect to any part of such Registration Statement within the meaning of the
term "experts" as used in the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
<PAGE>
EXHIBIT 99(h)
<PAGE>
Exhibit 99(h)
CONSENT OF MORGAN STANLEY & CO. INCORPORATED
BankBoston Corporation
Dear Sirs:
We hereby consent to the inclusion in the Registration Statement of
BankBoston Corporation ("BankBoston") and Fleet Financial Group, Inc. ("Fleet"),
relating to the proposed merger of BankBoston with and into Fleet, of our
opinion letter to the Board of Directors of BankBoston in the Joint Proxy
Statement/Prospectus which is a part of the Registration Statement, and to the
references of our firm name therein. 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, as amended, or the rules and
regulations adopted by the Securities and Exchange Commission thereunder nor do
we admit that we are experts with respect to any part of such Registration
Statement within the meaning of the term "experts" as used in the Securities Act
of 1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Stephen S. Crawford
--------------------------------
Stephen S. Crawford
Managing Director
July 8, 1999
