<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 4, 1995
REGISTRATION NO. 33-57627
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EF FECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SHAWMUT NATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 6712 06-1212629
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
777 MAIN STREET ONE FEDERAL STREET
HARTFORD, CONNECTICUT 06115 BOSTON, MASSACHUSETTS 02211
TEL. (203) 986-2000 TEL. (617) 292-2000
</TABLE>
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
J. MICHAEL SHEPHERD, ESQ.
ONE FEDERAL STREET
BOSTON, MASSACHUSETTS 02211
TEL. (617) 292-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
DONALD J. TOUMEY, ESQ. THOMAS J. HAGGERTY, ESQ.
SULLIVAN & CROMWELL CYNTHIA M. KRUS, ESQ.
125 BROAD STREET MULDOON, MURPHY & FAUCETTE
NEW YORK, NEW YORK 10004 5101 WISCONSIN AVENUE, N.W.
(212) 558-4000 WASHINGTON, D.C. 20016
(202) 362-0840
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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. / /
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- --------------------------------------------------------------------------------
<PAGE> 2
SHAWMUT NATIONAL CORPORATION
CROSS-REFERENCE SHEET BETWEEN ITEMS IN FORM S-4 AND PROSPECTUS OR PROSPECTUS
SUPPLEMENT
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
HEADING IN PROSPECTUS OR
ITEM NO. FORM S-4 CAPTION PROSPECTUS SUPPLEMENT
--------- --------------------------------------- ---------------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
Item 1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus............................. Cover Page of Registration Statement;
Cross Reference Sheet
Prospectus Supplement: Outside Front
Cover Page
Item 2. Inside Front and Outside Back Cover
Pages of Prospectus.................... Prospectus: Table of Contents
Prospectus Supplement: Inside Front
Cover Page; Table of Contents;
Available Information; Incorporation of
Certain Documents by Reference
Item 3. Risk Factors, Ratio of Earnings to
Fixed Charges and Other Information.... Prospectus: Summary; The Special
Meeting; The Merger
Prospectus Supplement: Recent
Developments; Updated Market Prices;
Shawmut National Corporation and
Subsidiaries Selected Financial Data;
Northeast Federal Corp. Selected
Financial Data; Updated Comparison of
Certain Per Share Data; Update of
Regulatory Approvals Required for the
Merger; Certain Information Regarding
the Shawmut/Fleet Merger
Item 4. Terms of the Transaction............... Prospectus: Summary; The Merger;
Description of Shawmut Capital Stock;
Comparison of Stockholder Rights
Prospectus Supplement: Certain
Information Regarding the Pending
Shawmut/Fleet Merger; Comparison of
Stockholder Rights
Item 5. Pro Forma Financial Information........ Prospectus Supplement: Updated
Comparison of Certain Per Share Data;
Unaudited Pro Forma Condensed Combined
Financial Information
Item 6. Material Contacts with the Company
Being Acquired......................... Prospectus: Summary; The Merger
Item 7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters.............. *
Item 8. Interests of Named Experts and
Counsel................................ *
Item 9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................ *
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
HEADING IN PROSPECTUS OR
ITEM NO. FORM S-4 CAPTION PROSPECTUS SUPPLEMENT
--------- --------------------------------------- ---------------------------------------
<S> <C> <C>
B. INFORMATION ABOUT THE REGISTRANT
Item 10. Information with Respect to S-3
Registrants............................ Prospectus: Summary; The Merger
Prospectus Supplement: Available
Information; Incorporation of Certain
Documents by Reference; Certain
Information Regarding the Pending
Shawmut/Fleet Merger; Unaudited Pro
Forma Condensed Combined Financial
Information
Item 11. Incorporation of Certain Information by
Reference.............................. Prospectus Supplement: Incorporation of
Certain Documents by Reference
Item 12. Information with Respect to S-2 or S-3
Registrants............................ *
Item 13. Incorporation of Certain Information by
Reference.............................. *
Item 14. Information with Respect to Registrants
Other than S-2 or S-3 Registrants...... *
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
Item 15. Information with Respect to S-3
Companies.............................. Prospectus Supplement: Available
Information; Incorporation of Certain
Documents by Reference
Item 16. Information with Respect to S-2 or S-3
Companies.............................. *
Item 17. Information with Respect to Companies
Other than S-2 or S-3 Companies *
D. VOTING AND MANAGEMENT INFORMATION
Item 18. Information if Proxies, Consents or
Authorizations Are to be Solicited..... Prospectus: Summary; The Special
Meeting; The Merger
Prospectus Supplement: Inside Front
Cover Page; Incorporation of Certain
Documents by Reference; Recent
Developments; Comparison of Stockholder
Rights
Item 19. Information if Proxies, Consents or
Authorizations Are to be Solicited in
an Exchange Offer...................... *
</TABLE>
- ---------------
* Omitted because inapplicable or answer is in the negative.
<PAGE> 4
[NORTHEAST FEDERAL CORP. LOGO]
70 Batterson Park Road
Farmington, Connecticut 06034
May , 1995
Dear Fellow Common Stockholder:
On February 13, 1995, Northeast Federal Corp. ("Northeast" or the
"Company") mailed to you the Notice of Special Meeting and Proxy
Statement/Prospectus ("Proxy Statement/Prospectus") relating to the Special
Meeting of Shareholders of Northeast (the "Special Meeting") initially convened
on Friday, March 17, 1995 at 10:00 a.m. at [The Hartford Club, 46 Prospect
Street, Hartford, Connecticut]. Such meeting was adjourned until April 14, 1995
and at that time again was adjourned until May 11, 1995. Northeast intends
further to adjourn the Special Meeting until May , 1995, at a.m. at [The
Hartford Club, 46 Prospect Street, Hartford, Connecticut], in order to permit
stockholders of Northeast to receive and consider the information contained in
the accompanying Proxy Statement/Prospectus Supplement (the "Supplement").
As described in the Proxy Statement/Prospectus, another copy of which has
been included with the Supplement for your convenience, at the reconvened
Special Meeting you will be asked to consider and vote upon a proposal to
approve and adopt an Agreement and Plan of Merger, dated as of June 11, 1994
(the "Merger Agreement"), by and between Shawmut National Corporation
("Shawmut") and the Company, pursuant to which a wholly owned subsidiary of
Shawmut will merge (the "Merger") with and into the Company, with the Company
becoming a wholly owned subsidiary of Shawmut. After the mailing of the Proxy
Statement/Prospectus, Shawmut and Fleet Financial Group, Inc., a bank holding
company with its principal offices in Providence, Rhode Island ("Fleet"),
entered into an Agreement and Plan of Merger, dated as of February 20, 1995 (the
"Shawmut/Fleet Merger Agreement"), pursuant to which Shawmut would merge (the
"Shawmut/Fleet Merger") with and into Fleet, with Fleet being the surviving
corporation. The Shawmut/Fleet Merger Agreement provides that upon consummation
of the Shawmut/Fleet Merger, each share of common stock, par value $.01 per
share, of Shawmut ("Shawmut Common Stock") would be exchanged, with certain
exceptions, for .8922 shares of common stock of Fleet ("Fleet Common Stock").
Accordingly, if the Merger is consummated, each share of Shawmut Common Stock
received by a Northeast stockholder in the Merger ultimately will be converted
into .8922 shares of Fleet Common Stock if the Shawmut/Fleet Merger is also
consummated.
As a result of Shawmut's entry into the Shawmut/Fleet Merger Agreement,
Northeast has had to postpone the stockholder vote on the Merger Agreement in
order to furnish you information regarding the proposed Shawmut/Fleet Merger. In
this regard, we are enclosing the Supplement in order to provide you with
additional information.
As described in the Proxy Statement/Prospectus, consummation of the Merger
is subject to certain conditions, including the approval of the Merger Agreement
by Northeast's stockholders and by various regulatory agencies. Subject to the
foregoing conditions, the Merger currently is expected to close in the second
quarter of 1995, but there can be no assurance that such conditions will be met
or, if met, as to the timing of the closing of the Merger. As described in the
Supplement, the Shawmut/Fleet Merger is subject to certain conditions, including
the approval of the Shawmut/Fleet Merger Agreement by Shawmut and Fleet
stockholders and various regulatory agencies, including the Board of Governors
of the Federal Reserve System. Subject to the foregoing conditions, the
Shawmut/Fleet Merger currently is expected to close in the fourth quarter of
1995, but there can be no assurance that such conditions will be met or, if met,
as to the timing of the closing of the Shawmut/Fleet Merger.
Northeast's Board of Directors has considered the change in circumstance
occasioned by the execution of the Shawmut/Fleet Merger Agreement and has
reconfirmed its approval of the proposed Merger and has determined that the
Merger remains in the best interests of the stockholders of Northeast assuming
that the Shawmut Common Stock Average Price (as defined in the Proxy
Statement/Prospectus) is at least $21.465, and, accordingly, reconfirms its
recommendation that you vote for approval of the Merger Agreement.
<PAGE> 5
The Supplement describes the Shawmut/Fleet Merger and provides information
which may be relevant to your vote at the Special Meeting. Please read these
materials carefully and consider the information contained in them. The
Supplement should be read in conjunction with the Proxy Statement/Prospectus
mailed to you on or about February 13, 1995, a copy of which has been included
with the Supplement for your convenience.
IN THE EVENT YOU HAVE NOT YET SIGNED AND RETURNED THE PROXY CARD ENCLOSED
WITH THE PROXY STATEMENT/PROSPECTUS DATED FEBRUARY 10, 1995, OR IN THE EVENT YOU
WISH TO REVOKE SUCH PROXY AND CHANGE YOUR VOTE, I URGE YOU TO EXECUTE, DATE, AND
RETURN THE ENCLOSED PROXY CARD (MARKED WITH A BLUE STRIPE) IN THE ENCLOSED
POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE TO ENSURE THAT YOUR SHARES WILL BE
VOTED AT THE SPECIAL MEETING. YOU NEED NOT EXECUTE THE ENCLOSED PROXY CARD
(MARKED WITH A BLUE STRIPE) IF YOU PREVIOUSLY HAVE EXECUTED, DATED AND RETURNED
A PROXY CARD AND YOU DO NOT WISH TO CHANGE YOUR VOTE. YOU SHOULD NOT SEND IN
CERTIFICATES FOR YOUR NORTHEAST SHARES AT THIS TIME.
It is very important that your shares be represented at the Special
Meeting, regardless of whether you plan to attend in person and whether or not
you have previously executed and returned the proxy card enclosed with the Proxy
Statement/Prospectus dated February 10, 1995. The affirmative vote of at least a
majority of the outstanding shares of Company common stock is required to
approve the Merger Agreement. Consequently, a failure to vote will have the same
effect as a vote against the Merger Agreement.
On behalf of the Northeast Board of Directors, I thank you for your support
and patience in light of the delay that has resulted from the proposed
Shawmut/Fleet Merger, and urge you to vote for approval of the Merger Agreement.
Cordially,
/s/ Kirk W. Walters
KIRK W. WALTERS
Chairman of the Board
2
<PAGE> 6
NORTHEAST FEDERAL CORP.
PROXY STATEMENT SUPPLEMENT
(TO PROXY STATEMENT DATED FEBRUARY 10, 1995)
FOR
ADJOURNED SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MAY , 1995
------------------------
SHAWMUT NATIONAL CORPORATION
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED FEBRUARY 10, 1995)
------------------------
8,034,055 SHARES OF COMMON STOCK
This Proxy Statement/Prospectus Supplement (the "Proxy Statement/Prospectus
Supplement") is being furnished to stockholders of Northeast Federal Corp.
("Northeast") in connection with the solicitation of proxies by the Board of
Directors of Northeast for use at the special meeting of stockholders of
Northeast (including any adjournments or postponements thereof) initially
convened on March 17, 1995 and as adjourned until April 14, 1995 and then until
May 11, 1995 and further adjournments thereof so as to permit stockholders of
Northeast to receive and consider the information contained herein (the "Special
Meeting"). Northeast intends to further adjourn the Special Meeting until May
, 1995, at a.m. at [The Hartford Club, 46 Prospect Street, Hartford,
Connecticut.] This Proxy Statement/Prospectus Supplement is a supplement to and
should be read in conjunction with the accompanying Proxy Statement/Prospectus
dated February 10, 1995, which was initially mailed to Northeast stockholders on
or about February 13, 1995. Any statement contained in that Proxy
Statement/Prospectus will be deemed to be modified or superseded to the extent
that a statement contained herein modifies or supersedes such statement but,
except as so modified or superseded, all statements contained therein shall
remain in full force and effect as if fully set forth herein.
The Special Meeting has been called for Northeast stockholders to consider
and vote upon the proposed merger of a wholly owned subsidiary of Shawmut
National Corporation ("Shawmut") with and into Northeast (the "Merger") with
Northeast surviving as a wholly owned subsidiary of Shawmut pursuant to the
Agreement and Plan of Merger, dated as of June 11, 1994 (the "Merger
Agreement"), by and between Shawmut and Northeast and certain transactions
contemplated thereby. Subsequent to the mailing of the Proxy
Statement/Prospectus, Shawmut and Fleet Financial Group, Inc. ("Fleet") entered
into an Agreement and Plan of Merger, dated as of February 20, 1995 (the
"Shawmut/Fleet Merger Agreement"), which provides for the merger (the
"Shawmut/Fleet Merger") of Shawmut with and into Fleet, with Fleet being the
surviving corporation.
This Proxy Statement/Prospectus Supplement also constitutes a prospectus
supplement of Shawmut with respect to up to 8,034,055 shares of common stock,
par value $.01 per share, of Shawmut ("Shawmut Common Stock") issuable to
holders of common stock, par value $.01 per share, of Northeast ("Northeast
Common Stock") in the Merger. Upon consummation of the Merger, each outstanding
share of Northeast Common Stock will, with certain exceptions (including the
issuance of cash in lieu of fractional shares), be converted into and
exchangeable for a number of shares (the "Exchange Ratio") of Shawmut Common
Stock, determined as follows:
(i) if the Shawmut Common Stock Average Price (as defined below) is
greater than or equal to $26.235, the Exchange Ratio will be .415;
(ii) if the Shawmut Common Stock Average Price is less than $26.235
but equal to or greater than $21.465, the Exchange Ratio will be (a)
$10.875 divided by (b) the Shawmut Common Stock Average Price; or
(iii) if the Shawmut Common Stock Average Price is less than $21.465,
the Exchange Ratio will be .507; provided, however, that, as described
below, under such circumstances Northeast has the right to, and represents
to its stockholders that it will, terminate the Merger Agreement, subject
to the right of Shawmut to avoid such termination by an increase in the
Exchange Ratio.
IF THE SHAWMUT COMMON STOCK AVERAGE PRICE IS LESS THAN $21.465, NORTHEAST'S
BOARD OF DIRECTORS (THE "NORTHEAST BOARD") HAS THE RIGHT TO, AND REPRESENTS TO
ITS STOCKHOLDERS THAT IT WILL, ELECT TO TERMINATE THE MERGER AGREEMENT UNLESS
SHAWMUT INCREASES THE EXCHANGE RATIO SO THAT THE SHARES OF SHAWMUT COMMON STOCK
ISSUED IN EXCHANGE FOR EACH SHARE OF NORTHEAST COMMON STOCK HAVE A VALUE (VALUED
AT THE SHAWMUT COMMON STOCK AVERAGE PRICE) OF $10.875. IN SUCH EVENT SHAWMUT
WILL NOT INCREASE THE EXCHANGE RATIO ABOVE .507. "Shawmut Common Stock Average
Price" means the average daily closing price of Shawmut Common Stock as reported
on The New York Stock Exchange ("NYSE") Composite Transaction reporting system
for the 15 consecutive full trading days ending at the close of trading on the
trading day immediately prior to the Determination Date. "Determination Date"
means the date on which the last regulatory approval required to consummate the
Merger has been obtained and all statutory waiting periods in respect thereof
have expired.
Based on the last reported sales price per share of Shawmut Common Stock on
May , 1995 of $ (assuming that this is the Shawmut Common Stock
Average Price as described above), each share of Northeast Common Stock would be
exchangeable for shares of Shawmut Common Stock having a value of
$ .
This Proxy Statement/Prospectus Supplement and the accompanying form of
proxy is first being mailed to stockholders of Northeast on or about May ,
1995.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE SHARES OF SHAWMUT COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND,
THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
The date of this Proxy Statement/Prospectus Supplement is May , 1995
<PAGE> 7
THIS PROXY STATEMENT/PROSPECTUS SUPPLEMENT SHOULD BE READ CAREFULLY AND
SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS
DATED FEBRUARY 10, 1995, WHICH WAS INITIALLY MAILED TO NORTHEAST STOCKHOLDERS ON
OR ABOUT FEBRUARY 13, 1995.
IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. THEREFORE, IN THE
EVENT YOU HAVE NOT YET SIGNED AND RETURNED THE PROXY CARD ENCLOSED WITH THE
PROXY STATEMENT/PROSPECTUS DATED FEBRUARY 10, 1995, OR IN THE EVENT YOU WISH TO
REVOKE SUCH PROXY AND CHANGE YOUR VOTE, WHETHER OR NOT YOU PLAN TO BE PRESENT IN
PERSON AT THE SPECIAL MEETING, PLEASE VOTE, DATE AND SIGN THE ENCLOSED PROXY
CARD (MARKED WITH A BLUE STRIPE) AND RETURN IT IN THE ENCLOSED ENVELOPE WHICH
DOES NOT REQUIRE POSTAGE IF MAILED IN THE UNITED STATES. THIS WILL NOT PREVENT
YOU FROM VOTING IN PERSON IF YOU ARE PRESENT AT THE MEETING.
YOU NEED NOT EXECUTE THE ENCLOSED PROXY CARD (MARKED WITH A BLUE STRIPE) IF
YOU PREVIOUSLY HAVE EXECUTED, DATED AND RETURNED A PROXY CARD AND YOU DO NOT
WISH TO CHANGE YOUR VOTE. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS
EXERCISE IN THE MANNER DESCRIBED IN THE PROXY STATEMENT/PROSPECTUS. ANY
STOCKHOLDER PRESENT AT THE SPECIAL MEETING, INCLUDING ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF, MAY REVOKE HIS OR HER PROXY AND VOTE PERSONALLY ON EACH
MATTER BROUGHT BEFORE THE SPECIAL MEETING.
No persons have been authorized to give any information or to make any
representations other than those contained in this Proxy Statement/Prospectus
Supplement, the accompanying Proxy Statement/Prospectus or incorporated by
reference herein or therein in connection with the solicitation of proxies or
the offering of securities made hereby and, if given or made, such information
or representations must not be relied upon as having been authorized by Shawmut
or Northeast. This Proxy Statement/Prospectus Supplement, together with the
accompanying Proxy Statement/Prospectus, does not constitute an offer to sell,
or a solicitation of an offer to buy, any securities, or the solicitation of a
proxy, in any jurisdiction, to or from any person to whom it is not lawful to
make any such offer or solicitation in such jurisdiction. Neither the delivery
of this Proxy Statement/Prospectus Supplement, together with the accompanying
Proxy Statement/Prospectus, nor any distribution of securities made hereunder
shall, under any circumstances, create an implication that there has been no
change in the affairs of Shawmut or Northeast since the date of this Proxy
Statement/Prospectus Supplement or that the information herein or in the
documents or reports incorporated by reference herein is correct as of any time
subsequent to such date. All information set forth herein or therein or
incorporated by reference herein or therein relating to Shawmut and its
subsidiaries has been supplied by Shawmut and all information set forth herein
or therein or incorporated by reference herein or therein relating to Northeast
and its subsidiaries has been supplied by Northeast.
------------------------
NORTH CAROLINA
The Commissioner of Insurance of the State of North Carolina has not
approved or disapproved this offering nor has the Commissioner passed upon the
accuracy or adequacy of this Proxy Statement/Prospectus Supplement or the
accompanying Proxy Statement/Prospectus.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION......................... S-3
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE................................... S-3
RECENT DEVELOPMENTS........................... S-5
UPDATED MARKET PRICES......................... S-9
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA..................... S-11
NORTHEAST FEDERAL CORP. SELECTED FINANCIAL
DATA........................................ S-12
UPDATED COMPARISON OF CERTAIN PER SHARE
DATA........................................ S-13
UPDATE OF REGULATORY APPROVALS REQUIRED FOR
THE MERGER.................................. S-14
UPDATED INTEREST OF CERTAIN PERSONS IN THE
MERGER...................................... S-15
NORTHEAST STOCK OWNERSHIP..................... S-17
CERTAIN INFORMATION REGARDING THE PENDING
SHAWMUT/FLEET MERGER........................ S-18
General..................................... S-18
Effect of Shawmut/Fleet Merger on Northeast
and Northeast Stockholders................ S-20
Board of Directors, Management and
Operations of Fleet following the
Shawmut/Fleet Merger...................... S-20
Shawmut and Fleet Stock Options............. S-23
Certain Federal Income Tax Considerations... S-24
Updated Opinion of Financial Advisor........ S-24
<CAPTION>
PAGE
------
<S> <C>
Involvement in Certain Legal Proceedings.... S-24
Recommendation of the Board of Directors.... S-25
DESCRIPTION OF FLEET CAPITAL STOCK............ S-25
General..................................... S-25
Fleet Common Stock.......................... S-26
Fleet Preferred Stock....................... S-29
COMPARISON OF STOCKHOLDER RIGHTS.............. S-32
Voting Rights............................... S-32
Action by Written Consent................... S-33
Special Meetings of Stockholders............ S-33
Stockholder Nominations and Proposals
for Business.............................. S-34
Business Combinations....................... S-35
Rights Plan................................. S-38
Amendment of Certificate of Incorporation or
By-Laws................................... S-38
Size and Classification of Board of
Directors................................. S-39
Removal of Directors........................ S-40
Dividends................................... S-41
Appraisal Rights............................ S-41
Derivative Suits............................ S-41
State Anti-Takeover Statutes................ S-42
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION....................... S-44
EXPERTS....................................... S-58
ANNEX A: UPDATED OPINION OF LEHMAN BROTHERS
INC......................................... S-A-1
</TABLE>
S-2
<PAGE> 8
AVAILABLE INFORMATION
Shawmut and Northeast are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by Shawmut and Northeast with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at 7 World Trade Center,
13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison,
Suite 1400, Chicago, Illinois 60661. Copies of such material also can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, copies
of such material filed by Shawmut and Northeast can be inspected at the offices
of the NYSE, 20 Broad Street, New York, New York 10005.
Shawmut has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereof, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of Shawmut Common Stock that may be issued pursuant to the Merger
Agreement. This Proxy Statement/Prospectus Supplement and the accompanying Proxy
Statement/Prospectus dated February 10, 1995 do not contain all the information
set forth in the Registration Statement and the exhibits thereto. Such
additional information may be inspected and copied as set forth above.
Statements contained in this Proxy Statement/Prospectus Supplement or in any
document incorporated by reference in this Proxy Statement/Prospectus Supplement
as to the contents of any contract or other document referred to herein or
therein are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement or such other document, each such statement being
qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Shawmut (File No.
1-10102) and Northeast (File No. 1-10571) are incorporated by reference in this
Proxy Statement/Prospectus Supplement:
1. Shawmut's Annual Report on Form 10-K for the year ended December
31, 1994 (as amended by a Form 10-K/A filed April 28, 1995)(the "1994
Shawmut Form 10-K").
2. Shawmut's Current Reports on Form 8-K dated January 6, 1995,
January 11, 1995 (as amended by a Report on Form 8-K/A dated January 11,
1995), January 17, 1995, January 26, 1995, February 7, 1995 (as amended by
a Report on Form 8-K/A dated February 7, 1995), February 20, 1995, February
21, 1995, April 13, 1995 (consolidated financial statements of Fleet for
the year ended December 31, 1994 are included in Shawmut's Current Report
on Form 8-K dated April 13, 1995) and April 19, 1995.
3. The description of Shawmut Common Stock and Shawmut Series A Junior
Participating Preferred Stock and Preferred Stock Purchase Rights set forth
in Shawmut's Registration Statements on Form 8-A dated November 29, 1988
and March 7, 1989 (as amended by a Form 8-A/A dated March 2, 1995).
4. Northeast's Annual Report on Form 10-K for the year ended December
31, 1994 (as amended by a Form 10-K/A filed May 1, 1995) (the "1994
Northeast Form 10-K").
5. The description of Northeast Common Stock set forth in Northeast's
Registration Statement on Form 8-B dated July 6, 1990, and any amendments
or updates thereto.
All documents and reports filed by Shawmut or Northeast pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement/Prospectus Supplement and prior to the date of the Special Meeting
shall be deemed to be incorporated by reference in this Proxy
Statement/Prospectus Supplement and to be a part hereof from the dates of filing
of such documents or reports. Any statement
S-3
<PAGE> 9
contained in a document or report incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus Supplement to the extent that a statement
contained herein, or in any other subsequently filed document or report that
also is deemed to be incorporated by reference herein, modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this Proxy
Statement/Prospectus Supplement.
THIS PROXY STATEMENT/PROSPECTUS SUPPLEMENT INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS
SUPPLEMENT IS DELIVERED, ON WRITTEN OR ORAL REQUEST, IN THE CASE OF DOCUMENTS
RELATING TO SHAWMUT, TO SHAWMUT NATIONAL CORPORATION, 777 MAIN STREET, MSN309,
HARTFORD, CONNECTICUT 06115, ATTENTION: SHAREHOLDER RELATIONS, TELEPHONE NUMBER
(203) 986-2028, AND IN THE CASE OF DOCUMENTS RELATING TO NORTHEAST, TO NORTHEAST
FEDERAL CORP., 70 BATTERSON PARK ROAD, FARMINGTON, CONNECTICUT 06034, ATTENTION:
SHAREHOLDER RELATIONS, TELEPHONE NUMBER (203) 679-0830. IN ORDER TO ENSURE
TIMELY DELIVERY OF SUCH DOCUMENTS, A REQUEST MUST BE RECEIVED NO LATER THAN MAY
, 1995.
S-4
<PAGE> 10
RECENT DEVELOPMENTS
SHAWMUT/FLEET MERGER AGREEMENT
On February 20, 1995, Shawmut entered into the Shawmut/Fleet Merger
Agreement with Fleet, which provides for the Shawmut/Fleet Merger. Upon
consummation of the Shawmut/Fleet Merger, among other things, each share of
Shawmut Common Stock would be converted into and exchangeable for, with certain
exceptions, .8922 shares of common stock of Fleet (the "Fleet Common Stock").
Shawmut's entry into the Shawmut/Fleet Merger Agreement has necessitated
the dissemination to the Northeast stockholders of the information contained
herein for their consideration in connection with their vote regarding the
Merger Agreement. As a result, Northeast found it necessary to adjourn the
Special Meeting from its originally scheduled date of March 17, 1995 to April
14, 1995 and then until May 11, 1995. Northeast intends to further adjourn the
Special Meeting until May , 1995. Assuming (i) the Northeast stockholders
approve the Merger Agreement at the Special Meeting, (ii) the Merger is
consummated and (iii) the Merger is consummated prior to the consummation of the
Shawmut/Fleet Merger, each outstanding share of Northeast Common Stock, with
certain exceptions, will be converted into and exchangeable for that number of
shares of Shawmut Common Stock determined by the Exchange Ratio.
In addition, assuming consummation of the Shawmut/Fleet Merger, each
outstanding share of Shawmut Common Stock (including each share of Shawmut
Common Stock that will have been issued to Northeast Stockholders pursuant to
the Merger, assuming the Shawmut/Fleet Merger is consummated subsequent to the
consummation of the Merger) would be converted into and exchangeable for, with
certain exceptions, .8922 shares of Fleet Common Stock (the "Shawmut/Fleet
Exchange Ratio"), pursuant to the terms of the Shawmut/Fleet Merger Agreement.
If both the Merger and the Shawmut/Fleet Merger are consummated, each share of
Northeast Common Stock ultimately would be converted into between .370 and .452
shares of Fleet Common Stock (the product of the Shawmut/Fleet Exchange Ratio
and the Exchange Ratio) depending upon the Shawmut Common Stock Average Price,
except that cash will be paid in lieu of fractional shares of Shawmut Common
Stock, in the case of Northeast, and Fleet Common Stock, in the case of Shawmut.
Shawmut has set June 21, 1995 as the date for its 1995 Annual Meeting at
which the holders of Shawmut Common Stock are to vote on the Shawmut/Fleet
Merger Agreement and has established May 3, 1995 as the record date for its
stockholders entitled to vote at such meeting. As a result, the Merger will not
be consummated in time for Northeast stockholders to become Shawmut stockholders
and have an opportunity to vote as Shawmut stockholders on the Shawmut/Fleet
Merger.
Northeast stockholders should understand that at the Special Meeting the
stockholders are voting on the Merger, and that there is no assurance that the
Shawmut/Fleet Merger will be consummated. If Northeast stockholders vote to
approve the Merger, such stockholders must be willing to accept their ownership
interest in Shawmut without regard to whether the Shawmut/Fleet Merger is
consummated. See "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION."
Subject to the conditions described in "CERTAIN INFORMATION REGARDING THE
PENDING SHAWMUT/FLEET MERGER -- Conditions to the Shawmut/Fleet Merger" below
and the accompanying Proxy Statement/Prospectus under "THE MERGER -- Conditions
to Consummation of the Merger," the Merger is currently expected to close in the
second quarter of 1995 and the Shawmut/Fleet Merger currently is expected to
close in the fourth quarter of 1995.
RESULTS OF OPERATIONS FOR QUARTER ENDED MARCH 31, 1995
Shawmut. Shawmut's net income for the quarter ended March 31, 1995 was
$62.6 million, or $.47 per common share, compared with net income of $77.3
million, or $.62 per common share for the first quarter of 1994. Included in
first quarter 1995 results was a $36.9 million pre-tax charge ($23.1 million
after-tax, or $.19 per common share) related to the settlement of certain
Shawmut employee retirement benefits caused by the
S-5
<PAGE> 11
pending Shawmut/Fleet Merger. First quarter 1995 results reflect the acquisition
of the Business Finance Division of Barclays Business Credit, Inc. ("Barclays").
Tax equivalent net interest income for the quarter ended March 31, 1995
totaled $273.2 million, compared with $275.4 million for the comparable period
in the previous year. The net interest margin for the first quarter of 1995 was
3.55 percent, compared to 3.65 percent for the fourth quarter of 1994 and 3.91
percent for the first quarter of 1994. The increase in net interest income
relative to the fourth quarter of 1994 resulted from growth in average
interest-earning assets, primarily due to the purchase acquisition of Barclays.
The decline in net interest margin for the same period resulted from the
liability sensitive nature of Shawmut's balance sheet in an environment of
rising interest rates. Consistent with its strategy in recent quarters, Shawmut
has extended funding maturities while shortening asset maturities to lessen
liability sensitivity. These risk reduction actions have contributed to the
decline in net interest margin.
Noninterest income for the quarter ended March 31, 1995 was $95.3 million,
compared with $88.7 million for the comparable prior year period. This
improvement in noninterest income was primarily due to the acquisition of
Barclays and purchases of other companies during 1994, which contributed to
increases in customer service and other fees.
Noninterest expenses for the quarter ended March 31, 1995 before the merger
related charge discussed above were $228.7 million, compared with $241.8 million
in the first quarter of 1994. Noninterest expenses for the first quarter of 1995
included $2.9 million of stock incentive adjustments reflecting the increase in
Shawmut's stock price which was influenced by the announcement of the
Shawmut/Fleet Merger and $9.0 million added by the acquisition of Barclays.
Excluding these items, noninterest expenses of $216.8 million declined by $25
million when compared with the first quarter of 1994, primarily due to Shawmut's
continuing cost management program and acquisition consolidation.
There was no provision for credit losses for the first quarter of 1995,
compared with $3.0 million for the first quarter of 1994. With continuing
increases in reserve coverage of nonaccruing loans and improving credit quality
in the loan portfolio, Shawmut does not currently anticipate that provisions for
credit losses will be necessary in the first half and possibly all of 1995.
At March 31, 1995, nonaccruing loans plus foreclosed properties were $240.3
million, compared with $242.8 million at December 31, 1994, or 1.14 percent and
1.31 percent, respectively, of total loans plus foreclosed properties.
Nonaccruing loans increased from $224.0 million at December 31, 1994 to $228.4
million at March 31, 1995. The acquisition of Barclays increased nonaccruing
loans by $14.1 million at period end and an additional $13.0 million of loans
were identified as assets held for accelerated disposition.
Shawmut's reserve for credit losses increased $17.1 million from $542.1
million at December 31, 1994 to $559.2 million at March 31, 1995, due to the
addition of $41.7 million of reserves purchased as part of the Barclays
acquisition, net of loans charged off of $24.6 million for the quarter. At March
31, 1995, Shawmut's ratio of credit loss reserves to nonaccruing loans was 245
percent, compared with 242 percent at December 31, 1994.
At March 31, 1995, Shawmut had total assets of $34.2 billion, total
deposits of $20.6 billion and total shareholders' equity of $2.4 billion. Total
loans and leases were $21.1 billion at March 31, 1995, compared with $18.5
billion at December 31, 1994. The increase in loans of $2.6 billion from year
end was due to the acquisition of Barclays. Shawmut's securities portfolio at
March 31, 1995 was $9.9 billion, compared with $10.0 billion at December 31,
1994. The after-tax unrealized loss on Shawmut's $2.1 billion available for sale
securities portfolio recorded as a component of shareholders' equity declined to
$37.4 million at March 31, 1995 from $54.3 million at year end. The unrealized
loss on Shawmut's $7.8 billion held to maturity securities portfolio declined to
$248.5 million at March 31, 1995 from $438.5 million at year end, or a decrease
of $190.0 million. At March 31, 1995, Shawmut's capital ratios exceeded the
ratios designated for well-capitalized financial institutions.
Fleet. Fleet's net income for the quarter ended March 31, 1995 was $164
million, or $1.02 per fully diluted share, compared to net income of $136
million, or $0.79 per fully diluted share for the first quarter of 1994, an
increase of 29%.
S-6
<PAGE> 12
Net interest income for the quarter ended March 31, 1995 totaled $487
million ($497 million on a fully taxable equivalent basis) compared to $482
million ($493 million on a fully taxable equivalent basis) for the fourth
quarter of 1994 and $504 million ($512 million on a fully taxable equivalent
basis) for the first quarter of 1994. The higher net interest margin of 4.83%,
an increase of 8 basis points over the 4.75% recorded in the fourth quarter of
1994, reflected a reduction in Fleet's securities portfolio as a result of
actions taken in the last half of 1994 to restructure its securities portfolio
and improve its sensitivity to rising interest rates and an increase in higher
yielding average loans outstanding, due in part to the acquisition of NBB
Bancorp, Inc. ("NBB") in January, 1995. These actions, coupled with an increase
in Fleet's prime rate during the first quarter, resulted in an increase in the
yield on interest earning assets from 8.03% in the fourth quarter of 1994 to
8.54% in the first quarter of 1995. This increase, however, was partially offset
by an increase in Fleet's overall cost of funds which was the result of
customers moving into higher yield time deposits, coupled with the impact of any
increase in short-term borrowing rates by the Federal Reserve of 50 basis points
during the first quarter of 1995.
Noninterest income for the quarter ended March 31, 1995 totaled $308
million, compared to $295 million for the same period in 1994. Mortgage banking
revenue of $99 million in the first quarter of 1995 remained basically even with
the $100 million recorded in the first quarter of 1994, reflecting a reduction
in mortgage production revenue, as this business has been negatively impacted by
rising interest rates over the past year, offset by an increase in mortgage
servicing revenue and gains on sale of servicing. Fleet's servicing portfolio
totaled $90 billion at March 31, 1995 compared to $70 billion at March 31, 1994.
Service charges, fees and commissions increased $13 million as a result of the
implementation of various fee producing programs initiated as part of Fleet's
efficiency improvement programs. Investment services revenue improved slightly
to $46 million, compared to the first quarter of 1994.
Noninterest expenses for the quarter ended March 31, 1995 were $498
million, a reduction of $52 million, compared to the $550 million reported for
the first quarter of 1994. The decrease is primarily attributable to the
successful implementation of numerous cost-cutting strategies developed as part
of Fleet's efficiency-improvement programs. The first quarter of 1994 included a
$25 million restructuring charge related to such efficiency improvement program.
Fleet's first quarter of 1995 provision for credit losses was $20 million,
a slight decrease from the prior year's first quarter. Net charge-offs for the
first quarter of 1995 totaled $35 million, compared to $32 million in the first
quarter of 1994. Expenses related to other real estate owned ("OREO") were $3
million for the first three months of 1995, compared to $7 million in the first
three months of 1994.
Nonperforming assets at March 31, 1995 increased to $578 million from $518
million at December 31, 1994, due primarily to the acquisition of NBB and Plaza
Home Mortgage Corporation ("Plaza").
Fleet's reserve for loan losses also rose to $966 million from $953
million. At March 31, 1995, Fleet's ratio of reserves to nonperforming loans was
198%, compared to 208% at March 31, 1994.
At March 31, 1995 Fleet had total assets of $47.8 billion, while total
loans and leases were $29.5 billion at the same date, compared with $48.8
billion of total assets and $27.7 billion of loans and leases at December 31,
1994. Total assets and loans and leases were $47.4 billion and $26.0 billion,
respectively, at March 31, 1994. Excluding the NBB and Plaza acquisitions, loans
and leases increased by approximately $513 million, or 8% on an annualized
basis, from December 31, 1994. The largest increases were noted in the
commercial and residential real estate portfolio. Fleet's investment securities
portfolio remained relatively stable from December 31, 1994 to March 31, 1995 at
$11 billion. However, the depreciation in the portfolio was reduced to
approximately $200 million at March 31, 1995, a reduction of more than $400
million from December 31, 1994 as a result of an increase in yields in the bond
market in the first quarter.
Stockholder's equity equaled $3.9 billion at March 31, 1995 and $3.4
billion at December 31, 1994, an increase of $500 million. This increase is
primarily attributable to the reissuance in the NBB acquisition of $217 million
of treasury stock purchased by Fleet for that purpose, and a $240 million
after-tax improvement in Fleet's securities available for sale valuation
reserve.
At March 31, 1995, Fleet's capital ratios exceeded all minimum regulatory
capital requirements.
S-7
<PAGE> 13
Northeast. Northeast reported net income of $2.5 million for the first
quarter ended March 31, 1995, resulting in primary and fully diluted net income
per common share of $0.11 after preferred stock dividend requirements. This
compares to net income of $1.0 million, or a primary and fully diluted net
income per common share of $0.01 after preferred stock dividend requirements for
the first quarter of 1994. Northeast considers such net income for the first
quarter of 1995 to be on target with its projection for 1995 that it would earn
between $14 and $17 million, or $0.75 to $0.95 per share after preferred stock
dividend requirements. See "Recent Developments -- Northeast -- Projection of
Earnings for 1995 and 1996" in the Proxy Statement/ Prospectus.
Non-performing assets at March 31, 1995 were $43.8 million, or 1.3% of
total assets, compared to $42.5 million at December 31, 1994. Non-performing
assets at March 31, 1995 were down significantly from the $90.9 million amount
at March 31, 1994, representing 2.5% of total assets at that date. Real estate
and other assets acquired by foreclosure or in settlement of loans ("REO"), one
component of non-performing assets, of $15.9 million at March 31, 1995
represents an increase from the $13.2 million amount at December 31, 1994 but
represents a significant decline from $58.6 million at March 31, 1994, due to
sales of REO in 1994. Non-accrual loans, the other component of non-performing
assets, decreased to $27.9 million at March 31, 1995 compared to $29.3 million
at December 31, 1994 and $32.3 million at March 31, 1994.
General and administrative expenses for the quarter ended March 31, 1995
decreased to $12.1 million from $13.9 million and $18.4 million for the quarters
ended December 31, 1994 and March 31, 1994, respectively. These improvements
reflect the sale of branches and the discontinuation of lending operations
outside Northeast's core markets, along with accompanying reductions in overhead
costs. Deposit insurance expense decreased to $1.7 million in the first quarter
of 1995 from $2.1 million in the fourth quarter of 1994 and $2.4 million in the
first quarter of 1994 due to the branch sales and to a reduction in insurance
premiums as a result of Northeast being considered "well capitalized."
Consistent with the reduction in the amount of REO, expenses associated with REO
were $580,000 in the first quarter of 1995 compared to $286,000 in the fourth
quarter of 1994 and $10.3 million in the first quarter of 1994.
For the fourth consecutive quarter, Northeast's subsidiary, Northeast
Savings, F.A. ("Northeast Savings") met the definition of a well-capitalized
thrift. Northeast Savings' core capital ratio improved to 5.38% at March 31,
1995, from 4.67% at March 31, 1994. Tangible core capital and total risk based
capital improved to 5.38% and 15.95% at March 31, 1995 compared to 4.65% and
13.44% at March 31, 1994, respectively.
NEW ADDRESS FOR NORTHEAST
Northeast has moved to its new executive offices at 70 Batterson Park Road,
Farmington, Connecticut 06034 and its telephone number is 203-679-0500.
S-8
<PAGE> 14
UPDATED MARKET PRICES
Shawmut Common Stock is listed and traded principally on the New York Stock
Exchange (the "NYSE") under the symbol "SNC." Fleet Common Stock is listed and
traded principally on the NYSE under the symbol "FLT." Northeast Common Stock is
listed and traded principally on the NYSE under the symbol "NSB."
The following table sets forth, for the periods indicated, the high and low
sale prices per share for Shawmut Common Stock, Fleet Common Stock and Northeast
Common Stock as reported on the NYSE.
<TABLE>
<CAPTION>
SHAWMUT FLEET NORTHEAST
------------- ------------- ------------
HIGH LOW HIGH LOW HIGH LOW
---- ---- ---- ---- ---- ---
<S> <C> <C> <C> <C> <C> <C>
YEAR
1994:
First Quarter.......................... $24 $19 3/4 $38 $31 3/4 $ 7 1/2 $4 3/8
Second Quarter......................... 25 19 1/4 41 3/8 34 3/8 10 1/2 6 3/4
Third Quarter.......................... 24 1/8 20 1/4 40 1/2 34 7/8 10 1/8 9 3/8
Fourth Quarter......................... 21 1/8 16 3/8 37 7/8 29 7/8 10 1/8 7 5/8
1995:
First Quarter.......................... 27 16 1/2 35 1/8 29 7/8 11 7 5/8
Second Quarter (through May , 1995)...
</TABLE>
<TABLE>
<CAPTION>
SHAWMUT AND FLEET AND
NORTHEAST SHAWMUT
PRO FORMA PRO FORMA
SHAWMUT NORTHEAST EQUIVALENT(2) FLEET EQUIVALENT(3)
------- --------- ------------- ----- -------------
<S> <C> <C> <C> <C> <C>
MARKET VALUE PER SHARE(1):
June 10, 1994................................ $24 $10 1/8 $10.875 $39 3/4 $16.059
May , 1995..................................
</TABLE>
- ---------------
(1) The market values for Shawmut Common Stock, Fleet Common Stock and Northeast
Common Stock represent the last reported sale prices per share on June 10,
1994, the last business day preceding public announcement of the Merger and
May , 1995, the last practicable date prior to the mailing of this Proxy
Statement/Prospectus Supplement.
(2) The pro forma equivalent per share market value of Northeast Common Stock at
each specified date was determined by multiplying the last reported sale
price of a share of Shawmut Common Stock on such date by assumed Exchange
Ratios of .453 and [.415] for June 10, 1994 and May , 1995, respectively.
For information regarding the determination of the Exchange Ratio see the
Proxy Statement/Prospectus under "THE MERGER" -- Exchange Ratio."
(3) The pro forma equivalent per share market value of Northeast Common Stock at
each specified date was determined by multiplying the last reported sale
price of Fleet Common Stock on such date by .404 (the product of the
Shawmut/Fleet Exchange Ratio and .453) and (the product of the
Shawmut/Fleet Exchange Ratio and ) for June 10, 1994 and May , 1995,
respectively.
Stockholders are advised to obtain current market quotations for Shawmut
Common Stock. No assurance can be given as to the market price of Shawmut Common
Stock at or after the Determination Date or the Effective Time of the Merger. It
is expected that the market price of Shawmut Common Stock will fluctuate between
the date of this Proxy Statement/Prospectus Supplement, the Determination Date
and the date on which the Merger is consummated (assuming the Merger Agreement
is not terminated) and thereafter. Stockholders are advised to obtain current
market quotations for Fleet Common Stock. No assurance can be given as to the
market price of Fleet Common Stock at the effective time of the Shawmut/ Fleet
Merger (assuming the Shawmut/Fleet Merger is consummated). It is expected that
the market price of Fleet Common Stock will fluctuate between the date of this
Proxy Statement/Prospectus Supplement and the
S-9
<PAGE> 15
date on which the Shawmut/Fleet Merger is consummated (assuming the
Shawmut/Fleet Merger is consummated) and thereafter. Northeast stockholders
should understand that at the Special Meeting the stockholders are voting on the
Merger, and that there is no assurance that the Shawmut/Fleet Merger will be
consummated. If Northeast stockholders vote to approve the Merger, such
stockholders must be willing to accept their ownership interest in Shawmut
without regard to whether the Shawmut/Fleet Merger is consummated. See
"UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION."
S-10
<PAGE> 16
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA(1)
The following table sets forth certain selected historical consolidated
financial data of Shawmut. The table is based on and should be read in
conjunction with Shawmut's historical financial statements and notes thereto
incorporated by reference in this Proxy Statement/Prospectus Supplement. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
SELECTED FINANCIAL DATA 1994 1993 1992 1991 1990
-------- --------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Interest and dividend income................................. $1,937.9 $ 1,827.0 $1,856.5 $2,028.1 $2,475.1
Interest expense............................................. 870.4 755.4 874.0 1,211.9 1,657.3
-------- --------- -------- -------- --------
Net interest income.......................................... 1,067.5 1,071.6 982.5 816.2 817.8
Provision for credit losses.................................. 3.0 55.9 242.1 486.4 474.0
-------- --------- -------- -------- --------
Net interest income after provision for credit losses........ 1,064.5 1,015.7 740.4 329.8 343.8
Noninterest income........................................... 378.5 398.3 428.7 465.0 449.8
Securities gains, net........................................ -- 12.5 94.1 80.1 23.4
Noninterest expenses(2)...................................... 1,071.4 1,137.1 1,154.6 1,044.1 972.7
-------- --------- -------- -------- --------
Income (loss) before income taxes, extraordinary credit and 371.6 289.4 108.6 (169.2) (155.7)
cumulative effect of accounting changes....................
Income taxes................................................. 134.2 6.6 40.9 4.1 .5
-------- --------- -------- -------- --------
Income (loss) before extraordinary credit and cumulative 237.4 282.8 67.7 (173.3) (156.2)
effect of accounting changes...............................
Extraordinary credit......................................... -- -- 18.4 -- --
Cumulative effect of changes in methods of accounting........ -- 46.2 -- -- --
-------- --------- -------- -------- --------
Net income (loss)............................................ $ 237.4 $ 329.0 $ 86.1 $ (173.3) $ (156.2)
======= ======== ======= ======= =======
Net income (loss) applicable to $ 221.9 $ 313.6 $ 81.3 $ (175.6) $ (158.6)
common shares..............................................
======= ======== ======= ======= =======
COMMON SHARE DATA:
Income (loss) before extraordinary credit and cumulative $ 1.87 $ 2.35 $ .60 $ (2.04) $ (1.89)
effect of accounting changes...............................
Net income (loss)............................................ 1.87 2.75 .78 (2.04) (1.89)
Dividends declared........................................... .82 .50 .75
PERIOD END BALANCES:
Total assets................................................. $ 32,399 $ 31,103 $ 29,256 $ 26,878 $ 25,832
Notes and debentures......................................... 2,022 759 810 665 679
Total shareholders' equity................................... 2,197 2,102 1,732 1,269 1,355
AVERAGE BALANCES:
Total assets................................................. $ 31,319 $ 29,320 $ 26,467 $ 26,260 $ 27,612
Notes and debentures......................................... 1,341 839 667 669 687
Total shareholders' equity................................... 2,162 1,859 1,507 1,327 1,572
</TABLE>
- ---------------
(1) Restated to reflect the pooling of interests acquisitions that occurred
during the second quarter of 1994.
(2) Includes merger and restructuring related charges of $140.7 million ($99.8
million after-tax) for the year ended December 31, 1994 and restructuring
related charges of $36.3 million ($23.6 million after-tax) for the year
ended December 31, 1993.
S-11
<PAGE> 17
NORTHEAST FEDERAL CORP.
SELECTED FINANCIAL DATA
The following table sets forth certain selected historical consolidated
financial data of Northeast. The table is based on and should be read in
conjunction with Northeast's historical financial statements and notes thereto
incorporated by reference in this Proxy Statement/Prospectus Supplement. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED FISCAL YEAR YEAR ENDED MARCH 31,
DECEMBER 31, ENDED
----------------------- DECEMBER 31, --------------------
SELECTED FINANCIAL DATA 1994 1993 1992 1992 1991
------ ------------ ------------ ------ -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Interest and dividend income....................... $192.7 $220.4 $ 196.3 $326.9 $ 449.1
Interest expense................................... 133.9 148.0 132.9 244.1 364.9
------ ------ ------------ ------ -------
Net interest income................................ 58.8 72.4 63.4 82.8 84.2
Provision for credit losses........................ 4.9 23.3 16.3 10.2 8.9
------ ------ ------------ ------ -------
Net interest income after provision for credit
losses........................................... 53.9 49.1 47.1 72.6 75.3
Noninterest income................................. 32.4 12.1 9.0 14.1 21.6
Securities gains (losses), net..................... 7.3 5.6 4.1 2.0 (2.7)
Noninterest expenses............................... 83.0 93.1 124.5 79.3 81.0
------ ------ ------------ ------ -------
Income (loss) before income taxes, extraordinary
credit and cumulative effect of accounting
change........................................... 10.6 (26.3) (64.3) 9.4 13.2
Income taxes (benefit)............................. (.4) (12.2) (5.1) 4.9 6.1
------ ------ ------------ ------ -------
Income (loss) before extraordinary credit and
cumulative effect of accounting change........... 11.0 (14.1) (59.2) 4.5 7.1
Extraordinary credit............................... -- -- -- .1 4.6
Cumulative effect of change in method of
accounting....................................... -- -- -- 1.0 --
------ ------ ------------ ------ -------
Net income (loss).................................. $ 11.0 $(14.1) $ (59.2) $ 5.6 $ 11.7
====== ============ ============ ====== =======
Net income (loss) applicable to common shares...... $ 7.4 $(18.6) $ (63.9) $ (2.9) $ 3.0
====== ============ ============ ====== =======
COMMON SHARE DATA:
Income (loss) before extraordinary credit and
cumulative effect of accounting change........... $ .52 $(1.75) $ (11.16) $ (.70) $ (.28)
Net income (loss).................................. .52 (1.75) (11.16) (.51) .52
Dividends declared................................. -- -- -- -- --
PERIOD END BALANCES:
Total assets....................................... $3,346 $3,920 $ 3,910 $3,821 $ 4,546
Notes and debentures............................... 42 38 36 1 1
Total shareholders' equity......................... 139 133 138 191 183
AVERAGE BALANCES:
Total assets....................................... $3,482 $3,961 $ 3,890 $3,980 $ 4,902
Notes and debentures............................... 40 37 29 1 161
Total shareholders' equity......................... 133 133 172 189 174
</TABLE>
S-12
<PAGE> 18
UPDATED COMPARISON OF CERTAIN PER SHARE DATA
The following table shows unaudited comparative historical per share data
for Shawmut and Northeast, unaudited pro forma per share and per share
equivalent data for Shawmut, Northeast and Shawmut's acquisition (the "Barclays
Acquisition") of substantially all of the assets and assumption of certain of
the liabilities, of Barclays, which acquisition was consummated on January 31,
1995, and unaudited pro forma per share and per share equivalent data for
Shawmut, Fleet, Northeast and Barclays combined for the year ended December 31,
1994. In addition, the table shows unaudited comparative historical per share
data for Shawmut and unaudited pro forma per share and per share equivalent data
for Shawmut, Fleet, Northeast and Barclays combined for the years ended December
31, 1993 and 1992. Pro forma per share and per share equivalent data for the
year ended December 31, 1994 are based on the minimum and maximum number of
shares of Shawmut Common Stock that may be issued pursuant to the Merger
Agreement, calculated as of December 31, 1994. The information presented should
be read in conjunction with the consolidated historical financial statements and
the notes thereto of Shawmut, Fleet, Northeast and Barclays, which are
incorporated by reference in this Proxy Statement/Prospectus Supplement, and the
unaudited pro forma condensed combined financial information, including the
notes thereto, which appear elsewhere in this Proxy Statement/Prospectus
Supplement. The pro forma data is presented for comparative purposes only and is
not necessarily indicative of the combined financial position or results of
operations in the future or of the combined financial position or results of
operations which would have been realized had the acquisitions been consummated
during the periods or as of the dates for which the pro forma data is presented.
See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1994 1993 1992(3)
---------- ---------- ----------
<S> <C> <C> <C>
PER SHARE OF SHAWMUT COMMON STOCK:
Income before extraordinary credit and accounting changes:
Historical................................................ $ 1.87 $2.35 $.60
Pro forma:
Shawmut, Northeast and Barclays(1)................... 1.93-1.91
Shawmut, Fleet, Northeast and Barclays(2)............ 2.61-2.60 2.55 1.20
Cash dividends declared:
Historical................................................ .82 .50 --
Book value (as of end of period):
Historical................................................ 16.72
Pro forma:
Shawmut, Northeast and Barclays(1)................... 17.16-16.96
Shawmut, Fleet, Northeast and Barclays(2)............ 18.06-17.96
PER SHARE OF NORTHEAST COMMON STOCK:
Income (loss) before extraordinary credit and accounting
changes:
Historical................................................ .52
Pro forma equivalent:
Shawmut, Northeast and Barclays(1)................... .80-.97
Shawmut, Fleet, Northeast and Barclays(2)............ 1.08-1.32
Cash dividends declared:
Historical................................................ --
Pro forma equivalent:
Shawmut, Northeast and Barclays(1)................... .34-.42
Shawmut, Fleet, Northeast and Barclays(4)............ .52-.63
Book value (as of end of period):
Historical................................................ 6.63
Pro forma equivalent:
Shawmut, Northeast and Barclays(1)................... 7.12-8.60
Shawmut, Fleet, Northeast and Barclays(2)............ 7.50-9.11
</TABLE>
- ---------------
(1) Indicates the range of pro forma equivalent per share information. Such pro
forma information is subject to variance of the Exchange Ratio. Under the
Merger Agreement, the Exchange Ratio may vary between .415 and .507, subject
to certain Northeast termination rights. See "Unaudited Pro Forma Condensed
Combined Financial Information" and the Proxy Statement/Prospectus under
"THE MERGER -- Exchange Ratio." Based on the Shawmut/Fleet Exchange Ratio of
.8922, assuming consummation of both the Merger and the Shawmut/Fleet
Merger, each share of Northeast Common Stock ultimately would be converted
into between .370 and .452 shares of Fleet Common Stock (subject to the
payment of cash in lieu of fractional shares).
(2) Indicates the range of pro forma equivalent per share information. Such pro
forma information is subject to variance of the Exchange Ratio. Under the
Merger Agreement, the Exchange Ratio may vary between .415 and .507 subject
to certain Northeast termination rights. See the Proxy Statement/Prospectus
under "THE MERGER -- Exchange Ratio."
(3) Northeast income (loss) before extraordinary credit and accounting changes
represents the year ended March 31, 1992.
(4) Based on historical Fleet declared common stock dividends of $1.40.
S-13
<PAGE> 19
UPDATE OF REGULATORY APPROVALS REQUIRED FOR THE MERGER
General. The following summary is provided to update the discussion of
regulatory approvals under "THE MERGER -- Regulatory Approvals Required for the
Merger" in the accompanying Proxy Statement/Prospectus and should be read in
conjunction therewith.
The Merger. The Merger is subject to the prior approval of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") under
Section 4 of the Bank Holding Company Act of 1956, as amended (the "BHC Act").
Such approval of the Federal Reserve Board was received on December 14, 1994 and
provides, among other things, that the Merger must be consummated by March 14,
1995, unless such date is extended by the Federal Reserve Board. The Federal
Reserve Board has extended such date until June 12, 1995. In the event an
additional extension would be needed, no assurances can be provided as to when
or whether such an extension would be granted.
The Merger is also subject to approval of the Office of Thrift Supervision
(the "OTS") under Section 10(e)(2) of the Home Owners' Loan Act of 1933, as
amended ("HOLA"). Such approval of the OTS was set forth in a letter dated
December 22, 1994 (the "OTS Approval Letter"). The OTS Approval Letter provides,
among other things, that (i) the Merger may not be consummated until receipt of
all necessary regulatory approvals for the Bank Reorganization (as defined in
the Proxy Statement/Prospectus) and (ii) the Merger and Bank Reorganization must
be consummated by April 21, 1995, unless such date is extended by the OTS for
good cause. The OTS has extended such date until August 21, 1995. In the event
an additional extension would be needed, no assurances can be provided as to
when or whether such an extension would be granted.
In addition, the Merger is subject to the approval of the Massachusetts
Board of Bank Incorporation (the "Massachusetts Board") under Chapter 167A,
Section 2 of the Massachusetts General Laws. An application for the foregoing
approval has been submitted and a public hearing was held on March 27, 1995. The
Massachusetts Board will not render its decision on the application until the
public comment period on the application expires. Such public comment period
will expire 5 days after the Northeast stockholder meeting has concluded unless
modified by the Massachusetts Board.
The Merger is also subject to the approval of the Connecticut Banking
Commissioner (the "Banking Commissioner") under Section 36-423 of the Banking
Law of Connecticut. An application for the foregoing approval has been
submitted. The Banking Commissioner's office has indicated that it will not
render its decision on the application until after the Northeast stockholders'
approve the Merger Agreement.
The Bank Reorganization. The Branch Purchases (as defined in the Proxy
Statement/Prospectus) are subject to the approval of the Office of the
Comptroller of the Currency (the "OCC") pursuant to (i) 12 U.S.C. sec. 215c and
the Bank Merger Act (Section 18(c)(2) of the Federal Deposit Insurance Act (the
"FDIA")), relating to the acquisition of assets and assumption of liabilities by
national banks, and (ii) Section 5(d)(3) of the FDIA, relating to the assumption
of deposit liabilities of a member of the Savings Association Insurance Fund of
the Federal Deposit Insurance Corporation ("FDIC") (such as Northeast Savings)
by a member of the Bank Insurance Fund of the FDIC (such as Shawmut Bank
Connecticut, National Association ("SBC") and Shawmut Bank, National Association
("SBM")). Such approval of the OCC was set forth in a letter dated on March 3,
1995 (the "OCC Approval Letter").
The Relocation (as defined in the Proxy Statement/Prospectus) required an
application to the OTS. Approval of such application was included in the OTS
Approval Letter.
The Conversion (as defined in the Proxy Statement/Prospectus) required an
application to the New York Banking Department pursuant to Section 410 of the
New York Banking Law and Part 87 of the General Regulations of the New York
Banking Board. Such approval of the New York Banking Department was received on
February 17, 1995.
The Chartering (as defined in the Proxy Statement/Prospectus) required (i)
an application to the OCC to charter Shawmut Bank New York, National Association
("SBNY"), (ii) an application to the Federal Reserve Board pursuant to Sections
3(a)(1) and (3) of the BHC Act for Shawmut to acquire SBNY and for
S-14
<PAGE> 20
Northeast to become a bank holding company, (iii) an application to the New York
Banking Board pursuant to Section 142 of the New York Banking Law to authorize
Shawmut to become a New York bank holding company and an application to the New
York Banking Department pursuant to Section 142-(b)(1) of the New York Banking
Law for a determination that Shawmut, a non-New York bank holding company, may
acquire SBNY, a national bank located in New York, and (iv) an application to
the Massachusetts Board pursuant to Chapter 167A, Section 2 of the Massachusetts
General Laws to authorize Shawmut to acquire SBNY. The OCC Approval Letter
included the approvals of the OCC to establish SBNY. On January 24, 1995, the
Federal Reserve Board approved the applications of Shawmut and Northeast under
Section 3 of the BHC Act to acquire SBNY. In its approval of such applications,
the Federal Reserve Board required the acquisition of SBNY by Shawmut and
Northeast to be consummated no later than April 24, 1995, unless such date is
extended by the Federal Reserve Board. The Federal Reserve Board has extended
such date until July 23, 1995. In the event an additional extension would be
needed, no assurances can be given as to when or whether such an extension would
be granted. The Massachusetts application is part of the application to the
Massachusetts Board described above.
As described in the Proxy Statement/Prospectus, on December 1, 1994, (i)
the New York Banking Board approved Shawmut's application pursuant to Section
142 of the New York Banking Law to become a New York bank holding company as a
result of Shawmut's acquisition of SBNY and (ii) the Superintendent of Banks of
the State of New York approved Shawmut's application under Section 142-b of the
New York Banking Law to acquire SBNY. On January 4, 1995, the New York Banking
Department issued a determination that the standards of Section 142-(b)(1) of
the New York Banking Law had been met.
The Subsidiary Merger required (i) an application to the OCC pursuant to 12
U.S.C. sec. 215c and the Bank Merger Act and (ii) an application to the New York
Banking Department pursuant to Section 600(7) of the New York Banking Law and
Part 16 of the General Regulations of the New York Banking Board. The OCC
Approval Letter included an approval of the Subsidiary Merger. The New York
Banking Department approval was received on February 17, 1995.
The Merger cannot proceed in the absence of the requisite regulatory
approvals therefor. In addition, the OTS Approval Letter requires the receipt of
all necessary regulatory approvals for the Bank Reorganization as a condition to
the consummation of the Merger. See the accompanying Proxy Statement/Prospectus
under "THE MERGER -- Conditions to Consummation of the Merger" and "-- Waiver
and Amendment; Termination." THERE CAN BE NO ASSURANCE THAT ALL OF THE REQUIRED
REGULATORY APPROVALS WILL BE OBTAINED, AND, IF THE MERGER IS APPROVED, THERE CAN
BE NO ASSURANCE AS TO THE DATE OF ANY SUCH APPROVAL. THERE CAN ALSO BE NO
ASSURANCE THAT ANY SUCH APPROVALS WILL NOT CONTAIN A CONDITION OR REQUIREMENT
THAT CAUSES SUCH APPROVALS TO FAIL TO SATISFY THE CONDITIONS SET FORTH IN THE
MERGER AGREEMENT AND DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS
UNDER "THE MERGER -- CONDITIONS TO CONSUMMATION OF THE MERGER."
UPDATED INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Northeast's management and the Northeast Board may be
deemed to have interests in the Merger in addition to their interests, if any,
as stockholders of Northeast generally. These include, among other things,
provisions in the Merger Agreement relating to indemnification, the possible
increase in value of a Northeast director's interest in the Northeast Savings
Directors Pension Plan and the items presented in the table below, which reflect
revised amounts from those set forth in the Proxy Statement/Prospectus.
The following table sets forth certain benefits that the five most highly
compensated executive officers of Northeast, and George P. Rutland, former
Chairman of the Board of Northeast, may receive as a result of the Merger. The
"Total" column includes the sum of such amounts as a result of (i) certain
change in control agreements, (ii) a non-competition agreement entered into with
Shawmut, (iii) retention bonus agreements
S-15
<PAGE> 21
and (iv) termination of certain life insurance plans, in each case, assuming the
Merger were consummated on May 31, 1995.
<TABLE>
<CAPTION>
TERMINATION OF
CHANGE IN CONTROL NONCOMPETITION RETENTION LIFE INSURANCE
NAME(1) AGREEMENTS(2)(4)(5) AGREEMENT(3) BONUS(4) PLANS(5) TOTAL
- ------------------------- ------------------- -------------- --------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Kirk W. Walters(6)....... $ 1,073,613 $1,550,000 -- -- $2,623,613
George P. Rutland(6)..... $ 1,156,033 -- -- $1,684,805 $2,840,838
JoAnn Dolan.............. -- -- $152,250 $ 49,501 $ 201,751
Daniel Steinmetz......... -- -- $115,500 $ 63,441 $ 178,941
Victor Vrigian........... -- -- $105,000 $ 44,105 $ 149,105
Lynne Carcia Wilson...... -- -- $ 89,250 $ 30,658 $ 119,908
------------------- -------------- --------- -------------- ----------
$6,114,156
==========
</TABLE>
- ---------------
(1) The "named executive officers" set forth in the table are the chief
executive officer, the former Chairman of the Board, and the four other
highest paid executive officers of Northeast based on their compensation
during calendar 1994.
(2) See the Proxy Statement/Prospectus under "THE MERGER -- Interests of Certain
Persons in The Merger -- Change in Control Agreements."
(3) See the Proxy Statement/Prospectus under "THE MERGER -- Interests of Certain
Persons in The Merger -- Noncompetition Agreement." Mr. Walter's agreement
not to compete has been modified and revalued. Mr. Walters will be paid the
non-compete amount in three installments: $620,000 at closing of the Merger
and on the 12th month anniversary of the closing of the Merger and $310,000
on the 24th month anniversary of the closing of the Merger.
(4) The Retention Bonus Arrangements and the Change in Control Agreements also
provide for certain continued health benefits and Supplemental Medical
Reimbursement Plan ("SMRP") benefits. The amount of the benefits for Messrs.
Walters and Rutland are included under the Change in Control Agreements
column. The SMRP has been terminated and in lieu of its continued coverage
under the Retention Bonus Arrangements, the amount of such continued benefit
has been paid to the covered executives. The aggregate maximum amount of
retention bonuses (as described in the Proxy Statement/Prospectus under "THE
MERGER -- Interests of Certain Persons in the Merger -- Retention Bonus
Arrangements") to be paid to 16 executive officers of Northeast is
approximately $1.7 million. See the Proxy Statement/Prospectus under "THE
MERGER -- Interests of Certain Persons in the Merger -- Retention Bonus
Arrangements."
(5) Northeast maintained two executive life insurance plans to cover executives
which contained change in control provisions. Such plans have been
terminated and the amounts set forth above have been paid to the named
executive officers. The amount of the benefit to Mr. Walters is included
under the "Change in Control Agreements" column. Mr. Rutland satisfied the
age and service requirements for early retirement benefits under the plans
and, accordingly, he was entitled to the amount shown regardless of whether
there is a change in control. See the Proxy Statement/Prospectus under "THE
MERGER -- Interests of Certain Persons in the Merger -- Change in Control
Agreements."
(6) To the extent that these payments to either of Messrs. Walters or Rutland,
together with any other payments under any other plan, agreement or
arrangement would constitute a "parachute payment" for federal income tax
purposes, such person would be entitled to a "gross up" payment for any
portion of such payments that are subject to the federal excise tax relating
to "excess parachute payments" so as to enable him to retain the payments he
would have retained had he not been subject to such excise tax.
The Northeast Board was aware of these interests and considered them among
other matters in approving the Merger Agreement and the transactions
contemplated thereby. See the Proxy Statement/Prospectus under "THE
MERGER -- Interests of Certain Persons in the Merger."
S-16
<PAGE> 22
NORTHEAST STOCK OWNERSHIP
Ownership by Directors and Executive Officers. The following table sets
forth information as of February 10, 1995 with respect to the shares of
Northeast Common Stock beneficially owned by each director of Northeast, certain
executive officers and by all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT OF COMMON
STOCK
BENEFICIALLY
OWNED AS OF THE PERCENT OF
RECORD DATE CLASS(1)
---------------- ----------
<S> <C> <C>
Gerald P. Carmen....................................... 20,520(2) *
David W. Clark, Jr. ................................... 74,081(2) *
George J. Fantini, Jr. ................................ 20,520(2) *
Richard H. Gordon...................................... 73,361(2) *
Beverly Lannquist Hamilton............................. 22,375(2) *
Barbara C. Lawrence.................................... 12,000 *
John F. McJennett, III................................. --(3) *
Thomas P. O'Neill, III................................. 33,162(2) *
George W. Sarney....................................... 39,893(2) *
Raymond T. Schuler..................................... 163,983(4) 1.14%
John R. Silber......................................... 65,638(2) *
Kirk W. Walters........................................ 473,338(5)(6) 3.20%
Frederick W. Zuckerman................................. 36,000(2) *
JoAnn Dolan............................................ 53,235(7)(8) *
Daniel J. Steinmetz.................................... 40,920(9)(10) *
Victor Vrigian......................................... 40,962(11)(12) *
Lynne C. Wilson........................................ 17,602(13)(14) *
All directors and executive officers of Northeast as a
group................................................ 1,187,590(15)(16) 7.86%
</TABLE>
- ---------------
(1) An asterisk in this column indicates that the percentage does not exceed
1.0% of Northeast's voting stock.
(2) Includes 20,000 options to purchase Northeast Common Stock exercisable
within 60 days of the record date (February 10, 1995).
(3) Does not include Northeast Common Stock beneficially owned by the Rhode
Island Depositors Economic Protection Corporation ("DEPCO") -- See "By
Other Beneficial Owners."
(4) Includes 30,000 options to purchase Northeast Common Stock exercisable
within 60 days of the record date (February 10, 1995).
(5) Includes 7,765 shares of Northeast Common Stock held for the benefit of Mr.
Walters in the Northeast Savings Thrift and Profit Sharing Plan ("401(k)
Plan") as of December 31, 1994. Also includes 7,374 shares of Northeast
Common Stock allocated to Mr. Walters' account pursuant to the Northeast
Savings Employee Stock Ownership Plan ("ESOP") as of December 31, 1994.
(6) Includes 445,000 options to purchase Northeast Common Stock exercisable
within 60 days of the record date.
(7) Includes 2,330 shares of Northeast Common Stock held for the benefit of Ms.
Dolan in the Northeast Savings 401(k) as of December 31, 1994. Also
includes 5,905 shares of Northeast Common Stock allocated to Ms. Dolan's
account pursuant to the Northeast Savings ESOP as of December 31, 1994.
(8) Includes 45,000 options to purchase Northeast Common Stock exercisable
within 60 days of the record date.
(9) Includes 1,038 shares of Northeast Common Stock held for the benefit of Mr.
Steinmetz in the Northeast Savings 401(k) as of December 31, 1994. Also
includes 3,883 shares of Northeast Common Stock allocated to Mr.
Steinmetz's account pursuant to the Northeast Savings ESOP as of December
31, 1994.
S-17
<PAGE> 23
(10) Includes 35,000 options to purchase Northeast Common Stock exercisable
within 60 days of the record date.
(11) Includes 341 shares of Northeast Common Stock held for the benefit of Mr.
Vrigian in the Northeast Savings 401(k) as of December 31, 1994. Also
includes 3,892 shares of Northeast Common Stock allocated to Mr. Vrigian
pursuant to the Northeast Savings ESOP as of December 31, 1994.
(12) Includes 35,000 options to purchase Northeast Common Stock exercisable
within 60 days of the record date.
(13) Includes 348 shares of Northeast Common Stock held for the benefit of Ms.
Wilson in the Northeast Savings 401(k) Plan as of December 31, 1994. Also
includes 2,254 shares of Northeast Common Stock allocated to Ms. Wilson's
account pursuant to the Northeast Savings ESOP as of December 31, 1994.
(14) Includes 15,000 options to purchase Northeast Common Stock exercisable
within 60 days of the record date.
(15) All shares above are individually held or held jointly or individually by a
spouse or child.
(16) Includes 785,000 options to purchase Northeast Common Stock held by
executive officers and exercisable within 60 days of the record date.
By Other Beneficial Owners. The regulations of the Commission require
disclosure with respect to any person known to Northeast to be a beneficial
owner, as beneficial ownership is defined in such regulations, of more than five
percent (5%) of any class of Northeast securities. Certain information known to
Northeast as of February 10, 1995, with respect to such persons appears in the
following table:
<TABLE>
<CAPTION>
TITLE OF NAME AND ADDRESS OF AMOUNT AND NATURE OF
CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------- -------------------------------- -------------------- ----------------
<S> <C> <C> <C>
Common Stock Rhode Island Depositors 800,000 5.58%
Economic Protection Corporation
89 Jefferson Boulevard
Warwick, RI
Common Stock First Manhattan Co. 848,951(1) 5.92%
437 Madison Avenue
New York, NY 10022
</TABLE>
- ---------------
(1) A schedule 13G dated February 10, 1995 has been filed by First Manhattan Co.
CERTAIN INFORMATION REGARDING THE
PENDING SHAWMUT/FLEET MERGER
The following summary of the pending merger between Shawmut and Fleet is
included to provide certain information regarding that transaction should it be
consummated. INFORMATION PROVIDED WITH RESPECT TO FLEET AND THE SHAWMUT/FLEET
MERGER WILL BE APPLICABLE TO NORTHEAST STOCKHOLDERS ONLY IF BOTH THE MERGER AND
THE SHAWMUT/FLEET MERGER ARE CONSUMMATED. See "-- Effect of Shawmut/Fleet Merger
on Northeast and Northeast Stockholders." This summary is necessarily incomplete
and qualified in its entirety by the more detailed information contained in
Shawmut's Current Reports on Form 8-K dated February 20, 1995, February 21, 1995
and April 13, 1995 (which are incorporated by reference herein).
GENERAL
Shawmut/Fleet Merger Agreement. On February 20, 1995, Shawmut and Fleet
entered into the Shawmut/Fleet Merger Agreement which provides for the
Shawmut/Fleet Merger. Upon consummation of the Shawmut/Fleet Merger, (i) each
share of issued and outstanding Shawmut Common Stock (other than shares of
Shawmut Common Stock held (x) in Shawmut's treasury or (y) directly or
indirectly by Shawmut or Fleet or any of their respective subsidiaries (except
for shares held by Shawmut or Fleet 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 or in respect of a debt previously
contracted) will be converted into the right to receive .8922 shares of Fleet
Common Stock (together with the associated preferred stock purchase
S-18
<PAGE> 24
rights of Fleet ("Fleet Rights") issued pursuant to the Fleet Rights Agreement
associated therewith); (ii) each issued and outstanding share of each series of
Shawmut Preferred Stock (as defined in the Proxy Statement/Prospectus) will be
converted into the right to receive one share of Fleet preferred stock with
substantially the same terms as the applicable series of Shawmut Preferred
Stock; (iii) outstanding shares of Shawmut Common Stock and Shawmut Preferred
Stock owned by Fleet or its subsidiaries or Shawmut or its subsidiaries for
their own accounts will be cancelled; and (iv) shares of Shawmut Common Stock
and Shawmut Preferred Stock held in Shawmut's treasury will be cancelled.
Conditions to the Shawmut/Fleet Merger. The respective obligations of
Shawmut and Fleet to effect the Shawmut/Fleet Merger are subject to certain
conditions, including satisfaction, or waiver where permissible, of the
following conditions at or prior to the consummation of the Shawmut/Fleet
Merger: (i) approval and adoption of the Shawmut/Fleet Merger Agreement, and the
transactions contemplated thereby, by the respective requisite affirmative votes
of the holders of a majority of the shares of Shawmut Common Stock and Fleet
Common Stock entitled to vote thereon; (ii) the authorization for listing on the
NYSE, subject to official notice of issuance, of the shares of Fleet Common
Stock issuable to holders of Shawmut Common Stock pursuant to the Shawmut/Fleet
Merger; (iii) approval of the Shawmut/Fleet Merger Agreement and the
transactions contemplated thereby by the required governmental authorities and
the expiration of any statutory waiting periods in respect thereof; (iv) the
Registration Statement on Form S-4 of Fleet relating to the Fleet Common Stock
to be offered to Shawmut stockholders in connection with the Shawmut/Fleet
Merger will have become effective under the Securities Act and no stop order
suspending the effectiveness of such Registration Statement will have been
issued and no proceedings for that purpose will have been initiated or
threatened by the Commission; (v) no order, injunction or decree issued by any
court or agency of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Shawmut/Fleet Merger or any of
the other transactions contemplated by the Shawmut/Fleet 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 governmental entity
which prohibits, restricts or makes illegal consummation of the Shawmut/Fleet
Merger; (vi) Fleet will have received an opinion of Wachtell, Lipton, Rosen &
Katz, special counsel to Fleet, and Shawmut will have received an opinion of
Skadden, Arps, Slate, Meagher & Flom, special counsel to Shawmut, in form and
substance reasonably satisfactory to Fleet and Shawmut, each dated as of the
date of the consummation of the Shawmut/Fleet Merger, that the Shawmut/Fleet
Merger will be treated for Federal income tax purposes as part of one or more
tax free reorganizations within the meaning of Section 368 of the Federal Income
Tax Code; (vii) Shawmut and Fleet will each have received a letter from KPMG
Peat Marwick LLP addressed to each of them, to the effect that the Shawmut/Fleet
Merger will qualify for "pooling of interests" accounting treatment; (viii) the
representations and warranties of the other party to the Shawmut/Fleet Merger
Agreement shall be true and correct in all material respects as of the date of
the Shawmut/Fleet Merger Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the date of
the consummation of the Shawmut/Fleet Merger as though made on the date of the
consummation of the Shawmut/Fleet Merger; (ix) each party shall have performed
in all material respects all obligations required to be performed by it under
the Shawmut/Fleet Merger Agreement at or prior to the date of the consummation
of the Shawmut/Fleet Merger; and (x) the rights issued pursuant to the Fleet
Rights Agreement or the Shawmut Rights Agreement, respectively, shall not have
become nonredeemable, exercisable, distributed or triggered pursuant to the
terms of each such agreement. See "DESCRIPTION OF FLEET CAPITAL STOCK -- Fleet
Common Stock" below and the accompanying Proxy Statement/Prospectus under
"DESCRIPTION OF SHAWMUT CAPITAL STOCK -- Rights Plan."
Subject to the approval of the Shawmut/Fleet Merger by the holders of
Shawmut Common Stock and Fleet Common Stock, respectively, and the satisfaction
or waiver of the other conditions to closing referenced above, the Shawmut/Fleet
Merger currently is expected to be consummated in the fourth quarter of 1995.
There can be no assurance, however, that such conditions will be met or, if met,
as to the timing of the closing of the Shawmut/Fleet Merger. If the
Shawmut/Fleet Merger is not consummated on or before February 20, 1996, the
Shawmut/Fleet Merger Agreement may be terminated by either Shawmut or Fleet,
unless the failure to effect the Shawmut/Fleet Merger by such date is due to the
failure of the party seeking to terminate
S-19
<PAGE> 25
the Shawmut/Fleet Merger Agreement to perform or observe covenants and
agreements of such party set forth therein.
Fleet. Fleet is a diversified financial services company organized under
the laws of the State of Rhode Island. At December 31, 1994, Fleet was the 17th
largest banking institution in the United States in terms of total assets, with
total assets of $48.8 billion, total deposits of $34.8 billion, and
stockholders' equity of $3.4 billion. For additional financial information
regarding Fleet, see Fleet's audited financial statements for the year ended
December 31, 1994, included in Shawmut's Current Report on Form 8-K filed April
13, 1995.
Fleet is engaged in a general commercial banking and trust business
throughout the states of Rhode Island, New York, Connecticut, Massachusetts,
Maine and New Hampshire, through its banking subsidiaries, Fleet National Bank
("Fleet-RI"), Fleet Bank, Fleet Bank, National Association ("Fleet-CT"), Fleet
Bank of Massachusetts, National Association ("Fleet-MA"), Fleet Bank of Maine
and Fleet Bank-NH. Fleet provides, through its nonbanking subsidiaries, a
variety of financial services, including mortgage banking, asset-based lending,
equipment leasing, consumer finance, real estate financing, credit-related life
and accident/health insurance, securities brokerage services, investment
banking, investment advice and management, data processing and student loan
servicing.
The principal office of Fleet is located at 50 Kennedy Plaza, Providence,
Rhode Island 02903, telephone number (401) 278-5800.
EFFECT OF SHAWMUT/FLEET MERGER ON NORTHEAST AND NORTHEAST STOCKHOLDERS
If both the Merger and the Shawmut/Fleet Merger are consummated, each share
of Northeast Common Stock ultimately would be converted into between .370 and
.452 shares of Fleet Common Stock (the product of .8922 (the Shawmut/Fleet
Merger Exchange Ratio) and the Exchange Ratio) depending upon the Shawmut Common
Stock Average Price, except that cash will be paid in lieu of fractional shares
of Shawmut Common Stock, in the case of Northeast, and Fleet Common Stock, in
the case of Shawmut.
Currently it is expected that the Merger, if approved by Northeast's
stockholders, will close in the second quarter of 1995, although there can be no
assurance that all conditions to the Merger will be met or as to the timing of
such conditions being met and, accordingly, there can be no assurance as to the
timing or occurrence of the Merger. See the accompanying Proxy
Statement/Prospectus under "THE MERGER -- Conditions to the Merger." The
Shawmut/Fleet Merger is subject to the conditions described above under
"-- Conditions to the Shawmut/Fleet Merger." The Shawmut/Fleet Merger currently
is expected to close in the fourth quarter of 1995, but there can be no
assurance that all conditions to the Shawmut/Fleet Merger will be met, or as to
the timing of such conditions being met and, accordingly, there can be no
assurance as to the timing or occurrence of the Shawmut/Fleet Merger.
BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS OF FLEET FOLLOWING THE
SHAWMUT/FLEET MERGER
Board of Directors. From and after the consummation of the Shawmut/Fleet
Merger, the Board of Directors of Fleet (the "Fleet Board") will consist of 20
persons, divided into three classes of directors, with each class serving
staggered terms of three years, so that only one class is elected in any one
year. Messrs. Terrence Murray, Chairman of the Board, President and Chief
Executive Officer of Fleet, and Joel B. Alvord, Chairman of the Board and Chief
Executive Officer of Shawmut, will each be a director of Fleet and, with the
approval of the respective Boards of Directors of Fleet and Shawmut, will
designate an additional eleven and seven individuals, respectively, to be
members of the Fleet Board. As of the date of this Proxy Statement/Prospectus
Supplement, such directors had not been designated by Messrs. Murray and Alvord
and their respective Boards of Directors.
The directors selected by Fleet and Shawmut will be divided as equally as
practicable among the three classes of directors and the various committees
established by the Fleet Board in proportion to the aggregate representation of
such directors. In addition, the Fleet Board will establish, promptly following
the consummation of the Shawmut/Fleet Merger, and maintain for a period of 18
months thereafter, an integration committee, comprised of Messrs. Murray and
Alvord, two additional representatives of Fleet and
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<PAGE> 26
two additional representatives of Shawmut, to oversee the integration of the
operations of Fleet and Shawmut and their respective subsidiaries.
Management. The executive officers of Fleet will be comprised of certain
members of Fleet's senior management and certain members of Shawmut's senior
management. In addition, the following table sets forth the name, age, present
company affiliation, responsibility at Fleet in the event the Shawmut/Fleet
Merger is consummated, and the employment at the present time and during the
last five years of certain persons who will become directors or executive
officers of Fleet following the Shawmut/Fleet Merger:
<TABLE>
<CAPTION>
PRESENT RESPONSIBILITY
COMPANY FOLLOWING BUSINESS EXPERIENCE DURING
NAME AGE AFFILIATION SHAWMUT/FLEET MERGER THE PAST FIVE YEARS
- ------------------------ --- ----------- ------------------------ ---------------------------
<S> <C> <C> <C> <C>
Joel B. Alvord.......... 56 Shawmut Chairman of the Board Chairman of SBC from 1986-
1992; Chairman of SBM from
1988-1992; Chairman, Chief
Executive Officer and
Director of Shawmut since
1988; Director of SBC and
SBM since 1978 and 1988
respectively.
Terrence Murray......... 55 Fleet Chief Executive Officer Director of Fleet since
and President 1976; Director of Fleet-RI
since 1977; Director of
Fleet Mortgage Group, Inc.
("FMG") since 1985;
President and Chief
Operating Officer of Fleet
since 1988; Chairman and
Chief Executive Officer of
Fleet since 1988.
Robert J. Higgins....... 49 Fleet Vice Chairman Executive Vice President of
(commercial banking) Fleet and Chief Executive
Officer of Fleet-RI since
1989; President of Fleet CT
since 1991; Vice Chairman
of Fleet since 1993.
Gunnar S. Overstrom, Jr. 52 Shawmut Vice Chairman (consumer President of SBC from
banking/ small business 1986-1992; Chief Executive
and investment services) Officer of SBC since 1988;
Chairman of SBC and
Chairman and Chief
Executive Officer of SBM
since 1992; Vice Chairman,
President and Chief
Operating Officer of
Shawmut since 1988;
Director of Shawmut, SBC
and SBM since 1987, 1986
and 1989, respectively.
H. Jay Sarles........... 50 Fleet Vice Chairman (staff Executive Vice President of
functions and corporate Fleet since 1986; President
strategy) and Chief Executive Officer
of Fleet Banking Group, the
parent company of Fleet-MA
and Fleet-CT, since 1991;
Vice Chairman of Fleet
since 1993.
</TABLE>
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<PAGE> 27
<TABLE>
<CAPTION>
PRESENT RESPONSIBILITY
COMPANY FOLLOWING BUSINESS EXPERIENCE DURING
NAME AGE AFFILIATION SHAWMUT/FLEET MERGER THE PAST FIVE YEARS
- ------------------------ --- ----------- ------------------------ ---------------------------
<S> <C> <C> <C> <C>
Michael R. Zucchini..... 48 Fleet Vice Chairman (financial Executive Vice President
services, fee-based and Chief Information
businesses and Officer of Fleet since
technology operations) 1987; Vice Chairman since
1993; Director of FMG since
1992; Interim Chairman and
Chief Executive Officer of
FMG from June 1994 until
November 1994.
David L. Eyles.......... 55 Shawmut Executive Vice President Vice Chairman and Chief
and Chief Credit Policy Credit Policy Officer of
Officer Shawmut since 1992; Vice
Chairman and Director of
SBC and SBM since 1992;
Vice Chairman and Chairman
of the Credit Policy
Committee at Mellon Bank
Corporation from 1988-1991.
Eugene M. McQuade....... 46 Fleet Executive Vice President Senior Vice
and Chief Financial President-Finance since
Officer 1992; Executive Vice
President of and Chief
Financial Officer of Fleet
since 1993; Director of FMG
since 1992; Executive Vice
President and Controller of
Manufacturers Hanover
Corporation from 1985 to
1991.
</TABLE>
Except for the foregoing, it has not yet been determined which members of
Fleet's or Shawmut's senior management will also become executive officers of
Fleet following the Shawmut/Fleet Merger or what such persons' titles or
functions will be. From time to time prior to consummation of the Shawmut/Fleet
Merger, decisions may be made with respect to the management and operations of
Fleet following the Shawmut/Fleet Merger, including the selection of executive
officers of Fleet.
Operations. Following the Shawmut/Fleet Merger, Fleet intends to combine
the operations of and, subject to required regulatory approvals, to merge
certain of the subsidiary banks of Fleet and Shawmut and to consolidate the
operations of certain other Fleet and Shawmut subsidiaries which provide similar
services. As of the date of this Proxy Statement/Prospectus Supplement, no final
determination with respect to such matters had been made, including final
determinations with respect to consolidation of operations of Shawmut that will
be acquired in the Merger.
While no assurance can be given, Fleet and Shawmut expect to achieve cost
savings of approximately $400 million (pre-tax) within fifteen months following
the Shawmut/Fleet Merger. Such cost savings are expected to be realized
primarily through reductions in staff, elimination, consolidation or divestiture
of certain branches and the consolidation of certain offices, data processing
and other redundant back-office operations and staff functions. Cost reductions
and branch consolidations will come from both companies and will be spread
throughout the geographic region. Cost savings are also expected to be achieved
in connection with the Merger and Fleet's acquisition of NBB and Plaza. These
cost savings are expected to be approximately $25 million, $20 million and $15
million, respectively, and are expected to be achieved within the first twelve
months after the consummation of these respective mergers. The extent to which
cost savings will be achieved is dependent upon various factors beyond the
control of Fleet and Shawmut, including the regulatory environment, economic
conditions, unanticipated changes in business conditions, inflation and the
level of FDIC assessments. Therefore, no assurances can be given with respect to
the ultimate level of cost savings to be realized, or that such savings will be
realized in the time-frame currently anticipated. In addition, certain
regulatory agencies may seek the divestiture of certain assets and liabilities
of the combined company following the Shawmut/Fleet Merger. Fleet and Shawmut
expect that the Federal Reserve Board or the
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<PAGE> 28
Department of Justice will request that Fleet or Shawmut divest certain
operations in order to alleviate what such agency believes would be an adverse
competitive effect. Fleet has not yet formulated a firm divestiture proposal and
will not do so until further discussions with the Federal Reserve Board and the
Department of Justice are held; accordingly, as of the date of this Proxy
Statement/Prospectus Supplement, neither Fleet nor Shawmut can predict what the
aggregate amount of any such divestitures may be. While any potential
divestitures may effect certain pro forma combined financial statement amounts,
merger and restructuring costs, cost savings and revenues, Fleet believes that
the aggregate amount and financial impact of any such divestitures would not be
material to the business, operations or financial condition of the combined
institution and its subsidiaries, taken as a whole. See "UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION".
Fleet and Shawmut also anticipate that they will incur one-time merger
expenses and restructuring charges in connection with the Shawmut/Fleet Merger,
estimated to be approximately $400 million (pre-tax) in the aggregate,
principally as a result of expenses to be incurred in connection with
anticipated staff reductions, elimination of duplicate headquarters and
operational facilities, and branch consolidations. It is anticipated that
substantially all of these charges will be recognized during 1995 upon
consummation of the Shawmut/Fleet Merger, with the exception of certain amounts
recognized by Shawmut during the first quarter of 1995 (See "Recent
Developments" for further discussion), and paid during the first 15 months
subsequent to the Shawmut/Fleet Merger. The following table provides details of
the estimated charges by type:
<TABLE>
<CAPTION>
ESTIMATED COSTS
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
TYPE OF COST
Personnel related......................................... $255,000
Facilities and equipment.................................. 68,000
Branch related............................................ 37,000
Other merger expenses..................................... 40,000
-----------
Total................................................ $400,000
================
</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. Facilities and equipment charges
consist of lease termination costs and other facilities related exit costs
resulting from consolidation of duplicate headquarters and operational
facilities, and computer equipment and software write-offs due to duplication or
incompatibility. Branch-related costs are primarily related to the cost of
exiting branches anticipated to be closed, including lease terminations and
equipment write-offs.
In connection with the Merger, Fleet is currently reviewing the investment
securities portfolio of Shawmut and Northeast to determine the classification of
such securities as either available for sale or held to maturity. As a result of
the review, certain reclassifications of Shawmut and Northeast investment
securities may result. See "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION".
Although Fleet has agreed to move its corporate headquarters to Boston,
Massachusetts promptly following the Shawmut/Fleet Merger, it intends to
continue to operate significant portions of its businesses from its existing
locations in Connecticut, New York and Rhode Island.
SHAWMUT AND FLEET STOCK OPTIONS
In conjunction with the execution and delivery of the Shawmut/Fleet Merger
Agreement, Shawmut and Fleet entered into stock option agreements, dated as of
February 20, 1995, pursuant to which Shawmut and Fleet granted to each other
options to purchase up to 19.9% of the outstanding Shawmut Common Stock, in the
case of Fleet, and up to 19.9% of the outstanding Fleet Common Stock, in the
case of Shawmut. The options will become exercisable upon the occurrence of
certain events as set forth in the respective stock option agreements and will
be exercisable at a per share price of $24.50, in the case of Shawmut Common
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<PAGE> 29
Stock, and $33.625 in the case of Fleet Common Stock. The number of shares
subject to such options and the purchase price per share provided for therein
are subject to adjustment as provided in the respective stock option agreements.
Fleet and Shawmut approved and entered into the respective option agreements to
induce each other to enter into the Shawmut/Fleet Merger Agreement. The option
agreements are intended to increase the likelihood that the Shawmut/Fleet Merger
will be consummated in accordance with the terms of the Shawmut/Fleet Merger
Agreement. Consequently, certain aspects of the option agreements may have the
effect of discouraging persons who might now or prior to the consummation of the
Shawmut/Fleet Merger be interested in acquiring all of or a significant interest
in Fleet or Shawmut from considering or proposing such an acquisition, even if,
in the case of Shawmut, such persons were prepared to offer to pay consideration
to Shawmut stockholders which had a higher current market price than the shares
of Fleet Common Stock to be received per share of Shawmut Common Stock pursuant
to the Shawmut/Fleet Merger Agreement.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
As more fully described in the Proxy Statement/Prospectus, consummation of
the Merger remains conditioned upon receipt by each of Shawmut and Northeast of
an opinion of Sullivan & Cromwell dated the Effective Date that the Merger will
be treated as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. In providing its opinion, Sullivan & Cromwell will assume
that the Shawmut/Fleet Merger, if and when completed, will qualify as a
reorganization within the meaning of Section 368(a) of the Code, and will rely
on certain additional representations by Shawmut and/or Fleet regarding the
structure of the Shawmut/Fleet Merger and the operation of Northeast after the
Shawmut/Fleet Merger.
The Shawmut/Fleet Merger Agreement provides, in part, that Shawmut's
obligation to effect the Shawmut/Fleet Merger is conditioned upon Shawmut
receiving an opinion of counsel substantially to the effect that the
Shawmut/Fleet Merger will be treated for Federal income tax purposes as part of
one or more reorganizations within the meaning of Section 368 of the Code.
Shawmut has represented to Sullivan & Cromwell that it will not complete the
Shawmut/Fleet Merger unless such an opinion has been received.
UPDATED OPINION OF FINANCIAL ADVISOR
Lehman Brothers has delivered to the Northeast Board its written opinion
dated February 10, 1995, updated as of the date of this Proxy
Statement/Prospectus Supplement, in light of the proposed Shawmut/Fleet Merger,
to the effect that, as of such dates and based upon and subject to the
assumptions, factors and limitations set forth in such opinion, consideration
equal to converting each share of Northeast Common Stock into the right to
receive the number of shares of Shawmut Common Stock determined by dividing
$10.875 by the Shawmut Common Stock Average Price is fair to holders of
Northeast Common Stock from a financial point of view. This opinion is
substantially identical to the opinions of Lehman Brothers delivered to the
Northeast Board on June 11, 1994 and February 10, 1995. The full text of the
written opinion of Lehman Brothers, dated as of the date hereof, sets forth
assumptions made, factors considered and limitations on the review undertaken by
Lehman Brothers, is included as Annex A to this Proxy Statement/Prospectus
Supplement. Northeast stockholders are urged to read such opinion carefully and
in its entirety.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Shortly following the announcement on February 21, 1995, that Fleet and
Shawmut had executed the Shawmut/Fleet Merger Agreement, certain alleged
stockholders of Shawmut filed seven purported class action lawsuits in the Court
of Chancery of the State of Delaware in and for New Castle County (the "Court")
against Shawmut, the members of the Board of Directors of Shawmut (the "Shawmut
Board") and Fleet. The complaints all make similar allegations concerning the
proposed Shawmut/Fleet Merger. The plaintiffs allege, among other things, that
the defendants have engaged in a plan and scheme to enrich themselves at the
expense of Shawmut's public stockholders; that the defendants have failed to
fully disclose the true value of Shawmut's assets and earnings power and the
future financial benefits which the defendants expect to derive from the
Shawmut/Fleet Merger; that the defendants have wrongfully failed and refused to
seek a purchase of Shawmut at the highest possible price and have sought to
chill potential offers for
S-24
<PAGE> 30
Shawmut; that the defendant members of the Shawmut Board have breached the
fiduciary duties owed by them to the plaintiffs and the members of the purported
class; and that defendant Fleet has induced and aided and abetted breaches of
fiduciary duty by the members of the Shawmut Board. The plaintiffs seek, among
other things, a declaration that the proposed transaction is unfair, unjust and
inequitable; an injunction preliminarily enjoining the defendants from taking
any steps necessary to accomplish or implement the proposed Shawmut/Fleet
Merger; and an order requiring the defendants to compensate plaintiffs and the
members of the class for all losses and damages suffered and to be suffered by
them as a result of the acts and transactions complained of in the complaints.
The plaintiffs also seek the award of the costs and disbursements of the action,
including reasonable attorneys', accountants' and experts' fees. The defendants
believe the allegations contained in the complaints are entirely without merit
and intend to contest them vigorously.
In addition, an alleged former stockholder of Shawmut who claims to have
sold shares of Shawmut Common Stock between December 11, 1994 and February 21,
1995 filed a purported class action lawsuit on behalf of himself and all other
persons who sold Shawmut Common Stock between such dates in the United States
District Court for the Eastern District of New York against Shawmut. The
plaintiff alleges, among other things, that, prior to the execution of the
Shawmut/Fleet Merger Agreement, Shawmut violated Section 10(b) of the Exchange
Act and Rule 10b-5 promulgated thereunder by disseminating false information
and/or failing to disclose material facts necessary in order not to mislead the
investing public and by artificially depressing the market price of the Shawmut
Common Stock as a result of these alleged acts and omissions. In particular, the
plaintiff alleges that on December 11, 1994 a newspaper article reported that
Mr. Alvord had "stated that a merger for Shawmut was not in the cards and that
he would be charting a course for Shawmut as an independent institution." The
plaintiff contends that this newspaper article constituted a representation by
Shawmut, that such alleged representation was materially false and misleading
when made and/or became materially misleading, and that Shawmut had a duty to
correct this alleged representation as soon as it believed that the alleged
representation was no longer accurate. The plaintiff seeks an order requiring
Shawmut to compensate plaintiff and the members of the class for all losses and
damages suffered by them as a result of the acts and omissions complained of in
the complaint. The plaintiff also seeks an award of the costs and disbursements
of the action, including reasonable attorneys', accountants' and experts' fees.
Shawmut denies that the newspaper article referred to by the plaintiff contains
any such statement by Mr. Alvord and further believes the allegations contained
in the complaint are entirely without merit and intends to contest them
vigorously.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF NORTHEAST BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF THE STOCKHOLDERS OF NORTHEAST ASSUMING THAT THE SHAWMUT COMMON
STOCK AVERAGE PRICE IS AT LEAST $21.465 AND, ACCORDINGLY, RECOMMENDS THAT
HOLDERS OF NORTHEAST COMMON STOCK VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
THE NORTHEAST BOARD REPRESENTS TO THE NORTHEAST STOCKHOLDERS THAT IT SHALL
TERMINATE THE MERGER AGREEMENT IF THE SHAWMUT COMMON STOCK AVERAGE PRICE IS LESS
THAN $21.465.
IF THE NORTHEAST BOARD EXERCISES ITS RIGHT TO TERMINATE THE MERGER
AGREEMENT IN THE EVENT THE SHAWMUT COMMON STOCK AVERAGE PRICE IS LESS THAN
$21.465, SHAWMUT WILL NOT INCREASE THE EXCHANGE RATIO ABOVE .507. ACCORDINGLY,
IN SUCH EVENT THE MERGER WOULD NOT BE CONSUMMATED.
DESCRIPTION OF FLEET CAPITAL STOCK
GENERAL
The Fleet Articles of Incorporation (the "Fleet Articles") currently
authorize the issuance of 300,000,000 shares of Fleet Common Stock and
16,000,000 shares of Fleet Preferred Stock, $1.00 par value
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<PAGE> 31
(the "Fleet $1 Par Preferred Stock"), issuable in one or more series from time
to time by action of the Fleet Board and 1,500,000 shares of Fleet Preferred
Stock with Cumulative and Adjustable Dividends, $20.00 par value (the "Fleet $20
Par Adjustable Rate Preferred Stock").
At December 31, 1994, 135,024,262 shares of Fleet Common Stock were
outstanding. In addition, Fleet currently has outstanding warrants to purchase
2,500,000 shares of Fleet Common Stock which were issued in connection with the
NBB acquisition (the "NBB Warrants"). The NBB Warrants are exercisable at any
time beginning January 27, 1996 and ending January 26, 2001 at an exercise price
of $43.875 per NBB Warrant, and are subject to customary anti-dilution
provisions.
As of December 31, 1994, Fleet had outstanding three series of Fleet $1 Par
Preferred Stock as follows: (i) 1,100,000 shares of Series III 10.12% Perpetual
Preferred Stock (the "Fleet Series III Preferred"), having a liquidation value
of $100 per share, plus accrued and unpaid dividends, were designated and
519,758 shares were issued and outstanding, (ii) 1,000,000 shares of Series IV
9.375% Perpetual Preferred Stock (the "Fleet Series IV Preferred"), having a
liquidation value of $100 per share, plus accrued and unpaid dividends, were
designated and 478,838 shares were issued and outstanding and (iii) 1,415,000
shares of Dual Convertible Preferred Stock (the "Fleet Dual Convertible
Preferred Stock"), having a liquidation preference of $200 per share, plus
accrued and unpaid dividends, were designated and 1,415,000 shares were issued
and outstanding. In addition, as of December 31, 1994, the Fleet Board had
established a series of 1,500,000 shares of Cumulative Participating Junior
Preferred Stock, par value $1 per share (the "Fleet Junior Preferred Stock")
issuable upon exercise of the Preferred Share Purchase Rights described below of
which no shares were outstanding. As of December 31, 1994, Fleet also had
authorized 1,500,000 shares of a separate class of the Fleet $20 par Adjustable
Rate Preferred Stock, having a liquidation value of $50 per share, plus accrued
and unpaid dividends, none of which were outstanding as of December 31, 1994 and
the terms of which are proposed to be deleted from the Fleet Articles in
connection with the Shawmut/Fleet Merger. Each such outstanding series and class
is described below under "Description of Fleet Preferred Stock".
In addition, in the event of the consummation of the Shawmut/Fleet Merger,
each issued and outstanding share of each series of Shawmut Preferred Stock will
be converted into the right to receive one share of Fleet preferred stock with
substantially the same terms as the applicable series of Shawmut Preferred Stock
(each such series of Fleet preferred stock, together with each series of Fleet
$1 Par Preferred Stock and the Fleet Junior Preferred Stock, the "Fleet
Preferred Stock"). For a description of each outstanding series of Shawmut
Preferred Stock see the accompanying Proxy Statement/Prospectus under
"DESCRIPTION OF SHAWMUT CAPITAL STOCK -- Shawmut Preferred Stock."
Prior to the consummation of the Shawmut/Fleet Merger, and subject to the
approval of holders of Fleet Common Stock, the Fleet Articles will be amended
to: (i) increase the authorized shares of Fleet Common Stock from 300,000,000 to
600,000,000, (ii) to change the par value of the Fleet Common Stock from $1.00
to $0.01 and (iii) delete therefrom the terms of the Fleet $20 Par Adjustable
Rate Preferred Stock and certain series of the Fleet $1 Par Preferred Stock, all
of which have been redeemed or converted in full.
The following summary does not purport to be complete and is subject in all
respects to the applicable provisions of the Rhode Island Business Corporation
Act ("Rhode Island law") and the Fleet Articles and Fleet By-Laws.
FLEET COMMON STOCK
General. 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
therefor, and are entitled upon liquidation, after claims of creditors and
preferences of Fleet Preferred Stock and any other series of preferred stock at
the time outstanding, to receive pro rata the net assets of Fleet. Dividends are
paid on Fleet Common Stock only if all dividends on the outstanding classes or
series of Fleet Preferred Stock or any other series of preferred stock at the
time outstanding, for the then current period and, in the case of cumulative
Fleet Preferred Stock or any other series of preferred stock at the time
outstanding, all prior periods have been paid or provided for.
S-26
<PAGE> 32
Fleet Preferred Stock and any other class of preferred stock have, or upon
issuance will have, preference over the Fleet Common Stock with respect to the
payment of dividends and the distribution of assets in the event of liquidation
or dissolution of Fleet and such other preferences as may be fixed by the Fleet
Board.
The holders of Fleet Common Stock are entitled to one vote for each share
held and are vested with all of the voting power except as the Fleet Board has
provided with respect to Fleet Preferred Stock, or may provide, in the future,
with respect to any other series of preferred stock which it may hereafter
authorize. The Fleet Common Stock does not have cumulative voting rights. Shares
of Fleet Common Stock are not redeemable and have no subscription, conversion or
preemptive rights.
The affirmative vote of not less than 80% of Fleet's outstanding voting
stock, voting separately as a class, is required for certain business
combinations between Fleet and/or its subsidiaries and persons owning 10% or
more or its voting stock. See "COMPARISON OF STOCKHOLDER RIGHTS -- Business
Combinations".
Fleet Common Stock is listed on the NYSE. The outstanding shares of Fleet
Common Stock are, and the shares to be issued to Shawmut stockholders upon
consummation of the Shawmut/Fleet Merger will be, validly issued, fully paid and
non-assessable and the holders thereof are not, and will not be, subject to any
liability as stockholders.
The Transfer Agent and Registrar for Fleet Common Stock is Fleet-RI.
Restrictions on Ownership. The BHC Act requires any "bank holding
company", as such term is defined therein, to obtain the approval of the Federal
Reserve Board prior to the acquisition of 5% or more of Fleet Common Stock. Any
person other than a bank holding company is required to obtain prior approval of
the Federal Reserve Board to acquire 10% or more of Fleet Common Stock under the
Change in Bank Control Act (the "CBCA"). In connection with Fleet's acquisition
of the banking subsidiaries of the failed Bank of New England Corp. in 1991
Fleet issued to certain limited partnerships managed by affiliates of Kohlberg,
Kravis, Roberts & Co. (the "Partnerships") the Fleet Dual Convertible Preferred
Stock. The Partnerships made a filing under the CBCA because of their
acquisition of such stock. Any holder of 25% or more of 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 BHC Act.
Preferred Share Purchase Rights. On November 21, 1990, the Fleet Board
declared a dividend of one preferred share purchase right ("Fleet Right") for
each outstanding share of Fleet Common Stock. The dividend was paid on December
4, 1990 to the shareholders of record on that date. Each Fleet Right, when
exercisable, will entitle the registered holder to purchase from Fleet one
one-hundredth of a share of the Fleet Junior Preferred Stock, at an exercise
price of $50 per one one-hundredth of a share of the Fleet Junior Preferred
Stock (the "Purchase Price"), subject to certain adjustments. Until the earlier
to occur of the Fleet Distribution Date and the Expiration Date (each as
hereinafter defined), Fleet will issue one Fleet Right with each share of Fleet
Common Stock; accordingly, each stockholder of Shawmut who receives Fleet Common
Stock upon consummation of the Shawmut/Fleet Merger will automatically receive
one Fleet Right with each such share issued.
The Fleet Rights are not represented by separate certificates and are not
exercisable or transferable apart from Fleet Common Stock until the earlier to
occur of (i) the tenth day after a public announcement by Fleet (x) that a
person or group of affiliated or associated persons has, subsequent to November
21, 1990 (the "Declaration Date") acquired, or obtained the right to acquire,
beneficial ownership (as defined in the Fleet Rights Agreement) of 10% or more
(or, in the case of a qualifying institutional investor, acting in the ordinary
course of business and not with the purpose of changing or influencing control
of Fleet (a "Qualifying Investor"), 15% or more) of the outstanding shares of
Fleet Common Stock, (y) that any person or group of affiliated or associated
persons, which beneficially owned 10% or more (or, in the case of a Qualifying
Investor, 15% or more) of the outstanding shares on the Declaration Date, or
which acquired beneficial ownership of 10% or more (or, in the case of a
Qualifying Investor, 15% or more) of the outstanding shares as a result of any
repurchase of shares by Fleet, thereafter acquired beneficial ownership of
additional shares constituting 1% or more of the outstanding shares, or (z) that
any person who was a Qualifying Investor
S-27
<PAGE> 33
owning 10% or more of the outstanding shares of Fleet Common Stock ceased to
qualify as a Qualifying Investor and thereafter acquired beneficial ownership of
additional shares constituting 1% or more of the outstanding shares (any person
described in clause (x), (y) or (z) being a "Fleet Acquiring Person"); and (ii)
the tenth day (or such later day as may be determined by action of the Fleet
Board prior to such time as any person becomes a Fleet Acquiring Person) after
the date of the commencement of a tender or exchange offer by any person (other
than Fleet) to acquire (when added to any shares as to which such person is the
beneficial owner immediately prior to such commencement) beneficial ownership of
10% or more of the issued and outstanding shares of Fleet Common Stock (the
earlier of such dates being called the "Fleet Distribution Date"). On March 28,
1991 and July 12, 1991 the Fleet Rights Agreement was amended to change the
definition of a "Fleet Acquiring Person" (i) to permit the sale of the Dual
Convertible Preferred Stock and issuance of rights to purchase Fleet Common
Stock to the Partnerships and (ii) to permit the Fleet Board to determine that a
person who would otherwise be a "Fleet Acquiring Person" had become such
inadvertently and therefore allow divestiture of a sufficient number of shares
to avoid such designation. The Fleet Rights Agreement was further amended on
February 20, 1995 to permit the execution and delivery of the Shawmut/Fleet
Merger Agreement and the related stock option agreements.
The Fleet Rights will first become exercisable on the Distribution Date and
could then begin trading separately from Fleet Common Stock. The Fleet Rights
will expire on the earliest of November 21, 2000 (the "Final Expiration Date"),
the date on which the Fleet Rights are earlier redeemed by Fleet or the date on
which the Fleet Rights are exchanged (such earliest date being referred to as
the "Expiration Date").
In the event any person becomes a Fleet Acquiring Person, the Fleet Rights
would give holders (other than such Fleet Acquiring Person and its transferees)
the right to buy, for the Purchase Price (and in lieu of Fleet Junior Preferred
Stock), Fleet Common Stock (or, under certain circumstances, cash, property or
other debt or equity securities ("Fleet Common Stock equivalents")) with a
market value of twice the Purchase Price. In addition, at any time after any
person becomes a Fleet Acquiring Person, the Fleet Board may, at its option and
in lieu of any transaction described in the preceding sentence, exchange the
outstanding and exercisable Fleet Rights (other than Fleet Rights held by any
such Fleet Acquiring Person and its transferees) for shares of Fleet Common
Stock or Fleet Common Stock equivalents at an exchange ratio of one share of
Fleet Common Stock per Fleet Right, subject to certain adjustments.
In any merger or consolidation involving Fleet after the Fleet Rights
become exercisable, each Fleet Right will be converted into the right to
purchase, for the Purchase Price, common stock of the surviving corporation
(which may be Fleet) with a market value of twice the Purchase Price.
The Fleet Board may amend the Fleet Rights Agreement or redeem the Fleet
Rights for $.01 each at any time until the date of a public announcement by
Fleet that there is a Fleet Acquiring Person. Thereafter, the Fleet Board may
amend the Fleet Rights Agreement only to eliminate ambiguities or to provide
additional benefits to, and if the amendment would not adversely affect, the
holders of the Fleet Rights (other than the Fleet Acquiring Person).
Until a Fleet Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of Fleet, including, without limitation, the right to
vote or to receive dividends.
The Purchase Price payable, and the number of shares of Fleet Junior
Preferred Stock or other securities or property issuable, upon exercise of the
Fleet Rights, and the number of outstanding Fleet Rights, are subject to
customary antidilution adjustments.
The Fleet Rights have certain "anti-takeover" effects. The Fleet Rights may
cause substantial dilution to a person or group that attempts to acquire Fleet
on terms not approved by the Fleet Board, except pursuant to an offer
conditioned on a substantial number of Fleet Rights being acquired. The Fleet
Rights should not interfere with any merger or other business combination
approved by the Fleet Board prior to the time that there is a Fleet Acquiring
Person (at which time holders of the Rights become entitled to exercise their
Fleet Rights for shares of Fleet Common Stock at one-half the market price),
since until such time the Fleet Rights generally may be redeemed by the Fleet
Board at $.01 per Fleet Right.
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FLEET PREFERRED STOCK
Fleet $1 Par Preferred Stock
Fleet $1 Par Preferred Stock is issuable in series, with such relative
rights, preferences and limitations of each series (including dividend rights,
dividend rate, liquidation preference, voting rights, conversion rights and term
of redemption (including sinking fund provisions), redemption price or prices
and the number of shares constituting any series) as may be fixed by the Fleet
Board.
The Fleet $1 Par Preferred Stock will rank pari passu with each series of
Fleet Preferred Stock that will be issued upon conversion of Shawmut Preferred
Stock.
As of the date of this Proxy Statement/Prospectus Supplement, Fleet has
three series of Fleet $1 Par Preferred Stock outstanding, and one series
designated but unissued.
Fleet Series III Preferred. In the event of the dissolution, liquidation
or winding up of Fleet, holders of shares of the outstanding Fleet Series III
Preferred are entitled to receive a distribution of $100 per share, plus accrued
and unpaid dividends, if any.
The holders of Fleet Series III Preferred are entitled to receive dividends
at the rate of 10.12% per annum computed on the basis of the issue price thereof
of $100 per share, payable quarterly, before any dividend shall be declared or
paid upon Fleet Common Stock or Fleet Junior Preferred Stock. The dividends on
Fleet Series III Preferred are cumulative. The Fleet Series III Preferred is
redeemable, in whole or in part, at Fleet's option, on and after June 1, 1996,
commencing at $105.06 per share and declining ratably on June 1 of each year to
$100 per share on or after June 1, 2001, plus, in each case, accrued and unpaid
dividends, if any. So long as any shares of the Fleet Series III Preferred are
outstanding, Fleet may not redeem, repurchase or otherwise acquire any shares of
the Fleet Common Stock or any other class of Fleet preferred stock ranking
junior to or on a parity with Fleet Series III Preferred either as to dividends
or upon liquidation unless full cumulative dividends on all outstanding shares
of Fleet Series III Preferred are paid for all past dividend payment periods.
Further, if any dividends on the Series III Preferred are in arrears, Fleet may
not redeem, purchase or otherwise acquire any shares of the Series III Preferred
unless all outstanding shares of such class are simultaneously redeemed,
purchased or otherwise acquired, except pursuant to a purchase or exchange offer
made on the same terms to holders of all outstanding shares of the Series III
Preferred.
Except as indicated below or except as expressly required by applicable
law, the holders of the Fleet Series III Preferred are not entitled to vote. If
the equivalent of six quarterly dividends payable on the Fleet Series III
Preferred or any other class or series of preferred stock (other than any other
class of preferred stock expressly entitled to elect additional directors by a
separate and distinct vote) are in default, the number of directors of Fleet
will be increased by two (without duplication of any increase made pursuant to
the terms of any other series of preferred stock of Fleet), and the holders of
the Fleet Series III Preferred, voting as a single class with the holders of
shares of any one or more other series of Fleet $1 Par Preferred Stock (other
than any other class of preferred stock expressly entitled to elect additional
directors by a separate and distinct vote) and any other class of Fleet
preferred stock ranking on a parity with the Fleet Series III Preferred either
as to dividends or distribution of assets and upon which like voting rights have
been conferred and are exercisable, will be entitled to elect two directors to
fill each of the two newly-created directorships. Such right will continue until
full cumulative dividends for all past dividend periods on all preferred shares
of Fleet (other than any other class of preferred stock expressly entitled to
elect additional directors by a separate and distinct vote), including any
shares of the Fleet Series III Preferred, have been paid or declared and set
apart for payment. Any such elected directors will serve until Fleet's next
annual meeting of stockholders (notwithstanding that prior to the end of such
term the dividend default shall cease to exist) or until their respective
successors shall be elected and qualify.
The affirmative vote or consent of the holders of at least 66 2/3% of the
outstanding shares of the Fleet Series III Preferred is required for any
amendment of the Fleet Articles (or any certificate supplemental thereto) which
will adversely affect the powers, preferences, privileges or rights of the Fleet
Series III Preferred. The affirmative vote or consent of the holders of at least
66 2/3% of the outstanding shares of the Fleet Series III Preferred and any
other series of Fleet $1 Par Preferred Stock ranking on a parity with the
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Fleet Series III Preferred either as to dividends or upon liquidation, voting as
a single class without regard to series, is required to issue, authorize or
increase the authorized amount of, or issue or authorize any obligation or
security convertible into or evidencing a right to purchase, any additional
class or series of stock ranking prior to the Fleet Series III Preferred as to
dividends or upon liquidation, or to reclassify any authorized stock of Fleet
into such prior shares.
Fleet Series IV Preferred. In the event of the dissolution, liquidation or
winding up of Fleet, holders of shares of the outstanding Fleet Series IV
Preferred are entitled to receive a distribution of $100 per share, plus accrued
and unpaid dividends, if any.
The holders of Fleet Series IV Preferred are entitled to receive dividends
at the rate of 9.375% per annum computed on the basis of the issue price thereof
of $100 per share, payable quarterly, before any dividend shall be declared or
paid upon Fleet Common Stock or Fleet Junior Preferred Stock. The dividends on
the Fleet Series IV Preferred are cumulative. The Fleet Series IV Preferred is
redeemable, in whole or in part, at Fleet's option, on and after December 1,
1996, at $100 per share, plus accrued and unpaid dividends, if any. So long as
any shares of the Fleet Series IV Preferred are outstanding, Fleet may not
redeem, repurchase or otherwise acquire any shares of the Fleet Common Stock or
any other class of Fleet preferred stock ranking junior to or on a parity with
the Fleet Series IV Preferred either as to dividends or upon liquidation unless
full cumulative dividends on all outstanding shares of Fleet Series IV Preferred
are paid for all past dividend payment periods. Further, if any dividends on the
Series IV Preferred are in arrears, Fleet may not redeem, purchase or otherwise
acquire any shares of the Series IV Preferred unless all outstanding shares of
such class are simultaneously redeemed, purchased or otherwise acquired, except
pursuant to a purchase or exchange offer made on the same terms to holders of
all outstanding shares of the Series IV Preferred.
Except as indicated below or except as expressly required by applicable
law, the holders of the Fleet Series IV Preferred are not entitled to vote. If
the equivalent of six quarterly dividends payable on the Fleet Series IV
Preferred or any other class or series of preferred stock are in default (other
than any other class of preferred stock expressly entitled to elect additional
directors by a separate and distinct vote), the number of directors of Fleet
will be increased by two (without duplication of any increase made pursuant to
the terms of any other series of preferred stock of Fleet), and the holders of
the Fleet Series IV Preferred, voting as a single class with the holders of
shares of any one or more other series of Fleet $1 Par Preferred Stock (other
than any other class of preferred stock expressly entitled to elect additional
directors by a separate and distinct vote) and any other class of Fleet
preferred stock ranking on a parity with the Fleet Series IV Preferred either as
to dividends or distribution of assets and upon which like voting rights have
been conferred and are exercisable, will be entitled to elect such directors to
fill each of the two newly-created directorships. Such right shall continue
until full cumulative dividends for all past dividend periods on all preferred
shares of Fleet (other than any other class of preferred stock expressly
entitled to elect additional directors by a separate and distinct vote),
including any shares of the Fleet Series IV Preferred, have been paid or
declared and set apart for payment. Any such elected directors shall serve until
Fleet's next annual meeting of stockholders (notwithstanding that prior to the
end of such term the dividend default shall cease to exist) or until their
respective successors shall be elected and qualify.
The affirmative vote or consent of the holders of at least 66 2/3% of the
outstanding shares of the Fleet Series IV Preferred is required for any
amendment of the Fleet Articles (or any certificate supplemental thereto) which
will adversely affect the powers, preferences, privileges or rights of the Fleet
Series IV Preferred. The affirmative vote or consent of the holders of at least
66 2/3% of the outstanding shares of the Fleet Series IV Preferred and any other
series of Fleet $1 Par Preferred Stock ranking on a parity with the Fleet Series
IV Preferred either as to dividends or upon liquidation, voting as a single
class without regard to series, is required to issue, authorize or increase the
authorized amount of, or issue or authorize any obligation or security
convertible into or evidencing a right to purchase, any additional class or
series of stock ranking prior to the Fleet Series IV Preferred as to dividends
or upon liquidation, or to reclassify any authorized stock of Fleet into such
prior shares.
Fleet Dual Convertible Preferred Stock. The Fleet Dual Convertible
Preferred Stock has no voting rights except as provided by Rhode Island law or
as indicated below. The Fleet Dual Convertible Preferred
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Stock is not entitled to vote for the election of directors in any
circumstances, including dividend arrearages, and the holders thereof have
agreed to vote the Fleet Dual Convertible Preferred Stock as directed by the
Fleet Board on any matters upon which the shares are entitled to vote under
Rhode Island law, except on those matters adversely affecting the rights of
holders of Fleet Dual Convertible Preferred Stock. The affirmative vote or
consent of the holders of at least 66 2/3% of the outstanding shares of Fleet
Dual Convertible Preferred Stock, voting as a class, given in person or by
proxy, either in writing or by resolution adopted at a special meeting called
for the purpose, is required to authorize any new class of equity securities of
Fleet to which the Fleet Dual Convertible Preferred Stock ranks junior, whether
with respect to dividends or upon liquidation, dissolution, winding up or
otherwise. In addition, the affirmative vote or consent of the holders of at
least 66 2/3% of the outstanding shares of Fleet Dual Convertible Preferred
Stock, voting as a class, given in person or by proxy, either in writing or by
resolution adopted at a special meeting called for the purpose, shall be
required for any amendment of the Fleet Articles (or the certificate of
designation of the Fleet Dual Convertible Preferred Stock), which would affect
materially and adversely the specified rights, preferences, privileges or voting
rights of shares of Dual Convertible Preferred Stock.
The holders of Fleet Dual Convertible Preferred Stock are entitled to
dividends equal to one-half of the total dividends declared (after the first $15
million in dividends), if any, by Fleet Banking Group, Inc., a wholly owned
subsidiary of Fleet ("Fleet Banking Group"), on its common stock. Such
dividends, if accrued and unpaid, will be cumulative. In the event of the
liquidation, dissolution or winding up of Fleet, the holders of the outstanding
Fleet Dual Convertible Preferred Stock are entitled to receive a distribution of
$200 per share, plus accrued and unpaid dividends, if any. So long as any shares
of the Fleet Dual Convertible Preferred Stock are outstanding, Fleet may not
make any payment on account of, or set apart for payment money for a sinking or
other similar fund for, the repurchase, redemption or other retirement of any
class or series of stock ranking junior to or on a parity with the Fleet Dual
Convertible Preferred Stock either as to dividends or upon liquidation unless
prior to or concurrently with such declaration, payment, setting apart for
dividends or upon liquidation unless prior to or concurrently with such
declaration, payment, setting apart for payment, repurchase, redemption or other
retirement or distribution, as the case may be, all accrued and unpaid dividends
on shares of the Fleet Dual Convertible Preferred Stock shall have been or be
paid.
On July 31, 1991, the date of issuance of the Fleet Dual Convertible
Preferred Stock, Fleet granted to the Partnerships which purchased the Fleet
Dual Convertible Preferred Stock rights (the "DCP Rights") to purchase 6,500,000
shares of Fleet Common Stock at $17.65 per share.
The Fleet Dual Convertible Preferred Stock is convertible into Fleet Common
Stock at a conversion price of $17.65 per share at any time. The total number of
shares issuable upon such conversion is 16,033,994 shares, subject to customary
anti-dilution adjustments. If any of such stock is converted prior to July 12,
2001, all of such stock must be converted. After July 12, 2001, any holder of
Fleet Dual Convertible Preferred Stock may convert its stock into Fleet Common
Stock independently of any other holder.
The Fleet Dual Convertible Preferred Stock is also convertible into 50% of
the common stock of Fleet Banking Group at any time after the later of (i) July
12, 1995 and (ii) the date on which the Partnerships distribute all the shares
of Fleet Dual Convertible Preferred Stock then held by them to the partners
therein (which distribution date will be July 12, 1997 unless the Federal
Reserve Board consents to an alternative distribution date, but in no event
earlier than July 12, 1995). The Fleet Dual Convertible Preferred Stock is also
convertible into Fleet Banking Group common stock on an earlier date in the
event that the quotient of (i) Fleet's Tier 1 capital as of the date of
determination (adjusted to include goodwill of Fleet as of July 12, 1991)
divided by (ii) total assets, falls below 3%. The Fleet Dual Convertible
Preferred Stock is not convertible into Fleet Banking Group common stock after
July 12, 2001 or at any time while it is held by the Partnerships. After the
Fleet Dual Convertible Preferred Stock becomes convertible into Fleet Banking
Group common stock, the holders of the Fleet Dual Convertible Preferred Stock
will have the right to obtain an appraisal of the fair value of the common stock
of Fleet Banking Group (the "Appraisal") as if all such shares were to be sold
to a third party in a transaction reflecting a control premium. If such
Appraisal is acceptable to the holders of the Fleet Dual Convertible Preferred
Stock, the Fleet Dual Convertible Preferred Stock may be converted into 50% of
the common stock of Fleet Banking Group on or after the date that is six months
after such acceptance or, in the case of the earlier date due to the capital
deficiency described above, on or after the
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date that is 60 days after the notice of such deficiency. During the period
after acceptance but prior to the date on which such shares becomes convertible,
Fleet will have the option to redeem the Fleet Dual Convertible Preferred Stock
at a redemption price equal to 50% of the Appraisal price less the sum of (i)
the market value of the shares of Fleet Common Stock into which the Fleet Dual
Convertible Preferred Stock are then convertible (and such shares of Fleet
Common Stock shall be distributed to the holders of Fleet Dual Convertible
Preferred Stock) and (ii) the value of the DCP Rights. Fleet has the option to
pay such redemption price in cash or in any combination of Fleet securities
having a realizable market value equal to such redemption price. If Fleet does
not exercise this option, the holders of the Fleet Dual Convertible Preferred
Stock may convert their shares into 50% of the common stock of Fleet Banking
Group. Any such conversion must be for all of the Fleet Dual Convertible
Preferred Stock.
Fleet Junior Preferred Stock. The Fleet Junior Preferred Stock will be
issued upon the exercise of Fleet Rights issued to holders of Fleet Common
Stock. As of the date of this Proxy Statement/Prospectus Supplement, there were
1,500,000 shares of Fleet $1 Par Preferred Stock reserved for issuance upon the
exercise of the Fleet Rights. See "-- Fleet Common Stock -- Preferred Share
Purchase Rights". Shares of Fleet Junior Preferred Stock purchasable upon
exercise of the Fleet Rights will rank junior to the Fleet $1 Par Preferred
Stock and the Fleet preferred stock issued as consideration for outstanding
Shawmut Preferred Stock and will not be redeemable. Each share of Fleet Junior
Preferred Stock will, subject to the rights of such senior securities of Fleet,
be entitled to a preferential cumulative quarterly dividend payment equal to the
greater of $1.00 per share or, subject to certain adjustments, 100 times the
dividend declared per share of Fleet Common Stock. Upon the liquidation,
dissolution or winding up of Fleet, the holders of the Fleet Junior Preferred
Stock will, subject to the rights of such senior securities, be entitled to a
preferential liquidation payment equal to the greater of $1.00 per share plus
all accrued and unpaid dividends or 100 times the payment made per share of
Fleet Common Stock. Finally, in the event of any merger, consolidation or other
transaction in which shares of Fleet Common Stock are exchanged, each share of
Fleet Junior Preferred Stock will, subject to the rights of such senior
securities, be entitled to receive 100 times the amount received per share of
Fleet Common Stock. Each share of Fleet Junior Preferred Stock will have 100
votes, voting together with the Fleet Common Stock. The rights of the Fleet
Junior Preferred Stock are protected by customary antidilution provisions.
COMPARISON OF STOCKHOLDER RIGHTS
Currently, Shawmut and Northeast are corporations organized under, and
governed by, Delaware law and their respective Certificates of Incorporation and
By-laws. Fleet is organized under, and governed by, Rhode Island law, the Fleet
Articles and the Fleet By-laws. At the Effective Time, stockholders of Northeast
automatically will become stockholders of Shawmut, and their rights as
stockholders will be determined by Delaware law and Shawmut's Certificate of
Incorporation and By-laws. If both the Merger and the Shawmut/Fleet Merger are
consummated, stockholders of Northeast will ultimately become shareholders of
Fleet and their rights as shareholders will be determined by Rhode Island law,
the Fleet Articles and the Fleet By-laws. The rights of a holder of Northeast
Common Stock are similar in some respects and different in other respects from
the rights of a holder of Shawmut Common Stock or Fleet Common Stock. The
following summarizes certain similarities and differences but does not purport
to be a complete description of the similarities and differences between the
rights of Fleet, Shawmut and Northeast stockholders. Such differences may be
determined in full by reference to Rhode Island law, Delaware law, the Fleet
Articles, the Shawmut Certificate, the Northeast Certificate, the Fleet By-laws,
the Shawmut By-laws and the Northeast By-laws. THE INFORMATION RELATED TO FLEET
WILL BE APPLICABLE TO NORTHEAST STOCKHOLDERS ONLY IF THE SHAWMUT/FLEET MERGER IS
CONSUMMATED.
VOTING RIGHTS
General. Each of the Shawmut Certificate and the Fleet Articles provide
that holders of shares of Shawmut Common Stock and Fleet Common Stock,
respectively, are entitled to one vote per share of record for the election of
directors and all other purposes, subject to the voting rights, if any, of
holders of any Shawmut Preferred Stock and Fleet Common Stock, respectively.
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The Northeast Certificate provides that holders of shares of Northeast
Common Stock have cumulative voting rights with respect to election of
directors.
Northeast's cumulative voting rights, together with the classification of
the Northeast Board discussed below under "-- Size and Classification of Board
of Directors," increases the difficulty of a stockholder to ensure the election
of a particular director or to gain control of the Northeast Board.
ACTION BY WRITTEN CONSENT
Except for corporate action relating to a merger or consolidation,
acquisition or disposition, Rhode Island law permits corporate action without a
meeting if the charter of a corporation authorizes such action and the
shareholders consenting to such action would be entitled to cast, at a meeting
at which all shareholders entitled to vote thereon were present, at least the
minimum number of votes which would be required to take such action. Rhode
Island law further provides that corporate action relating to a merger,
consolidation, acquisition or disposition may be taken without a meeting if all
shareholders entitled to vote thereon consent in writing.
The Fleet Articles authorize such action by shareholders if the written
consent of shareholders having not less than the minimum percentage of the total
vote statutorily required for the proposed corporate action is obtained and
provided that notice of such action is given to all Fleet shareholders who would
have been entitled to vote upon the action if such meeting were held.
Delaware law provides that, unless otherwise provided in the certificate of
incorporation, stockholders may act by written consent if consents are signed
representing not less than the minimum number of votes that would be necessary
to take such action at a meeting where all shares entitled to vote were present
and voted. Prompt notice of the taking of action without a meeting by less than
unanimous written consent must be given to all stockholders who have not
consented in writing. The Shawmut Certificate does not provide otherwise.
The Northeast Certificate provides that stockholders may not act by written
consent, subject to the rights of holders of any class or series of Preferred
Stock.
The certificate of designation of the outstanding Northeast $8.50
Cumulative Preferred Stock, Series B (the "Series B Preferred Stock") permits
holders of such series to act by written consent, but only as to any amendment
to the provisions of the Series B Preferred Stock and to the creation,
authorization or issuance of a new series of preferred stock (or increase in the
authorized amount of an existing series of preferred stock) or a class of other
stock with preference or priority over or on a parity with the Series B
Preferred Stock as to the right to receive either dividends or amounts
distributable upon liquidation, dissolution or winding up of Northeast.
In publicly-held corporations with many stockholders, such as Shawmut and
Fleet, the practical ability of stockholders to act by written consent in
circumstances in which they could not otherwise call a special meeting, as
described below, is remote.
SPECIAL MEETINGS OF STOCKHOLDERS
Rhode Island law provides that a special meeting of shareholders may be
called by the president, the board of directors or the holders of 10% or more of
the shares entitled to vote at such meeting, or such other officers or persons
specified in the charter or by-laws.
The Fleet By-laws permit special meetings of shareholders to be called by
the Fleet Board pursuant to a resolution adopted by the majority of the Fleet
Board, or by the Chairman of the Fleet Board or the president. In addition, the
Fleet By-laws require that the Secretary of Fleet must call a special meeting of
shareholders upon written request of three or more shareholders holding at least
80% of the outstanding shares of stock of Fleet entitled to vote at such
meeting.
Under Delaware law, a special meeting of stockholders may be called by the
board of directors or such other persons as are authorized by the certificate of
incorporation or by-laws.
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Pursuant to the Shawmut By-laws, special meetings of stockholders may be
called by the Shawmut Board, the Chairman of the Board or upon the written
request of seven or more stockholders holding not less than 30% of the
outstanding shares of Shawmut Common Stock.
Neither the Northeast Certificate nor the Northeast By-laws give the right
to stockholders to call special meetings.
Thus, under certain circumstances Shawmut and Fleet stockholders have the
right to have a special meeting called, whereas Northeast stockholders do not
have such a right.
STOCKHOLDER NOMINATIONS AND PROPOSALS FOR BUSINESS
The Fleet By-laws establish procedures that must be followed for
shareholders to nominate individuals to the Fleet Board or to propose business
at a meeting of Fleet shareholders. The Fleet By-laws specify that nominations
of persons for election as director may be made at a meeting of shareholders by
or at the direction of the Fleet Board, or by any holder of stock entitled to
vote thereon who complies with the requisite notice procedure. Such notice must
include the information required to be disclosed in solicitation for proxies for
election of directors pursuant to Regulation 14A under the Exchange Act, along
with the name, record address, class and number of shares of capital stock of
Fleet beneficially owned by the shareholder giving such notice and by other
shareholders known by such shareholder to be supporting such nominees on the
date of such shareholders' notice, and any material interest of the shareholder
in such proposal.
In order to properly propose that certain business come before a meeting of
Fleet shareholders, a shareholder's notice to the Secretary of Fleet shall set
forth a brief description of the business desired to be brought before a meeting
of Fleet shareholders, and the reasons for conducting such business, the name
and address of the shareholder proposing such business and any other
shareholders known by such shareholder to be supporting such proposal, the class
and number of shares of Fleet which are beneficially owned by such shareholder
on the date of such shareholder's notice and by any other shareholders known by
such shareholder to be supporting such proposal on the date of such
shareholder's notice, and any material interest of the shareholder in such
proposal.
The notice procedure requires that a shareholder's nomination of a person
for election as a director or to properly propose that certain business come
before a meeting of Fleet shareholders must be made in writing and received by
the Secretary of Fleet not less than 30 days prior to the date of the meeting of
shareholders, provided, however, that if fewer than 40 days' notice or prior
public disclosure of the date of the meeting is given to shareholders, the
shareholder's nomination notice must be received not later than the close of
business on the seventh day following the first to occur of the publication or
mailing of the notice of the meeting date.
The Shawmut By-laws establish procedures that must be followed for
stockholders to nominate individuals to the Shawmut Board at the annual meeting
of stockholders. In order to nominate individuals to the Shawmut Board, a
stockholder must provide timely notice of such nomination in writing to the
Secretary of Shawmut and a written statement by the candidate of his or her
willingness to serve. Such notice must include the information required to be
disclosed in solicitations for proxies for election of directors pursuant to
Regulation 14A under the Exchange Act, along with the name, record address,
class and number of shares of capital stock of Shawmut beneficially owned by the
stockholder giving such notice.
In order to properly propose that certain business come before the annual
meeting of Shawmut stockholders, a stockholder must provide timely notice in
writing to the Secretary of Shawmut which notice must include a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting. In addition, the
notice must contain the name, record address, class and number of shares of
capital stock of Shawmut beneficially owned by the stockholder giving such
notice and any material interest of the stockholder in such business.
To be timely, notice must be delivered to Shawmut not less than 50 nor more
than 75 days prior to the meeting at which directors are to be elected or the
proposed business is to be conducted, or, if Shawmut gives less than 65 days'
notice of the meeting, then notice by the stockholder must be received by the
close of
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business on the 15th day following the earlier of the date notice of the meeting
was mailed or public disclosure of the meeting was made.
The Northeast By-laws establish similar procedures that must be followed
for stockholders to nominate individuals to the Northeast Board or to propose
business at the annual meeting of stockholders. The informational requirements
of the Northeast By-laws for nominations to the Northeast Board and business
proposals are essentially the same as those of Shawmut and Fleet; however, under
the Northeast By-laws, in order to be timely, notice must be delivered to
Northeast not less than 60 days prior to the meeting at which directors are to
be elected or the proposed business is to be conducted, or, if Northeast gives
less than 70 days' notice of the meeting then notice by the stockholder must be
received by the close of business on the 10th day following the date on which
notice of the meeting was mailed to stockholders.
Except for the timing requirements described above for nominating directors
or proposing business at a stockholder meeting and the differences between such
timing requirements for Fleet, Shawmut and Northeast stockholders, there are no
material differences between Fleet, Shawmut and Northeast's procedures for
nominating directors or proposing business at a stockholders meeting.
BUSINESS COMBINATIONS
Both Rhode Island and Delaware law generally require approval of a merger,
consolidation, dissolution or sale of all or substantially all of a
corporation's assets by the affirmative vote of the holders of a majority of the
outstanding shares of the corporation entitled to vote thereon. In addition,
under Rhode Island law, if any class of stock is entitled to vote separately,
approval of the plan of merger or consolidation, dissolution or sale of all or
substantially all assets also requires the affirmative vote of the holders of a
majority of the shares of each class of stock entitled to vote as a class
thereon. Delaware law, absent a charter provision to the contrary, does not
require such a class vote.
Rhode Island law provides that, unless the corporate charter provides
otherwise, the vote of the shareholders of a surviving corporation is not
required to approve a merger if: (a) the plan of merger does not amend the
corporation's charter and (b) the number of shares of common stock to be issued
or transferred in the merger plus the number of shares of common stock into
which any other securities to be issued in the merger are convertible within one
year does not exceed one-third of the total combined voting power of all classes
of stock then entitled to vote for the election of directors which would be
outstanding immediately after the merger.
Delaware law provides further that, unless the corporate charter provides
otherwise, no vote of the stockholders of a surviving corporation is required to
approve a merger if: (a) the agreement of merger does not amend in any respect
the corporation's charter; (b) each share of the corporation's stock outstanding
immediately prior to the effective date of the merger is to be an identical
outstanding or treasury share of the surviving corporation after the effective
date of the merger is to be an identical outstanding or treasury share of the
surviving corporation after the effective date of the merger; and (c) either no
shares of common stock of the surviving corporation and no shares, securities or
obligations convertible into such stock are to be issued or delivered under the
plan of merger, or the number of authorized unissued shares or treasury stock of
the surviving corporation's common stock to be issued or delivered under the
plan of merger plus the number of shares of common stock into which any other
shares, securities or obligations to be issued or delivered in the plan of
merger are initially convertible does not exceed 20% of the surviving
corporation's common stock outstanding immediately prior to the effective date
of the merger.
The Fleet Articles require that neither Fleet nor any of its subsidiaries
may engage in a Fleet Business Combination (as hereinafter defined) with a Fleet
Related Person (as hereinafter defined) unless such Fleet Business Combination
(a) was approved by an 80% vote of the Fleet Board prior to the time the Fleet
Related Person became such; (b) is approved by a vote of 80% of the Fleet
Continuing Directors and a majority of the entire Fleet Board and certain
conditions as to price and procedure are complied with; or (c) is approved by a
vote of 80% of Fleet's outstanding shares of Fleet capital stock entitled to
vote generally in the election of directors, voting as a single class. Under the
Fleet Articles, a "Fleet Business Combination" includes any merger or
consolidation of Fleet or any of its subsidiaries into or with a Fleet Related
Person or any of its
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affiliates or associates; any sale, exchange, lease, transfer or other
disposition to or with a Fleet Related Person or any of its affiliates or
associates of all, substantially all or any Substantial Part (defined as assets
having a value of more than 5% of the total consolidated assets of Fleet and its
subsidiaries) of the assets of Fleet or any of its subsidiaries; any purchase,
exchange, lease or other acquisition by Fleet or any of its subsidiaries of all
or any Substantial Part of the assets or business of a Fleet Related Person or
any of its affiliates or associates; any reclassification of securities,
recapitalization or other transaction which has the effect, directly or
indirectly, of increasing the proportionate amount of voting shares of Fleet or
any subsidiary which are beneficially owned by a Fleet Related Person; and the
acquisition by a Fleet 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
"Fleet Related Person" includes any person who is the beneficial owner of 10% or
more of Fleet's voting shares, as of the date on which a binding agreement
providing for a Fleet Business Combination is authorized by the Fleet Board or
prior to the consummation of a Fleet Business Combination or any person who is
an affiliate of Fleet and was the beneficial owner of 10% or more of Fleet's
then outstanding voting shares at any time within the five years preceding the
date on which a binding agreement providing for a Fleet Business Combination is
authorized by the Fleet Board; and the "Fleet Continuing Directors" are those
individuals who were members of the Fleet Board prior to the time a Fleet
Related Person became the beneficial owner of 10% or more of Fleet's voting
stock or those individuals designated as Fleet Continuing Directors (prior to
their initial election as directors) by a majority of the then Fleet Continuing
Directors.
To amend these provisions, a super majority vote (80%) of the Fleet Board,
a majority vote of the Fleet Continuing Directors and a super majority vote
(80%) of the stockholders is required unless the amendment is recommended to the
stockholders by a majority of the Fleet Board and not less than 80% of the Fleet
Continuing Directors, in which event only the vote provided under Rhode Island
law is required. Because, among other things, the Shawmut/Fleet Merger was
unanimously approved by the Fleet Board, the Shawmut/Fleet Merger would not
trigger these provisions of the Fleet Articles.
The Shawmut Certificate provides that any "Business Combination" involving
Shawmut and a person who beneficially owns 10% or more of Shawmut's outstanding
voting capital stock or certain affiliates or associates of Shawmut who
beneficially owned, at any time within, the 2-year period prior to the date in
question, 10% or more of Shawmut's outstanding voting stock (a "Shawmut Related
Person") must be approved by the holders of at least 80% of the votes entitled
to be cast by the holders of the outstanding shares of Shawmut voting stock (the
"Shawmut Voting Requirement") voting together as a single class. The Shawmut
Voting Requirement does not apply if (i) the Business Combination is approved by
a majority of the "Shawmut Continuing Directors" (defined generally to include
any person who is unaffiliated with, and not a representative of, the Shawmut
Related Person in the Business Combination and who either was a director
immediately prior to the time the Shawmut Related Person became such a person or
was recommended or elected to succeed such a Shawmut Continuing Director by a
majority of the Shawmut Continuing Directors); or (ii) certain "fair price"
(defined generally to mean that the consideration to be received by stockholders
in such Business Combination shall be at least equal to the higher of, and in
the same form as, the consideration paid by the Shawmut Related Person for such
person's acquisition of the applicable Shawmut capital stock within the two year
period immediately prior to the first public announcement of the proposal of the
Business Combination or in the transaction in which such person became a Shawmut
Related Person) and other criteria are met. As defined in the Shawmut
Certificate, a Business Combination includes, among other things, (i) any merger
or consolidation of Shawmut of any Shawmut subsidiary with any Shawmut Related
Person or affiliate or associate thereof; (ii) the sale, lease, exchange,
mortgage, pledge, transfer or other disposition by Shawmut of assets or
securities having a fair market value equal to 10% or more of the total
shareholders' equity of Shawmut ("Substantial Assets") to a Shawmut Related
Person or an affiliate or associate thereof, (iii) the acquisition by Shawmut of
Substantial Assets from a Shawmut Related Person or an affiliate or associate
thereof; (iv) the adoption of a plan or proposal for the liquidation or
dissolution of Shawmut proposed by or on behalf of a Shawmut Related Person or
an affiliate or associate thereof; (v) any transaction that has the effect of
increasing the proportionate share of any class of equity or convertible
security of Shawmut or any subsidiary that is beneficially owned by a Shawmut
Related Person or any affiliate or associate thereof and (vi) any agreement or
arrangement providing for any of the foregoing.
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This provision of the Shawmut Certificate can only be amended or repealed
upon the affirmative vote by the holders of at least 80% of the voting stock
entitled to vote unless such amendment or repeal is unanimously recommended by
the Shawmut Board and all of such directors are Shawmut Continuing Directors.
The Northeast Certificate provides that any "Northeast Business
Combination" (as defined below) involving Northeast and any person who, together
with affiliates and associates, beneficially owns 5% or more of Northeast Common
Stock (a "Northeast Related Person") must be approved by the holders of at least
80% of each class of stock of Northeast unless (i) the Northeast Business
Combination was approved by at least two thirds of the Northeast Continuing
Directors (defined generally as a director who was a member of the Northeast
Board immediately prior to the time the Northeast Related Person acquired 5% or
more of Northeast Common Stock), or (ii) that (a) certain "fair price" (defined
generally to mean that the aggregate consideration to be received per share of
capital stock of Northeast in the Northeast Business Combination by the holders
of capital stock of Northeast, other than the Northeast Related Person involved
in the Northeast Business Combination, is in the same form as, and is not less
than, the highest per share price paid by such Related Person in acquiring any
of its holdings of Northeast's capital stock); and (b) the Northeast Business
Combination is approved by the affirmative vote of the holders of not less than
two thirds of each class of stock of Northeast. As defined in the Northeast
Certificate, a Northeast Business Combination means (i) any merger or
consolidation of Northeast with or into a Northeast Related Person, (ii) any
sale, lease, exchange, transfer or other disposition of 10% or more of the
assets of Northeast or of a subsidiary, to a Northeast Related Person, (iii) any
merger or consolidation of a Northeast Related Person with or into Northeast or
a subsidiary of Northeast, (iv) any sale, lease, exchange, transfer or other
disposition of 10% or more of the assets of a Northeast Related Person to
Northeast or a subsidiary of Northeast, (v) the issuance of any securities of
Northeast to a Northeast Related Person, (vi) the acquisition by Northeast or a
subsidiary of Northeast of any securities of a Northeast Related Person, (vii)
any reclassification of Northeast Common Stock or any recapitalization involving
Northeast Common Stock, consummated within five years after a Northeast Related
Person becomes a Northeast Related Person, and (viii) any agreement, contract or
other arrangement providing for any of the foregoing.
This provision of the Northeast Certificate can only be amended or repealed
if it is first proposed by the Northeast Board and thereafter approved by the
affirmative vote of the holders of at least 80% of each class of stock of
Northeast, voting separately as a class, which shall include the affirmative
vote of at least 50% of the outstanding vote of Northeast Common Stock held by
shareholders other than a Related Person; provided, however, that such 80% vote
shall not be required for any such amendment, change or repeal recommended to
shareholders of Northeast by the affirmative vote of not less than two thirds of
the Northeast Continuing Directors and in such event such amendment, change or
repeal so recommended shall require only the vote, if any, required under the
applicable provisions of law.
In addition, the Northeast Certificate provides that the Northeast Board,
when evaluating any offer of another person to (A) make a tender or exchange
offer for any equity security of Northeast, (B) merge or consolidate Northeast
with another corporation or entity or (C) purchase or otherwise acquire all or
substantially all of the properties and assets of Northeast may, in connection
with the exercise of its judgment in determining what is in the best interest of
Northeast and its stockholders, give due consideration to all relevant factors,
including, without limitation, the social and economic effect of acceptance of
such offer on Northeast's present and future customers and employees and those
of its subsidiaries; on the communities in which Northeast and its subsidiaries
operate or are located; on the ability of its subsidiary savings association to
fulfill the objectives of a savings association under applicable statutes and
regulations.
The Northeast Certificate's business combination provision generally
provides for additional and higher tests to be met for approval of a "Northeast
Business Combination" under the Northeast Certificate than the Shawmut
Certificate's "Business Combination" provision or the Fleet Certificate's "Fleet
Business Combination" provision.
No provisions relating to the approval of mergers with unrelated third
parties by holders of the respective corporation's common stock are contained in
the corporate charter of either Fleet, Shawmut, or Northeast.
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RIGHTS PLANS
Material Differences in Rights Plans. The material differences between the
Fleet Rights Agreement (see "DESCRIPTION OF FLEET CAPITAL STOCK -- Fleet Common
Stock" above) and the Shawmut Rights Agreement (see the accompanying Proxy
Statement/Prospectus "DESCRIPTION OF SHAWMUT CAPITAL STOCK -- Rights Plan"),
relate to the stock ownership thresholds and other conditions which would cause
the rights issued under the respective rights agreements to separate from the
common stock certificates to which such rights are attached and become
exercisable.
In particular, the stock ownership thresholds under which the rights become
exercisable are lower under the Fleet Rights Agreement than under the Shawmut
Rights Agreement. Moreover, under the Shawmut Rights Agreement, but not the
Fleet Rights Agreement, the rights become exercisable 10 business days after the
Shawmut Board deems that with respect to any person who has become the
beneficial owner of 10% or more of the outstanding Shawmut Common Stock (x) such
beneficial ownership by such person is intended to cause Shawmut to repurchase
the Shawmut stock owned by such person (or enter into other transactions
intended to provide such person with financial gain) under circumstances where
the Shawmut Board determines that the best interests of Shawmut would not be
served by taking such action or (y) such beneficial ownership is causing or is
reasonably likely to cause a material adverse impact on the business or
prospects of Shawmut.
The Northeast Board has not adopted a stockholder rights plan.
AMENDMENT OF CERTIFICATE OF INCORPORATION OR BY-LAWS
To authorize an amendment to the corporate charter, both Delaware and Rhode
Island law provide that (i) the board of directors adopt a resolution submitting
the proposed amendment to the shareholders and (ii) the affirmative vote of the
holders of a majority of the outstanding shares entitled to vote thereon. Both
Delaware and Rhode Island law also provide for any class of stock or series to
vote as a class on the proposed amendment if the amendment would change the
number or par value of the aggregate authorized shares of a class. Rhode Island
law also requires separate class voting if the amendment would, among other
things, change the designations, preferences, limitations or relative rights of
the class, effect an exchange or create a right of exchange of all or any part
of the shares of another class into shares of the class, or create a new class
of shares having rights and preferences prior and superior to the shares of the
class. Delaware law also provides for class voting if the amendment would alter
or modify the powers, preferences or special rights of the shares of such class
to affect such class adversely.
Under both Rhode Island and Delaware law, if so provided in the charter,
provide that the by-laws of a corporation may be amended by the vote of a
majority of the board of directors. The board of directors' authority to adopt,
amend or repeal the by-laws of a corporation does not divest nor limit the power
of stockholders to adopt, amend or repeal by-laws. Any amendment by the board of
directors to the by-laws may be subsequently changed by the affirmative vote of
holders of a majority of the shares entitled to vote thereon.
The Fleet Articles provide that any amendment, alteration, change or repeal
of the provisions in such charter relating to (i) directors and business
combinations requires the affirmative vote of 80% of the Fleet Board and a
majority of the Continuing Directors and the affirmative vote of the holders of
80% or more of the outstanding shares of capital stock entitled to vote
generally in the election of directors, voting separately as a class; and (ii)
the provisions in the Fleet Articles governing the amendment of such articles
require the affirmative vote of the holders of 80% or more of the outstanding
shares of capital stock entitled to vote generally in the election of directors,
voting separately as a class.
The Fleet By-laws provide that such by-law may be altered, amended or
repealed in whole or in part and new By-laws may be adopted in whole or in part,
only by the affirmative vote of 80% of the Fleet Board and a majority of the
Continuing Directors or by an affirmative vote of the holders of at least 50% of
the Fleet Common Stock entitled to vote thereon.
The Shawmut Certificate provides generally that Shawmut reserves the right
to amend, alter, change or repeal any provision contained in its Certificate in
the manner prescribed by statute. The Shawmut Certificate
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further provides that the amendment, repeal or adoption of any provisions
inconsistent with the provisions of the Shawmut Certificate relating to business
combinations shall require the affirmative vote of at least 80% of the votes
entitled to be cast by the holders of the outstanding shares of voting stock,
voting together as a single class, provided that no such requirement shall apply
to any amendment, repeal or adoption unanimously recommended by the Shawmut
Board if all such directors are persons who would be eligible to serve as
Shawmut Continuing Directors. Any repeal or modification by the stockholders of
Shawmut relating to the provisions regarding the management of the business
shall not adversely affect any right or protection of a director of Shawmut
existing at the time of such repeal or modification with respect to acts or
omissions occurring prior to such repeal or modification.
The Shawmut Certificate further provides that directors shall have
concurrent power with the stockholders to make, alter, amend, change, add to or
repeal the Shawmut By-Laws. Any action by stockholders to effect such
alteration, change, addition or repeal requires the affirmative vote of a
majority of the shares represented and entitled to vote at the meeting at which
the action is to be taken. The Shawmut Certificate further provides that notice
of any such action specifying or describing the same shall be contained in or
accompany the notice of the meeting at which the action is to be taken.
The Northeast Certificate provides generally that Northeast reserves the
right to amend or repeal any provision contained in its Certificate in the
manner prescribed by the laws of Delaware. The Northeast Certificate does
establish specific voting requirements to amend or repeal provisions relating to
any Northeast Business Combination. See "Business Combinations."
The Northeast Certificate further provides that Northeast Board is
generally expressly empowered to adopt, amend or repeal By-laws of Northeast.
Any adoption, amendment, or repeal of the By-laws of Northeast by the Northeast
Board shall require the approval of a majority of the Directors then in office.
The stockholders shall also have power to adopt, amend or repeal the By-laws of
Northeast; provided, however, that any such alteration, amendment or repeal must
be approved by the affirmative vote of the holders of a majority of the voting
power of all of the then outstanding shares of capital stock of Northeast
entitled to vote generally in the election of directors, voting together as a
single class.
SIZE AND CLASSIFICATION OF BOARD OF DIRECTORS
Under both Rhode Island and Delaware law a corporation must have a board of
directors consisting of at least one director. Both states permit classification
of the board of directors if the corporate charter so provides. Delaware law
also permits classification of directors if an initial by-law so provides, or by
by-law adopted by a vote of the stockholders.
The Fleet Articles will provide that the Fleet Board will 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
Fleet Continuing Directors. As of the consummation of the Shawmut/Fleet Merger
and pursuant to such an adopted resolution, the Fleet Board will consist of 20
members (exclusive of directors to be elected by holders of any one or more
series or classes of Fleet Preferred Stock voting separately as a class or
classes). The Fleet By-laws provide, and the Fleet Articles will provide, for
classification of the Fleet Board into three classes as nearly equal in number
as possible, with one class being elected annually. Pursuant to the Fleet
Articles vacancies on the Fleet Board, whether due to resignation, death,
incapacity or an increase in the number of directors, may only be filled by the
Fleet Board, acting by a vote of 80% of the directors then in office.
The Shawmut By-laws provide for not less than three directors. The Shawmut
By-laws also provide that the majority of directors then in office may, between
annual meetings of stockholders, increase the membership of the Shawmut Board by
up to eight members. Shawmut currently has 12 directors. Neither the Shawmut
Certificate nor the Shawmut By-laws has provided for classification of
directors. Pursuant to the Shawmut By-laws, vacancies on the Shawmut Board,
whether due to an increase in the number of directors, or any other reason, may,
between annual meetings of stockholders, be filled by majority vote of the
Shawmut Board.
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Northeast's Certificate and By-laws provide for division of the Northeast
Board into three classes, with each class as nearly equal in the number of
directors as the other classes to the extent permitted by the number of
directors constituting the entire Northeast Board. As a result of the
classification of the Northeast Board, any person attempting to have a slate of
nominees elected which would constitute a majority of the Northeast Board would
need at least two Annual Meetings to do so. Northeast's By-laws provide further
that the Northeast Board will consist of twelve directors, subject to the rights
of the holders of any class or series of preferred stock.
Pursuant to the terms of the Series B Preferred Stock, the size of the
Northeast Board has been increased by two members and DEPCO, or a permitted
nominee under the DEPCO Agreement, has the right to elect both of these
directors provided that it holds at least 211,020 shares of Series B Preferred
Stock. If DEPCO and permitted nominees hold less than 211,020 shares but 105,510
shares or more of Series B Preferred Stock, the size of the Northeast Board will
be reduced by one and such holder will have the right to elect only one member
of the Northeast Board. If DEPCO and permitted nominees hold less than 105,510
shares of Series B Preferred Stock, the Northeast Board will be reduced and such
holder will lose the right to elect a member of the Northeast Board. DEPCO
currently has the right to elect two directors of Northeast. However, one of the
two directors elected by DEPCO resigned in July 1994 and DEPCO has not nominated
a replacement. Accordingly, the Northeast Board currently consists of thirteen
members.
Any person attempting to have a slate of nominees for either a Northeast or
Fleet director, as the case may be, elected which would constitute a majority of
the Northeast Board, or Fleet Board would need at least two Annual Meetings to
do so and, as a result, Northeast's and Fleet's classified boards may have
certain anti-takeover effects.
REMOVAL OF DIRECTORS
Under Rhode Island law, a director may be removed by the shareholders
without cause, if the charter or by-laws so provide but, in the case of a
corporation permitting cumulative voting for the election of directors, only if
the number of shares voted against removal would not be sufficient to elect the
director if voted cumulatively.
Under Delaware law, any director or the entire board of directors of a
corporation may be removed, with or without cause, by the holders of a majority
of the shares then entitled to elect directors. In the case of a corporation
whose board is classified, stockholders may effect such removal only for cause
unless the charter provides otherwise. In the case of a corporation having
cumulative voting, if less than the entire board is to be removed, no director
may be removed without cause if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the entire
board of directors, or if there are classes of directors, at an election of the
class of directors of which he is a part.
The Fleet Articles provide that Directors of Fleet may only be removed for
cause and only (a) by a vote of the holders of 80% of the outstanding shares of
Fleet stock entitled to vote thereon voting separately as a class at a meeting
called for that purpose or (b) by a vote of a majority of the Fleet Continuing
Directors and a majority of the Fleet Board as constituted at that time.
Neither the Shawmut Certificate nor the Shawmut By-laws contain any
provisions regarding removal of directors other than the provision stating that
any Shawmut Preferred Director may be removed by, and shall not be removed
except by, the vote of the holders of record of outstanding shares of Shawmut
Preferred Stock, voting as a class.
The Northeast Certificate provides that subject to the rights of the
holders of any series of Northeast preferred stock outstanding, any director, or
the entire Northeast Board, may be removed from office, only for cause, by
affirmative vote of the holders of a majority of the voting power of all
outstanding shares of capital stock of Northeast entitled to vote generally in
the election of directors, voting together as a single class.
Thus, the Northeast Certificate and the Fleet Articles restrict the ability
of Northeast stockholders and Fleet shareholders, respectively, to remove
directors from office whereas the Shawmut Certificate does not contain any such
restrictions.
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DIVIDENDS
Under Rhode Island law, the board of directors has the power to declare and
pay dividends in cash, property or securities of the corporation unless (a) such
corporation is or would be thereby made insolvent or (b) the declaration or
payment of such dividend would be contrary to any restrictions contained in the
charter. Rhode Island law further provides that no distribution may be made (i)
if the corporation would become unable to pay its debts as they become due in
the usual course of business or (ii) the corporation's total assets would be
less than the sum of its liabilities plus, unless the articles of incorporation
permit otherwise, the amount that would be needed, if the corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
receiving the distribution.
Under Delaware law, the directors of a corporation are generally permitted
to declare and pay dividends out of surplus or out of net profits for the
current and/or preceding fiscal year, provided that such dividends will not
reduce capital below the amount of capital represented by all classes of issued
and outstanding stock having a preference upon the distribution of assets. Also
under Delaware law, a corporation may generally redeem or purchase shares of its
stock if such redemption or purchase will not impair the capital of the
corporation.
APPRAISAL RIGHTS
Under Rhode Island law, appraisal rights are available only in connection
with (a) a statutory merger or consolidation (unless the corporation is to be
the surviving corporation and no vote of its shareholders is required to approve
the merger); (b) acquisitions which require shareholder approval; and (c) sales
or exchanges of all or substantially all of the property and assets of a
corporation in a transaction requiring stockholder approval. In addition, unless
otherwise provided in the charter, no appraisal rights are available to holders
of shares of any class of stock which, as of the date fixed to determine the
shareholders entitled to receive notice of the proposed transaction, are (i)
registered on a national securities exchange or included as national market
securities in the automated quotation system of the National Association of
Securities Dealers, Inc. ("NASD") or (ii) held of record by not less than 2,000
shareholders. There are no provisions in the Fleet Articles for appraisal
rights.
Under Delaware law, appraisal rights are available in connection with a
statutory merger or consolidation in certain specified situations. Appraisal
rights are not available when a corporation is to be the surviving corporation
and no vote of its stockholders is required to approve the merger. In addition,
unless otherwise provided in the charter, no appraisal rights are available to
holders of shares of any class of stock which is either: (a) listed on a
national securities exchange or designated as a national market system security
on an inter-dealer quotation system by the NASD or (b) held of record by more
than 2,000 stockholders, unless such stockholders are required by the terms of
the merger to accept anything other than: (i) shares of stock of the surviving
corporation; (ii) shares of stock of another corporation which are or will be so
listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the NASD or held of record
by more that 2,000 stockholders; (iii) cash in lieu of fractional shares of such
stock; or (iv) any combination thereof. The Shawmut Certificate and the
Northeast Certificate have no provisions for appraisal rights.
DERIVATIVE SUITS
Under both Rhode Island and Delaware law, stockholders may bring suits on
behalf of the corporation to enforce the rights of a corporation. Under both
Rhode Island and Delaware law, a person may institute and maintain a suit only
if such person was a stockholder at the time of the transaction which is the
subject of the suit. Under Rhode Island law, upon final judgment and a finding
that the commencement of a derivative action by a shareholder was without
reasonable cause, a court may require the plaintiff(s) to pay to the parties
named as defendant(s) the reasonable expenses including legal fees incurred by
them in defense of such action.
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Additionally, under Delaware law, the plaintiff generally must be a
stockholder not only at the time of the transaction which is the subject of the
action but also throughout the duration of the derivative suit. Delaware law
also requires that the derivative plaintiff make demand on the directors of the
corporation to assert the corporate claim unless such demand would be futile
before the suit may be prosecuted by the derivative plaintiff.
STATE ANTI-TAKEOVER STATUTES
Pursuant to Rhode Island law, a corporation shall not engage in any
business combination with an interested shareholder (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
shareholder became an interested shareholder unless either (a) the board of
directors of the corporation approved the business combination or transaction
prior to the date the shareholder became an interested shareholder; (b) holders
of two-thirds of the outstanding voting stock, excluding any stock owned by the
interested shareholder or any affiliate or associate of the interested
shareholder, have approved the business combination at a meeting called for such
purpose no earlier than five years after the interested shareholder's stock
acquisition date; or (c) the business combination meets each of the following
conditions: (i) the nature, form and adequacy of the consideration to be
received by the corporation's shareholders in the business combination
transaction satisfies certain specific enumerated criteria; (ii) the holders of
all the outstanding shares of stock of the corporation not beneficially owned by
the interested shareholder are entitled to receive the specified consideration
in the business combination transaction; and (iii) the interested shareholder
shall not acquire additional shares of voting stock of the corporation except in
certain specifically identified transactions.
The restrictions prescribed by the statute will not be applicable to any
business combination (a) involving a corporation that does not have a class of
voting stock registered under the Exchange Act, unless the charter provides
otherwise; (b) involving a corporation which did not have a class of voting
stock registered under the Exchange Act at the time the corporation's charter
was amended to provide that the corporation shall be subject to the statutory
restriction provisions and the interested shareholder's stock acquisition date
is prior to the effective date of the charter amendment; (c) involving a
corporation whose original charter contains a provision expressly electing not
to be subject to the statutory restrictions or which adopted an amendment
expressly electing not to be subject to the statutory restrictions either to its
by-laws prior to March 31, 1991 or to its charter if such charter amendment is
approved by the affirmative vote of holders, other than the interested
shareholders, and their affiliates and associates, of two-thirds of the
outstanding voting stock, excluding the voting stock of the interested
shareholders; provided, that the amendment to the charter shall not be effective
until 12 months after the vote of the shareholders and shall not apply to any
business combination of the corporation with an interested shareholder whose
stock acquisition date is on or prior to the effective date of the amendment; or
(d) involving a corporation with an interested shareholder who became an
interested shareholder inadvertently, if the interested shareholder divests
itself of such number of shares so that it is no longer the beneficial owner of
10% of the outstanding voting stock and, but for such inadvertent ownership, was
not an interested shareholder within the five-year period preceding the
announcement of the business combination. Neither the Fleet Articles nor the
original Fleet charter contain any provisions expressly relating to the
non-applicability of the statute.
Pursuant to Delaware law, a corporation shall not engage in any business
combination with an interested stockholder (generally defined as the holder of
15% or more of the corporation's voting stock) for a period of three years
following the date that such stockholder became an interested stockholder,
unless (a) the board of directors approved either the business combination or
transaction prior to the date that the interested stockholder became an
interested stockholder; (b) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (i) any
persons who are directors and also officers and (ii) employee stock plans in
which employee participants do not have the right to determine
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confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer; or (c) on or subsequent to the date the stockholder
became an interested stockholder, the board of directors approved the
transaction and the stockholders approved the transaction, not by written
consent, but at an annual or special meeting of shareholders, with an
affirmative vote of two-thirds of the outstanding voting stock, excluding any
stock owned by the interested stockholder. The restrictions prescribed by the
statute will not be applicable if (a) a corporation's charter or by-laws contain
a provision expressly providing that the corporation shall not be subject to
such statutory restrictions; (b) if the corporation does not have a class of
voting stock that is (i) listed on a national securities exchange; (ii)
authorized for quotation on an inter-dealer quotation system of a registered
national securities association; or (iii) held of record by more than 2,000
stockholders, unless any of the foregoing results from action taken directly or
indirectly by an interested stockholder or from a transaction in which a person
becomes an interested stockholder or (c) a stockholder becomes an interested
stockholder inadvertently and divests sufficient shares so that the stockholder
ceases to be an interested stockholder and would not at any time during the
three-year period immediately prior to a business combination between the
corporation and the interested stockholder have been an interested stockholder
but for the inadvertent acquisition; or (d) the business combination is proposed
prior to the consummation or abandonment of and subsequent to the earlier of the
public announcement or required notice to interested stockholders of a proposed
transaction: (i) involving (A) a merger or consolidation (except a merger in
respect of which no vote of the stockholders of the corporation is required);
(B) a sale, lease, exchange, mortgage, pledge, transfer or other disposition of
assets of the corporation or of any direct or indirect majority-owned subsidiary
of the corporation having an aggregate market value equal to 50% or more of
either the aggregate market value of all the assets of the corporation
determined on a consolidated basis or the aggregate market value of all the
outstanding stock of the corporation; or (C) a proposed tender offer or exchange
offer for 50% or more of the outstanding voting stock of the corporation; (ii)
is with or by a person who either was not an interested stockholder during the
previous 3 years or who became an interested stockholder with the approval of
the corporation's board of directors; and (iii) is approved or not opposed by a
majority of the members of the board of directors who were directors prior to
any person becoming an interested stockholder during the previous 3 years or
were recommended for election or elected to succeed such directors by a majority
of directors. Neither the Shawmut Certificate and the Shawmut By-Laws nor the
Northeast Certificate and Northeast By-Laws contain any provision expressly
providing that the corporation will not be subject to the restrictions
prescribed by the statute. See "-- Business Combinations."
S-43
<PAGE> 49
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Combined Balance Sheet as of
December 31, 1994, and the Unaudited Pro Forma Condensed Combined Statement of
Income for the year ended December 31, 1994, give effect to the Shawmut/Fleet
Merger, accounted for as a pooling of interests, and the Merger, the
consummation of the merger of NBB into Fleet (the "NBB Merger") and the issuance
of 6,165,912 shares of Fleet Common Stock in connection therewith, the
consummation of the merger of (the "Plaza Merger") of a wholly-owned subsidiary
of Fleet-RI into Plaza, the consummation of the Barclays Acquisition and the
consummation of Fleet's repurchase (the "FMG Repurchase") of the publicly-held
shares of Fleet's majority owned subsidiary, FMG, each of which were or will be
accounted for by the purchase method of accounting, in each case as if such
transactions had occurred on January 1, 1994. The Unaudited Pro Forma Condensed
Combined Statements of Income for the years ended December 31, 1993 and December
31, 1992, give effect to the Shawmut/Fleet Merger as if the Shawmut/Fleet Merger
had occurred on January 1 in each such year and do not take into account the
effect of the Merger, the NBB Merger, the Plaza Merger, the Barclays Acquisition
and the FMG Repurchase because such transactions were or will be accounted for
under the purchase method of accounting.
The pro forma information is based on the historical consolidated financial
statements of Fleet, Shawmut, Northeast, NBB, Plaza, Barclays and FMG and their
subsidiaries under the assumptions and adjustments set forth in the accompanying
Notes to the Unaudited Pro Forma Condensed Combined Financial Information. The
unaudited pro forma condensed combined financial statements do not give effect
to the anticipated cost savings in connection with the Shawmut/Fleet Merger, the
Merger, the NBB Merger and the Plaza Merger or the effects of any required
regulatory divestitures.
At the Special Meeting the Northeast stockholders are voting on the Merger,
and there is no assurance that the Shawmut/Fleet Merger will be consummated.
Accordingly, Northeast stockholders should consider carefully the unaudited pro
forma condensed combined financial information that gives effect to the Merger
only (under the heading "Shawmut Pro Forma") as well as the information that
gives effect to the Shawmut/Fleet Merger, the Merger, the NBB Merger, the Plaza
Merger and the FMG Repurchase (under the heading "Fleet and Shawmut Pro Forma
Combined").
The information shown below should be read in conjunction with the
consolidated historical financial statements of Fleet, Shawmut, Northeast and
Barclays, including the respective notes thereto, which are incorporated by
reference in this Proxy Statement/Prospectus Supplement. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE." The pro forma data is presented for comparative
purposes only and is not necessarily indicative of the combined financial
position or results of operations in the future or of the combined financial
position or results of operations which would have been realized had the
acquisitions been consummated during the periods or as of the dates for which
the pro forma data is presented.
The pro forma data assumes an exchange ratio of .415 shares of Shawmut
Common Stock for each outstanding share of Northeast Common Stock and stock
option of Northeast, calculated as set forth in the Merger Agreement, assuming
for illustrative purposes only, that the Shawmut Common Stock Average Price is
$26.75, the closing price of the Shawmut Common Stock on April 7, 1995. Pro
forma per share amounts for the combined Fleet and Shawmut entity are based on
the Shawmut/Fleet Exchange Ratio of .8922 shares of Fleet Common Stock for each
share of Shawmut Common Stock.
S-44
<PAGE> 50
FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 1994(A)
<TABLE>
<CAPTION>
FLEET AND
SHAWMUT
FLEET SHAWMUT PRO FORMA PRO FORMA
PRO FORMA PRO FORMA ADJUSTMENTS COMBINED
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents......................................... $ 5,109,009 $ 2,377,273 -- $ 7,486,282
Federal funds sold and securities purchased under
agreements to resell............................................ 648,681 331,425 -- 980,106
Securities available for sale, at market.......................... 10,359,441 2,099,363 $ (95,169)(d) 12,363,635
Securities held to maturity....................................... 891,076 9,877,281(b) -- 10,768,357(b)
Loans and leases.................................................. 28,816,314 21,871,784 -- 50,688,098
Reserve for credit losses......................................... (980,509) (595,605) -- (1,576,114)
Mortgages held for resale......................................... 658,077 77,017 -- 735,094
Premises and equipment............................................ 852,171 353,851 -- 1,206,022
Purchased mortgage servicing rights............................... 1,066,670 47,851 -- 1,114,521
Excess cost over net assets of subsidiaries acquired.............. 464,681 531,961 -- 996,642
Other intangibles................................................. 209,186 17,473 -- 226,659
Other assets...................................................... 2,723,673 1,417,641 147,405(d)(e) 4,288,719
----------- ----------- ----------- -----------
Total assets...................................................... $50,818,470 $38,407,315 $ 52,236 $89,278,021
========== ========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Demand.......................................................... $ 6,974,389 $ 5,189,589 -- $12,163,978
Regular savings, NOW, money market.............................. 16,191,444 9,434,493 -- 25,625,937
Time............................................................ 14,009,389 8,513,589 -- 22,522,978
----------- ----------- ----------- -----------
Total deposits.................................................. 37,175,222 23,137,671 -- 60,312,893
----------- ----------- ----------- -----------
Federal funds purchased and securities sold under
agreements to repurchase........................................ 2,846,197 8,190,001 -- 11,036,198
Other short-term borrowings....................................... 2,487,291 1,715,697 -- 4,202,988
Accrued expenses and other liabilities............................ 1,210,814 454,587 $ 398,721(d)(e) 2,064,122
Long-term debt.................................................... 3,503,866 2,421,788 -- 5,925,654
----------- ----------- ----------- -----------
Total liabilities................................................. 47,223,390 35,919,744 398,721 83,541,855
----------- ----------- ----------- -----------
Stockholders' equity:
Preferred stock................................................. 378,815 303,185 --(c) 682,000
Common stock.................................................... 141,574 1,274 107,156(c) 250,004
Common surplus.................................................. 1,547,228 1,454,157 (230,615)(c) 2,770,770
Retained earnings............................................... 1,936,165 783,223 (240,000)(e) 2,479,388
Net unrealized gain/(loss) on securities available
for sale...................................................... (374,200) (54,268)(b) 16,974(d) (411,494)(b)
Treasury stock, at cost......................................... (34,502) -- -- (34,502)
----------- ----------- ----------- -----------
Total stockholders' equity........................................ 3,595,080 2,487,571 (346,485) 5,736,166
----------- ----------- ----------- -----------
Total liabilities and stockholders' equity........................ $50,818,470 $38,407,315 $ 52,236 $89,278,021
========== ========== =========== ===========
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION."
S-45
<PAGE> 51
FLEET FINANCIAL GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 1994, CONTINUED(A)
<TABLE>
<CAPTION>
PRO FORMA FLEET
FLEET NBB PLAZA ADJUSTMENTS PRO FORMA
----------- ---------- -------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents.............................. $ 5,208,938 $ 79,698 $ 31,188 $ (210,815)(f) $ 5,109,009
Federal funds sold and securities purchased
under agreements to resell........................... 648,681 -- -- -- 648,681
Securities available for sale, at market............... 10,352,656 663,461 164,215 (820,891)(g) 10,359,441
Securities held to maturity............................ 891,076 322,384 -- (322,384)(g) 891,076
Loans and leases....................................... 27,540,644 1,325,990 5,832 (56,152)(h) 28,816,314
Reserve for credit losses.............................. (953,449) (27,060) -- -- (980,509)
Mortgages held for resale.............................. 488,898 -- 405,253 (236,074)(g)(h) 658,077
Premises and equipment................................. 823,822 22,104 15,087 (8,842)(h) 852,171
Purchased mortgage servicing rights.................... 826,559 -- 53,701 186,410 (h)(m) 1,066,670
Excess cost over net assets of subsidiaries acquired... 180,257 9,222 -- 275,202 (i)(m) 464,681
Other intangibles...................................... 159,186 3,614 -- 46,386 (h) 209,186
Other assets........................................... 2,589,822 68,767 46,961 18,123 (h) 2,723,673
----------- ---------- -------- ----------- -----------
Total assets........................................... $48,757,090 $2,468,180 $722,237 $(1,129,037) $50,818,470
========== ========= ======== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Demand............................................... $ 6,889,763 $ 84,626 $ 4,472 $ (4,472)(g) $ 6,974,389
Regular savings, NOW, money market................... 15,220,444 971,000 2,341 (2,341)(g) 16,191,444
Time................................................. 12,695,896 1,134,948 189,132 (10,587)(g)(h) 14,009,389
----------- ---------- -------- ----------- -----------
Total deposits....................................... 34,806,103 2,190,574 195,945 (17,400) 37,175,222
----------- ---------- -------- ----------- -----------
Federal funds purchased and securities sold
under agreements to repurchase....................... 2,846,197 -- -- -- 2,846,197
Other short-term borrowings............................ 3,105,188 -- 427,797 (1,045,694)(g)(m) 2,487,291
Accrued expenses and other liabilities 1,162,256 23,032 18,846 6,680 (h)(m) 1,210,814
Long-term debt......................................... 3,457,266 -- 46,600 -- 3,503,866
----------- ---------- -------- ----------- -----------
Total liabilities...................................... 45,377,010 2,213,606 689,188 (1,056,414) 47,223,390
----------- ---------- -------- ----------- -----------
Stockholders' equity:
Preferred stock...................................... 378,815 -- -- -- (l) 378,815
Common stock......................................... 141,574 963 116 (1,079)(l) 141,574
Common surplus....................................... 1,547,228 136,557 25,767 (162,324)(l) 1,547,228
Retained earnings.................................... 1,936,165 140,337 7,166 (147,503)(l) 1,936,165
Net unrealized gain/(loss) on securities available
for sale........................................... (374,200) (13,342) -- 13,342 (l) (374,200)
Treasury stock, at cost.............................. (249,502) (9,941) -- 224,941 (l) (34,502)
----------- ---------- -------- ----------- -----------
Total stockholders' equity............................. 3,380,080 254,574 33,049 (72,623) 3,595,080
----------- ---------- -------- ----------- -----------
Total liabilities and stockholders' equity............. $48,757,090 $2,468,180 $722,237 $(1,129,037) $50,818,470
========== ========= ======== =========== ==========
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION".
S-46
<PAGE> 52
SHAWMUT NATIONAL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 1994, CONTINUED (A)
<TABLE>
<CAPTION>
SHAWMUT
NORTHEAST AND
PRO FORMA NORTHEAST BARCLAYS SHAWMUT
SHAWMUT NORTHEAST ADJUSTMENTS PRO FORMA PRO FORMA PRO FORMA
----------- ---------- ----------- ----------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents........ $ 2,426,118 $ 34,145 $ (87,604)(f) $ 2,372,659 $ 4,614 $ 2,377,273
Federal funds sold and securities
purchased under agreements to
resell......................... 308,700 22,725 -- 331,425 -- 331,425
Securities available for sale, at
market......................... 1,991,853 107,510 -- 2,099,363 -- 2,099,363
Securities held to maturity...... 8,000,382(b) 1,960,699(b) (83,800)(g) 9,877,281(b) -- 9,877,281(b)
Loans and leases................. 18,487,143 959,648 (33,300)(h) 19,413,491 2,458,293 (j) 21,871,784
Reserve for credit losses........ (542,116) (11,746) -- (553,862) (41,743) (595,605)
Mortgages held for resale........ 72,205 4,812 -- 77,017 -- 77,017
Premises and equipment........... 329,780 27,401 (6,000)(h) 351,181 2,670 353,851
Purchased mortgage servicing
rights......................... 13,851 1,686 32,314(h) 47,851 -- 47,851
Excess cost over net assets of
subsidiaries acquired.......... 137,143 -- 169,818(i) 306,961 225,000 (j) 531,961
Other intangibles................ 17,345 128 -- 17,473 -- 17,473
Other assets..................... 1,156,207 238,564 18,955(h) 1,413,726 3,915 1,417,641
----------- ---------- ----------- ----------- ---------- -----------
Total assets..................... $32,398,611 $3,345,572 $ 10,383 $35,754,566 $2,652,749 $38,407,315
========== ========= =========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Deposits:
Demand......................... $ 5,161,182 $ 28,407 -- $ 5,189,589 -- $ 5,189,589
Regular savings, NOW, money
market....................... 8,649,988 784,505 -- 9,434,493 -- 9,434,493
Time........................... 6,935,083 1,580,172 $ (1,666)(h) 8,513,589 -- 8,513,589
----------- ---------- ----------- ----------- ---------- -----------
Total deposits................... 20,746,253 2,393,084 (1,666) 23,137,671 -- 23,137,671
----------- ---------- ----------- ----------- ---------- -----------
Federal funds purchased and
securities sold under
agreements to repurchase....... 6,076,808 -- -- 6,076,808 $2,113,193(j) 8,190,001
Other short-term borrowings...... 1,009,771 707,772 (1,846)(h) 1,715,697 -- 1,715,697
Accrued expenses and other
liabilities.................... 346,818 63,573 25,640(h) 436,031 18,556 (j) 454,587
Long-term debt................... 2,021,788 42,243 (42,243)(k) 2,021,788 400,000 (j) 2,421,788
----------- ---------- ----------- ----------- ---------- -----------
Total liabilities................ 30,201,438 3,206,672 (20,115) 33,387,995 2,531,749 35,919,744
----------- ---------- ----------- ----------- ---------- -----------
Stockholders' equity:
Preferred stock................ 178,185 4 (4)(j)(l) 178,185 125,000 303,185
Common stock................... 1,208 144 (78)(l) 1,274 -- 1,274
Common surplus................. 1,288,825 191,756 (22,424)(l) 1,458,157 (4,000)(j) 1,454,157
Retained earnings.............. 783,223 (54,892) 54,892(l) 783,223 -- 783,223
Net unrealized gain/(loss) on
securities available for
sale......................... (54,268) 1,888 (1,888)(l) (54,268)(b) -- (54,268)(b)
Treasury stock, at cost........ -- -- -- -- -- --
----------- ---------- ----------- ----------- ---------- -----------
Total stockholders' equity....... 2,197,173 138,900 30,498 2,366,571 121,000 2,487,571
----------- ---------- ----------- ----------- ---------- -----------
Total liabilities and
stockholders' equity........... $32,398,611 $3,345,572 $ 10,383 $35,754,566 $2,652,749 $38,407,315
========== ========= =========== ========== ========== ==========
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION."
S-47
<PAGE> 53
FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994(A)
<TABLE>
<CAPTION>
FLEET AND
SHAWMUT
FLEET SHAWMUT PRO FORMA PRO FORMA
PRO FORMA PRO FORMA ADJUSTMENTS COMBINED
---------- ---------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Interest and fees on loans and leases............................. $2,513,235 $1,576,256 $ -- $4,089,491
Interest on securities............................................ 907,065 733,853 (2,346)(d) 1,638,572
---------- ---------- ----------- ----------
Total interest income......................................... 3,420,300 2,310,109 (2,346) 5,728,063
---------- ---------- ----------- ---------- ----
Interest expense:
Deposits........................................................ 847,475 509,065 -- 1,356,540
Short-term borrowings........................................... 263,997 476,815 -- 740,812
Long-term debt.................................................. 255,170 109,916 -- 365,086
---------- ---------- ----------- ----------
Total interest expense........................................ 1,366,642 1,095,796 -- 2,462,438
---------- ---------- ----------- ----------
Net interest income............................................... 2,053,658 1,214,313 (2,346) 3,265,625
Provision for credit losses....................................... 65,076 14,383 -- 79,459
---------- ---------- ----------- ----------
Net interest income after provision for credit losses............. 1,988,582 1,199,930 (2,346) 3,186,166
---------- ---------- ----------- ----------
Mortgage banking.................................................. 390,311 47,583 -- 437,894
Investment services revenue....................................... 174,764 117,501 -- 292,265
Service charges, fees and commissions............................. 326,807 201,842 -- 528,649
Securities available for sale gains (losses)...................... (2,779) 7,283 -- 4,504
Other noninterest income.......................................... 319,045 74,452 -- 393,497
---------- ---------- ----------- ----------
Total noninterest income...................................... 1,208,148 448,661 -- 1,656,809
---------- ---------- ----------- ----------
Employee compensation and benefits................................ 1,005,961 537,221 -- 1,543,182
Occupancy and equipment........................................... 324,721 177,020 -- 501,741
Purchased mortgage servicing rights amortization.................. 119,574 10,471 -- 130,045
FDIC assessment................................................... 74,962 52,470 -- 127,432
Marketing......................................................... 66,220 19,902 -- 86,122
Core deposit and goodwill amortization............................ 82,928 28,525 -- 111,453
OREO expense...................................................... 42,665 24,905 -- 67,570
Restructuring charges............................................. 44,000 39,800 -- 83,800
Merger-related charges............................................ -- 100,900 -- 100,900
Other noninterest expense......................................... 490,332 232,003 -- 722,335
---------- ---------- ----------- ----------
Total noninterest expense..................................... 2,251,363 1,223,217 -- 3,474,580
---------- ---------- ----------- ----------
Income before taxes............................................... 945,367 425,374 (2,346) 1,368,395
Applicable income taxes........................................... 373,210 155,637 (938) 527,909
---------- ---------- ----------- ----------
Net income before minority interest............................... 572,157 269,737 (1,408) 840,486
Minority interest................................................. -- -- -- --
---------- ---------- ----------- ----------
Net income........................................................ $ 572,157 $ 269,737 $ (1,408) $ 840,486
========== ========== =========== ==========
Net income applicable to common shares............................ $ 557,035 $ 242,615 $ 798,242 (o)
========== ========== ==========
Weighted average common shares outstanding:
Primary....................................................... 165,648,933 125,549,233 272,478,583 (o)
Fully diluted................................................. 165,648,933 125,549,233 272,478,583 (o)
Income from continuing operations per common share:
Primary....................................................... $3.36 $1.93 $2.93
Fully diluted................................................. $3.36 $1.93 $2.93
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION".
S-48
<PAGE> 54
FLEET FINANCIAL GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994, CONTINUED(A)
<TABLE>
<CAPTION>
PRO FORMA FLEET
FLEET NBB PLAZA ADJUSTMENTS PRO FORMA
---------- -------- -------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Interest and fees on loans and leases...................... $2,366,923 $108,081 $ 42,838 $ (4,607)(g)(h) $2,513,235
Interest on securities..................................... 905,350 59,507 6,119 (63,911)(g) 907,065
---------- -------- -------- ----------- ----------
Total interest income.................................. 3,272,273 167,588 48,957 (68,518) 3,420,300
---------- -------- -------- ----------- ----------
Interest expense:
Deposits............................................... 764,186 71,137 14,304 (2,152)(g)(h) 847,475
Short-term borrowings.................................. 294,186 -- 22,486 (52,675)(g)(m) 263,997
Long-term debt......................................... 232,211 -- 1,586 21,373(f) 255,170
---------- -------- -------- ----------- ----------
Total interest expense................................. 1,290,583 71,137 38,376 (33,454) 1,366,642
---------- -------- -------- ----------- ----------
Net interest income........................................ 1,981,690 96,451 10,581 (35,064) 2,053,658
Provision for credit losses................................ 62,130 500 2,446 -- 65,076
---------- -------- -------- ----------- ----------
Net interest income after provision for credit losses...... 1,919,560 95,951 8,135 (35,064) 1,988,582
---------- -------- -------- ----------- ----------
Mortgage banking........................................... 362,587 -- 27,724 --(g) 390,311
Investment services revenue................................ 174,764 -- -- -- 174,764
Service charges, fees and commissions...................... 321,170 5,637 -- -- 326,807
Securities available for sale gains (losses)............... (620) 68 (2,227) --(g) (2,779)
Other noninterest income................................... 315,240 1,191 2,614 -- 319,045
---------- -------- -------- ----------- ----------
Total noninterest income............................... 1,173,141 6,896 28,111 -- 1,208,148
---------- -------- -------- ----------- ----------
Employee compensation and benefits......................... 949,251 21,823 34,887 -- 1,005,961
Occupancy and equipment.................................... 300,646 4,352 20,891 (1,168)(h) 324,721
Purchased mortgage servicing rights amortization........... 85,349 -- 7,361 26,864(h)(m) 119,574
FDIC assessment............................................ 69,965 4,997 -- -- 74,962
Marketing.................................................. 64,520 1,113 587 -- 66,220
Core deposit and goodwill amortization..................... 57,309 2,615 -- 23,004(h)(i)(m) 82,928
OREO expense............................................... 39,471 3,194 -- -- 42,665
Restructuring charges...................................... 44,000 -- -- -- 44,000
Merger-related charges..................................... -- -- -- -- --
Other noninterest expense.................................. 459,334 13,898 17,100 -- 490,332
---------- -------- -------- ----------- ----------
Total noninterest expense.............................. 2,069,845 51,992 80,826 48,700 2,251,363
---------- -------- -------- ----------- ----------
Income before taxes........................................ 1,022,856 50,855 (44,580) (83,764) 945,367
Applicable income taxes.................................... 397,708 20,445 (16,199) (28,744) 373,210
---------- -------- -------- ----------- ----------
Net income before minority interest........................ 625,148 30,410 (28,381) (55,020) 572,157
Minority interest.......................................... (12,217) -- -- 12,217(m) --
---------- -------- -------- ----------- ----------
Net income................................................. $ 612,931 $ 30,410 $(28,381) $ (42,803) $ 572,157
========= ======== ======== =========== ==========
Net income applicable to common shares..................... $ 597,809 $ 557,035 (n)
========= ==========
Weighted average common shares outstanding:
Primary................................................ 159,483,021 165,648,933 (n)
Fully diluted.......................................... 159,483,021 165,648,933 (n)
Income from continuing operations per common share:
Primary................................................ $3.75 $3.36
Fully diluted.......................................... $3.75 $3.36
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION".
S-49
<PAGE> 55
SHAWMUT NATIONAL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994, CONTINUED(A)
<TABLE>
<CAPTION>
SHAWMUT
NORTHEAST AND
PRO FORMA NORTHEAST BARCLAYS SHAWMUT
SHAWMUT NORTHEAST ADJUSTMENTS PRO FORMA PRO FORMA PRO FORMA
--------------- -------------- -------------- --------------- -------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Interest and fees on loans and
leases....................... $1,326,542 $ 84,212 $ 2,220(h) $1,412,974 $163,282(j) $1,576,256
Interest on securities......... 611,387 108,499 13,967(h) 733,853 -- 733,853
--------------- -------------- -------------- --------------- -------------- ---------------
Total interest income...... 1,937,929 192,711 16,187 2,146,827 163,282 2,310,109
--------------- -------------- -------------- --------------- -------------- ---------------
Interest expense:
Deposits................... 406,346 101,886 833(h) 509,065 -- 509,065
Short-term borrowings...... 368,347 28,215 615(h) 397,177 79,638 476,815
Long-term debt............. 95,651 3,858 (3,858)(k) 95,651 14,265(j) 109,916
--------------- -------------- -------------- --------------- -------------- ---------------
Total interest expense..... 870,344 133,959 (2,410) 1,001,893 93,903 1,095,796
--------------- -------------- -------------- --------------- -------------- ---------------
Net interest income............ 1,067,585 58,752 18,597 1,144,934 69,379 1,214,313
Provision for credit losses.... 3,000 4,900 -- 7,900 6,483 14,383
--------------- -------------- -------------- --------------- -------------- ---------------
Net interest income after
provision for credit
losses....................... 1,064,585 53,852 18,597 1,137,034 62,896 1,199,930
--------------- -------------- -------------- --------------- -------------- ---------------
Mortgage banking............... 28,852 18,731 -- 47,583 -- 47,583
Investment services revenue.... 117,501 -- -- 117,501 -- 117,501
Service charges, fees and
commissions.................. 195,774 6,068 -- 201,842 -- 201,842
Securities available for sale
gains (losses)............... -- 7,283 -- 7,283 -- 7,283
Other noninterest income....... 40,841 9,537 -- 50,378 24,074 74,452
--------------- -------------- -------------- --------------- -------------- ---------------
Total noninterest income... 382,968 41,619 -- 424,587 24,074 448,661
--------------- -------------- -------------- --------------- -------------- ---------------
Employee compensation and
benefits..................... 478,142 27,459 -- 505,601 31,620 537,221
Occupancy and equipment........ 154,511 16,168 (600)(h) 170,079 6,941 177,020
Purchased mortgage servicing
rights amortization.......... 4,486 1,946 4,039(h) 10,471 -- 10,471
FDIC assessment................ 43,711 8,759 -- 52,470 -- 52,470
Marketing...................... 19,902 -- -- 19,902 -- 19,902
Core deposit and goodwill
amortization................. 8,068 136 11,321(i) 19,525 9,000(i) 28,525
OREO expense................... 11,702 13,203 -- 24,905 -- 24,905
Restructuring charges.......... 39,800 -- -- 39,800 -- 39,800
Merger-related charges......... 100,900 -- -- 100,900 -- 100,900
Other noninterest expense...... 214,727 17,276 -- 232,003 -- 232,003
--------------- -------------- -------------- --------------- -------------- ---------------
Total noninterest
expense.................. 1,075,949 84,947 14,760 1,175,656 47,561 1,223,217
--------------- -------------- -------------- --------------- -------------- ---------------
Income before taxes............ 371,604 10,524 3,837 385,965 39,409 425,374
Applicable income taxes........ 134,252 (442) 6,063 139,873 15,764 155,637
--------------- -------------- -------------- --------------- -------------- ---------------
Net income before minority
interest..................... 237,352 10,966 (2,226) 246,092 23,645 269,737
Minority interest.............. -- -- -- -- -- --
--------------- -------------- -------------- --------------- -------------- ---------------
Net income..................... $ 237,352 $ 10,966 $ (2,226) $ 246,092 $ 23,645 $ 269,737
=============== ============== ============== =============== ============== ===============
Net income applicable to common
shares....................... $ 221,917 $ 7,434 $ 1,306(n) $ 230,657 $ 11,958(n) $ 242,615(n)
=============== ============== ============== =============== ============== ===============
Weighted average common shares
outstanding:
Primary.................... 118,977,173 14,175,779 125,549,233(n) 125,549,233(n)
Fully diluted.............. 118,977,173 14,222,384 125,549,233(n) 125,549,233(n)
Income from continuing
operations per common share:
Primary.................... $1.87 $0.52 $1.84 $1.93
Fully diluted.............. $1.87 $0.52 $1.84 $1.93
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION".
S-50
<PAGE> 56
FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993(A)
<TABLE>
<CAPTION>
FLEET AND
SHAWMUT
PRO FORMA PRO FORMA
FLEET SHAWMUT ADJUSTMENTS COMBINED
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest and fees on loans and leases.................................. $2,339,609 $1,272,319 -- $3,611,928
Interest on securities................................................. 872,886 554,663 $ (80)(d) 1,427,469
--------- --------- ----- ---------
Total interest income.............................................. 3,212,495 1,826,982 (80) 5,039,397
--------- --------- ----- ---------
Interest expense:
Deposits............................................................. 744,080 420,966 -- 1,165,046
Short-term borrowings................................................ 180,507 262,413 -- 442,920
Long-term debt....................................................... 236,794 72,040 -- 308,834
--------- --------- ------- ---------
Total interest expense............................................. 1,161,381 755,419 -- 1,916,800
--------- --------- ------- ---------
Net interest income.................................................... 2,051,114 1,071,563 (80) 3,122,597
Provision for credit losses............................................ 270,724 55,944 -- 326,668
--------- --------- ------- ---------
Net interest income after provision for credit losses.................. 1,780,390 1,015,619 (80) 2,795,929
--------- --------- ------- ---------
Mortgage banking....................................................... 414,086 30,737 -- 444,823
Service charges, fees and commissions.................................. 310,095 186,452 -- 496,547
Investment services revenue............................................ 173,762 116,845 -- 290,607
Securities available for sale gains (losses)........................... 282,444 12,468 -- 294,912
Other noninterest income............................................... 284,888 71,690 -- 356,578
--------- --------- ------- ---------
Total noninterest income........................................... 1,465,275 418,192 -- 1,883,467
--------- --------- ------- ---------
Employee compensation and benefits..................................... 1,018,124 500,254 -- 1,518,378
Occupancy and equipment................................................ 303,953 163,792 -- 467,745
Purchased mortgage servicing rights amortization....................... 239,940 7,343 -- 247,283
FDIC assessment........................................................ 75,854 52,302 -- 128,156
Marketing.............................................................. 53,141 22,240 -- 75,381
Core deposit and goodwill amortization................................. 53,594 6,289 -- 59,883
OREO expense........................................................... 57,364 105,173 -- 162,537
Restructuring charges.................................................. 125,000 36,319 -- 161,319
Other noninterest expense.............................................. 497,256 250,623 -- 747,879
--------- --------- ------- ---------
Total noninterest expense.......................................... 2,424,226 1,144,335 -- 3,568,561
--------- --------- ------- ---------
Income before income taxes, cumulative effect of
changes in accounting principles and minority interest............... 821,439 289,476 (80) 1,110,835
Applicable income taxes................................................ 327,407 6,628 (32) 334,003
--------- --------- ------- ---------
Income before cumulative effect of changes in accounting
principles and minority interest..................................... 494,032 282,848 (48) 776,832
Minority interest...................................................... (5,983) (5,983)
--------- --------- ------- ---------
Income before cumulative effect of changes in
accounting principles.............................................. $ 488,049 $ 282,848 $ (48) $ 770,849
========= ========= ======= =========
Income applicable to common shares..................................... $ 465,840 $ 267,379 $ (48) $ 733,171(o)
========= ========= ======= =========
Weighted average common shares outstanding:
Primary.............................................................. 154,666,307 113,908,148 255,938,277(o)
Fully diluted........................................................ 154,899,995 113,908,148 256,171,965(o)
Income from continuing operations per share before cumulative
effect of changes in accounting principles:
Primary.............................................................. $3.01 $2.35 $2.86
Fully diluted........................................................ $3.01 $2.35 $2.86
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION".
S-51
<PAGE> 57
FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1992(A)
<TABLE>
<CAPTION>
FLEET AND
SHAWMUT
PRO FORMA PRO FORMA
FLEET SHAWMUT ADJUSTMENTS COMBINED
---------- ---------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest and fees on loans and leases.................................. $2,513,587 $1,328,876 -- $3,842,463
Interest on securities................................................. 902,702 527,650 -- 1,430,352
---------- ---------- ---------- ----------
Total interest income.............................................. 3,416,289 1,856,526 -- 5,272,815
---------- ---------- ----------- ----------
Interest expense:
Deposits............................................................. 1,076,368 622,436 -- 1,698,804
Short-term borrowings................................................ 164,171 192,240 -- 356,411
Long-term debt....................................................... 222,104 59,321 -- 281,425
---------- ---------- ---------- ----------
Total interest expense............................................. 1,462,643 873,997 -- 2,336,640
---------- ---------- ---------- ----------
Net interest income.................................................... 1,953,646 982,529 -- 2,936,175
Provision for credit losses............................................ 485,823 242,128 -- 727,951
---------- ---------- ---------- ----------
Net interest income after provision for credit losses.................. 1,467,823 740,401 -- 2,208,224
---------- ---------- ---------- ----------
Mortgage banking....................................................... 364,011 29,071 -- 393,082
Service charges, fees and commissions.................................. 285,562 187,459 -- 473,021
Investment services revenue............................................ 160,083 115,103 -- 275,186
Securities available for sale gains (losses)........................... 206,713 94,103 -- 300,816
Gain on sale of FMG.................................................... 121,274 -- -- 121,274
Other noninterest income............................................... 230,147 103,327 -- 333,474
---------- ---------- ---------- ----------
Total noninterest income........................................... 1,367,790 529,063 -- 1,896,853
---------- ---------- ---------- ----------
Employee compensation and benefits..................................... 957,654 474,725 -- 1,432,379
Occupancy and equipment................................................ 283,191 179,507 -- 462,698
Purchased mortgage servicing rights amortization....................... 106,716 6,258 -- 112,974
FDIC assessment........................................................ 75,444 44,937 -- 120,381
Marketing.............................................................. 50,971 16,004 -- 66,975
Core deposit and goodwill amortization................................. 44,799 6,084 -- 50,883
OREO expense........................................................... 154,170 177,813 -- 331,983
Loss on sale of problem assets......................................... 115,000 -- -- 115,000
Other noninterest expense.............................................. 530,118 255,511 -- 785,629
---------- ---------- ---------- ----------
Total noninterest expense.......................................... 2,318,063 1,160,839 -- 3,478,902
---------- ---------- ---------- ----------
Income before income taxes, extraordinary tax credit and minority
interest............................................................. 517,550 108,625 -- 626,175
Applicable income taxes................................................ 228,526 40,898 -- 269,424
---------- ---------- ---------- ----------
Income before extraordinary tax credit and minority interest........... 289,024 67,727 -- 356,751
Minority interest...................................................... (9,181) (9,181)
---------- ---------- ---------- ----------
Income before extraordinary tax credit................................. $ 279,843 $ 67,727 -- $ 347,570
========= ========= =========== ==========
Income applicable to common shares..................................... $ 252,801 $ 62,944 $ 315,745 (o)
========= ========= =========== ==========
Weighted average common shares outstanding:
Primary.............................................................. 141,469,658 104,379,621 234,597,156 (o)
Fully diluted........................................................ 142,778,665 104,379,621 235,906,163 (o)
Income from continuing operations per share before extraordinary tax
credit:
Primary.............................................................. $1.78 $0.60 $1.35
Fully diluted........................................................ $1.77 $0.60 $1.34
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION".
S-52
<PAGE> 58
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(a) The pro forma information presented is not necessarily indicative of
the results of operations or the combined financial position that would have
resulted had the Shawmut/Fleet Merger, the Merger, the NBB Merger, the Plaza
Merger, the Barclays Acquisition and the FMG Repurchase been consummated at the
beginning of the periods indicated, nor is it necessarily indicative of the
results of operations in future periods or the future financial position of the
combined entities. The NBB Merger was consummated on January 27, 1995, the
Barclays Acquisition was consummated on January 31, 1995, and the Plaza Merger
was consummated on March 3, 1995. It is anticipated that the Shawmut/Fleet
Merger will be consummated in the fourth quarter of 1995 and the Merger and the
FMG Repurchase will be consummated in the second quarter of 1995.
Under generally accepted accounting principles, the assets and liabilities
of Shawmut will be combined with those of Fleet at book value. In addition, the
statements of income of Shawmut will be combined with the statements of income
of Fleet as of the earliest period presented. Certain reclassifications have
been included in the Unaudited Pro Forma Condensed Combined Balance Sheet and
Unaudited Pro Forma Condensed Combined Statements of Income to conform to
Fleet's presentation. Certain transactions conducted in the ordinary course of
business between Fleet, Shawmut, Northeast, NBB, Barclays, Plaza and FMG are
immaterial and, accordingly, have not been eliminated.
The unaudited pro forma condensed combined financial statements do not give
effect to the anticipated cost savings in connection with the Merger, the
Shawmut/Fleet Merger, the NBB Merger and the Plaza Merger or the effects of any
required regulatory divestitures. While no assurance can be given, Fleet and
Shawmut expect to achieve cost savings of approximately $400 million (pre-tax)
within fifteen months following the Shawmut/Fleet Merger. Such cost savings are
expected to be realized primarily through reductions in staff, elimination,
consolidation or divestiture of certain branches and the consolidation of
certain offices, data processing and other redundant back-office operations and
staff functions. Cost reductions and branch consolidations will come from both
companies and will be spread throughout the geographic region. Cost savings are
also expected to be achieved in connection with the Merger, the NBB Merger and
the Plaza Merger. These cost savings are expected to be approximately $25
million, $20 Million and $15 million (pre-tax) respectively, and are expected to
be achieved within the first twelve months after the consummation of these
respective mergers. The extent to which cost savings will be achieved is
dependent upon various factors beyond the control of Fleet and Shawmut,
including the regulatory environment, economic conditions, unanticipated changes
in business conditions, inflation and the level of FDIC assessments. Therefore,
no assurances can be given with respect to the ultimate level of cost savings to
be realized, or that such savings will be realized in the time-frame currently
anticipated. In addition, certain regulatory agencies may require the
divestiture of certain assets and liabilities of the combined company following
the Shawmut/Fleet Merger. Such divestitures may affect certain unaudited pro
forma combined financial statement amounts, merger and restructuring costs and
cost savings.
(b) Fleet is currently reviewing the investment securities portfolios of
Shawmut and Northeast to determine the classification of such securities as
either available for sale or held to maturity in connection with Fleet's
existing interest-rate risk position. As a result of this review, certain
reclassifications of Shawmut and Northeast investment securities may result. No
adjustments have been made to either the available for sale or the held to
maturity portfolios in the accompanying Unaudited Pro Forma Condensed Combined
Balance Sheet to reflect any such reclassification as management has not made a
final determination with respect to such matters. Any such reclassification will
be accounted for in accordance with Financial Accounting Standards Board
Statement No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," which requires that securities transferred from held to maturity to
available for sale be transferred at fair value with any unrealized gain or
loss, net of taxes, at the date of transfer recognized as a separate component
of stockholders' equity. At December 31, 1994, securities held to maturity at
Shawmut and Northeast had unrealized losses of $438,492,000 and $83,800,000,
respectively.
(c) Pro forma adjustments to common shares and capital surplus at December
31, 1994, reflect the Shawmut/Fleet Merger accounted for as a pooling of
interests, through: (a) the exchange of 108,429,899 shares of Fleet Common Stock
(using the Shawmut/Fleet Merger Exchange Ratio of .8922) for the
S-53
<PAGE> 59
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION -- (CONTINUED)
121,530,934 outstanding shares of Shawmut Common Stock at December 31, 1994
(which includes the 6,572,060 shares of Shawmut Common Stock issued to acquire
all the outstanding shares of Northeast Common Stock and stock options of
Northeast, and excludes the 5,811,900 shares of Shawmut Common Stock held by
Fleet as of such date, which are assumed to be retired for combining purposes),
and (b) the exchange of shares of Fleet new preferred stock for all shares of
Shawmut Preferred Stock on a share-for-share basis.
(d) Pro forma adjustments to securities available for sale at December 31,
1994, and to dividend income on securities for the years ended December 31, 1994
and December 31, 1993 reflect the elimination of the 5,811,900 shares of Shawmut
Common Stock held by Fleet at December 31, 1994, and the corresponding dividend
income recorded on such shares during each of the years in the three-year period
ending December 31, 1994. Pro forma adjustments to other assets and accrued
expenses and other liabilities at December 31, 1994, include the elimination of
Fleet's dividend receivable related to such shares and the elimination of
Shawmut's corresponding dividend payable. The Unaudited Pro Forma Condensed
Combined Balance Sheet also eliminates the after-tax unrealized loss on these
securities recorded in stockholders' equity and the related deferred tax
benefit.
(e) A liability of $400,000,000 has been recorded in the Unaudited Pro
Forma Condensed Combined Balance Sheet to reflect Fleet and Shawmut managements'
best estimate of merger and restructuring related charges in connection with the
Shawmut/Fleet Merger. This liability resulted in a $240,000,000 after-tax charge
to retained earnings in the Unaudited Pro Forma Condensed Combined Balance
Sheet. It is anticipated that substantially all of these charges will be
recognized during 1995 upon consummation of the Shawmut/Fleet Merger, with the
exception of certain amounts recognized by Shawmut during the first quarter of
1995, and paid during the first 15 months subsequent to the Shawmut/Fleet
Merger. The following table provides details of the estimated charges by type:
<TABLE>
<CAPTION>
ESTIMATED COSTS
TYPE OF COST ----------------------
----------------------------------------- (DOLLARS IN THOUSANDS)
<S> <C>
Personnel related........................ $255,000
Facilities and equipment................. 68,000
Branch related........................... 37,000
Other merger expenses.................... 40,000
-----------
Total.................................... $400,000
=================
</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. Facilities and equipment charges
consist of lease termination costs and other related exit costs resulting from
consolidation of duplicate headquarters and operational facilities, and computer
equipment and software write-offs due to duplication or incompatibility. Branch
related costs are primarily related to the cost of exiting branches anticipated
to be closed, including lease terminations and equipment write-offs. The effect
of the proposed charge has been reflected in the Unaudited Pro Forma Condensed
Combined Balance Sheet as of December 31, 1994; however, since the proposed
charge is nonrecurring, it has not been reflected in the pro forma combined
statements of income.
(f) The pro forma adjustments to cash include the redemption of the Series
B Preferred Stock based on the redemption value of such stock at December 31,
1994 ($42,879,000), and the redemption of all of the Northeast Uncertificated
Debentures (the "Northeast Debentures") based on the face value of the Northeast
Debentures at December 31, 1994 ($44,725,000), as if such redemptions had
occurred on January 1, 1994.
Also included in the pro forma adjustments to cash is the amount paid in
cash by Fleet in connection with the NBB Merger. The total consideration paid to
NBB shareholders in the NBB Merger was $425,815,000. Fleet paid $210,815,000 in
cash and issued $215,000,000 of Fleet Common Stock to NBB shareholders, which
S-54
<PAGE> 60
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION -- (CONTINUED)
was repurchased by Fleet in the open market in the fourth quarter of 1994 and
held in treasury at December 31, 1994. Proceeds from Fleet's senior debt
issuances during the third and fourth quarters of 1994 were used to fund both
the cash payment made to NBB shareholders and such repurchase of shares of Fleet
Common Stock. The 1994 Unaudited Pro Forma Condensed Combined Statement of
Income also includes an adjustment increasing interest expense for the year
ended December 31, 1994, by $21,373,000 to reflect the estimated interest
expense that would have been recorded on Fleet's senior indebtedness if such
indebtedness had been outstanding as of January 1, 1994.
(g) The pro forma adjustments also include fair value adjustments of
$(83,800,000) and $(11,373,000) to securities held to maturity of Northeast and
NBB, respectively. The pro forma adjustments also reflect Fleet's sale of NBB's
available for sale and held to maturity securities portfolios as if such sales
occurred on January 1, 1994, and includes adjustments to eliminate the
corresponding interest income for such period. The proceeds from the sale of
$974,472,000 were assumed to have reduced Fleet's short-term borrowings as of
January 1, 1994 and, accordingly, interest expense on short-term borrowings has
also been reduced by $47,307,000 for such period reflecting a weighted average
short-term borrowing rate of 4.75%.
The pro forma adjustments also reflect the sale of $157,430,000 of Plaza's
mortgage-backed securities, the sale of $230,000,000 of Plaza's adjustable rate
loans, and the sale of $18,445,000 of Plaza's retail consumer deposits, in each
case as if such sales had occurred on January 1, 1994, and includes adjustments
to eliminate the corresponding interest income and expense for such period. The
net proceeds from the sales of $368,985,000 were assumed to have reduced
short-term borrowings as of January 1, 1994 and, accordingly, interest expense
on short-term borrowings has also been reduced by $17,904,000 for such period
reflecting a weighted average short-term borrowings rate of 4.75%. The pro forma
adjustments also assume that Fleet funded the Plaza Merger by the issuance of
commercial paper on January 1, 1994, and accordingly reflect the corresponding
incremental interest expense of $4,358,000 for such period.
(h) These pro forma adjustments reflect the purchase accounting adjustments
related to the assets acquired and liabilities assumed for the Merger, NBB
Merger, Barclays Acquisition, Plaza Merger and the FMG Repurchase. These
adjustments are based on the best available information and may be different
from the actual adjustments to reflect the fair value of the net assets
purchased as of the date of the acquisition. The core deposit intangible is
being amortized over seven years.
(i) The 1994 pro forma statements include adjustments for the excess cost
over net assets of subsidiaries acquired for each of the material pending and/or
completed mergers and acquisitions calculated as follows:
<TABLE>
<CAPTION>
NORTHEAST NBB BARCLAYS PLAZA FMG
-------- -------- ---------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Purchase price.............................. $171,398 $425,815 $2,634,193 $88,015 $194,241
-------- -------- ---------- ------- --------
Historical net tangible assets acquired... 95,893 241,738 2,344,193 33,049 93,604
Estimated fair value adjustments.......... (94,313) (33,700) 65,000 17,491 71,465
-------- -------- ---------- ------- --------
Estimated fair value of net assets.......... 1,580 208,038 2,409,193 50,540 165,069
-------- -------- ---------- ------- --------
Excess cost over net assets of
subsidiaries acquired.................. $169,818 $217,777 $ 225,000 $37,475 $ 29,172
======== ======== ========= ======= ========
</TABLE>
Adjustments have been made to the Unaudited Pro Forma Condensed Combined
Balance Sheet to reflect the recording of these intangibles as calculated above
as well as to eliminate any intangible balances previously recorded at these
companies, in accordance with the purchase method of accounting. Reflected in
the 1994 Unaudited Pro Forma Condensed Combined Statement of Income are
adjustments to reflect the amortization of Northeast's, NBB's and Plaza's excess
cost over net assets of subsidiaries acquired ("goodwill") over 15 years, the
amortization of Barclays' goodwill over 25 years, and the amortization of FMG's
goodwill over 20 years.
S-55
<PAGE> 61
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION -- (CONTINUED)
(j) Barclays Pro Forma represents the acquisition of certain net assets
from Barclays totaling $2,344,193,000 at December 31, 1994 for a premium of
$290,000,000. The Barclays Pro Forma include adjustments to net assets purchased
to show the effects of the funding of the Barclays Acquisition of short-term
borrowings (primarily federal funds purchased and repurchase agreements) of
$2,113,193,000, the issuance of $250,000,000 of subordinated notes and
$150,000,000 of senior bank notes, and the issuance of $125,000,000 of the 9.35%
Cumulative Preferred Stock of Shawmut (the "9.35% Cumulative Preferred").
Expenses of $5,000,000 relating to the acquisition are included in other
liabilities and in the amount of estimated goodwill. The excess of purchase
price (including acquisition costs) over the book value of net assets acquired
($295,000,000) has been allocated between loan premium ($70,000,000) and
goodwill ($225,000,000) for pro forma purposes. The loan premium is being
amortized over an estimated life of four years for pro forma purposes.
Adjustments to increase interest expense in the amount of $14,265,000 for the
year ended December 31, 1994 were made to reflect an estimate of the incremental
interest expense which would have been incurred as if such borrowings had
occurred on January 1, 1994.
(k) These pro forma adjustments include the redemption of all of the
Northeast Debentures based on the face value of the Debentures ($44,725,000), as
if such redemption had occurred on January 1, 1994, and a related adjustment to
eliminate the interest expense recorded on such debentures ($3,858,000) for the
year ended December 31, 1994.
(l) The pro forma stockholders' equity accounts of Northeast, NBB and Plaza
have been adjusted in the Unaudited Pro Forma Condensed Combined Balance Sheet
to reflect the elimination of the stockholders' equity accounts in accordance
with the purchase method of accounting. The Fleet Pro Forma adjustments reflect
the issuance of 6,165,912 shares of Fleet Common Stock in connection with the
NBB Merger. The Shawmut Pro Forma adjustments reflect the issuance of 6,572,060
shares of Shawmut Common Stock in exchange for all of the outstanding shares of
Northeast Common Stock and stock options of Northeast (assuming that the
Exchange Ratio is .415 which is based on the closing sales price for Shawmut
Common Stock on April 7, 1995), and the redemption of the Series B Preferred
Stock. Also included in Shawmut's pro forma adjustments is the $125,000,000 of
the 9.35% Cumulative Preferred, the net proceeds of $121,000,000 which were used
to partially fund the Barclays Acquisition. Shawmut's pro forma net income
applicable to common shares was decreased to include the effect of additional
preferred stock dividends of $11,688,000, as if the 9.35% Cumulative Preferred
had been issued on January 1, 1994.
(m) Pro forma adjustments reflect the payment of $194,241,000 for the 19.3%
publicly-held shares of FMG common stock in connection with the FMG Repurchase
as if such transaction had occurred on January 1, 1994. The excess of such
purchase price over the fair value of net assets acquired of $165,069,000
resulted in $29,172,000 of excess cost over net assets acquired that will be
amortized over 20 years. Pro forma adjustments for such period reflect the fair
market value adjustment of $118,867,000 to FMG's purchased mortgage servicing
rights as well as the related amortization expense of $14,264,000, the
corresponding deferred tax liability and the elimination of the minority
interest in both the balance sheet and income statement. The pro forma
adjustments also assume that Fleet funded the FMG repurchase by the issuance of
commercial paper on January 1, 1994, and accordingly reflect the corresponding
$8,178 incremental interest expense for such period.
(n) The Fleet Pro Forma weighted average shares outstanding for the year
ended December 31, 1994 reflect Fleet's historical weighted average shares
outstanding plus the issuance of 6,165,912 shares of Fleet Common Stock in
connection with the NBB Merger.
The Shawmut Pro Forma weighted average shares outstanding for the year
ended December 31, 1994 reflect Shawmut's historical weighted average shares
outstanding plus the issuance of 6,572,060 shares of Shawmut Common Stock in
connection with the Merger. Shawmut's pro forma net income applicable to common
shares was decreased to include the effect of additional preferred stock
dividends of $11,688,000, as if the Cumulative 9.35% Preferred had been issued
on January 1, 1994 and increased to include the effect of the pro forma
redemption of the Series B Preferred Stock, as if such redemption occurred on
January 1, 1994.
S-56
<PAGE> 62
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION -- (CONTINUED)
(o) The Fleet and Shawmut Pro Forma Combined weighted average shares
outstanding for the year ended December 31, 1994 reflect the Fleet Pro Forma
weighted average shares plus the converted Shawmut Pro Forma weighted average
shares outstanding (after adjustment to eliminate the 5,811,900 shares of
Shawmut Common Stock owned by Fleet, which are assumed to be retired for
combining purposes). Each share of Shawmut Common Stock is converted into .8922
shares of Fleet Common Stock.
The Fleet and Shawmut Pro Forma Combined net income applicable to common
shares reflects the sum of the Fleet Pro Forma net income applicable to common
shares and the Shawmut Pro Forma net income applicable to common shares adjusted
for any Fleet/Shawmut Pro Forma adjustments.
S-57
<PAGE> 63
EXPERTS
The consolidated financial statements of Shawmut incorporated in this Proxy
Statement/Prospectus Supplement by reference to Shawmut's Annual Report on Form
10-K for the year ended December 31, 1994 have been so incorporated in reliance
on the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The consolidated financial statements of Fleet appearing in Shawmut's
Current Report on Form 8-K filed on April 13, 1995 for the year ended December
31, 1994, incorporated by reference herein (and elsewhere in this Registration
Statement) have been incorporated by reference herein (and elsewhere in this
Registration Statement) in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, and upon the authority of said firm as
experts in accounting and auditing. The report of KPMG Peat Marwick LLP covering
the December 31, 1994 financial statements refers to a change in the method of
accounting for investments.
The consolidated financial statements of Northeast and subsidiaries as of
December 31, 1994 and for the year then ended, included in Northeast's Annual
Report on Form 10-K for the year ended December 31, 1994 and incorporated by
reference into this Proxy Statement/Prospectus Supplement, have been
incorporated by reference herein and in the Registration Statement of which the
Proxy Statement/Prospectus Supplement is a part in reliance upon the report of
Deloitte & Touche, LLP, independent accountants, dated January 20, 1995, and
upon the authority of said firm as experts in accounting and auditing. The
consolidated financial statements of Northeast and subsidiaries for the nine
months ended December 31, 1992, included in Northeast's Annual Report on Form
10-K for the year ended December 31, 1994 incorporated by reference into this
Proxy Statement/Prospectus Supplement have been incorporated by reference herein
and in the Registration Statement of which the Proxy Statement/Prospectus
Supplement is a part in reliance upon the report of Coopers & Lybrand, LLP,
independent accountants, and upon the authority of said firm as experts in
accounting and auditing.
The financial statements of the Business Finance Division of Barclays
Business Credit, Inc. incorporated in this Proxy Statement/Prospectus by
reference to Shawmut's Current Report on Form 8-K, filed on April 13, 1995, have
been so incorporated in reliance upon the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
S-58
<PAGE> 64
ANNEX A
May [ ], 1995
Board of Directors
Northeast Federal Corp.
70 Batterson Park Road
Farmington, Connecticut 06034
Members of the Board:
We understand that Northeast Federal Corp. (the "Company") and Shawmut
National Corporation ("Shawmut") have entered into a definitive merger agreement
pursuant to which the Company will be merged with and into Shawmut and each
share of common stock of the Company will be converted into the right to receive
the number of shares of the common stock of Shawmut determined by dividing
$10.875 by the average closing price per share of Shawmut's common stock for the
fifteen trading days ending on the business day prior to the date on which the
last regulatory approval required to consummate the proposed merger has been
obtained and all statutory waiting periods in respect thereof have expired (the
"Proposed Transaction"). The terms and conditions of the Proposed Transaction
are set forth in more detail in the Agreement and Plan of Merger, dated as of
June 11, 1994, by and between the Company and Shawmut (the "Agreement").
We have been requested by the Company to render our opinion with respect to
the fairness, from a financial point of view, to the Company's stockholders of
the consideration to be offered in the Proposed Transaction. We have not been
requested to opine as to, and our opinion does not in any manner address, the
Company's underlying business decision to proceed with or effect the Proposed
Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement,
(2) the Form 10-K for the twelve months ended December 31, 1994 for the Company
and Shawmut, and such other publicly available information concerning the
Company and Shawmut which we believe to be relevant to our inquiry, (3)
financial and operating information with respect to the business, operations and
prospects of the Company furnished to us by the Company, (4) financial and
operating information with respect to the business, operations, and prospects of
Shawmut furnished to us by Shawmut, (5) trading history for the past three years
(through April [ ], 1995) and market valuation of the Company's common stock
and Shawmut's common stock and a comparison of those trading histories with
those of the other companies which we deemed relevant, (6) a comparison of the
historical financial results and present financial condition of the Company with
those of other companies which we deemed relevant, and (7) a comparison of the
financial terms of the Proposed Transaction with the financial terms of certain
other recent transactions which we deemed relevant. In addition, we have had
discussions with the management of the Company and Shawmut concerning their
respective businesses, operations, assets, financial conditions and prospects
and undertook such other studies, analyses and investigations as we deemed
appropriate.
We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our opinion without
independent verification and have further relied upon the assurances of
management of the Company and Shawmut that they are not aware of any facts that
would make such information inaccurate or misleading. With respect to the
financial projections of the Company, upon advice of the Company, we have
assumed that such projections have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
management of the Company, as to the future financial performance of the
Company, and we have relied upon such projections in arriving at our opinion. In
arriving at our opinion, we have not conducted a physical inspection of the
properties and facilities of the Company or Shawmut and have not made nor
obtained any evaluations or appraisals of the assets or liabilities of the
Company or Shawmut. In addition, in arriving at our opinion, we have not
considered the potential effects to the Company of pending litigation. Upon
advice of the Company, we have assumed that the merger will qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended, and therefore as a tax-free transaction. Our opinion is
necessarily based upon
S-A-1
<PAGE> 65
market, economic, regulatory and other conditions as they exist on, and can be
evaluated as of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
offered to the stockholders of the Company in the Proposed Transaction is fair
to such stockholders.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In addition, the Company has
agreed to indemnify us for certain liabilities that might arise out of the
rendering of this opinion. We also have performed various investment banking
services for the Company in the past (including acting as financial advisor for
the reclassification of the Company's $2.25 Cumulative Convertible Preferred
Stock, Series A, completed in May 1993) and have received customary fees for
such services. In the ordinary course of our business, we actively trade in the
debt and equity securities of the Company and Shawmut 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 solely for the use and benefit of the Board of Directors of
the Company. This opinion is not intended to be and does not constitute a
recommendation to any stockholder of the Company as to how such stockholder
should vote with respect to the Proposed Transaction.
Very truly yours,
LEHMAN BROTHERS INC.
S-A-2
<PAGE> 66
50 State House Square
Hartford, CT 06103
February 10, 1995
Dear Fellow Common Stockholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of Stockholders of Northeast Federal Corp. ("Northeast" or the
"Company") which will be held at The Hartford Club, 46 Prospect Street,
Hartford, Connecticut on March 17, 1995 at 10:00 a.m.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Merger, dated as of June
11, 1994 (the "Merger Agreement"), by and between Shawmut National Corporation
("Shawmut") and the Company, pursuant to which a wholly owned subsidiary of
Shawmut would merge (the "Merger") with and into the Company, with the Company
becoming a wholly owned subsidiary of Shawmut.
The consideration for each share of the Company's Common Stock, with
certain exceptions, will be a number of shares (the "Exchange Ratio") of Shawmut
Common Stock determined as follows:
(i) if the Shawmut Common Stock Average Price (as defined below) is
greater than or equal to $26.235, the Exchange Ratio will be .415;
(ii) if the Shawmut Common Stock Average Price is less than $26.235
but equal to or greater than $21.465, the Exchange Ratio will be (a)
$10.875 divided by (b) the Shawmut Common Stock Average Price; or
(iii) if the Shawmut Common Stock Average Price is less than $21.465,
the Exchange Ratio will be .507; provided, however, that, as described
below, under such circumstances the Company has the right to, and
represents to its stockholders that it will, terminate the Merger
Agreement, subject to the right of Shawmut to avoid such termination by an
increase in the Exchange Ratio.
IF THE SHAWMUT COMMON STOCK AVERAGE PRICE IS LESS THAN $21.465, NORTHEAST'S
BOARD OF DIRECTORS (THE "NORTHEAST BOARD") HAS THE RIGHT TO, AND REPRESENTS TO
ITS STOCKHOLDERS THAT IT WILL, TERMINATE THE MERGER AGREEMENT PURSUANT TO ITS
TERMS, WHETHER BEFORE OR AFTER THE APPROVAL OF THE MERGER BY NORTHEAST'S
STOCKHOLDERS; PROVIDED, HOWEVER, THAT SHAWMUT MAY AVOID SUCH TERMINATION BY
INCREASING THE EXCHANGE RATIO SO THAT THE SHARES OF SHAWMUT COMMON STOCK ISSUED
IN EXCHANGE FOR EACH SHARE OF THE COMPANY'S COMMON STOCK HAVE A VALUE (VALUED AT
THE SHAWMUT COMMON STOCK AVERAGE PRICE) OF $10.875. The term "Shawmut Common
Stock Average Price" means the average daily closing price of Shawmut Common
Stock as reported on the New York Stock Exchange Composite Transaction reporting
system for the 15 consecutive full trading days ending on the last trading day
prior to the date on which the last regulatory approval is obtained and all
statutory waiting periods in respect thereof have expired.
SHAWMUT'S PRESENT INTENTION IS NOT TO INCREASE THE EXCHANGE RATIO ABOVE
.507; HOWEVER, NO FINAL DECISION WILL BE MADE UNTIL THE ACTUAL ESTABLISHMENT OF
THE SHAWMUT COMMON STOCK AVERAGE PRICE.
Based on the last reported sales price per share of Shawmut Common Stock on
February 10, 1995, of $21.125 (assuming that this is the Shawmut Common Stock
Average Price), each share of Northeast Common Stock would be exchangeable for
.507 shares of Shawmut Common Stock having a value of $10.71; and, accordingly,
the Northeast Board would terminate the Merger Agreement. Upon such termination
Shawmut may elect to increase the number of shares of Shawmut Common Stock to be
exchanged for each share of Northeast Common Stock so that the Shawmut Common
Stock Average Price for such shares of Shawmut Common Stock would equal $10.875.
If the Northeast Board, however, terminates the Merger Agreement, Shawmut's
present intention is not to increase the Exchange Ratio above .507 and, as a
result, the Merger would not be consummated.
<PAGE> 67
The proposed Merger has been approved by the Northeast Board as being in
the best interest of Northeast and its shareholders. The Northeast Board has
received an opinion of Lehman Brothers Inc., its financial advisor, as of the
date of the enclosed Proxy Statement/Prospectus, that consideration equal to
converting each share of Northeast Common Stock into the right to receive the
number of shares of Shawmut Common Stock determined by dividing $10.875 by the
Shawmut Common Stock Average Price is fair from a financial point of view to
Northeast stockholders. The written opinion of Lehman Brothers Inc. is
reproduced in full in Annex B to the accompanying Proxy Statement/Prospectus.
The Northeast Board recommends that you vote "FOR" approval of the Merger
Agreement.
Consummation of the Merger is subject to certain conditions, including the
approval of the Merger Agreement by Company stockholders and the approval of the
Merger by various regulatory agencies.
The enclosed Notice of Special Meeting of Stockholders and Proxy
Statement/Prospectus describe the Merger and provide specific information
concerning the Special Meeting. Please read these materials carefully and
consider the information contained in them.
It is very important that your shares be represented at the Special
Meeting, regardless of whether you plan to attend in person. The affirmative
vote of at least a majority of the outstanding shares of Company common stock is
required to approve the Merger Agreement. Consequently, a failure to vote will
have the same effect as a vote against the Merger Agreement. Therefore, we urge
you to complete, sign, date and return the enclosed proxy card in the enclosed
postage-paid envelope as soon as possible to ensure that your shares will be
voted at the Special Meeting. You should not send in the certificate for your
shares of Company Common Stock at this time.
On behalf of the Northeast Board, I thank you for your support and urge you
to vote for approval of the Merger Agreement.
Cordially,
KIRK W. WALTERS
Chairman of the Board
2
<PAGE> 68
50 State House Square
Hartford, CT 06103
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
MARCH 17, 1995
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Northeast
Federal Corp. ("Northeast") will be held at The Hartford Club, 46 Prospect
Street, Hartford, Connecticut, on March 17, 1995, at 10:00 a.m. (the "Special
Meeting"), for the following purposes, all of which are more fully described in
the accompanying Proxy Statement/Prospectus:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of June 11, 1994 (the "Merger
Agreement"), by and between Shawmut National Corporation ("Shawmut") and
Northeast, and the transactions contemplated thereby, including the merger
of a wholly owned subsidiary of Shawmut with and into Northeast with
Northeast surviving as a wholly owned subsidiary of Shawmut, all as more
fully described in the accompanying Proxy Statement/Prospectus.
2. To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
Pursuant to the By-laws, the Board of Directors has fixed the close of
business on February 10, 1995 as the record date for the determination of
stockholders entitled to notice of and to vote at the Special Meeting and any
adjournments or postponements thereof. Only stockholders of record at the close
of business on such date are entitled to notice of and to vote at the Special
Meeting. A list of Northeast stockholders entitled to vote at the Special
Meeting will be available for examination for any purpose germane to the Special
Meeting at the time and place of the Special Meeting and during the ten days
prior to the Special Meeting, during ordinary business hours, at the Office of
the Secretary, Northeast Federal Corp., 50 State House Square, Hartford,
Connecticut 06103. In the event there are not sufficient shares represented for
a quorum or a vote to approve the Merger Agreement or otherwise at the Special
Meeting, the Special Meeting may be adjourned in order to permit further
solicitation of proxies by Northeast.
Your vote is important regardless of the number of shares you own. Each
stockholder, even though he or she now plans to attend the Special Meeting, is
requested to sign, date and return the enclosed Proxy without delay in the
enclosed postage-paid envelope. You may revoke your Proxy at any time prior to
its exercise. Any stockholder present at the Special Meeting or at any
adjournments or postponements thereof may revoke his or her Proxy and vote
personally on each matter brought before the Special Meeting.
By Order of the Board of Directors,
CRAIG W. SMITH,
Secretary
Hartford, Connecticut
February 10, 1995
<PAGE> 69
NORTHEAST FEDERAL CORP.
PROXY STATEMENT
------------------------
SHAWMUT NATIONAL CORPORATION
PROSPECTUS
------------------------
8,034,055 SHARES OF COMMON STOCK
This Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") is being
furnished to stockholders of Northeast Federal Corp. ("Northeast") in connection
with the solicitation of proxies by the Board of Directors of Northeast for use
at the special meeting of stockholders of Northeast (including any adjournments
or postponements thereof) to be held on March 17, 1995 (the "Special Meeting").
This Proxy Statement/Prospectus relates to the proposed merger of a wholly owned
subsidiary of Shawmut National Corporation ("Shawmut") with and into Northeast
(the "Merger") with Northeast surviving as a wholly owned subsidiary of Shawmut
pursuant to the Agreement and Plan of Merger, dated as of June 11, 1994 (the
"Merger Agreement"), by and between Shawmut and Northeast and certain
transactions contemplated thereby.
This Proxy Statement/Prospectus also constitutes a prospectus of Shawmut
with respect to up to 8,034,055 shares of common stock, par value $.01 per
share, of Shawmut ("Shawmut Common Stock") issuable to holders of common stock,
par value $.01 per share, of Northeast ("Northeast Common Stock") in the Merger.
Upon consummation of the Merger, each outstanding share of Northeast Common
Stock will, with certain exceptions (including the issuance of cash in lieu of
fractional shares), be converted into and exchangeable for a number of shares
(the "Exchange Ratio") of Shawmut Common Stock, determined as follows:
(i) if the Shawmut Common Stock Average Price (as defined below) is
greater than or equal to $26.235, the Exchange Ratio will be .415;
(ii) if the Shawmut Common Stock Average Price is less than $26.235
but equal to or greater than $21.465, the Exchange Ratio will be (a)
$10.875 divided by (b) the Shawmut Common Stock Average Price; or
(iii) if the Shawmut Common Stock Average Price is less than $21.465,
the Exchange Ratio will be .507; provided, however, that, as described
below, under such circumstances Northeast has the right to, and represents
to its stockholders that it will, terminate the Merger Agreement, subject
to the right of Shawmut to avoid such termination by an increase in the
Exchange Ratio.
IF THE SHAWMUT COMMON STOCK AVERAGE PRICE IS LESS THAN $21.465, NORTHEAST'S
BOARD OF DIRECTORS (THE "NORTHEAST BOARD") HAS THE RIGHT TO, AND REPRESENTS TO
ITS STOCKHOLDERS THAT IT WILL, ELECT TO TERMINATE THE MERGER AGREEMENT UNLESS
SHAWMUT INCREASES THE EXCHANGE RATIO SO THAT THE SHARES OF SHAWMUT COMMON STOCK
ISSUED IN EXCHANGE FOR EACH SHARE OF NORTHEAST COMMON STOCK HAVE A VALUE (VALUED
AT THE SHAWMUT COMMON STOCK AVERAGE PRICE) OF $10.875. "Shawmut Common Stock
Average Price" means the average daily closing price of Shawmut Common Stock as
reported on The New York Stock Exchange ("NYSE") Composite Transaction reporting
system for the 15 consecutive full trading days ending at the close of trading
on the trading day immediately prior to the Determination Date. "Determination
Date" means the date on which the last regulatory approval required to
consummate the Merger has been obtained and all statutory waiting periods in
respect thereof have expired. SHAWMUT'S PRESENT INTENTION IS NOT TO INCREASE THE
EXCHANGE RATIO ABOVE .507; however, no final decision will be made until the
actual establishment of the Shawmut Common Stock Average Price. For a more
complete description of the terms of the Merger Agreement, which is included as
Annex A to this Proxy Statement/Prospectus, see "THE MERGER."
Based on the last reported sales price per share of Shawmut Common Stock on
February 10, 1995 of $21.125 (assuming that this is the Shawmut Common Stock
Average Price as described above), each share of Northeast Common Stock would be
exchangeable for .507 shares of Shawmut Common Stock having a value of $10.71;
and, accordingly, the Northeast Board would terminate the Merger Agreement. Upon
such termination, Shawmut may elect to increase the number of shares of Shawmut
Common Stock to be exchanged for each share of Northeast Common Stock so that
the Shawmut Common Stock Average Price for such shares of Shawmut Common Stock
would equal $10.875. If the Northeast Board, however, terminates the Merger
Agreement, Shawmut's present intention is not to increase the Exchange Ratio
above .507 and as a result, the Merger would not be consummated.
This Proxy Statement/Prospectus and the accompanying form of proxy is first
being mailed to stockholders of Northeast on or about February 13, 1995.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE SHARES OF SHAWMUT COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND,
THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
The date of this Proxy Statement/Prospectus is February 10, 1995
<PAGE> 70
IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY, THEREFORE, WHETHER
OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, PLEASE VOTE,
DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE
WHICH DOES NOT REQUIRE POSTAGE IF MAILED IN THE UNITED STATES. THIS WILL NOT
PREVENT YOU FROM VOTING IN PERSON IF YOU ARE PRESENT AT THE MEETING.
No persons have been authorized to give any information or to make any
representations other than those contained in this Proxy Statement/Prospectus or
incorporated by reference herein in connection with the solicitation of proxies
or the offering of securities made hereby and, if given or made, such
information or representations must not be relied upon as having been authorized
by Shawmut or Northeast. This Proxy Statement/Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, any securities, or the
solicitation of a proxy, in any jurisdiction, to or from any person to whom it
is not lawful to make any such offer or solicitation in such jurisdiction.
Neither the delivery of this Proxy Statement/Prospectus nor any distribution of
securities made hereunder shall, under any circumstances, create an implication
that there has been no change in the affairs of Shawmut or Northeast since the
date of this Proxy Statement/Prospectus or that the information herein or in the
documents or reports incorporated by reference herein is correct as of any time
subsequent to such date. All information set forth herein or incorporated by
reference in this Proxy Statement/Prospectus relating to Shawmut and its
subsidiaries has been supplied by Shawmut and all information set forth herein
or incorporated by reference in this Proxy Statement/Prospectus relating to
Northeast and its subsidiaries has been supplied by Northeast.
------------------------
NORTH CAROLINA
The Commissioner of Insurance of the State of North Carolina has not
approved or disapproved this offering nor has the Commissioner passed upon the
accuracy or adequacy of this Proxy Statement/Prospectus.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
AVAILABLE INFORMATION............................ 3
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE...................................... 3
SUMMARY.......................................... 5
RECENT DEVELOPMENTS.............................. 17
THE SPECIAL MEETING.............................. 22
General........................................ 22
Record Date; Voting; Solicitation and
Revocation of Proxies........................ 22
THE MERGER....................................... 24
General........................................ 24
Exchange Ratio................................. 24
Background of the Merger....................... 26
Northeast's Reasons for the Merger............. 30
Recommendation of the Board of Directors of
Northeast.................................... 31
Shawmut's Reasons for the Merger............... 31
Opinion of Northeast's Financial Advisor....... 31
Special Considerations -- Litigation........... 36
Interests of Certain Persons in the Merger..... 37
Employee Matters............................... 40
Effective Time................................. 40
Conversion of Shares: Procedures for Exchange
of Certificates; Fractional Shares........... 41
Conditions to the Merger....................... 42
Bank Reorganization............................ 43
Regulatory Approvals Required for the Merger... 43
Conduct of Business Pending the Merger......... 47
Waiver and Amendment; Termination.............. 49
No Solicitation of Transactions................ 51
Resales of Shawmut Common Stock Received
in the Merger................................ 51
Stock Exchange Listing......................... 51
Anticipated Accounting Treatment............... 52
Certain Federal Income Tax Considerations...... 52
No Appraisal Rights............................ 53
<CAPTION>
PAGE
-----
<S> <C>
CERTAIN REGULATORY CONSIDERATIONS................ 53
Supervision and Regulation -- General.......... 53
Holding Company Liability...................... 53
Transactions with Affiliates................... 54
Capital........................................ 54
Regulatory Restrictions on Dividends........... 54
FIRREA......................................... 55
FDICIA......................................... 55
Interstate Banking and Branching Legislation... 57
DESCRIPTION OF SHAWMUT CAPITAL
STOCK.......................................... 57
General........................................ 57
Common Stock................................... 58
Rights Plan.................................... 59
Shawmut Preferred Stock........................ 60
COMPARISON OF STOCKHOLDER RIGHTS................. 61
Voting Rights.................................. 62
Action by Written Consent...................... 62
Special Meetings of Stockholders............... 62
Stockholder Nominations and Proposals for
Business..................................... 63
Business Combinations.......................... 63
Rights Plans................................... 65
Size and Classification of Board of
Directors.................................... 65
Removal of Directors........................... 65
Indemnification................................ 66
UNAUDITED PRO FORMA CONDENSED FINANCIAL
INFORMATION.................................... 67
VALIDITY OF SECURITIES........................... 77
EXPERTS.......................................... 77
ANNEX A: AGREEMENT AND PLAN OF MERGER............ A-1
ANNEX B: OPINION OF LEHMAN BROTHERS INC.......... B-1
</TABLE>
2
<PAGE> 71
AVAILABLE INFORMATION
Shawmut and Northeast are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by Shawmut and Northeast with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at 7 World Trade Center,
13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison,
Suite 1400, Chicago, Illinois 60661. Copies of such material also can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, copies
of such material filed by Shawmut and Northeast can be inspected at the offices
of the NYSE, 20 Broad Street, New York, New York 10005.
Shawmut has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereof, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of Shawmut Common Stock that may be issued pursuant to the Merger
Agreement. This Proxy Statement/Prospectus does not contain all the information
set forth in the Registration Statement and the exhibits thereto. Such
additional information may be inspected and copied as set forth above.
Statements contained in this Proxy Statement/Prospectus or in any document
incorporated by reference in this Proxy Statement/Prospectus as to the contents
of any contract or other document referred to herein or therein are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement or
such other document, each such statement being qualified in all respects by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Shawmut (File No.
1-10102) and Northeast (File No. 1-10571) are incorporated by reference in this
Proxy Statement/Prospectus:
1. Shawmut's Annual Report on Form 10-K for the year ended December
31, 1993 (the "1993 Shawmut Form 10-K").
2. Shawmut's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1994, June 30, 1994 and September 30, 1994.
3. Shawmut's Current Reports on Form 8-K, dated February 28, 1994,
March 1, 1994, March 7, 1994, March 28, 1994, April 19, 1994, April 28,
1994, May 5, 1994, June 13, 1994, July 15, 1994, August 2, 1994, August 12,
1994, December 29, 1994, January 6, 1995, January 11, 1995, January 17,
1995, January 26, 1995 and February 7, 1995.
4. The description of Shawmut Common Stock and Shawmut Series A Junior
Participating Preferred Stock and Preferred Stock Purchase Rights set forth
in Shawmut's Registration Statements on Form 8-A dated November 29, 1988
and March 7, 1989.
5. The portions of Shawmut's Proxy Statement for the Annual Meeting of
Shareholders held on April 26, 1994 that have been incorporated by
reference in the 1993 Shawmut Form 10-K.
6. Northeast's Annual Report on Form 10-K for the year ended December
31, 1993 (the "1993 Northeast Form 10-K").
7. Northeast's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1994, June 30, 1994 and September 30, 1994 and its Form 10-Q/A
for the quarter ended September 30, 1994.
8. The description of Northeast Common Stock set forth in Northeast's
Registration Statement on Form 8-B dated July 6, 1990, and any amendments
or updates thereto.
3
<PAGE> 72
9. Northeast's Current Reports on Form 8-K, dated January 4, 1994, May
20, 1994 and June 11, 1994.
10. The portions of Northeast's Proxy Statement for the Annual Meeting
of Stockholders held on May 20, 1994 that have been incorporated by
reference in the 1993 Northeast Form 10-K.
All documents and reports filed by Shawmut or Northeast pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Proxy Statement/Prospectus and prior to the date of the Special Meeting shall be
deemed to be incorporated by reference in this Proxy Statement/Prospectus and to
be a part hereof from the dates of filing of such documents or reports. Any
statement contained in a document or report incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement/Prospectus to the extent that a statement
contained herein, or in any other subsequently filed document or report that
also is deemed to be incorporated by reference herein, modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, ON
WRITTEN OR ORAL REQUEST, IN THE CASE OF DOCUMENTS RELATING TO SHAWMUT, TO
SHAWMUT NATIONAL CORPORATION, 777 MAIN STREET, MSN309, HARTFORD, CONNECTICUT
06115, ATTENTION: SHAREHOLDER RELATIONS, TELEPHONE NUMBER (203) 986-2028, AND IN
THE CASE OF DOCUMENTS RELATING TO NORTHEAST, TO NORTHEAST FEDERAL CORP., 50
STATE HOUSE SQUARE, HARTFORD, CONNECTICUT 06103, ATTENTION: SHAREHOLDER
RELATIONS, TELEPHONE NUMBER (203) 280-1187. IN ORDER TO ENSURE TIMELY DELIVERY
OF THE DOCUMENTS, REQUESTS SHOULD BE RECEIVED BY MARCH 6, 1995.
4
<PAGE> 73
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/ Prospectus. As this summary is necessarily incomplete,
reference is made to, and this summary is qualified in its entirety by, the more
detailed information contained or incorporated by reference in this Proxy
Statement/ Prospectus and the Annexes hereto. Stockholders are urged to read
this Proxy Statement/Prospectus and the Annexes hereto in their entirety.
Certain capitalized terms which are used but not defined in this summary are
defined elsewhere in this Proxy Statement/Prospectus.
THE SPECIAL MEETING
The Special Meeting will be held at The Hartford Club, 46 Prospect Street,
Hartford, Connecticut on March 17, 1995, beginning at 10:00 a.m. local time. The
purpose of the Special Meeting is to consider and vote upon a proposal to
approve and adopt the Merger Agreement and the transactions contemplated
thereby. See "THE SPECIAL MEETING."
Only holders of record of Northeast Common Stock at the close of business
on February 10, 1995 (the "Record Date") will be entitled to notice of and to
vote at the Special Meeting. As of the Record Date, there were 14,332,195 shares
of Northeast Common Stock outstanding and entitled to vote. See "THE SPECIAL
MEETING -- Record Date; Voting; Solicitation and Revocation of Proxies."
PARTIES TO THE MERGER
Shawmut. Shawmut is a multibank holding company and a unitary savings and
loan holding company, registered under the Bank Holding Company Act of 1956, as
amended, and the Home Owners' Loan Act of 1933, as amended ("HOLA"). It was
organized under the laws of the State of Delaware in October 1987 and became a
bank holding company on February 29, 1988 through the consummation of a plan of
reorganization between Hartford National Corporation ("HNC") and Shawmut
Corporation ("SC") pursuant to which both HNC and SC became wholly owned
subsidiaries of Shawmut. Shawmut maintains dual headquarters in the States of
Connecticut and Massachusetts. The principal executive offices of Shawmut are
located at 777 Main Street, Hartford, Connecticut 06115 and One Federal Street,
Boston, Massachusetts 02211. Its telephone numbers in Connecticut and
Massachusetts are (203) 986-2000 and (617) 292-2000, respectively.
The principal business of Shawmut is to provide, through its bank
subsidiaries, comprehensive corporate, commercial, correspondent and individual
banking services, and personal and corporate trust services, through its network
of more than 350 branches located throughout Connecticut, Massachusetts, New
Hampshire and Rhode Island. Shawmut's principal banking subsidiaries are Shawmut
Bank Connecticut, National Association, Hartford, Connecticut ("SBC") and
Shawmut Bank, National Association, Boston, Massachusetts ("SBM"). Shawmut's
thrift subsidiary is Shawmut Bank, FSB.
At September 30, 1994, Shawmut had assets of $31.4 billion, deposits of
$19.5 billion, loans of $17.7 billion and shareholders' equity of $2.1 billion.
For more information about Shawmut, reference is made to the 1993 Shawmut
Form 10-K, Shawmut's Current Report on Form 8-K dated August 2, 1994 and
Shawmut's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994,
June 30, 1994 and September 30, 1994 which are incorporated herein by reference.
See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
Northeast. Northeast is a unitary savings and loan holding company
registered under HOLA which provides financial services through its subsidiary,
Northeast Savings, F.A. ("Northeast Savings"). As of September 30, 1994,
Northeast had assets of $3.3 billion, deposits of $2.4 billion and stockholders'
equity of $135.1 million. The principal executive offices of Northeast are
located at 50 State House Square, Hartford, Connecticut 06103 and its telephone
number is (203) 280-1000. Unless the context otherwise requires, references
herein to Northeast include Northeast Savings.
5
<PAGE> 74
Northeast Savings currently maintains 33 offices (including its main office
in Hartford, Connecticut) located in Connecticut, Massachusetts and the capital
region of New York and serves depositors and borrowers in those markets. Its
principal business has consisted of attracting deposits from the general public
and primarily using such deposits to make residential mortgage loans, although
it also makes commercial mortgage, residential construction and consumer loans.
The primary sources of funds for Northeast's lending and investment activities
are deposits, payments of interest and principal on loans, borrowings and, to a
lesser extent, maturing investments and earnings on investments.
Northeast Savings is subject to supervision, examination, and regulation by
the Office of Thrift Supervision (the "OTS"), as well as by the Federal Deposit
Insurance Corporation (the "FDIC").
For more information about Northeast, reference is made to the 1993
Northeast Form 10-K, Northeast's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1994, June 30, 1994 and September 30, 1994 and Northeast's Form
10-Q/A for the quarter ended September 30, 1994 which are incorporated herein by
reference, see "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE."
As of September 30, 1994, the total assets of Shawmut and Northeast would
have represented 90.3% and 9.7%, respectively, of the total assets of Shawmut on
a pro forma basis assuming consummation of the Merger and their total
shareholders' equity would have represented 94.1% and 5.9%, respectively, of the
total shareholders' equity of Shawmut on such a pro forma basis. For the
nine-month period ended September 30, 1994, Shawmut and Northeast's total
interest income would have represented 90.9% and 9.1%, respectively, of the
total interest income of Shawmut on such a pro forma basis, their total
non-interest income would have represented 88.5% and 11.5%, respectively, of the
total non-interest income of Shawmut on such a pro forma basis and their net
income would have represented 94.0% and 6.0%, respectively, of net income of
Shawmut on such a pro forma basis.
REQUIRED STOCKHOLDER APPROVAL
The approval and adoption of the Merger Agreement by Northeast stockholders
will require the affirmative vote of the holders of a majority of the shares of
Northeast Common Stock outstanding as of the Record Date and entitled to vote
thereon. As of the Record Date, directors and executive officers of Northeast
and their affiliates may be deemed to be beneficial owners of 402,996 shares of
Northeast Common Stock or approximately 2.81% of the shares of Northeast Common
Stock outstanding and entitled to vote thereon. In addition, as of the Record
Date, the Rhode Island Depositors Economic Protection Corporation ("DEPCO")
beneficially owned 800,000 shares of Northeast Common Stock, representing
approximately 5.6% of the Northeast Common Stock outstanding and entitled to
vote. The directors, the four non-director executive officers of Northeast and
DEPCO have indicated their intent to vote their shares of Northeast Common Stock
for approval of the Merger Agreement. See "THE SPECIAL MEETING -- Record Date;
Voting; Solicitation and Revocation of Proxies and "THE MERGER -- Interests of
Certain Persons in the Merger."
EFFECT OF THE MERGER
Pursuant to the Merger Agreement, at the Effective Time (as defined below),
a wholly owned "shell" subsidiary of Shawmut ("Merger Sub") will be merged with
and into Northeast. As a result of the Merger, Northeast will become a wholly
owned subsidiary of Shawmut and the stockholders of Northeast will become
shareholders of Shawmut. See "THE MERGER -- General."
EFFECTIVE TIME
The Merger will become effective upon the filing of a certificate of merger
with the Secretary of State of the State of Delaware in accordance with
applicable law or at such later time as the certificate may specify (the
"Effective Time"). The certificate will be filed on the tenth business day after
satisfaction or waiver of the latest to occur of certain conditions to the
Merger specified in the Merger Agreement, unless another date is agreed to by
Shawmut and Northeast. See "THE MERGER -- Effective Time."
6
<PAGE> 75
EXCHANGE RATIO
At the Effective Time, each issued and outstanding share of Northeast
Common Stock, except for shares held, directly or indirectly, by Northeast or
Shawmut (other than shares held in a fiduciary capacity ("Trust Account Shares")
or in respect of a debt previously contracted ("DPC Shares")) will be converted
into and exchangeable for a number of shares (the "Exchange Ratio") of Shawmut
Common Stock determined as follows: (i) if the Shawmut Common Stock Average
Price (as defined below) is greater than or equal to $26.235, the Exchange Ratio
will be .415; (ii) if the Shawmut Common Stock Average Price is less than
$26.235 but equal to or greater than $21.465, the Exchange Ratio will be (a)
$10.875 divided by (b) the Shawmut Common Stock Average Price; or (iii) if the
Shawmut Common Stock Average Price is less than $21.465, the Exchange Ratio will
be .507. If the Shawmut Common Stock Average Price is less than $21.465,
Northeast's Board of Directors (the "Northeast Board") has the right to, and
represents to Northeast's stockholders that it will, terminate the Merger
Agreement pursuant to its terms, whether before or after approval of the Merger
Agreement by Northeast's stockholders; provided, however, that Shawmut may avoid
such termination by electing to increase the Exchange Ratio so that the shares
of Shawmut Common Stock issued in exchange for each share of Northeast Common
Stock have a value (valued at the Shawmut Common Stock Average Price) of
$10.875. Shawmut's present intention is not to increase the Exchange Ratio above
.507; however no final decision will be made until the actual establishment of
the Shawmut Common Stock Average Price. As used in the Merger Agreement,
"Shawmut Common Stock Average Price" means the average of the daily closing
prices of shares of Shawmut Common Stock as reported on the New York Stock
Exchange ("NYSE") Composite Transactions reporting system (as reported by The
Wall Street Journal or, if not reported thereby, another authoritative source as
chosen by Shawmut) for the 15 consecutive full trading days in which such shares
are traded on the NYSE ending at the close of trading on the trading day
immediately prior to the Determination Date. "Determination Date" means the date
on which the last regulatory approval required to consummate the Merger has been
obtained and all statutory waiting periods in respect thereof have expired. Such
required regulatory approvals include all of the regulatory approvals necessary
for both the Merger and the Bank Reorganization identified under "THE MERGER --
Regulatory Approvals Required for the Merger." Under the terms of the Merger
Agreement, cash will be paid in lieu of the issuance of fractional shares of
Shawmut Common Stock. See "THE MERGER -- Exchange Ratio," "-- Conversion of
Shares; Procedures for Exchange of Certificates; Fractional Shares" and
"-- Waiver and Amendment; Termination."
NORTHEAST'S REASONS FOR THE MERGER;
RECOMMENDATION OF THE BOARD OF DIRECTORS OF NORTHEAST
The Northeast Board has approved the Merger Agreement and has determined
that the Merger is fair to, and in the best interests of, Northeast and its
stockholders, provided that the Shawmut Common Stock Average Price of the shares
of Shawmut Common Stock to be exchanged for each share of Northeast Common Stock
in the Merger is at least $10.875. The Northeast Board represents to the
Northeast stockholders that if the Shawmut Common Stock Average Price is less
than $21.465, the Northeast Board will terminate the Merger Agreement as
permitted thereunder. The Northeast Board therefore recommends that holders of
Northeast Common Stock vote FOR the approval of the Merger Agreement. The
Northeast Board believes that the Merger will enable holders of Northeast Common
Stock to realize significant value and also will enable Northeast stockholders
to participate in opportunities for growth and capital appreciation that the
Northeast Board believes the Merger makes possible. See "THE
MERGER -- Northeast's Reasons for the Merger," "-- Recommendation of the Board
of Directors of Northeast" and "-- Opinion of Northeast's Financial Advisor." In
reaching its decision to approve the Merger Agreement, the Northeast Board
consulted with its management and Lehman Brothers Inc. ("Lehman Brothers"),
Northeast's financial advisor, and Northeast's legal advisors regarding the
terms of the transaction and the Northeast Board's obligations in its
consideration of the proposed transaction. See "THE MERGER -- Northeast's
Reasons for the Merger" and " -- Recommendation of the Board of Directors of
Northeast."
7
<PAGE> 76
OPINION OF NORTHEAST'S FINANCIAL ADVISOR
Lehman Brothers has rendered a written opinion to the Northeast Board,
dated as of the date of this Proxy Statement/Prospectus, to the effect that, as
of such date, consideration equal to converting each share of Northeast Common
Stock into the right to receive the number of shares of Shawmut Common Stock
determined by dividing $10.875 by the Shawmut Common Stock Average Price is
fair, from a financial point of view, to the holders of Northeast Common Stock.
As discussed in "THE MERGER -- Northeast's Reasons for the Merger" and
"-- Opinion of Northeast's Financial Advisor," Lehman Brothers' opinion and
presentation to the Northeast Board, together with a review by the Northeast
Board of the assumptions used by Lehman Brothers, were among the factors
considered by the Northeast Board in reaching its determination to approve the
Merger. The opinion of Lehman Brothers is attached as Annex B to this Proxy
Statement/Prospectus. Stockholders are urged to read such opinion in its
entirety for a description of the procedures followed, assumptions made, matters
considered and qualifications on the review undertaken by Lehman Brothers in
connection therewith. See "THE MERGER -- Opinion of Northeast's Financial
Advisor."
SPECIAL CONSIDERATIONS -- LITIGATION
Northeast Savings has filed suit against the United States claiming that
the government has breached a contract with Northeast Savings as well as
violated Northeast Savings' constitutional rights as a result of the denial of
core capital treatment to supervisory goodwill acquired by Northeast Savings in
its 1982 acquisitions from the Federal Savings and Loan Insurance Corporation of
three insolvent thrifts. This action is currently pending before the United
States Court of Federal Claims (the "Claims Court"). The Claims Court has
deferred action on the lawsuit as well as on lawsuits by other parties raising
similar issues, pending rulings on three cases currently on appeal. Northeast
Savings anticipates that any final judicial determination of its lawsuit will
not occur for an extended period of time and no prediction can be made as to the
outcome of such litigation. See "THE MERGER -- Special
Considerations -- Litigation."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Northeast's management and the Northeast Board may be
deemed to have interests in the Merger in addition to their interests, if any,
as stockholders of Northeast generally. These include, among other things,
provisions in the Merger Agreement relating to indemnification, the possible
increase in value of a Northeast director's interest in the Northeast Savings
Directors Pension Plan and the items presented in the table below.
8
<PAGE> 77
The following table sets forth certain benefits that the five most highly
compensated executive officers of Northeast, and George P. Rutland, former
Chairman of the Board of Northeast, may receive as a result of the Merger. The
"Total" column includes the sum of such amounts as a result of (i) certain
changes in control agreements, (ii) a non-competition agreement entered into
with Shawmut, (iii) retention bonus agreements and (iv) termination of certain
life insurance plans, in each case, assuming the Merger were consummated on
January 31, 1995.
<TABLE>
<CAPTION>
TERMINATION OF
CHANGE IN CONTROL NON-COMPETITION RETENTION LIFE INSURANCE
NAME(1) AGREEMENTS(2) AGREEMENT(3) BONUS(4) PLANS(5) TOTAL
- ------------------------------ ------------------ ---------------- --------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Kirk W. Walters............... $1,109,000 $1,144,000 -- $ 59,888 $2,312,888
George P. Rutland............. $ 767,000 -- -- -- $ 767,000
JoAnn Dolan................... -- -- $ 145,000 $20,278 $ 165,278
Daniel Steinmetz.............. -- -- $ 110,000 $25,995 $ 135,995
Victor Vrigian................ -- -- $ 100,000 $17,667 $ 117,667
Lynne Carcia Wilson........... -- -- $ 85,000 $11,323 $ 96,323
$3,595,151
=========
</TABLE>
- ---------------
(1) The "named executive officers" set forth in the table are the chief
executive officer, the former Chairman of the Board, and the four other
highest paid executive officers of Northeast based on their compensation
during calendar 1994.
(2) See "THE MERGER -- Interests of Certain Persons in The Merger -- Change in
Control Agreements."
(3) See "THE MERGER -- Interests of Certain Persons in The
Merger -- Non-competition Agreement."
(4) The Retention Bonus Arrangements also provide for certain continued health
benefits and Supplemental Medical Reimbursement Plan ("SMRP") benefits. The
SMRP has been terminated and in lieu of its continued coverage under the
Retention Bonus Arrangements, the amount of such continued benefit has been
paid to the covered executives. See "THE MERGER -- Interests of Certain
Persons in The Merger -- Retention Bonus Arrangements."
(5) Northeast maintained two executive life insurance plans to cover executives
which contained change in control provisions. Such plans have been
terminated and Northeast released its interest in the plans in the amounts
set forth above to the named executive officers. See "THE
MERGER -- Interests of Certain Persons in The Merger -- Change in Control
Agreements."
The Northeast Board was aware of these interests and considered them among
other matters in approving the Merger Agreement and the transactions
contemplated thereby. See "THE MERGER -- Interests of Certain Persons in the
Merger."
EMPLOYEE MATTERS
The Merger Agreement provides that the employees of Northeast and its
subsidiaries (the "Northeast Employees") will be entitled to participate in
Shawmut's employee benefit plans in which similarly situated employees of
Shawmut participate, to the same extent and on the same terms and conditions
(including waiver of pre-existing conditions prohibitions) as comparable
employees of Shawmut. To the extent Northeast employees participate in any
employee benefit plans of Shawmut, such employees will be credited with prior
years of service with Northeast and its subsidiaries (to the extent Northeast
gave effect to such service) as if such service were with Shawmut, for purposes
of eligibility and vesting, but not for benefit accrual purposes (except as
regards to vacation, severance and short-term disability accruals or for
purposes of determining employer contributions for retiree medical benefits).
9
<PAGE> 78
BANK REORGANIZATION
Shawmut intends that, following the consummation of the Merger, the assets
and liabilities of Northeast Savings will be transferred to national bank
subsidiaries of Shawmut (the "Bank Reorganization"). In the Bank Reorganization,
(i) Northeast Savings will relocate its home office from Hartford, Connecticut
to Saratoga Springs, New York and redesignate its Hartford, Connecticut home
office as a branch office (the "Relocation"), (ii) SBC will acquire each
Connecticut branch of Northeast Savings and SBM will acquire each Massachusetts
branch of Northeast Savings (the "Branch Purchases"), (iii) Northeast Savings
will convert into Shawmut Savings and Loan Association, a New York stock-form
savings and loan association ("SSLA") (the "Conversion"), (iv) Shawmut Bank New
York, National Association, a national bank in organization ("SBNY"), will be
chartered as a national bank subsidiary of Shawmut and Northeast (the
"Chartering") and (v) SSLA will be merged with and into SBNY (the "Subsidiary
Merger"). The Bank Reorganization is subject to the prior receipt of certain
regulatory approvals, and there can be no assurance that such approvals will be
obtained or that the Bank Reorganization will be consummated. It is expected
that all requisite regulatory approvals for the Bank Reorganization will be
received prior to, or at the time of, the receipt of all requisite regulatory
approvals of the Merger and, accordingly, that the Bank Reorganization will be
consummated shortly following the Merger. See "THE MERGER -- Regulatory
Approvals Required for the Merger."
CONDITIONS; REGULATORY APPROVALS
Consummation of the Merger is subject to various conditions, including,
among others, receipt of the Northeast stockholder approval solicited hereby,
receipt of necessary regulatory approvals, receipt of opinions of counsel
regarding certain federal income tax consequences of the Merger and the
satisfaction of other customary closing conditions. See "THE
MERGER -- Conditions to the Merger."
Regulatory approvals for the Merger, and the indirect acquisition of
Northeast Savings effected thereby, must be obtained from the Board of Governors
of the Federal Reserve System (the "Federal Reserve Board"), which approval was
received on December 14, 1994, the OTS, which approval was received on December
22, 1994, the Connecticut Banking Commissioner, the Massachusetts Board of Bank
Incorporation and, by virtue of the conditions set forth in the OTS approval,
the other governmental authorities whose approval is necessary for the Bank
Reorganization. Regulatory approvals for the Bank Reorganization must be
obtained from the Federal Reserve Board, the OTS, the Office of the Comptroller
of the Currency, the Connecticut Banking Commissioner, the Massachusetts Board
of Bank Incorporation and the New York Banking Department. Some, but not all, of
these approvals have been received. See "THE MERGER -- Regulatory Approvals
Required for the Merger." There can be no assurance as to whether or when the
regulatory approvals yet to be obtained will be obtained.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time by the mutual consent of Shawmut and Northeast and by either of them
individually under certain specified circumstances, including if the Merger has
not been consummated by June 30, 1995. In addition, the Merger Agreement
provides that the Northeast Board, has the right to, and the Northeast Board
represents to the Northeast stockholders that it will, elect to terminate the
Merger Agreement if the Shawmut Common Stock Average Price is less than $21.465
per share unless Shawmut agrees to increase the Exchange Ratio to an amount
equal to $10.875 divided by the Shawmut Common Stock Average Price. Shawmut's
present intention is not to increase the Exchange Ratio above .507. See "THE
MERGER -- Exchange Ratio" and "-- Waiver and Amendment; Termination."
NO SOLICITATION
Northeast has agreed in the Merger Agreement that neither it nor any of its
subsidiaries will solicit, initiate or encourage inquiries or proposals with
respect to, or, subject to the fiduciary duties of the Northeast Board (as
advised in writing by its counsel), participate in any negotiations or
discussions concerning any acquisition or purchase of all or a substantial
portion of its assets, or of a substantial equity interest in it or any of its
subsidiaries, or any merger or other business combination with it or any of its
subsidiaries, other than as
10
<PAGE> 79
contemplated by the Merger Agreement, except that Northeast may communicate
information about any such proposal to its stockholders if and to the extent
such communication is required under applicable law (as advised in writing by
its counsel); Northeast also agreed in the Merger Agreement that it would
immediately cease and cause to be terminated any existing activities,
discussions or negotiations previously conducted with any parties other than
Shawmut with respect to the foregoing; it will notify Shawmut immediately if any
such inquiries or proposals are received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated with,
it or any of its subsidiaries and will promptly inform Shawmut in writing of the
relevant details with respect to the foregoing; and it will instruct its
officers, directors, agents, advisors and affiliates to comply with the same
restrictions. See "THE MERGER -- No Solicitation of Transactions."
TERMINATION FEE
Pursuant to the Merger Agreement, Northeast has agreed to pay Shawmut a fee
of $11,000,000 following the occurrence of certain events. Such events include
(i) the acquisition by any person, other than Shawmut, of beneficial ownership
of 50% or more of Northeast Common Stock, (ii) Northeast, without having
received Shawmut's written consent, entering into an Acquisition Transaction (as
defined below) with any person other than Shawmut, or (iii) the Northeast Board
recommending that stockholders of Northeast accept any Acquisition Transaction.
The right to receive the fee terminates if the Merger is consummated or if
certain other events occur prior to or within a certain period of time following
termination of the Merger Agreement. See "THE MERGER -- Waiver and Amendment;
Termination."
The termination fee is intended to increase the likelihood that the Merger
will be consummated in accordance with the terms of the Merger Agreement.
Consequently, certain aspects of the termination fee may have the effect of
discouraging persons who might now or prior to the Effective Date be interested
in acquiring all or a significant interest in Northeast from considering or
proposing such an acquisition.
STOCK EXCHANGE LISTING
The Shawmut Common Stock is listed on the NYSE. Shawmut has agreed to cause
the shares of Shawmut Common Stock to be issued in the Merger to be approved for
listing on the NYSE. The obligation of each of Shawmut and Northeast to
consummate the Merger is subject to approval for listing by the NYSE of such
shares. See "THE MERGER -- Conditions to the Merger."
ANTICIPATED ACCOUNTING TREATMENT
The Merger is expected to qualify as a "purchase" for accounting and
financial reporting purposes. See "THE MERGER -- Anticipated Accounting
Treatment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is intended that the Merger will be treated as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"). Consummation of the Merger is conditioned upon receipt by Shawmut
and Northeast of an opinion of Sullivan & Cromwell, special counsel to Shawmut,
dated as of the Effective Time, substantially to the effect that the Merger will
be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code. Accordingly, for federal income tax
purposes (i) no gain or loss will be recognized by Merger Sub, Shawmut or
Northeast; (ii) no gain or loss will be recognized by holders of Northeast
Common Stock upon the receipt of Shawmut Common Stock in exchange for Northeast
Common Stock in the Merger (except as discussed below with respect to cash
received in lieu of a fractional share interest in Shawmut Common Stock) as a
result of the Merger or the Bank Reorganization; (iii) the aggregate adjusted
tax basis in the shares of Shawmut Common Stock to be received by each holder of
Northeast Common Stock in the Merger will be the same as the aggregate adjusted
tax basis in the shares of Northeast Common Stock surrendered in exchange
therefor (reduced by any amount allocable to fractional share interests for
which cash is to be received); and (iv) the holding period of the shares of
Shawmut Common Stock to be received by each holder of Northeast Common Stock in
the Merger will include the holding period of the shares of Northeast Common
Stock surrendered in
11
<PAGE> 80
exchange therefor, provided, that such shares of Northeast Common Stock are held
as capital assets at the Effective Time. See "THE MERGER -- Federal Income Tax
Consequences."
NO APPRAISAL RIGHTS
No stockholders of Northeast are entitled to appraisal rights in connection
with, or as a result of, the Merger. See "THE MERGER -- No Appraisal Rights."
COMPARISON OF STOCKHOLDER RIGHTS
At the Effective Time, Northeast stockholders automatically will become
stockholders of Shawmut and their rights as stockholders of Shawmut will be
governed by the Delaware General Corporation Law and by Shawmut's Certificate of
Incorporation and By-laws. The rights of stockholders of Shawmut differ from the
rights of the stockholders of Northeast with respect to certain important
matters, including, among others, with respect to cumulative voting, the ability
of stockholders to act by written consent, the calling of a special meeting,
stockholder nominations and proposals for business, the definition of and the
vote required for certain business combinations, constituencies considered by
the respective Board of Directors in business combinations, rights plans, size
and classification of Board of Directors, removal of directors, meetings of
creditors and/or stockholders and indemnification of directors, officers,
employees and agents. For a summary of these differences, see "COMPARISON OF
STOCKHOLDER RIGHTS."
12
<PAGE> 81
MARKET PRICES
Shawmut Common Stock is listed and traded principally on the NYSE under the
symbol "SNC." Northeast Common Stock is listed and traded principally on the
NYSE under the symbol "NSB."
The following table sets forth, for the periods indicated, the high and low
sale prices per share for Shawmut Common Stock and Northeast Common Stock as
reported on the NYSE.
<TABLE>
<CAPTION>
SHAWMUT NORTHEAST
------------- ------------
YEAR HIGH LOW HIGH LOW
- ------------------------------------------------------------- ---- ---- ---- ---
<S> <C> <C> <C> <C>
1994:
First Quarter........................................... $24 $19 3/4 $ 7 1/2 $4 3/8
Second Quarter.......................................... 25 19 1/4 10 1/2 6 3/4
Third Quarter........................................... 24 1/8 20 1/4 10 1/8 9 3/8
Fourth Quarter.......................................... 21 1/8 16 3/8 10 1/8 7 5/8
1995:
First Quarter (through February 10, 1995)............... 22 5/8 16 1/2 9 3/4 7 5/8
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
MARKET VALUE PER SHARE(1): SHAWMUT NORTHEAST EQUIVALENT(2)
- ----------------------------------------------------------- ------- --------- -------------
<S> <C> <C> <C>
June 10, 1994.............................................. $24 $10 1/8 $10.875
February 10, 1995.......................................... 21 1/8 9 1/2 10.71(3)
</TABLE>
- ---------------
(1) The market values for Shawmut Common Stock and Northeast Common Stock
represent the last reported sale prices per share on June 10, 1994, the
last business day preceding public announcement of the Merger and February
10, 1995, the last practicable date prior to the mailing of this Proxy
Statement/ Prospectus.
(2) The pro forma equivalent per share market value of Northeast Common Stock at
each specified date was determined by multiplying the last reported sale
price of a share of Shawmut Common Stock on such date by assumed Exchange
Ratios of .453 and .507 for June 10, 1994 and February 10, 1995,
respectively. For information regarding the determination of the Exchange
Ratio see "THE MERGER -- Exchange Ratio."
(3) The Northeast Board represents to the Northeast stockholders that it will
exercise its right under the Merger Agreement to terminate the Merger
Agreement if the Shawmut Common Stock Average Price is less than $21.465
and, as a result, the value on the Determination Date of the Shawmut Common
Stock to be exchanged for each share of Northeast Common Stock is less than
$10.875. Shawmut's present intention is not to increase the Exchange Ratio
above .507; however, no final decision will be made until the actual
establishment of the Shawmut Common Stock Average Price.
Stockholders are advised to obtain current market quotations for Shawmut
Common Stock. No assurance can be given as to the market price of Shawmut Common
Stock at or after the Determination Date or the Effective Time of the Merger. It
is expected that the market price of Shawmut Common Stock will fluctuate between
the date of this Proxy Statement/Prospectus, the Determination Date and the date
on which the Merger is consummated (assuming the Merger Agreement is not
terminated) and thereafter.
13
<PAGE> 82
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA(1)
The following table sets forth certain selected historical consolidated
financial data of Shawmut. The table is based on and should be read in
conjunction with Shawmut's historical financial statements and notes thereto
incorporated by reference in this Proxy Statement/Prospectus. See "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE." Interim unaudited data for the nine months
ended September 30, 1994 and 1993 reflect, in the opinion of the management of
Shawmut, all adjustments necessary (consisting of normal recurring adjustments)
for a fair presentation of such data. The results of operations for the nine
months ended September 30, 1994 are not necessarily indicative of results which
may be expected for any other interim period or for the year as a whole.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------------
SELECTED FINANCIAL DATA 1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Interest and dividend income........... $1,415.9 $1,364.0 $1,826.9 $1,856.5 $2,028.1 $2,475.1 $2,824.4
Interest expense....................... 611.7 572.1 755.4 874.0 1,211.9 1,657.3 1,874.4
-------- -------- -------- -------- -------- -------- --------
Net interest income.................... 804.2 791.9 1,071.5 982.5 816.2 817.8 950.0
Provision for credit losses............ 3.0 45.8 55.9 242.1 486.4 474.0 638.4
-------- -------- -------- -------- -------- -------- --------
Net interest income after provision for
credit losses........................ 801.2 746.1 1,015.6 740.4 329.8 343.8 311.6
Noninterest income..................... 274.3 302.6 401.3 428.7 465.0 449.8 364.5
Securities gains, net.................. -- 11.0 12.5 94.1 80.1 23.4 42.0
Noninterest expenses(2)................ 846.9 882.8 1,139.9 1,154.6 1,044.1 972.7 921.3
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes,
extraordinary credit and cumulative
effect of accounting changes......... 228.6 176.9 289.5 108.6 (169.2) (155.7) (203.2)
Income taxes (benefit)................. 84.7 40.3 6.6 40.9 4.1 .5 (80.8)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary
credit and cumulative effect of
accounting changes................... 143.9 136.6 282.9 67.7 (173.3) (156.2) (122.4)
Extraordinary credit................... -- -- -- 18.4 -- -- --
Cumulative effect of changes in methods
of accounting........................ -- 46.2 46.2 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)...................... $ 143.9 $ 182.8 $ 329.1 $ 86.1 $ (173.3) $ (156.2) $ (122.4)
======== ======== ======== ======== ======== ======== ========
Net income (loss) applicable to
common shares........................ $ 132.3 $ 171.2 $ 313.6 $ 81.3 $ (175.6) $ (158.6) $ (124.7)
======== ======== ======== ======== ======== ======== ========
COMMON SHARE DATA:
Income (loss) before extraordinary
credit and cumulative effect of
accounting changes................... $ 1.12 $ 1.11 $ 2.35 $ .60 $ (2.04) $ (1.89) $ (1.45)
Net income (loss)...................... 1.12 1.52 2.75 .78 (2.04) (1.89) (1.45)
Dividends declared..................... .60 .30 .50 .75 1.40
PERIOD END BALANCES:
Total assets........................... $ 31,352 $ 30,860 $ 31,103 $ 29,256 $ 26,878 $ 25,832 $ 29,954
Notes and debentures................... 1,634 874 759 810 665 679 699
Total shareholders' equity............. 2,129 1,943 2,102 1,732 1,269 1,355 1,588
AVERAGE BALANCES:
Total assets........................... $ 30,925 $ 28,880 $ 29,319 $ 26,467 $ 26,259 $ 27,612 $ 29,298
Notes and debentures................... 1,166 848 839 668 669 687 714
Total shareholders' equity............. 2,131 1,817 1,859 1,507 1,326 1,572 1,942
</TABLE>
- ---------------
(1) Restated to reflect the pooling of interests acquisitions that occurred
during the second quarter of 1994.
(2) Includes merger and restructuring related charges of $140.7 million ($99.8
million after-tax) for the nine months ended September 30, 1994 and
restructuring related charges of $36.3 million ($23.6 million after-tax)
for the 1993 periods presented.
14
<PAGE> 83
NORTHEAST FEDERAL CORP.
SELECTED FINANCIAL DATA
The following table sets forth certain selected historical consolidated
financial data of Northeast. The table is based on and should be read in
conjunction with Northeast's historical financial statements and notes thereto
incorporated by reference in this Proxy Statement/Prospectus. See "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE." Interim unaudited data for the nine months
ended September 30, 1994 and 1993 reflect, in the opinion of the management of
Northeast, all adjustments necessary (consisting of normal recurring
adjustments) for a fair presentation of such data. Results for the nine months
ended September 30, 1994 are not necessarily indicative of results which may be
expected for any other interim period or for the year as a whole.
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED FISCAL YEAR
SEPTEMBER 30, YEAR ENDED ENDED YEAR ENDED MARCH 31,
----------------- DECEMBER 31, DECEMBER 31, -----------------------------
SELECTED FINANCIAL DATA 1994 1993 1993 1992 1992 1991 1990
------ ------ ------------ ------------ ------ ------ -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)(1)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Interest and dividend income............ $141.3 $169.0 $220.4 $ 196.3 $326.9 $449.1 $ 608.7
Interest expense........................ 97.5 112.3 148.0 132.9 244.1 364.9 530.1
------ ------ ------ -------- ------ ------ -------
Net interest income..................... 43.8 56.7 72.4 63.4 82.8 84.2 78.6
Provision for credit losses............. 3.8 20.3 23.3 16.3 10.2 8.9 6.7
------ ------ ------ -------- ------ ------ -------
Net interest income after provision for
credit losses......................... 40.0 36.4 49.1 47.1 72.6 75.3 71.9
Noninterest income...................... 29.0 9.4 12.1 9.0 14.1 21.6 32.8
Securities gains (losses), net.......... 6.6 4.7 5.6 4.1 2.0 (2.7) (13.4)
Noninterest expenses.................... 66.8 71.8 93.1 124.5 79.3 81.0 198.0
------ ------ ------ -------- ------ ------ -------
Income (loss) before income taxes,
extraordinary credit and cumulative
effect of accounting change........... 8.8 (21.3) (26.3) (64.3) 9.4 13.2 (106.7)
Income taxes (benefit).................. (.3) (10.1) (12.2) (5.1) 4.9 6.1 .5
------ ------ ------ -------- ------ ------ -------
Income (loss) before extraordinary
credit and cumulative effect of
accounting change..................... 9.1 (11.2) (14.1) (59.2) 4.5 7.1 (107.2)
Extraordinary credit.................... .1 4.6 .1
Cumulative effect of change in method of
accounting............................ -- -- -- -- 1.0 -- --
------ ------ ------ -------- ------ ------ -------
Net income (loss)....................... $ 9.1 $(11.2) $(14.1) $ (59.2) $ 5.6 $ 11.7 $(107.1)
====== ====== ====== ======== ====== ====== =======
Net income (loss) applicable to common
shares................................ $ 6.5 $(14.9) $(18.6) $ (63.9) $ (2.9) $ 3.0 $(115.8)
====== ====== ====== ======== ====== ====== =======
COMMON SHARE DATA:
Income (loss) before extraordinary
credit and cumulative effect of
accounting change..................... $ .46 $(1.53) $(1.75) $ (11.16) $ (.70) $ (.28) $(20.28)
Net income (loss)....................... .46 (1.53) (1.75) (11.16) (.51) .52 (20.27)
Dividends declared...................... -- -- -- -- -- -- --
PERIOD END BALANCES:
Total assets............................ $3,350 $3,943 $3,920 $ 3,910 $3,821 $4,546 $ 4,974
Notes and debentures.................... 40 37 38 36 1 1 221
Total shareholders' equity.............. 135 126 133 138 191 183 171
AVERAGE BALANCES:
Total assets............................ $3,518 $3,975 $3,961 $ 3,890 $3,980 $4,902 $ 6,482
Notes and debentures.................... 40 37 37 29 1 161 251
Total shareholders' equity.............. 132 133 133 172 189 174 278
</TABLE>
- ---------------
(1) Per share amounts have been restated to give effect to the two 2% stock
dividends declared in fiscal 1990.
15
<PAGE> 84
COMPARISON OF CERTAIN PER SHARE DATA
The following table shows unaudited comparative historical per share data
for Shawmut and Northeast, unaudited pro forma per share and per share
equivalent data for Shawmut and Northeast combined and unaudited pro forma per
share and per share equivalent data for Shawmut, Northeast and Shawmut's pending
acquisition of substantially all of the assets, and assumption of certain of the
liabilities, of the Business Finance Division of Barclays Business Credit, Inc.
("Barclays") combined for the nine months ended September 30, 1994 and the year
ended December 31, 1993. Pro forma per share and per share equivalent data for
the nine months ended September 30, 1994 and the year ended December 31, 1993
are based on the minimum and maximum number of shares of Shawmut Common Stock
that may be issued pursuant to the Merger Agreement, calculated as of September
30, 1994. The information presented should be read in conjunction with the
consolidated historical financial statements and notes thereto of Shawmut and
Northeast, which are incorporated by reference in this Proxy
Statement/Prospectus, and the unaudited pro forma condensed combining financial
information, including the notes thereto, which appear elsewhere in this Proxy
Statement/Prospectus. The pro forma data is presented for comparative purposes
only and is not necessarily indicative of the combined financial position or
results of operations in the future or of the combined financial position or
results of operations which would have been realized had the acquisitions been
consummated during the periods or as of the dates for which the pro forma data
is presented. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and
"UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1994 DECEMBER 31, 1993
------------------ -----------------
<S> <C> <C>
PER SHARE OF SHAWMUT COMMON STOCK:
Income before cumulative effect of accounting changes:
Historical...................................................... $ 1.12 $ 2.35
Pro forma:
Shawmut and Northeast(1)...................................... 1.12-1.11 2.09-2.06
Shawmut, Northeast and Barclays(1)............................ 1.19-1.18 2.11-2.08
Cash dividends declared:
Historical...................................................... .60 .50
Book value (as of end of period):
Historical...................................................... 16.32 16.25
Pro forma:
Shawmut and Northeast(1)...................................... 16.76-16.57 16.71-16.51
Shawmut, Northeast and Barclays(1)............................ 16.76-16.57 16.71-16.51
PER SHARE OF NORTHEAST COMMON STOCK:
Income (loss) before cumulative effect of accounting changes:
Historical...................................................... .46 (1.75)
Pro forma equivalent:
Shawmut and Northeast(1)...................................... .46-.56 .87-1.04
Shawmut, Northeast and Barclays(1)............................ .49-.60 .88-1.05
Cash dividends declared:
Historical...................................................... -- --
Pro forma equivalent(1)......................................... .25-.30 .21-.25
Book value (as of end of period):
Historical...................................................... 6.81 6.83
Pro forma equivalent:
Shawmut and Northeast(1)...................................... 6.96-8.40 6.93-8.37
Shawmut, Northeast and Barclays(1)............................ 6.96-8.40 6.93-8.37
</TABLE>
- ---------------
(1) Indicates the range of pro forma equivalent per share information. Such pro
forma information is subject to variance of the Exchange Ratio. Under the
Merger Agreement, the Exchange Ratio may vary between .415 and .507, subject
to certain Northeast termination rights. See "THE MERGER -- Exchange Ratio"
and "-- Unaudited Pro Forma Condensed Financial Information."
16
<PAGE> 85
RECENT DEVELOPMENTS
SHAWMUT
Shawmut's net income for the fourth quarter of 1994 was $93.5 million, or
$.74 per common share, versus income, excluding one-time income tax benefits of
$70.2 million, of $76.0 million, or $.62 per common share, in the fourth quarter
of 1993. Reported net income in the fourth quarter of 1993 was $146.2 million,
or $1.22 per common share.
Shawmut's net income for 1994 of $237.4 million, or $1.87 per common share,
was achieved despite merger-related charges of $73.9 million (after-tax)
associated with the integration of three acquisitions during the second quarter
of 1994 and a restructuring charge in the second quarter of 1994 of $25.9
million (after-tax) associated with its cost management program. The net income
of Shawmut for 1993 of $329.0 million or $2.75 per common share, included
after-tax charges of $23.6 million associated with the implementation of a cost
management program, $13.0 million relating to a bulk sale of real estate assets,
$9.2 million for the writedown in the value of excess servicing rights and $2.3
million related to fair lending initiatives. Also included in 1993 results were
income tax benefits of $140.7 million and an after-tax charge of $6.6 million,
each relating to changes in accounting.
Tax-equivalent net interest income of Shawmut for the fourth quarter was
$265.9 million, a decline of $3.0 million, or 1 percent, relative to third
quarter results. Strong earning-asset growth, driven by an increase in loans of
$751 million, or 17 percent on an annualized basis, in the fourth quarter
relative to the prior quarter, was insufficient to offset the 13 basis point
decline in net interest margin to 3.65 percent.
In reaction to an outlook for rising interest rates, Shawmut continued
implementation of its risk reduction strategy by extending aggregate funding
maturities and shortening the maturities of certain assets. While this strategy
is designed to reduce the pressure on net interest income should interest rates
continue to rise, its immediate effect was also to reduce the net interest
margin.
At the end of the fourth quarter, Shawmut's gap between liabilities and
assets repricing over the next twelve months was $1.3 billion liability
sensitive, or approximately 4 percent of interest-earning assets. This liability
sensitive position was more than halved from $2.8 billion, or 10 percent of
interest-earning assets, at the end of the third quarter.
Shawmut's exposure to a reduction in annualized net interest income
resulting from an immediate 100 basis point increase in interest rates was also
reduced by these balance sheet actions to approximately $12 million, or an
amount that approximates one percent of full year 1994 net interest income. At
the end of the third quarter of 1994, the earnings exposure to the same
immediate shift in the yield curve had been approximately $21 million.
The noninterest income of Shawmut, excluding securities gains and losses,
was $104.2 million for the fourth quarter of 1994, an increase of $13.3 million
from the third quarter of 1994. This increase included a gain of $8.2 million
from the sale of mortgage servicing rights in the fourth quarter. There were no
material gains from sales of this type in the third quarter of 1994. Foreign
exchange trading showed income of $2.8 million in the fourth quarter versus a
break-even third quarter. Other areas showing growth included trust and agency
fees, which were up by $2.0 million versus the third quarter. This improvement
resulted from the acquisition of Poorman-Douglas, which added $2.2 million to
fourth quarter trust and agency fees.
Shawmut's noninterest income, excluding securities gains, for 1994 totaled
$378.5 million, compared with $398.3 million in 1993. Included in noninterest
income in 1993 were increased residential mortgage sale gains of $24.6 million
and $13.8 million in Federal Deposit Insurance Corporation assistance received
by acquired institutions. Noninterest income for 1994 included increased gains
on sales of mortgage servicing of $12.8 million, and increases of $12.8 million
in credit and trade related service fees, and $6.2 million in deposit and
transaction fees. These increases were partially offset by declines of $10.0
million in cash management fees, reflecting both an increase in customers'
earnings credits for deposit balances and competitive pricing pressure, and a
net decline of $3.2 million in other fees.
Shawmut achieved a 60.5 percent efficiency ratio in the fourth quarter,
just short of its stated objective of 60 percent. The efficiency ratio improved
by 230 basis points from 62.8 percent in the third quarter of 1994 and improved
by 400 basis points from 64.5 percent in last year's fourth quarter. For full
year 1994 the
17
<PAGE> 86
efficiency ratio was 63.6 percent, or an improvement of 420 basis points over
1993's 67.8 percent efficiency ratio.
Noninterest expenses, excluding provision for foreclosed properties,
decreased by $1.8 million, or 1 percent, from the third quarter of 1994 to
$224.0 million. Fourth quarter noninterest expenses included $4.1 million in
expenses from recent acquisitions which received purchase accounting treatment
and therefore these incremental expenses were not reflected in prior quarters.
Excluding the provision for foreclosed properties and special items as noted
above, noninterest expenses for 1994 were $926.7 million, or 9 percent lower,
compared to $1,020.7 million in 1993.
Total personnel expenses for Shawmut declined by $7.9 million, or 7 percent
relative to the $118.8 million level reported in 1994's third quarter. Relative
to the same quarter a year ago, the decline was $14.3 million, or 11 percent.
These cost savings followed a significant decline in head count of 1,783, or 16
percent, measured on a full-time equivalent ("FTE") basis relative to the
year-end 1993 totals. In the fourth quarter, head count was reduced by 405 FTEs.
The fourth quarter continued Shawmut's 1994 pattern of having no provision
for credit losses (an originally reported zero provision in the first quarter of
1994 was restated to $3.0 million to reflect provisioning actions of acquired
banks). The provision for credit losses in the fourth quarter of 1993 was $10.2
million.
Net charge-offs were $25.7 million during the fourth quarter of 1994. This
compares with net charge-offs of $26.3 million during the third quarter of 1994
and $35.1 million during the fourth quarter a year ago.
Shawmut's total average interest-earning assets increased by $684 million,
or 2 percent, from the third quarter of 1994. The performance was largely
propelled by strong loan growth with average loans up by $658 million, or 4
percent, relative to the third quarter 1994 averages.
Shawmut's period-end loan portfolio grew by $751 million, or 17 percent on
an annualized basis, in the fourth quarter of 1994 compared with the third
quarter. The commercial and industrial portfolio was up sharply from the
previous quarter with much of the increase coming from specialized lending.
Showing good loan growth in the consumer sector was installment lending which
was up $62 million, or 5 percent, in the quarter.
Total problem assets at December 31, 1994 declined to $242.8 million, down
$55.2 million, or 19 percent, from $298.0 million at September 30, 1994 and down
$194.6 million, or 44 percent, from $437.4 million a year ago. The ratio of
nonaccruing loans plus foreclosed properties to loans plus foreclosed properties
declined to 1.31 percent at December 31, 1994, compared with 1.68 percent at
September 30, 1994 and 2.48 percent at December 31, 1993. Foreclosed properties
declined by $13.3 million, or 41 percent, to $18.8 million at December 31, 1994
from $32.1 million at September 30, 1994.
The reserve for credit losses was $542.1 million at December 31, 1994,
compared with $567.8 million at September 30, 1994 and $669.2 million at
December 31, 1993. Reserve coverage continued to strengthen as the ratio of the
reserve for credit losses to nonaccruing loans was 242 percent at December 31,
1994, compared with 179 percent a year earlier. The reserve coverage was 214
percent at September 30, 1994. Net charge-offs were $25.7 million in the fourth
quarter, down $9.4 million, or 27 percent, from the same quarter a year ago.
Securities classified as held to maturity and reported at amortized cost
decreased $200 million to $8.0 billion at December 31, 1994, from $8.2 billion
at September 30, 1994. Securities classified as available for sale totaled $2.0
billion at December 31, 1994, compared with $2.1 billion at September 30, 1994.
The amortized cost of securities classified as available for sale exceeded fair
value by approximately $83.5 million at December 31, 1994, consisting of
unrealized losses of approximately $86.3 million and unrealized gains of
approximately $2.8 million. The amortized cost of securities classified as held
to maturity exceeded fair value by approximately $438.5 million at December 31,
1994, consisting of unrealized losses of approximately $439.6 million and
unrealized gains of approximately $1.1 million.
Book value per share increased by $.40, or 2 percent, to $16.72 per share
in the fourth quarter of 1994 from September 30, 1994. Common shareholders'
equity increased by $68 million in the fourth quarter of 1994. Shawmut's
preliminary risk-based tier 1 and total capital ratios were 8.37 percent and
11.66 percent, respectively, at December 31, 1994, compared with 8.47 percent
and 11.99 percent, respectively, at September 30, 1994. The leverage ratio, a
measure of tier 1 capital to quarterly average assets, was 6.56
18
<PAGE> 87
percent at December 31, 1994, compared with 6.54 percent at September 30, 1994.
Shawmut's and its principal banking subsidiaries' risk-based capital and
leverage ratios continued to exceed the ratios designated for well-capitalized
financial institutions.
Shawmut increased the quarterly common dividend by 10 percent to $.22 per
share. The dividend is payable January 15 to holders of record as of January 5.
Shawmut last announced an increase in its quarterly dividend in December 1993,
doubling the dividend payable in January 1994 to $.20 per share.
NORTHEAST
Northeast reported net income of $1.8 million for the quarter ended
December 31, 1994, resulting in primary and fully diluted net income per common
share of $.06 after preferred stock dividend requirements. This compares with a
net loss of $2.9 million for the quarter ended December 31, 1993, resulting in a
primary and fully diluted net loss per common share of $.28 after preferred
stock dividend requirements. Net income for the year ended December 31, 1994 was
$11.0 million, or primary and fully diluted net income per common share of $.52
after preferred stock dividend requirements, which compares with a net loss of
$14.1 million, or a primary and fully diluted net loss per common share of $1.75
after preferred stock dividend requirements for the year ended December 31,
1993.
In a series of transactions completed during the first and second quarters
of 1994, Northeast Savings restructured its mortgage portfolio and reduced its
exposure to the California real estate market by closing its mortgage lending
operation in San Diego, California and discontinuing the origination of new
loans in that state. Northeast Savings also closed its mortgage lending office
in Denver, Colorado. In addition, Northeast Savings sold virtually all of its
adjustable rate single-family loans secured by California properties as well as
virtually all of its foreclosed real estate in California. These transactions
reduced the level of Northeast's exposure to the California real estate market
to 6% of the total loan portfolio at December 31, 1994 from 47% of the total
loan portfolio at December 31, 1993. As a result of these transactions and the
branch sales discussed below under "THE MERGER -- Background of the Merger",
Northeast's total assets at December 31, 1994 decreased to $3.3 billion from
$3.9 billion at December 31, 1993.
Northeast's non-performing assets, which include non-accrual loans and real
estate owned ("REO"), declined by 70.2% to $42.5 million at December 31, 1994,
from $142.4 million at December 31, 1993. Non-accrual loans at the same
respective dates decreased to $29.3 million from $67.5 million, and REO dropped
to $13.2 million from $75.0 million.
Northeast Savings' risk based tier 1 and total capital ratios were 14.72%
and 15.69%, respectively, at December 31, 1994, compared to 9.74% and 11.03%,
respectively, at December 31, 1993. Northeast Savings' core and tangible core
capital improved to 5.31% from 4.28% and 4.27%, respectively, at the same
respective dates.
For the quarters ended December 31, 1994 and 1993, total interest income
was relatively level at $51.5 million and $51.4 million, respectively. Net
interest income before the provision for loan losses also remained relatively
flat at $15.0 million and $15.7 million for the same respective periods. The
provision for loan losses decreased to $1.1 million for the quarter ended
December 31, 1994 from $3.0 million for the quarter ended December 31, 1993, due
to the sharp reduction in non-performing assets and a significant reduction in
credit risk exposure in the residential mortgage loan portfolio.
Northeast's other income for the quarters ended December 31, 1994 and 1993
was relatively flat at $4.0 million and $3.7 million, respectively. During the
fourth quarter of 1994, Northeast completed the sale of $164.2 million of GNMA
mortgage servicing rights. General and administrative expenses for the quarters
ended December 31, 1994 and 1993 were $13.9 million and $16.3 million,
respectively. The decrease was due to lower general and administrative expenses
as a result of the sale of branch offices in the second and third quarters of
1994, and the closing of the California and Colorado mortgage offices during the
first quarter of 1994, offset by $1.0 million of expenses related to the Merger.
Expenses relating to REO also decreased to $286,000 from $2.7 million for the
quarters ended December 31, 1994 and 1993, respectively, due to the large
reduction in REO.
Northeast's total interest income for the years ended December 31, 1994 and
1993, was $192.7 million and $220.4 million, respectively. The decrease was due
to the reduction in interest earning assets resulting
19
<PAGE> 88
from the aforementioned sales and to a shift during 1994 in the composition of
the company's assets from single-family residential real estate loans earning a
higher average yield to mortgage-backed securities. Net interest income before
the provision for loan losses decreased to $58.8 million for the year December
31, 1994 from $72.4 million for the same period in 1993. For the years ended
December 31, 1994 and 1993, Northeast's provision for loan losses was $4.9
million and $23.3 million, respectively. The allowance for loan losses also
decreased to $11.5 million from $28.3 million at December 31, 1994 and 1993,
respectively, due to the change in the loan portfolio risk.
Non-interest income for the years ended December 31, 1994 and 1993 was
$39.7 million and $17.7 million, respectively. The increase was due to gains of
approximately $9.6 million and $13.6 million, respectively, recognized in 1994
as a result of the branch sales described below under "THE MERGER -- Background
of the Merger", and the sale of California adjustable rate single-family loans,
and to realized capital gains of approximately $7 million allocated to Northeast
Savings by two limited partnerships in which Northeast Savings invested and
holds in its available-for-sale portfolio. General and administrative expense
decreased to $61.0 million for the year ended December 31, 1994 from $67.2
million for the same period in 1993. Expenses relating to REO also decreased to
$13.2 million from $17.6 million for the years ended December 31, 1994 and 1993.
Projections of Earnings for 1995 and 1996. Northeast has updated its
previously announced earnings projections for 1995, particularly in light of a
changed interest rate environment. The following are projections by Northeast
based on its plan of operations as a stand alone entity. They are therefore
based on Northeast's own strategies for, among other things, asset/liability
management and loan growth during the periods covered. Shawmut has advised
Northeast that its plan for integrating Northeast into its operations, as well
as its business strategies, are in numerous respects different from those of
Northeast. Thus the following projections do not reflect, and should not be
viewed as reflecting, what Shawmut projects will be the contributions of
Northeast to the results of operations of the combined entity after the Merger.
Northeast expects net income for 1995 to be in the range of approximately
$14 million to $17 million, or $0.75 to $0.95 per common share after preferred
stock dividend requirements. This projection is based on, among other things,
the assumptions discussed below. Northeast's May 1994 earnings projection for
1995 was for net income to be in the range between $16 million and $19 million,
or $0.80 to $1.00 per common share after preferred stock dividend requirements,
and was based on the assumption that interest rates would remain relatively
stable compared to prevailing rates at the time of the projection. In addition,
the number of common shares outstanding used in the current projection is
greater than the number used in the May 1994 projection due to the fact that
DEPCO exercised warrants to purchase 800,000 common shares in December, 1994.
In addition, Northeast expects its net income for 1996 to be in the range
of approximately $20 million to $25 million, or $1.25 to $1.60 per common share
after preferred stock dividends requirements.
Northeast's earnings projections for 1995 and 1996 are based on an
assumption that short term interest rates increase in the first six months of
1995 between 0.5% and 1.5% and remain unchanged thereafter. Such increase in
short term interest rates would result in a relatively flat yield curve. The
projections for 1995 and 1996 also assume a 42% effective tax rate.
Net interest income for 1995 is projected to increase between 3% and 10%
from 1994 depending on interest rates. For 1995, significant reductions in
credit costs, deposit insurance expense, and general and administrative expenses
are projected to more than offset a reduction in non-interest income. Credit
costs for 1995 are projected to decline by approximately 75% from 1994 due to a
decline of 70% in non-performing assets in 1994 and the sale of the California
residential loan portfolio in the first quarter of 1994. Deposit insurance
expenses for 1995 are projected to decline by approximately 25% due to the
reduction in deposits attributable to the sale of 15 branches offices in 1994
and to a lower premium rate as a result of Northeast Savings becoming
well-capitalized in June 1994. General and administrative expenses for 1995 are
projected to decline by approximately 25% from 1994 due to reductions directly
or indirectly associated with the 15 branch offices sold in 1994, the two
mortgage lending offices closed in 1994, the relocation of Northeast's
administrative offices in 1995 and the continued streamlining of operations.
Non-interest income is projected to decline by approximately 60% in 1995.
Non-interest income for 1994 included gains recognized on the sales
20
<PAGE> 89
of the branch offices and the California residential loan portfolio. Northeast's
non-interest income projection for 1995 includes gains on its available-for-sale
investments comparable to those recorded in 1994, and, in addition, gains of
approximately $2.7 million from the sale of certain assets.
For 1996, an increase in net interest income combined with further
reductions in non-interest expenses are projected to more than offset a
reduction in non-interest income. Net interest income for 1996 is projected to
increase between 25% and 40% from 1995 as the repricing of adjustable rate
assets increases interest income. Non-interest expenses for 1996 are projected
to decrease approximately 5% from 1995 due primarily to the realization of a
full year's benefit of reduced occupancy costs associated with the relocation of
Northeast's administrative offices. Non-interest income for 1996 is projected to
decline by approximately 50% from 1995 based on an assumption of minimal gains
in Northeast's available-for-sale investments.
While the projected earnings reflect Northeast management's judgment
regarding what stockholders can expect, there can be no assurance that earnings
will be within the ranges predicted. In addition, the projections only relate to
the periods indicated and should not be taken as an indication of anticipated
earnings for any other period. The projections do not consider any effect that
the Merger would have on Northeast's operations.
21
<PAGE> 90
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to stockholders of
Northeast Federal Corp. ("Northeast") in connection with the solicitation of
proxies by the Board of Directors of Northeast (the "Northeast Board") for use
at the special meeting of stockholders of Northeast and at any adjournments or
postponements thereof (the "Special Meeting") to be held at The Hartford Club,
46 Prospect Street, Hartford, Connecticut, on March 17, 1995 at 10:00 a.m. At
the Special Meeting, the stockholders of Northeast will be asked to approve and
adopt the Agreement and Plan of Merger, dated as of June 11, 1994 (the "Merger
Agreement"), by and between Shawmut National Corporation ("Shawmut") and
Northeast. A copy of the Merger Agreement is attached as Annex A hereto. The
Merger Agreement provides, among other things, that a wholly owned subsidiary of
Shawmut ("Merger Sub") will merge (the "Merger") with and into Northeast with
Northeast surviving as a wholly owned subsidiary of Shawmut and, except as
described below, each share of common stock, par value $0.01 per share, of
Northeast ("Northeast Common Stock") will be converted into and exchangeable for
a number of shares (the "Exchange Ratio") of common stock, par value $.01 per
share, of Shawmut ("Shawmut Common Stock") determined as follows:
(i) if the Shawmut Common Stock Average Price (as defined in "THE
MERGER -- Exchange Ratio" below) is greater than or equal to $26.235, the
Exchange Ratio will be .415;
(ii) if the Shawmut Common Stock Average Price is less than $26.235
but equal to or greater than $21.465, the Exchange Ratio will be (a)
$10.875 divided by (b) the Shawmut Common Stock Average Price; or
(iii) if the Shawmut Common Stock Average Price is less than $21.465,
the Exchange Ratio will be .507; provided, however, that, as described
below, under such circumstances Northeast has the right to, and represents
to the Northeast stockholders that it will, terminate the Merger Agreement,
subject to the right of Shawmut to avoid such termination by an increase in
the Exchange Ratio.
IF THE SHAWMUT COMMON STOCK AVERAGE PRICE IS LESS THAN $21.465, THE
NORTHEAST BOARD HAS THE RIGHT TO, AND REPRESENTS TO THE NORTHEAST STOCKHOLDERS
THAT IT WILL, TERMINATE THE MERGER AGREEMENT UNLESS SHAWMUT INCREASES THE
EXCHANGE RATIO SO THAT THE SHARES OF SHAWMUT COMMON STOCK ISSUED IN EXCHANGE FOR
EACH SHARE OF NORTHEAST COMMON STOCK HAVE A VALUE (VALUED AT THE SHAWMUT COMMON
STOCK AVERAGE PRICE) OF $10.875.
SHAWMUT'S PRESENT INTENTION IS NOT TO INCREASE THE EXCHANGE RATIO ABOVE
.507; HOWEVER, NO FINAL DECISION WILL BE MADE UNTIL THE ACTUAL ESTABLISHMENT OF
THE SHAWMUT COMMON STOCK AVERAGE PRICE.
The Northeast Board believes the Merger Agreement is in the best interest
of Northeast and its stockholders, and recommends its approval by Northeast
stockholders. See "The Merger -- Northeast Background and Reasons."
RECORD DATE; VOTING; SOLICITATION AND REVOCATION OF PROXIES
The Northeast Board has fixed the close of business on February 10, 1995 as
the record date (the "Record Date") for the determination of those Northeast
stockholders entitled to notice of and to vote at the Special Meeting and any
adjournments or postponements thereof. Only holders of record of Northeast
Common Stock at the close of business on the Record Date will be entitled to
notice of and to vote at the Special Meeting. As of the Record Date, there were
14,332,195 shares of Northeast Common Stock outstanding, entitled to vote and
held by approximately 4,703 holders of record. On such date, there were an
additional 31,802 shares of Northeast Common Stock outstanding but not entitled
to vote as a result of holders' failure to exchange certificates representing
$2.25 Cumulative Convertible Preferred Stock, Series A (the "Convertible
Preferred Stock") for certificates representing shares of Northeast Common Stock
in connection with the conversion of the Convertible Preferred Stock. Each
holder of record of shares of Northeast Common Stock on the Record Date and
entitled to vote is entitled to cast one vote per share on the proposal to
approve and adopt the Merger Agreement and on any other matter properly
submitted for the vote
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<PAGE> 91
of the Northeast stockholders at the Special Meeting. The presence, either in
person or by properly executed proxy, of the holders of a majority of the
outstanding shares of Northeast Common Stock entitled to vote at the Special
Meeting is necessary to constitute a quorum at the Special Meeting. Abstentions
and broker non-votes will be counted for purposes of determining the presence or
absence of a quorum at the Special Meeting.
The approval and adoption of the Merger Agreement by Northeast stockholders
will require the affirmative vote of the holders of a majority of the
outstanding shares of Northeast Common Stock entitled to vote thereon. As
described in "THE MERGER -- Conditions to the Merger," such stockholder approval
is a condition to consummation of the Merger. Under applicable Delaware law, in
determining whether the Merger Agreement has received the requisite number of
affirmative votes, abstentions and broker non-votes will be counted and will
have the same effect as a vote against the Merger Agreement.
A FAILURE TO VOTE, EITHER BY NOT RETURNING THE ENCLOSED PROXY OR BY
CHECKING THE "ABSTAIN" BOX THEREON, WILL HAVE THE SAME EFFECT AS A VOTE AGAINST
APPROVAL OF THE MERGER AGREEMENT.
As of the Record Date, directors and executive officers of Northeast and
their affiliates beneficially owned 402,996 shares of Northeast Common Stock,
representing approximately 2.81% of the shares of Northeast Common Stock
outstanding as of the Record Date. In addition, as of the Record Date, the Rhode
Island Depositors Economic Protection Corporation ("DEPCO") beneficially owned
800,000 shares of Northeast Common Stock, representing approximately 5.6% of the
outstanding shares of Northeast Common Stock. As of the Record Date, no
directors or executive officers of Shawmut or their affiliates beneficially
owned any shares of Northeast Common Stock. As of the Record Date, subsidiaries
of Shawmut held of record or in the name of nominees 153,444 shares of Northeast
Common Stock in a fiduciary capacity, representing approximately 1.07% of the
outstanding shares of Northeast Common Stock, as to 108 of which shares they had
sole or shared voting authority. The directors, the four non-director executive
officers of Northeast and DEPCO have indicated their intent to vote their shares
of Northeast Common Stock for approval of the Merger Agreement.
All shares of Northeast Common Stock that are entitled to be voted and are
represented at the Special Meeting by properly executed proxies received prior
to or at the Special Meeting, and not revoked, will be voted at the Special
Meeting, and any adjournments or postponements thereof, in accordance with the
instructions indicated on such proxies. If no instructions are indicated, such
proxies will be voted FOR approval and adoption of the Merger Agreement and
otherwise in the discretion of the proxy holders as to any other matter which
may come before the Special Meeting or any adjournment or postponement thereof,
including, among other things, a motion to adjourn or postpone the Special
Meeting to another time and/or place for the purpose of soliciting additional
proxies or otherwise; provided, however, that no proxy which is voted against
the proposal to approve and adopt the Merger Agreement will be voted in favor of
any such adjournment or postponement.
If any other matters are properly presented at the Special Meeting for
consideration, the persons named in the form of proxy enclosed herewith and
acting thereunder will have discretionary authority to vote on such matters in
accordance with their best judgment; provided, however, that such discretionary
authority will only be exercised to the extent possible under applicable federal
and state securities and corporation laws. Northeast does not have any knowledge
of any matters to be presented at the Special Meeting other than the matters set
forth above under "-- General."
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of Northeast, at or before the taking of the vote at the
Special Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a later-dated proxy relating to the same shares and
delivering it to the Secretary of Northeast before the taking of the vote at the
Special Meeting, or (iii) attending the Special Meeting and voting in person
(although attendance at the meeting will not in and of itself constitute a
revocation of a proxy). Any written notice of revocation or subsequently
executed proxy should be sent so as to be delivered to Northeast Federal Corp.,
50 State House Square, Hartford, Connecticut 06103, Attention: Secretary, or
hand delivered to the Secretary of Northeast at or before the taking of the vote
at the Special Meeting.
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<PAGE> 92
Northeast will bear all expenses of this solicitation, except that the cost
of printing and mailing this Proxy Statement/Prospectus will be borne equally by
Northeast and Shawmut. In addition to solicitation by use of the mails, proxies
may be solicited by directors, officers and employees of Northeast in person or
by telephone, telegram or other means of communication. Such directors, officers
and employees will not be additionally compensated, but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation.
Northeast may retain a proxy soliciting firm to assist in such solicitation. The
fee to be paid to any such firm is not expected to exceed $10,000 plus
reasonable out-of-pocket costs and expenses. In addition, Northeast will make
arrangements with brokerage firms and other custodians, nominees and fiduciaries
to send proxy materials to their principals and will reimburse such parties for
their expenses in doing so.
NORTHEAST STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS.
THE MERGER
The following information concerning the Merger, insofar as it relates to
matters contained in the Merger Agreement, describes the material aspects of the
Merger but does not purport to be a complete description and is qualified in its
entirety by reference to the Merger Agreement, which is incorporated herein by
reference and attached hereto as Annex A. Northeast stockholders are urged to
read the Merger Agreement carefully.
GENERAL
Pursuant to the terms of the Merger Agreement, subject to the satisfaction
or waiver (where permissible) of certain conditions, including, among other
things, the receipt of all necessary regulatory approvals, the expiration of all
waiting periods in respect thereof, and the approval of the Merger Agreement by
the stockholders of Northeast, a wholly owned "shell" subsidiary of Shawmut will
be merged with and into Northeast. As a result of the Merger, Northeast will
become a wholly owned subsidiary of Shawmut and the stockholders of Northeast
will become stockholders of Shawmut.
EXCHANGE RATIO
At the Effective Time (as defined below), each issued and outstanding share
of Northeast Common Stock, except for shares held directly or indirectly by
Northeast or Shawmut or any of their respective subsidiaries (other than shares
held by Shawmut or Northeast directly or indirectly in trust accounts, managed
accounts and the like or otherwise in a fiduciary capacity that are beneficially
owned by third parties ("Trust Account Shares") or in respect of a debt
previously contracted ("DPC Shares")) will be converted into and exchangeable
for a number of shares of Shawmut Common Stock equal to the Exchange Ratio
determined as follows:
(i) if the Shawmut Common Stock Average Price (as defined below) is
greater than or equal to $26.235, the Exchange Ratio will be .415;
(ii) if the Shawmut Common Stock Average Price is less than $26.235
but equal to or greater than $21.465, the Exchange Ratio will be (a)
$10.875 divided by (b) the Shawmut Common Stock Average Price; or
(iii) if the Shawmut Common Stock Average Price is less than $21.465,
the Exchange Ratio will be .507; provided, however, that, as described
below, under such circumstances Northeast has the right to, and represents
to the Northeast stockholders that it will, terminate the Merger Agreement,
subject to the right of Shawmut to avoid such termination by an increase in
the Exchange Ratio.
The Merger Agreement provides that if the Shawmut Common Stock Average
Price is less than $21.465, Northeast has the right to, and the Northeast Board
represents to the Northeast stockholders that it will, elect, by action of the
Northeast Board, to terminate the Merger Agreement, whether before or after
approval of the Merger Agreement by Northeast's stockholders, by giving written
notice of such election to Shawmut at any time during the five-day period
commencing with the Determination Date, unless Shawmut elects within
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<PAGE> 93
three days of receiving such written notice to increase the Exchange Ratio such
that the value of the Exchange Ratio will be equal to the quotient obtained by
dividing (i) $10.875 by (ii) the Shawmut Common Stock Average Price. See
"-- Waiver and Amendment; Termination" below. As used in the Merger Agreement,
"Shawmut Common Stock Average Price" means the average of the daily closing
sales prices of Shawmut Common Stock as reported on the New York Stock Exchange
("NYSE") Composite Transactions reporting system (as reported by The Wall Street
Journal or, if not reported thereby, another authoritative source as chosen by
Shawmut) for the 15 consecutive full trading days in which such shares are
traded on the NYSE ending at the close of trading on the trading day immediately
prior to the Determination Date (as defined below). Under the terms of the
Merger Agreement, cash will be paid in lieu of the issuance of fractional shares
of Shawmut Common Stock. As used in the Merger Agreement, "Determination Date"
means the date on which the last regulatory approval required to consummate the
Merger has been obtained and all statutory waiting periods in respect thereof
have expired. Such required regulatory approvals include all of the regulatory
approvals necessary for both the Merger and the Bank Reorganization identified
under "THE MERGER -- Regulatory Approvals Required for the Merger." See
"-- Conversion of Shares; Procedures for Exchange of Certificates; Fractional
Shares" below. In addition, each share of Shawmut Common Stock issued in the
Merger will include the corresponding rights attached thereto pursuant to
Shawmut's Shareholder Rights Agreement (as defined below). See "DESCRIPTION OF
SHAWMUT CAPITAL STOCK -- General" and " -- Rights Plan."
Shawmut's present intention is not to increase the Exchange Ratio above
.507; however, no final decision will be made until the actual establishment of
the Shawmut Common Stock Average Price.
The following table sets forth example Exchange Ratios at varying Shawmut
Common Stock Average Prices. The Shawmut Common Stock Average Prices set forth
below are for purposes of illustration only and are not intended to indicate any
expectation or prediction as to the actual Shawmut Common Stock Average Price.
<TABLE>
<CAPTION>
VALUE (BASED ON
SHAWMUT COMMON
STOCK AVERAGE PRICE)
SHAWMUT COMMON STOCK PER SHARE OF
AVERAGE PRICE EXCHANGE RATIO NORTHEAST COMMON STOCK
-------------------- -------------- ----------------------
<S> <C> <C>
$26.235 or greater .415 $10.875 or greater
less than 26.235 greater than .415 $10.875
but equal to or and less than .507
greater than
$21.465
less than $21.465 .507 less than $10.875
</TABLE>
However, in the event that the Shawmut Common Stock Average Price is less
than $21.465, the Northeast Board represents to the Northeast stockholders that
it will elect to terminate the Merger Agreement. If the Shawmut Board elects to
increase the Exchange Ratio to prevent such termination, the result would be as
follows:
<TABLE>
<S> <C> <C>
less than $21.465 greater than .507 $10.875
</TABLE>
25
<PAGE> 94
[Figure 1]
The Merger Agreement provides that, in the event Shawmut changes the number
of shares of Shawmut Common Stock issued and outstanding between the date of the
Merger Agreement and the Effective Time as a result of a stock split or
combination, stock dividend or other similar distribution, the Exchange Ratio
will be adjusted proportionately.
The determination of the Exchange Ratio resulted from arms'-length
negotiations between Northeast and Shawmut.
In addition, at the Effective Time, each outstanding and unexercised option
and warrant granted by Northeast to purchase shares of Northeast Common Stock
will be converted into an option or warrant, as the case may be, to acquire the
number of shares of Shawmut Common Stock equal to the product rounded to the
nearest share, of the number of shares of Northeast Common Stock subject to such
Northeast option or warrant, as the case may be, and the Exchange Ratio, at a
price per share equal to the exercise price per share of Northeast Common Stock
otherwise purchasable pursuant to such Northeast option or warrant, as the case
may be, divided by the Exchange Ratio, rounded to the nearest cent.
BACKGROUND OF THE MERGER
Since 1988, Northeast Savings and, following its formation, Northeast, have
faced a series of challenges posed by changes in both the regulatory and
economic environments in which they operate. In the regulatory environment,
changes in capital standards subsequent to the passage of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") in August
1989 initially left Northeast Savings out of compliance with minimum capital
standards primarily due to the exclusion of supervisory goodwill and preferred
stock from the calculation of regulatory capital. The successful implementation
of a capital plan in 1990, including the formation of Northeast as the savings
and loan holding company of Northeast Savings, put Northeast Savings back into
compliance with capital standards in July of 1990. The passage of the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") in December
1991 had the effect of increasing minimum capital provisions. Northeast Savings
met the increased standards and has been in continuous compliance with all
minimum capital standards since July 1990. Since June 30, 1994 and through
December 31, 1994, Northeast Savings has exceeded the standards for a well
capitalized institution.
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<PAGE> 95
In the economic environment, Northeast's market areas experienced severe
recessions at the same time that stricter regulatory restraints were being
imposed on Northeast. The economies of Connecticut, Massachusetts and New York
began to contract in early 1989 and continued to contract through 1993.
California entered a recession in 1990. Although the economies of these states
have begun to grow in 1994, the severe contractions they experienced brought
about job losses and depressed real estate markets and led to a significant
increase in the level of non-performing assets for Northeast Savings. Total
non-performing assets reached a peak of $196.0 million, or 4.92% of assets, at
March 31, 1993. The actions Northeast took in response to such increase in
non-performing assets included a series of sales of residential foreclosed
properties and the sale of virtually the entire California loan portfolio,
including non-performing loans. As a result, Northeast Savings has reduced total
non-performing assets to $42.5 million, or 1.27% of total assets, at December
31, 1994.
Northeast's earnings have been significantly impaired directly or
indirectly as a result of changes in its regulatory and economic environment.
Northeast recorded a net loss in three of its last six fiscal years, including
the nine-month period ended December 31, 1992, when the Company changed its
fiscal year end to December 31.
The following table shows the net income or loss reported by Northeast in
each of its last six fiscal years, including the nine-month period ended
December 31, 1992, together with Northeast's net income (loss) per common share
for such periods.
NORTHEAST FEDERAL CORP.
NET INCOME (LOSS)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NET INCOME
NET INCOME (LOSS)
(LOSS) PER COMMON SHARE
---------- ----------------
<S> <C> <C>
Year ended:
March 31, 1990.................................... $(107,136) $ (20.27)
March 31, 1991.................................... 11,728 0.52
March 31, 1992.................................... 5,607 (0.51)
Nine months ended:
December 31, 1992................................. (59,234) (11.16)
Year ended:
December 31, 1993................................. (14,139) (1.75)
December 31, 1994................................. 10,966 0.52
</TABLE>
A reduction in the value of supervisory goodwill of $109.4 million in the
twelve months ended March 31, 1990 accounts for the loss of $107.1 million
recorded in that period. A subsequent reduction of $56.6 million in the value of
supervisory goodwill in the nine months ended December 31, 1992 contributed
significantly towards the loss recorded in that period. These reductions in the
value of supervisory goodwill were precipitated by several factors that had
diminished the value of Northeast Savings' Connecticut and Massachusetts
franchises, but were primarily caused by the adverse impact on the value of
Northeast Savings' Connecticut and Massachusetts franchise rights by regulations
promulgated by the Office of Thrift Supervision (the "OTS") pursuant to FIRREA
and FDICIA.
The economic environment also has adversely affected earnings since 1992.
The direct and indirect costs associated with the high level of non-performing
assets contributed to the loss for the nine months ended December 31, 1992 and
resulted in the loss for the twelve months ended December 31, 1993. The
provision for loan losses and the costs associated with real estate acquired by
foreclosure were $26.0 million and $40.9 million, respectively, for the nine
months ended December 31, 1992 and the twelve months ended December 31, 1993.
In 1992, at the same time that Northeast announced it was reducing the
value of its supervisory goodwill by $56.6 million, it also commented publicly
on its policy regarding offers to invest in Northeast. Certain parties had made
inquiries to Northeast regarding possible investments in or acquisitions of
Northeast and had conducted private evaluations. Northeast had no offer under
consideration at that time. Northeast indicated that its policy was to meet with
any responsible party who expressed an interest in Northeast and to evaluate
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<PAGE> 96
from the standpoint of the best interest of Northeast and its stockholders any
offer it received. This policy was based on the position that Northeast had
maintained since 1988 that it is inconsistent with maximizing stockholder value
to be unwilling to consider bona fide merger or acquisition proposals from
potential acquirors. Although Northeast continued to receive indications of
interest from time to time from other financial institutions, no offers for a
merger or acquisition were made prior to 1994.
In response to the inquiries made in 1992 regarding possible investments in
or acquisitions of Northeast and in anticipation of increased interest in the
acquisition of Northeast as a result of the virtual elimination of supervisory
goodwill, the anticipated recovery of the New England economy and the improved
financial condition of most of the region's largest banks, Northeast entered
into an agreement with Lehman Brothers Inc. ("Lehman Brothers") in 1992 for
financial advisory services, including but not limited to advising Northeast on
offers received from potential acquirors. This agreement was renewed in 1993.
In the last quarter of 1993, Northeast reassessed its business plan,
including the markets in which it was operating. In order to reduce Northeast's
non-performing assets and to focus its business activities in its core markets,
Northeast implemented steps to reduce its exposure to the California real estate
market and to sell its branches located outside its key markets. In November
1993, Northeast securitized $337 million of California residential mortgages,
thereby eliminating the credit risk on those loans. In February 1994, Northeast
closed its loan origination offices in California and Colorado; and in March
1994, Northeast sold $876.1 million of single-family residential loans, 93% of
which were secured by California properties. Included in the sale were $40.5
million of non-performing California loans. In April and May 1994, Northeast
sold $33.1 million of real estate acquired by foreclosure, all of which was
located in California.
In order to focus Northeast Savings' retail deposit franchise in those
markets which Northeast had identified as its key markets, Northeast implemented
a plan to sell Northeast Savings branches in eastern Massachusetts, Rhode
Island, and California. In February 1994, Northeast Savings signed an agreement
to sell five branches in eastern Massachusetts and five branches in Rhode Island
to Shawmut. At that time, Shawmut indicated to Northeast that it was not
interested in a transaction involving its acquisition of Northeast. In March
1994, Northeast Savings signed an agreement to sell its California branches to
Home Savings of America and an agreement to sell its remaining branch in eastern
Massachusetts to The Sandwich Co-operative Bank. As a result of the consummation
of these sales, 32 of Northeast Savings' 33 branches are now located in its four
key market areas of the capital district of New York, and the Hartford,
Springfield, and Worcester metropolitan areas.
Concurrent with these activities, and pursuant to the financial advisory
agreement referenced above, during the period from September 1993 through
February 1994, Lehman Brothers identified with Northeast and contacted twelve
institutions that might have been interested in acquiring Northeast. Six of
those institutions, including Shawmut, expressed general interest, signed
confidentiality agreements and conducted at least preliminary due diligence.
On February 14, 1994, the Northeast Board met to review three possible
alternatives for realizing increased shareholder value. The three alternatives
were continuing as an independent institution, selling selected deposit
franchises or combining with another financial institution by merger or
acquisition. The Northeast Board also considered on that date two proposals
received in response to the solicitation efforts described above. One verbal
proposal related to an acquisition by a bank holding company headquartered in
New York state. The terms of the proposed acquisition were that Northeast
shareholders would receive $8.00 in cash for each share of Northeast Common
Stock. The proposal was contingent upon the completion of a satisfactory due
diligence review, the negotiation and execution of a definitive agreement and
regulatory and shareholder approvals. The other proposal related to the
acquisition of a portion of Northeast Savings' retail franchise and was
evaluated to have a value, together with the value of the remaining retail
franchise, of less than the current agreement with Shawmut or the other proposal
considered at the same time. The Northeast Board rejected both proposals as not
in the best interest of stockholders and inadequate when compared to the value
to be achieved by remaining an independent institution.
In April 1994, the Northeast Board reviewed Northeast's three-year business
plan for 1994 through 1996, which plan incorporated the effects of the
initiatives to reduce non-performing assets and to focus its market
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<PAGE> 97
franchise discussed above. In light of the significant improvement in financial
performance projected in this business plan, Northeast departed from past
practice and announced at its annual meeting on May 20, 1994 that it expected
net earnings for 1994 to be in the range of approximately $9 million to $11
million, or $0.40 to $0.50 per share, and net earnings for 1995 to be in the
range of $16 million to $19 million, or $0.80 to $1.00 per share. The
improvement in net income reflected in the projected earnings were expected to
come from: (i) a reduction in credit costs due to the reduction in
non-performing assets and credit risk exposure to the California economy; (ii) a
reduction in general and administrative expenses due to the relocation of
corporate headquarters from Hartford to Farmington in 1995 and the sale of the
branches in eastern Massachusetts, Rhode Island and California; and (iii) an
increase in net interest margin, primarily due to the reduction in
non-performing assets. Net income for the year ended December 31, 1994 was in
line with the expectations of the three-year business plan. Those projections
reflected Northeast management's judgment regarding what stockholders could
expect from the continued independent operation of Northeast. The projections
assumed the national economy would continue to grow moderately and that the
regional economies in the market areas to be focused upon by Northeast would
begin to recover in 1994, but at a slower pace than the national economy, and
that interest rates would remain relatively stable compared to then current
levels. See "RECENT DEVELOPMENTS -- Northeast."
Subsequent to the steps taken in the first quarter of 1994 to reduce
non-performing assets and to sell branches outside Northeast's key markets,
three financial institutions, including one which had made a previous proposal,
contacted Northeast expressing interest in a possible business combination.
Shawmut was one of these three other institutions. Proposals were received from
Shawmut and one other institution. The third institution declined to submit a
proposal. The proposal from the other institution was from a bank holding
company based in New York state which was not the same company whose proposal
was rejected in February. This proposal was for the acquisition of Northeast for
$9.125 in cash for each share of Northeast Common Stock. The proposal was
contingent upon the completion of a satisfactory due diligence review, the
negotiation and execution of a definitive agreement and regulatory and
shareholder approvals. In May 1994, the Northeast Board considered the proposals
made by Shawmut and the other institution and rejected both proposals as not
being in the best interests of Northeast's stockholders in view of the value to
be achieved by continuing as an independent institution and proceeding with the
business plan. At the direction of the Northeast Board, management indicated to
Shawmut and the other institution that further discussions and exchange of
information would proceed only if their proposals could be increased in value.
Additional discussions and exchanges of information continued with
representatives of Shawmut through the beginning of June. On June 5th, a
representative of Shawmut made an oral proposal for the acquisition of
Northeast. At a special meeting on June 6, 1994, the Northeast Board determined
that such proposal was not acceptable, but authorized continued discussions with
Shawmut regarding the terms and conditions of a merger agreement. Such
discussions culminated in the Merger Agreement.
At a special meeting on June 11, 1994, the Northeast Board met to consider
the Merger Agreement, including a detailed review of its terms. Copies of the
Merger Agreement had previously been furnished to the board members. In
addition, in the course of the Northeast Board's consideration of the Merger
Agreement, it discussed various financial and other considerations, including
the high degree of uncertainty of recovery and possible magnitude thereof by
Northeast Savings under its goodwill litigation (see "Special Considerations --
Litigation"). It was the judgment of the Northeast Board that it should continue
to act in what it perceived as the best interests of Northeast and its
stockholders based on the financial prospects of Northeast without regard to the
uncertain and remote in time prospects for any recovery on the litigation. Also,
by receiving stock in Shawmut, Northeast's stockholders could continue to share
in the litigation prospects to the extent Shawmut continues the litigation,
along with all the business prospects of the combined entities, albeit on a
substantially diluted basis in terms of their ownership percentage of Shawmut
compared to their ownership of Northeast.
The Northeast Board reviewed the business and financial prospects of
Northeast and received a presentation by Lehman Brothers regarding efforts
undertaken to identify possible acquirors, the terms of the Shawmut Proposal
compared to recent acquisitions and pending acquisitions, the business and
financial prospects of Shawmut and trading market information pertaining to both
Northeast and Shawmut common
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stock. The Northeast Board also received and reviewed the written opinion of
Lehman Brothers that the consideration was fair from a financial point of view.
See "-- Opinion of Financial Advisor." Following the review of all materials,
the Northeast Board approved the Merger Agreement and the transactions
contemplated thereby. Northeast believes that the consideration to be received
by its stockholders pursuant to the Merger Agreement has not been affected by
the prior branch sale transaction with Shawmut.
NORTHEAST'S REASONS FOR THE MERGER
In the course of reaching its conclusion to approve the Merger and the
Merger Agreement, the Northeast Board considered numerous factors. The Northeast
Board did not assign any relative or specific weights to the factors considered.
The material factors considered by the Northeast Board were as follows:
(i) The Northeast Board's familiarity with and review of Northeast's
business, current and prospective operations and financial condition,
including its capital position, asset quality and future growth prospects
were it to remain independent;
(ii) The recessionary economic conditions, weak real estate markets
and relatively limited growth prospects in the markets in which Northeast
operates, the continuing trend toward consolidation within the banking
industry and the fact that a business combination with a significantly
larger bank holding company such as Shawmut could provide Northeast's
stockholders with substantial competitive advantages, including cost
savings through the integration of overlapping operations and support
functions, improved access to capital and funding, greater diversity in
product offerings and the ability to spread costs of new products, services
and research and development over a wider customer base;
(iii) The presentations of Northeast's financial advisor, Lehman
Brothers, as to selected financial and stock market data concerning
Shawmut, Northeast and other publicly held bank holding companies, certain
financial analyses of the terms of the Merger and a comparison to the terms
of other recent business combinations involving bank holding companies, and
the opinion rendered by Lehman Brothers to the effect that consideration
equal to converting each share of Northeast Common Stock into the right to
receive the number of shares of Shawmut Common Stock determined by dividing
$10.875 by the Shawmut Common Stock Average Price was fair, from a
financial point of view, to the holders of Northeast Common Stock as
further described under "Opinion of Financial Advisor";
(iv) The consideration (based on an assumed consideration of $10.875
of Shawmut Common Stock per share of Northeast Common Stock) in relation to
the then market price and book value of Northeast Common Stock, and the
past and projected earnings of Northeast;
(v) Reports by management and Lehman Brothers as to discussions with
other parties which had been contacted concerning the possibility of a
business combination with Northeast, and the fact that the Shawmut Proposal
was a firm offer representing greater value to Northeast's shareholders in
terms of premium over current market prices and on a long-term basis than
any other proposal received by Northeast during its discussions with other
financial institution holding companies, as described in greater detail
above under "Background of the Merger";
(vi) The current and historical market prices and liquidity of and
dividends on Northeast Common Stock and Shawmut Common Stock, the fact that
Shawmut currently pays dividends on Shawmut Common Stock (equivalent to
$0.36 per share of Northeast Common Stock based on an assumed Exchange
Ratio of .456 based on the average closing price of $23.85 for Shawmut
Common Stock over the five days prior to the execution of the Merger
Agreement and Shawmut's current dividend policy) in comparison to
Northeast, which had declared no dividends on Northeast Common Stock since
1989, and which is not expected to pay dividends in the foreseeable future
(see "Summary -- Selected Comparative Per Share Data" for certain
historical and pro forma data regarding dividends on Northeast Common Stock
and Shawmut Common Stock);
(vii) The business, results of operations, prospects and financial
condition of Shawmut, the future growth prospects, including deposit, loan
and earnings growth prospects, of Shawmut and Northeast
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following the Merger and separately, the potential synergies and cost
savings expected to be realized from the Merger and the resources to be
obtained from combining Northeast with Shawmut;
(viii) The fact that the Merger would provide holders of Northeast
Common Stock with the opportunity to receive a premium over current market
prices for their shares on a tax-free basis while at the same time enabling
them to participate in the expanded opportunities for growth made possible
by the Merger; and
(ix) The impact generally of the Merger on the employees, depositors
and customers of Northeast and the communities in which Northeast operates.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF NORTHEAST
THE BOARD OF DIRECTORS OF NORTHEAST BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF THE STOCKHOLDERS OF NORTHEAST ASSUMING THAT THE SHAWMUT COMMON
STOCK AVERAGE PRICE IS AT LEAST $21.465, AND, ACCORDINGLY, RECOMMENDS THAT
HOLDERS OF NORTHEAST COMMON STOCK VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
THE NORTHEAST BOARD REPRESENTS TO THE NORTHEAST STOCKHOLDERS THAT IT SHALL
TERMINATE THE MERGER AGREEMENT IF THE SHAWMUT COMMON STOCK AVERAGE PRICE IS LESS
THAN $21.465.
SHAWMUT'S REASONS FOR THE MERGER
In reaching its determination to enter into the Merger Agreement, the Board
of Directors of Shawmut (the "Shawmut Board") considered a number of factors,
including the following: (i) the Shawmut Board's familiarity with and review of
Shawmut's business, operations, financial condition, earnings and prospects;
(ii) the Shawmut Board's review, based in part on a presentation by Shawmut
management regarding its due diligence on Northeast, of the business,
operations, earnings and financial condition of Northeast on an historical,
prospective and pro forma basis, and the enhanced opportunities for growth that
the Merger makes possible; (iii) a variety of factors affecting and relating to
the overall strategic focus of Shawmut including, without limitation,
opportunities for growth in deposits, assets and earnings, and opportunities
available to Shawmut in the market areas where Northeast conducts business; (iv)
the current and prospective economic environment facing financial institutions,
including Shawmut; (v) the terms of the Merger Agreement and the other documents
executed in connection with the Merger; and (vi) the anticipated revenue
enhancement, cost savings and efficiencies available from the Merger. The
Shawmut Board did not assign any specific or relative weight to the factors in
its consideration.
IF THE NORTHEAST BOARD EXERCISES ITS RIGHT TO TERMINATE THE MERGER
AGREEMENT IN THE EVENT THE SHAWMUT COMMON STOCK AVERAGE PRICE IS LESS THAN
$21.465, SHAWMUT'S PRESENT INTENTION IS NOT TO INCREASE THE EXCHANGE RATIO ABOVE
.507; HOWEVER, NO FINAL DECISION WILL BE MADE UNTIL THE ACTUAL ESTABLISHMENT OF
THE SHAWMUT COMMON STOCK AVERAGE PRICE.
OPINION OF NORTHEAST'S FINANCIAL ADVISOR
The Northeast Board retained the investment banking firm of Lehman Brothers
to act as its financial advisor as it relates to the Merger and to render its
opinion with respect to the fairness, from a financial point of view, to
Northeast's stockholders of the consideration to be received in the Merger. At
the meeting of the Northeast Board on June 11, 1994, in connection with the
Northeast Board's consideration of the Merger, Lehman Brothers made a
presentation to the Northeast Board with respect to the Merger and delivered its
written opinion stating that, on and as of the date of such opinion and based
upon and subject to the assumptions, factors and limitations set forth in such
opinion and described below, consideration equal to converting each share of
Northeast Common Stock into the right to receive the number of shares of Shawmut
Common Stock determined by dividing $10.875 by the Shawmut Common Stock Average
Price is fair to
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holders of Northeast Common Stock from a financial point of view. This was
confirmed by Lehman Brothers in its updated opinion, dated the date hereof,
which is substantially identical to the opinion of Lehman Brothers delivered to
the Northeast Board on June 11, 1994. The full text of the written opinion of
Lehman Brothers, dated as of the date hereof, sets forth assumptions made,
factors considered and limitations on the review undertaken by Lehman Brothers,
is included as Annex B to this Proxy Statement/Prospectus. Northeast
stockholders are urged to read such opinion carefully and in its entirety.
No limitations were imposed by Northeast on the scope of Lehman Brothers'
investigation or the procedures followed by Lehman Brothers in rendering its
opinion. Lehman Brothers was not requested to and did not make any
recommendation to the Northeast Board as to the form or amount of the
consideration to be paid to stockholders of Northeast in the Merger, which was
determined through arms'-length negotiations among the parties and their
respective financial advisors. In arriving at its opinion, Lehman Brothers did
not ascribe a specific range of value to Northeast, but made its determination
as to the fairness, from a financial point of view, of the consideration to be
offered in the Merger on the basis of the financial and comparative analyses
described below. Lehman Brothers' opinion is directed to the Northeast Board
only and does not constitute a recommendation to any Northeast stockholder as to
how such stockholder should vote at the Special Meeting. Lehman Brothers was not
requested to opine as to, and its opinion does not in any manner address,
Northeast's underlying business decision to proceed with or effect the Merger.
In arriving at its opinion, Lehman Brothers reviewed and analyzed: (i) the
Merger Agreement; (ii) the Form 10-Q for the quarters ended March 31, 1994, June
30, 1994 and September 30, 1994, the Form 10-K for the year ended December 31,
1993, and the year end 1994 press releases for both Northeast and Shawmut and
such other publicly available information concerning Northeast and Shawmut which
Lehman Brothers believed to be relevant to its inquiry; (iii) financial and
operating information with respect to the business, operations and prospects of
Northeast and Shawmut furnished to it by Northeast and Shawmut; (iv) market
valuation and price performance of Northeast Common Stock and the common stock
of other northeastern thrifts and other thrifts which Lehman Brothers deemed
relevant; (v) a comparison of the historical financial results and present
financial condition of Northeast with those of other northeastern thrifts and
other thrifts which Lehman Brothers deemed relevant; (vi) market valuation and
price performance of Shawmut Common Stock and the common stock of other
super-regional banking companies which Lehman Brothers deemed relevant; (vii) a
comparison of the historical financial results and present financial condition
of Shawmut with those of other super-regional banking companies which Lehman
Brothers deemed relevant; and (viii) a comparison of the financial terms of the
Merger with the terms of certain other recent transactions which Lehman Brothers
deemed relevant. Lehman Brothers also considered the results of its efforts
(undertaken in conjunction with Northeast) to solicit proposals from third
parties with respect to a purchase of Northeast and reviewed such proposals. In
addition, Lehman Brothers had discussions with the managements of Northeast and
Shawmut concerning their respective businesses, operations, assets, financial
conditions and prospects and undertook such other studies, analyses and
investigations it deemed appropriate.
In connection with its review, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by it in
arriving at its opinion without assuming any responsibility for the independent
verification of such information and further relied upon the assurances of the
managements of Northeast and Shawmut that they were not aware of any facts that
would make such information inaccurate or misleading. With respect to the
financial projections of Northeast, upon advice of Northeast, Lehman Brothers
assumed that such projections have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
management of Northeast, as to the future financial performance of Northeast,
and Lehman Brothers relied upon such projections in arriving at its opinion. In
arriving at its opinion, Lehman Brothers did not conduct a physical inspection
of the properties and facilities of Northeast or Shawmut and did not make nor
obtain any evaluations or appraisals of the assets or liabilities of Northeast
or Shawmut. In addition, in arriving at its opinion, Lehman Brothers did not
consider the potential effects to Northeast of pending litigation. Lehman
Brothers has assumed that the Merger will qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and therefore as a tax-free transaction. Lehman Brothers' opinion was
necessarily based upon market, economic, regulatory and other conditions as they
existed on, and can be evaluated as of, the date of its letter.
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The following paragraphs summarize certain of the financial and comparative
analyses performed by Lehman Brothers in arriving at its opinion as to the
fairness, from a financial point of view, of the consideration to be offered to
Northeast's Stockholders in the Merger. Lehman Brothers presented certain of
these analyses to the Northeast Board on June 11, 1994 and updated these
analyses in connection with the rendering of its written opinion dated as of the
date hereof. The following does not purport to be a complete description of the
analyses performed, or the matters considered, by Lehman Brothers in arriving at
its opinion.
The preparation of a fairness opinion involves 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,
such an opinion is not readily susceptible to summary description. Furthermore,
in arriving at its fairness opinion, Lehman Brothers did not attribute any
particular weight to any analysis, or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, Lehman Brothers believes that its analyses must be
considered as a whole and that considering any portion or portions of such
analyses and of the factors considered, without considering all analyses and
factors, could create a misleading or incomplete view of the process underlying
its fairness opinion. In its analyses, Lehman Brothers made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond Northeast's and Shawmut's control.
Any estimates contained in these analyses are not necessarily indicative of
actual values or predictive of future results or value, which may be
significantly more or less favorable than as set forth therein. In addition,
analyses relating to the value of businesses do not purport to be appraisals or
to reflect the prices at which businesses actually may be sold.
Purchase Price Analysis. The closing price of Shawmut Common Stock on June
10, 1994, was $24.00 and the average of the closing prices of Shawmut Common
Stock for the 5-day period ended June 10, 1994, was $23.85. The shares of
Shawmut Common Stock to be received by the holders of Northeast Common Stock
based on the average of the closing prices of Shawmut Common Stock for the 5-day
period ended June 10, 1994, was 0.456. The consideration (based on such average
closing price) implied a premium to be received by holders of Northeast Common
Stock of 7.4% over the closing price of Northeast Common Stock on June 10, 1994,
which was $10.125. In addition, the consideration (based on such average closing
price), reflecting a value of $10.875, represented a 30% and 39% premium over
the average of the closing prices of Northeast's Common Stock for the 30-day
period and 60-day period ended June 10, 1994, which were $8.363 and $7.835,
respectively. For the period beginning January 1, 1994 and ending June 10, 1994,
such value of $10.875 represented a 65% premium over the average closing price
of $6.582 for the period.
Comparable Company Analysis. Using publicly available information, Lehman
Brothers compared the financial performance and stock market valuation of
Northeast with the following twelve selected thrifts and thrift holding
companies (the "Comparable Group") deemed relevant by Lehman Brothers: Anchor
Bancorp, Inc., ALBANK Financial Corporation, Astoria Financial Corporation,
Collective Bancorp, Inc., Centerbank, Dime Bancorp, Inc., Fidelity New York,
F.S.B., The Greater New York Savings Bank, Peoples Heritage Financial Group,
Inc., The Rochester Community Savings Bank, Sovereign Bancorp, Inc. and Webster
Financial Corporation. Indications of such financial performance and stock
market valuation included profitability (a median return on average assets and
return on average equity for the twelve month period ended March 31, 1994 of
0.64% and 10.31%, respectively, for the Comparable Group and negative values for
Northeast); the ratio of tangible equity to tangible assets (a median of 5.9%
for the Comparable Group and 3.6% for Northeast); the ratio of non-performing
assets to total loans and foreclosed real estate (a median of 4.1% for the
Comparable Group and 8.6% for Northeast); and price-to-book ratios (a median of
1.00x for the Comparable Group and 1.51x for Northeast). These ratios are based
on public financial statement information as of March 31, 1994, and closing
stock market prices on June 10, 1994. Because of the inherent differences
between the operations of Northeast and the selected comparable companies,
Lehman Brothers believed that it was inappropriate to, and therefore did not,
rely solely on the results of the quantitative analysis and accordingly also
made qualitative judgments concerning differences between the financial and
operating characteristics of Northeast and the selected companies. These
qualitative judgments included Lehman Brothers' views as to business conditions
and prospects in the various markets in which these selected
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companies operate and business mix, sources of revenue, risk profile and
prospects for these selected companies. Although Lehman Brothers did not
attribute any particular weight to any such factor, such qualitative factors as
a whole influenced the significance and relevance placed on the comparison
between Northeast and each of the comparable companies.
Discounted Cash Flow Analysis. Lehman Brothers discounted an estimated
terminal value of Northeast Common Stock, using a range of discount rates from
12% to 18%, which were chosen to reflect different assumptions regarding the
required rates of return of holders or prospective buyers of Northeast Common
Stock. Lehman Brothers derived an estimate of a range of terminal values by
applying multiples ranging from 8 to 12 times projected 1996 net income. These
multiples were derived to reflect appropriate trading multiples for thrift
stocks. In connection with this analysis, Northeast management provided Lehman
Brothers with net income, book value and dividend payment projections (including
projections regarding no resumption of common stock dividend payments in the
foreseeable future). This analysis, and its underlying assumptions, yielded a
range of values for Northeast Common Stock from $6.50 to approximately $10.82
per share.
Comparable Transaction Analysis. Using publicly available information,
Lehman Brothers reviewed certain terms, and financial characteristics of, and
book value and historical earnings multiples, as well as core deposit premiums,
applicable to, fourteen banking or thrift merger and acquisition transactions
("Comparable Transactions Group") publicly announced in the period 1992 through
June 10, 1994, which Lehman Brothers deemed to be comparable to the present
transaction. The Comparable Transactions Group considered by Lehman Brothers in
its analysis consists of the following transactions (identified by
acquiror/acquiree): Sovereign Bancorp, Inc./Shadow Lawn Savings Bank; Anchor
Bank FSB/Lincoln Savings Bank, FSB; Summit Bancorporation/Crestmont Financial
Corp.; First Fidelity Bancorporation/First Inter-Bancorp Inc.; Shawmut/Gateway
Financial Corporation; Citizens Financial Group, Inc./Neworld Bancorp, Inc.;
First Fidelity Bancorporation/Greenwich Financial Corporation; First Fidelity
Bancorporation/Peoples Westchester Savings Bank; Citizens Financial Group,
Inc./The Boston Five Bancorp, Inc.; Shawmut/New Dartmouth Bank; First Fidelity
Bancorporation/Village Financial Services, Ltd.; Collective Bancorp,
Inc./Montclair Bancorp, Inc.; Bank of Boston Corporation/Society for Savings
Bancorp, Inc.; and Sovereign Bancorp, Inc./Harmonia Bancorp, Inc. Lehman
Brothers calculated price-to-book ratios, price-to-last-twelve-months ("LTM")
earnings ratios and core deposit premiums for the Comparable Transactions Group.
The high, median and low values for these transactions were 1.7x, 1.3x and 0.7x
price-to-book, 16.8x, 13.0x and "not meaningful" price-to-LTM earnings, and
5.9%, 3.3% and (1.4)% core deposit premiums. By comparison, the values for the
Merger were 1.6x price-to-book, "not meaningful" price-to-LTM-earnings, and 3.2%
core deposit premium. Because the reasons for and circumstances surrounding each
of the transactions analyzed were so diverse and because of the inherent
differences between the operations of Northeast, Shawmut and the selected
companies, Lehman Brothers believed that it was inappropriate to, and therefore
did not, rely solely on the quantitative results of the analysis and accordingly
also made qualitative judgments concerning differences between the
characteristics of these transactions and the Merger which would affect the
acquisition value of the acquired companies and Northeast. These qualitative
judgments included Lehman Brothers' views as to the universe of potential buyers
in each of these transactions, their potential level of interest in an
acquisition of these companies and the ability of the acquirors to implement
cost savings at and business synergies with the acquired companies and, in
addition, Lehman Brothers' views as to the business conditions and prospects in
various markets in which these acquired companies operate and business mix,
sources of revenue, risk profile and prospects for these acquired companies.
Although Lehman Brothers did not attribute any particular weight to any such
factor, such qualitative factors as a whole influenced the significance and
relevance placed on the comparison between Northeast and each of the comparable
transactions.
Historical Stock Price Analysis. Lehman Brothers reviewed the historical
performance of Northeast Common Stock from June 3, 1989, through June 8, 1994;
the closing price of Northeast Common Stock did not exceed $10.125 through the
end of this period. Lehman Brothers also compared the price performance of
Northeast Common Stock with the performance of a nationwide index of stocks of
thrifts (prepared by Lehman Brothers) and an index of stocks of the Comparable
Group during this period. Lehman Brothers
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compared the price performance of Northeast Common Stock with the consideration
to be received by holders of Northeast Common Stock in the Merger.
Financial Review of Shawmut. Lehman Brothers reviewed the historical price
performance of Shawmut Common Stock from June 2, 1989 through June 7, 1994 and
compared such performance with that of a nationwide index of stocks of regional
banking companies. Lehman Brothers compared the financial performance, dividend
policy, historical and future estimated price/earnings ratios and price-to-book
ratios of Shawmut to nine banking companies ("Shawmut Group"): Bank of Boston
Corporation, The Bank of New York Company, Inc., BayBanks, Inc., CoreStates
Financial Corp, First Empire State Corporation, First Fidelity Bancorporation,
Fleet Financial Group, Inc., Mellon Bank Corporation and Midlantic Corporation.
The historical price/earnings ratio was a median of 10.1x for the Shawmut Group
and 7.2x for Shawmut. The price-to-book ratio was a median of 1.51x for the
Shawmut Group and 1.39x for Shawmut. These ratios are based on public financial
statement information as of March 31, 1994 and closing stock market prices on
June 9, 1994.
Pro Forma Merger Analysis. Lehman Brothers estimated the impact of the
Merger on Shawmut's projected earnings per share and book value per share for
1995 and the following three years. In connection with this analysis, management
of Northeast and Shawmut provided Lehman Brothers with information with regard
to expected future earnings. Based on such information, the terms of the present
transaction, assuming a Shawmut Common Stock Average Price of $23.85 and,
accordingly, an Exchange Ratio of 0.456 and consideration of $10.875 per share
of Northeast Common Stock, and Lehman Brothers' judgment, Lehman Brothers
concluded that the Merger would be slightly dilutive to earnings per share of
Shawmut's Common Stock in 1995 and accretive thereafter.
In rendering its opinion, Lehman Brothers also considered the financial
terms of the other proposals received by Northeast as described above (see "THE
MERGER -- Background of the Merger"), compared such terms to the consideration
and applied certain of the analyses described above to such proposals. This
comparison and analysis supported Lehman Brothers' opinion that from a financial
point of view consideration equal to converting each share of Northeast Common
Stock into the right to receive the number of shares of Shawmut Common Stock
determined by dividing $10.875 by the Shawmut Common Stock Average Price is fair
to the holders of Northeast Common Stock.
In arriving at its updated opinion, Lehman Brothers considered market,
economic and other conditions as they existed on the date of the updated
opinion. Although changes in such conditions since the date of Lehman Brothers'
initial opinion affected certain of the above-described financial and
comparative analyses performed by Lehman Brothers, Lehman Brothers is still of
the opinion that, as of the date hereof, consideration equal to converting each
share of Northeast Common Stock into the right to receive the number of shares
of Shawmut Common Stock determined by dividing $10.875 by the Shawmut Common
Stock Average Price is fair, from a financial point of view, to the holders of
Northeast Common Stock.
Lehman Brothers is an internationally recognized investment banking firm
and, as part of its investment banking activities, Lehman Brothers is regularly
engaged in the evaluation of businesses and their securities in connection with
mergers and acquisitions, including thrift and bank holding company
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The Northeast Board selected Lehman
Brothers because of its expertise, its reputation and its familiarity with
Northeast and the thrift and commercial banking industries in general.
As compensation for its services in connection with the Merger, Northeast
has (A) paid Lehman Brothers a retainer fee of $25,000 in 1993 and (B) agreed to
pay (i) a fee of $150,000 for its rendering a written opinion to the Northeast
Board and (ii) a fee payable upon consummation of the Merger based on the
aggregate value of Shawmut Common Stock received by Northeast stockholders as
determined at that time. Assuming the Shawmut Common Stock Average Price is
$21.465, the fee payable upon consummation of the Merger would total
approximately $1.7 million. In addition, Northeast has agreed to reimburse
Lehman Brothers for reasonable out-of-pocket expenses incurred in connection
with the Merger and to indemnify Lehman Brothers against certain liabilities,
including liabilities that may arise under the federal securities laws.
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Lehman Brothers has acted as financial advisor to Northeast in connection
with the Merger. In the ordinary course of its business, Lehman Brothers
actively trades in the debt and equity securities of Northeast for its own
account and for the accounts of others and, accordingly, may at any time hold a
long or short position in such securities.
SPECIAL CONSIDERATIONS -- LITIGATION
On December 9, 1989, Northeast Savings filed suit in the United States
District Court for the District of Columbia claiming that the government has
breached its contract with Northeast Savings as well as violated Northeast
Savings' constitutional rights as a result of the denial of core capital
treatment to supervisory goodwill acquired by Northeast Savings as a result of
its 1982 acquisitions from the Federal Savings and Loan Insurance Corporation
("FSLIC") of three insolvent thrifts. The district court dismissed this action
on July 16, 1991 for lack of jurisdiction and indicated that proper jurisdiction
lay in an action for money damages in the United States Claims Court. (The name
of the United States Claims Court subsequently was changed to the United States
Court of Federal Claims, such court hereinafter is referred to as the "Claims
Court.") Northeast Savings appealed this ruling to the United States Court of
Appeals for the District of Columbia Circuit (the "Court of Appeals for D.C."),
and then on July 8, 1992, filed a motion to voluntarily dismiss its appeal. On
July 9, 1992, the Court of Appeals for D.C. granted this motion to dismiss.
Northeast Savings then filed its claim for damages in the Claims Court on August
12, 1992. This action is still pending. The Claims Court has indicated that it
is deferring action on the Northeast Savings case, as well as on over 30 other
supervisory goodwill cases pending before the Claims Court, until three cases
(the "Test Cases"), currently on appeal to the United States Court of Appeals
for the Federal Circuit ("Federal Circuit Court of Appeals"), are finally ruled
upon. In the Test Cases, including Winstar v. United States, the government has
vigorously defended itself. Among other things, the government has contended
that the "supervisory goodwill" that was created in connection with the
resolution by the Federal Home Loan Bank Board (the "Bank Board"), which was the
predecessor agency to the OTS, of supervisory problems existed "under the Bank
Board's regulatory function and represents a statement of compliance with
then-existing statutory and regulatory requirements which requirements, however,
were subject to change." Thus, the government contends that Congress was
entitled to override the existing regulatory requirements which recognized
supervisory goodwill by new legislation directed at the general public welfare.
The government then contends that it cannot be obligated to measure regulatory
capital in a manner inconsistent with what Congress has mandated under FIRREA,
and therefore, it is absolved of any and all contract liability based on the
elimination of supervisory goodwill under the "Sovereign Acts Doctrine." In
support of its arguments, the government cites, among other things, the 1992
holding of the Court of Appeals for D.C. in Transohio Savings Bank v. Director
("Transohio") in rejecting the attempt of a savings institution to obtain
injunctive relief against the application of the FIRREA capital standards.
In each of the Test Cases, the Claims Court determined that plaintiffs had
contracts with the United States governing long-term regulatory treatment of
goodwill, and that those contracts had been breached by FIRREA's new
restrictions on use of goodwill to meet statutory capital mandates. The Claims
Court consolidated its rulings in the Test Cases for immediate interlocutory
appeal. On May 25, 1993, a divided panel of the Federal Circuit Court of Appeals
reversed the Claims Court's finding that the government was liable for breach of
contract in the Test Cases. The Federal Circuit Court of Appeals, among other
things, based its decision on its conclusion that "... the plaintiffs had no
contract right to have the goodwill generated by their acquisitions treated as
regulatory capital." According to the Federal Circuit Court of Appeals, "[a]ll
of the subject contracts left the Bank Board (and OTS) free to regulate in
accordance with subsequent acts of Congress, specifically FIRREA. Thus, there
was no contractual promise by the government which could be breached."
Approximately one and one-half months later, on July 7, 1993, in Hughes
Communications Galaxy, Inc. v. United States ("Hughes") a different panel of the
Federal Circuit Court of Appeals issued what has generally been interpreted as
an opposite ruling from that given in the Test Cases on another government
breach of contract dispute. In Hughes, which was not a case involving depository
institutions, the Federal Circuit Court of Appeals determined that there was a
breach of contract by the government, and in doing so,
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apparently rejected some of the same arguments advanced by the government and
accepted by the Federal Circuit Court of Appeals in the test cases. Although the
government in Hughes petitioned the Federal Circuit Court of Appeals for a
rehearing and an en banc hearing, on October 26, 1993, both were denied. The
Federal Circuit Court of Appeals, however, did vacate the panel decision in the
Test Cases, which decision was in favor of the government's position, and
ordered an en banc hearing. Briefing for that hearing has been completed and
oral arguments took place in February 1994. No decision on such rehearing has
been rendered by the Federal Circuit Court of Appeals at this time. Recently, a
panel of the Court of Appeals for D.C. issued a clarification of its Transohio
decision indicating that its analysis was solely directed at an action for
injunctive relief and did not address the merits of a claim for money damages in
the Claims Court.
Another supervisory goodwill case, Resolution Trust Corporation v. FSLIC
(the "Resolution Trust Corporation"), was recently decided by the Court of
Appeals of the 10th Circuit (the "10th Circuit Court of Appeals") in favor of
the purchasers of Security Federal from the FSLIC, whose purchase was made prior
to FIRREA. Pursuant to an arrangement with the FSLIC, the purchasers infused $6
million into Security Federal, an insolvent institution, and thereby saved the
FSLIC the cost of liquidating Security Federal. Even with such capital infusion,
were it not for the treatment of supervisory goodwill as capital, Security
Federal would have remained significantly under-capitalized at the time, and
thereby would have had to have been liquidated by the FSLIC.
As a result of the restriction on the use of supervisory goodwill as
capital pursuant to FIRREA and resulting OTS regulations, the OTS determined
that Security Federal was insolvent and in February 1990 ordered the purchasers
to infuse additional capital into it. In March of 1990, the purchasers notified
the OTS that they were rescinding the agreement to acquire the institution,
tendered their stock to the OTS, and requested the return of their capital
contribution. The OTS refused the tender, and the purchasers filed suit seeking
rescission and restitution for breach of contract. In Resolution Trust
Corporation, the FDIC and the OTS appealed a district court's summary judgment
ruling in favor of the purchasers for breach of contract, holding that the
treatment of goodwill as regulatory capital was an express term of the overall
contractual agreement. The 10th Circuit Court of Appeals affirmed the lower
court's ruling and stated that "[b]ecause the Agencies breached their agreement
to treat supervisory goodwill...as assets for regulatory purposes, we [the
Court] agree that the investors [i.e., purchasers] properly rescinded the
agreement and thus are entitled to restitution."
Northeast cannot predict when the Federal Circuit Court of Appeals will
render any decision on the test cases, or the nature of any such decision and
its effect on Northeast Savings' pending goodwill litigation in the Claims
Court. In addition, the Claims Court's initial decision in the Test Cases did
not address the amount of damages, if any; therefore, questions regarding the
amount of damages are not subject to the current appeal pending in the Federal
Circuit Court of Appeals. Northeast anticipates that even if the Federal Circuit
Court of Appeals renders a decision in the Test Cases that is favorable to the
claims made by Northeast Savings in its goodwill litigation, a final judicial
determination, if any, as to Northeast Savings' pending goodwill litigation,
after addressing the issue of damages and the resolution of all appeals,
including likely appeals to the Supreme Court, will not occur for an extended
period of time; and even if Northeast Savings attains a final money judgment in
its goodwill litigation, as to which no prediction can be made, the amount of
any such judgment is highly uncertain. No amount has been recorded on
Northeast's financial statements based on any possible recovery by Northeast
under the litigation.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Northeast's management and the Northeast Board may be
deemed to have interests in the Merger in addition to their interests, if any,
as stockholders of Northeast generally. The Northeast Board was aware of these
factors and considered them, among other matters, in approving the Merger
Agreement and the transactions contemplated thereby.
Change in Control Agreements. Northeast and Northeast Savings have entered
into change in control agreements with George P. Rutland, former Chairman of the
Board, and Kirk W. Walters, Chairman of the Board, Chief Executive Officer,
President, Chief Operating Officer and Chief Financial Officer. In the event of
a "change in control" of Northeast, Messrs. Rutland and Walters are entitled to
certain payments in the event
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of their termination of employment other than upon death, retirement or
disability or by Northeast for "cause" or a termination by themselves for "good
reason" following such change in control (a "Change in Control Termination").
Execution of the Merger Agreement resulted in a change in control under these
agreements. The Merger Agreement expressly provides that Shawmut will honor
these agreements. If either person terminates his employment, because of, among
other things, a substantial alteration in the nature or status of his
responsibilities or an assignment of duties inconsistent with his office, a
reduction in his base salary or substantial change in his employee benefits, the
relocation of Northeast's principal executive offices, or a failure of Northeast
to obtain a satisfactory agreement from any successors to assume and agree to
perform the change in control agreements, such termination will be considered to
be for "good reason."
Upon a Change in Control Termination, Mr. Walters would be entitled to,
among other benefits, payment of 2.99 times his base salary upon such
termination of employment, if the termination occurs within one year following a
change in control; payment of two times his base salary if the termination
occurs more than one but less than two years following a change in control; and
payment of his base salary if the termination occurs more than two years
following a change in control; provided, however, that in the event Mr. Walters'
employment is terminated, if any such payments together with any other payments
or benefits received or to be received by Mr. Walters under any other plan,
arrangement or agreement which he has the right to receive would constitute a
"parachute payment" for federal income tax purposes, such payments shall be
reduced to the largest amount as will result in no portion of such aggregate
payments being subject to the federal excise tax with respect to "excess
parachute payments" so as to enable him to retain the payments he would have
retained had he not been subject to such excise tax.
Upon a Change in Control Termination, Mr. Rutland would be entitled to,
among other benefits, the greater of (i) all salary payments due pursuant to his
change in control agreement for the remaining employment term or (ii) one year's
base salary, at the rate in effect on the date of termination; provided, that if
any of such payment, together with any other payments or benefits received or to
be received by Mr. Rutland under any other plan, arrangement or agreement which
he has the right to receive would constitute a "parachute payment" for federal
income tax purposes, he is entitled to a "gross up" payment for any portion of
such payments that are subject to the federal excise tax relating to "excess
parachute payments" so as to enable him to retain the payments he would have
retained had he not been subject to such excise tax.
Assuming the Merger were consummated on March 31, 1995, if Messrs. Rutland
and Walters were to terminate their employment at the Effective Time upon a
Change in Control Termination, Mr. Rutland would be entitled to approximately
$767,000 and Mr. Walters would be entitled to approximately $1,109,000 pursuant
to their change in control agreements, subject to certain conditions.
In addition, Northeast Savings has maintained two executive life insurance
plans to cover executives of Northeast Savings and its principal subsidiaries.
Under the plans, if a change in control occurs, Northeast Savings is required to
release its interest in the life insurance policies covered by the plans to the
covered employee upon the happening of one of the following: (i) termination of
the employee's employment; (ii) termination of the plan or (iii) an amendment
reducing employee benefits under the plan. The Merger Agreement constituted a
change in control under the plans. In light of the prospective requirement for
the release of Northeast Savings' interest to the covered employees subsequent
to the Merger, and with the consent of Shawmut, Northeast Savings terminated
both plans effective December 1, 1994. As a result of such termination, Mr.
Walters will receive a release of Northeast Savings' interest in his insurance
policy having a value of $59,888. The four other executive officers of Northeast
will receive releases of Northeast Savings' interest in their insurance policies
having an aggregate value of approximately $75,000.
Noncompetition Agreement. In addition, Mr. Walters has entered into a
noncompetition agreement with Shawmut (the "Noncompetition Agreement"). Pursuant
to the Noncompetition Agreement, Mr. Walters has agreed not to engage in
competitive activity with Shawmut by becoming the chairman, chief executive
officer or president (or perform the duties of such positions) of any bank,
savings and loan, savings bank, credit union or other depository institution or
bank holding company, savings and loan holding company or other depository
institution holding company for a period of 30 months commencing upon the first
date following the Effective Time that he is not employed by Northeast or
Shawmut, if at the time of his
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commencement of employment with such entity the entity has total assets or
deposits in excess of $1 billion and maintains its principal office(s) in
Connecticut or Massachusetts, or more than 50% of its deposits or assets are in
Connecticut and Massachusetts.
In consideration for his agreement not to compete, Mr. Walters will be paid
an amount currently estimated to be approximately $1,144,000 (and subject to
revaluation prior to the Effective Time), to be paid in three equal installments
on the 1st, 13th and 25th month anniversaries of Mr. Walters ceasing to be
employed by Northeast or Shawmut; provided, that if any such payment, together
with any other payments under any other plan, agreement or arrangement would
constitute a "parachute payment" for federal income tax purposes, Mr. Walters
would be entitled to a "gross up" payment for any portion of such payments that
are subject to the federal excise tax relating to "excess parachute payments" so
as to enable him to retain the payments he would have retained had he not been
subject to such excise tax.
Retention Bonus Arrangements. Shawmut has committed to pay bonuses, at 50%
of base salary, to 18 executive officers of Northeast, not including Mr. Walters
and Mr. Rutland, provided they continue in their current positions through the
consummation of the Merger and to pay additional bonuses, at 50% of base salary,
to such employees if such employees are not offered similar positions following
the Merger, or do not accept similar positions. These payments are to be made in
recognition of the essential roles these individuals will play in the Merger
process and as compensation for the additional work that will be required and to
encourage such individuals to remain with Shawmut following the Merger. Under
these arrangements, such executive officers of Northeast may be paid bonuses up
to an aggregate maximum amount of approximately $1.7 million under such bonus
arrangements. Such executives are also generally provided with continued health
coverage for 18 months upon a termination of employment at any time prior to 18
months from the Effective Time, and continued coverage under a Supplemental
Medical Reimbursement Plan ("SMRP") and disability plan for 18 months after the
Effective Time. Northeast Savings, with the consent of Shawmut, elected to
terminate its SMRP and disability plan effective December 1, 1994 and to pay the
covered executives an amount equivalent to their coverage under or reimbursable
to them under the plans for an 18 month period. In consideration for Shawmut's
consent, Shawmut was relieved of any obligation to provide the 18 months
coverage after the Effective Time discussed above. As a result of such
termination, Mr. Walters will be paid $29,200, Mr. Rutland will be paid $3,400
and four other executive officers will be paid an aggregate of $49,000.
Directors Pension Plan. Northeast Savings has a pension plan for directors
who are not employees of Northeast (the "Directors Pension Plan"), which
provides an annual benefit of $15,000 for the lesser of ten years or the
cumulative period of full and partial years of board service by a director,
determined in full calendar quarters. Payment of such benefit commences after
the annual meeting of stockholders after a director attains age 70. The
Directors Pension Plan also contains a change in control provision pursuant to
which each eligible and active director as of the date of the change in control
is deemed to have the years of service such director would have if he remained a
director until the June 30 after he attained age 70, and that each director
would be paid the actuarial present value of his or her pension benefit prior to
the change in control. The Merger would constitute a change in control under the
Directors Pension Plan. Assuming such change in control occurred as of January
31, 1995, directors Carmen, Clark, Fantini, Gordon, Hamilton, Lawrence, O'Neill,
Sarney, Schuler, Silber and Zuckerman each would receive a payment in an amount
ranging between $31,696 and $93,942 as the full payment of his or her benefits
under the Directors Pension Plan. The aggregate of such payments would be
$656,856. The amount of such payments that result from an increase in the value
of a director's interest under the Directors Pension Plan as a result of the
Merger ranges from $0 to $32,673.
Indemnification. The Merger Agreement also provides that, in the event of
any threatened or actual claim, action, suit, proceeding or investigation in
which any person who is or has been a director, officer or employee of Northeast
or any of its subsidiaries is, or is threatened to be, made a party based in
whole or in part on, or pertaining to the fact that such person was a director,
officer or employee of Northeast or any of its subsidiaries, Shawmut will,
subject to the conditions set forth in the Merger Agreement, indemnify such
person to the fullest extent permitted by Northeast's Certificate of
Incorporation and By-laws and permitted by Delaware law, against any liability
or expense incurred in connection with any such action, suit, claim, proceeding
or investigation. Such indemnification rights will continue for a period of six
years from the
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Effective Time. The Merger Agreement further provides that Shawmut will, subject
to the conditions set forth in the Merger Agreement including certain cost-based
limitations, use its best efforts to cause the persons serving as officers and
directors of Northeast immediately prior to the Merger to be covered for a
period of four years by Northeast's directors and officers liability insurance
policy (or any equivalent substitute therefor).
DEPCO. As of the Record Date, DEPCO beneficially owned 800,000 shares, or
5.6% of the outstanding shares, of Northeast Common Stock, which it acquired
upon exercise of warrants (the "Warrants") subsequent to September 30, 1994. In
addition, DEPCO holds all outstanding shares of Northeast's $8.50 Cumulative
Preferred Stock, Series B (the "Series B Preferred Stock"). As holder of the
Series B Preferred Stock, DEPCO currently is entitled to elect two members of
the Northeast Board. Currently, John F. McJennett III, the Executive Director of
DEPCO, serves as a member of the Northeast Board pursuant to the election by
DEPCO. DEPCO acquired the Warrants and the Series B Preferred Stock pursuant to
a Stock and Warrant Purchase Agreement, dated as of April 21, 1992 (the "DEPCO
Agreement"), by and between DEPCO and Northeast. In the event of a change in
control of Northeast, the DEPCO Agreement requires Northeast to make an offer to
repurchase the Series B Preferred Stock, to the extent Northeast has available
funds, within 45 days of the consummation of such change in control, so long as
DEPCO (or a certain nominee holder) is entitled under the Series B Preferred
Stock to elect at least one director. The consummation of the Merger would
constitute a change in control under the DEPCO Agreement. It is anticipated
that, upon consummation of the Merger, Shawmut will redeem the Series B
Preferred Stock. The aggregate amount of such redemption would be $44,720,639,
as of March 31, 1995.
EMPLOYEE MATTERS
The Merger Agreement provides that the employees of Northeast and its
subsidiaries (the "Northeast Employees") will be entitled to participate in
Shawmut's employee benefit plans in which similarly situated employees of
Shawmut participate, to the same extent and on the same terms and conditions
(including waiver of pre-existing conditions prohibitions) as comparable
employees of Shawmut. To the extent Northeast employees participate in any
employee benefit plans of Shawmut, such employees will be credited with prior
years of service with Northeast and its subsidiaries (to the extent Northeast
gave effect to such service) as if such service were with Shawmut, for purposes
of eligibility and vesting, but not for benefit accrual purposes (except as
regards to vacation, severance and short-term disability accruals or for
purposes of determining employer contributions for retiree medical benefits).
In addition, Northeast maintains certain stock option plans. Such plans
provide for an immediate acceleration of the vesting period for options granted
under the plans as a result of the execution of the Merger Agreement. For a
description of the treatment of Northeast options granted pursuant to such plans
under the Merger, See "-- Exchange Ratio."
EFFECTIVE TIME
The Merger will become effective upon the filing of a certificate of merger
with the Secretary of State of the State of Delaware in accordance with
applicable law or such later time as is specified in such certificate (the
"Effective Time"). The filing with respect to the Merger will occur on the tenth
business day after satisfaction or waiver of the latest to occur of the
conditions to the Merger specified in the Merger Agreement, unless another date
is agreed to in writing by Shawmut and Northeast. See "-- Conditions to the
Merger" below. It is expected that a period of time will elapse between the
Special Meeting and the Effective Time while the parties seek to obtain the
regulatory approvals required to consummate the Merger. There can be no
assurance that such approvals will be obtained or that the Merger will be
completed. There can also be no assurance that such approvals will not contain
materially adverse conditions. See "-- Regulatory Approvals Required for the
Merger" below. The Merger Agreement may be terminated by either party if, among
other reasons, the Merger has not been consummated on or before June 30, 1995
unless the failure to consummate is due to a breach of an agreement or covenant
of the Merger Agreement by the party seeking to terminate the Merger Agreement.
See "-- Waiver and Amendment; Termination" below.
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CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
As soon as practicable after the Effective Time, Chemical Bank, acting in
the capacity of exchange agent (the "Exchange Agent"), will mail to each holder
of record of Northeast Common Stock a form of letter of transmittal, together
with instructions for the exchange of such holder's certificates formerly
representing shares of Northeast Common Stock for certificates representing
shares of Shawmut Common Stock and cash in lieu of fractional shares.
HOLDERS OF NORTHEAST COMMON STOCK SHOULD NOT SEND IN THEIR CERTIFICATES
UNTIL THEY RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS FROM THE
EXCHANGE AGENT.
Upon proper surrender to the Exchange Agent of one or more certificates
representing shares of Northeast Common Stock, together with a properly
completed letter of transmittal, there will be issued and mailed to the holder
of Northeast Common Stock surrendering such items a certificate or certificates
representing the number of shares of Shawmut Common Stock to which such holder
is entitled, if any, and, where applicable, a check for the amount representing
any fractional share determined in the manner described below, without interest.
The Northeast certificate or certificates so surrendered will be cancelled.
Notwithstanding anything to the contrary contained herein, no certificate
representing Shawmut Common Stock or cash in lieu of a fractional share interest
will be delivered to a person who is an affiliate (for purposes of Rule 145
under the Securities Act) of Northeast unless such affiliate has theretofore
executed and delivered to Shawmut the agreement referred to below under
"-- Resales of Shawmut Common Stock Received in the Merger."
No dividend or other distribution payable after the Effective Time with
respect to Shawmut Common Stock will be paid to the holder of any unsurrendered
Northeast certificate until the holder surrenders such certificate, at which
time the holder will be entitled to receive all previously withheld dividends
and distributions, without interest. No holder of an unsurrendered Northeast
certificate will be entitled, until the surrender of such certificate, to vote
the shares of Shawmut Common Stock into which his or her shares of Northeast
Common Stock have been converted.
After the Effective Time, there will be no transfers on the stock transfer
books of Northeast of shares of Northeast Common Stock issued and outstanding
immediately prior to the Effective Time. If certificates representing shares of
Northeast Common Stock are presented for transfer after the Effective Time, they
will be cancelled and exchanged for certificates representing shares of Shawmut
Common Stock.
Neither Shawmut nor Northeast nor any other person will be liable to any
former holder of Northeast Common Stock for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
If a certificate for Northeast Common Stock has been lost, stolen or
destroyed, the Exchange Agent will issue the consideration properly payable in
accordance with the Merger Agreement upon receipt of appropriate evidence as to
such loss, theft or destruction, appropriate evidence as to the ownership of
such certificate by the claimant and appropriate and customary indemnification.
No fractional shares of Shawmut Common Stock will be issued in the Merger.
Instead, the Merger Agreement provides that each holder of shares of Northeast
Common Stock exchanged pursuant to the Merger who would otherwise have been
entitled to receive a fraction of a share of Shawmut Common Stock will receive,
in lieu thereof, cash in an amount equal to such fractional part of a share of
Shawmut Common Stock multiplied by the average of the closing sale prices of
Shawmut Common Stock on the NYSE (as reported by The Wall Street Journal) for
the five trading days immediately preceding the Effective Time. No such holder
will be entitled to dividends, voting rights or any other rights as a
shareholder in respect of any fractional share to which such holder would
otherwise have been entitled to receive.
Shares of Shawmut capital stock (including Shawmut Common Stock) issued and
outstanding immediately prior to the Effective Time will remain issued and
outstanding after the Merger.
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CONDITIONS TO THE MERGER
The respective obligations of Shawmut and Northeast to effect the Merger
are subject to the satisfaction of the following conditions at or prior to the
Effective Time: (i) approval of the Merger Agreement by the affirmative vote of
the holders of at least a majority of the outstanding shares of Northeast Common
Stock entitled to vote thereon; (ii) the authorization for listing on the NYSE,
subject to official notice of issuance of the shares of Shawmut Common Stock
issuable to holders of Northeast Common Stock pursuant to the Merger; (iii)
approval of the Merger Agreement and the transactions contemplated thereby by
the required governmental authorities and the expiration of any statutory
waiting periods in respect thereof, and the approval, consent or waiver of all
other governmental authorities that are necessary to the consummation of the
Merger (other than immaterial consents, the failure to obtain which would not
have a material adverse effect on Shawmut (on a combined basis giving effect to
the Merger)); provided, however, that no approval, consent or waiver will be
deemed to have been received if it includes any condition or requirement that,
in the opinion of Shawmut, would so materially adversely affect the economic or
business benefits of the transaction contemplated by Shawmut as to render
inadvisable the consummation of the Merger; provided further, that no condition
or requirement that does no more than subject Shawmut or Northeast to legal
requirements generally applicable to a bank holding company under the Bank
Holding Company Act of 1956, as amended (the "BHC Act"), or savings and loan
holding company under the Home Owners' Loan Act of 1933, as amended ("HOLA"), as
a matter of law will be deemed to affect materially and adversely the economic
or business benefits of the transactions contemplated; (see "-- Regulatory
Approvals Required for the Merger" below); (iv) no issuance of a stop order
suspending the effectiveness of the Registration Statement of which this Proxy
Statement/Prospectus forms a part and no initiation or threat by the Commission
of proceedings for that purpose; (v) no order, injunction or decree issued by
any court or agency of competent jurisdiction or other legal restraint or
prohibition which prohibits the consummation of the Merger or any of the other
transactions contemplated by the Merger Agreement (an "Injunction") will be in
effect; (vi) no statute, rule, regulation, order, injunction or decree will have
been enacted, entered, promulgated or enforced by any governmental authority
which prohibits, restricts or makes illegal consummation of the Merger; and
(vii) Shawmut and Northeast will have received an opinion of Sullivan &
Cromwell, special counsel to Shawmut, in form and substance reasonably
satisfactory to Shawmut and Northeast, as to certain tax consequences described
under "-- Federal Income Tax Consequences" below.
The obligations of Shawmut to effect the Merger are further subject to the
satisfaction, or waiver by Shawmut, of the following conditions: (i) the
representations and warranties of Northeast contained in 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 that such representations and warranties
relate to an earlier date) as of the Effective Time as though made at and as of
the Effective Time; (ii) Northeast will have performed in all material respects
all obligations required to be performed by it under the Merger Agreement at or
prior to the Effective Time; (iii) the consent, approval or waiver of each
person (other than the governmental authorities referred to in clause (iii) of
the immediately preceding paragraph) whose consent or approval is required in
order to permit the succession by the surviving corporation in the Merger to any
obligation, right or interest of Northeast or any subsidiary of Northeast under
any agreement or instrument will have been obtained, except where the failure to
obtain such consent, approval or waiver would not materially adversely affect
the economic or business benefits of the transactions contemplated by the Merger
Agreement to Shawmut so as to render inadvisable the consummation of the Merger;
(iv) no proceeding initiated by a governmental authority seeking an Injunction
will be pending; (v) DEPCO or a nominee holder or partnership created
specifically for the purpose of holding shares of the Series B Preferred Stock
and the Warrants pursuant to the DEPCO Agreement (a) will own all of the issued
and outstanding shares of the Series B Preferred Stock and will have the right
to elect and will have elected at least one current member of the Northeast
Board and (b) the directors of Northeast elected by DEPCO or any such nominee
pursuant to the terms of the Series B Preferred Stock will represent less than
20% of the number of members of the Northeast Board; and (vi) Shawmut will have
received from Northeast's independent public accountants certain customary
letters with respect to certain financial information of Northeast included in
the Registration Statement.
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The obligations of Northeast to effect the Merger are further subject to
the satisfaction, or waiver by Northeast, of the following conditions: (i) the
representations and warranties of Shawmut contained in 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 that such representations and warranties
relate to an earlier date) as of the Effective Time as though made at and as of
the Effective Time; (ii) Shawmut will have performed all obligations to be
performed by it under the Merger Agreement at or prior to the Effective Time;
(iii) the consent or approval of each person (other than the governmental
authorities referred to in clause (iii) of the second preceding paragraph) whose
consent or approval is required in connection with the transactions contemplated
by the Merger Agreement under any agreement or instrument to which Shawmut or
any of its subsidiaries is a party or is otherwise bound, except those for which
the failure to obtain such consents and approvals would not, individually or in
the aggregate, have a material adverse effect on the business, operations or
financial condition of Shawmut and its subsidiaries taken as a whole (after
giving effect to the transactions contemplated by the Merger Agreement), will
have been obtained; and (iv) no proceeding initiated by any governmental
authority seeking an Injunction is pending.
No assurance can be provided as to when, or whether, all of the regulatory
consents and 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. See "-- Regulatory Approvals Required
for the Merger" below. If the Merger is not effected on or before June 30, 1995,
the Merger Agreement may be terminated by a vote of a majority of the Board of
Directors of either Shawmut or Northeast, unless the failure to effect the
Merger by such date is due to the breach of an agreement or covenant of the
Merger Agreement by the party seeking to terminate the Merger Agreement.
BANK REORGANIZATION
Shawmut intends that, following the consummation of the Merger, the assets
and liabilities of Northeast Savings will be transferred to national bank
subsidiaries of Shawmut (the "Bank Reorganization"). In the Bank Reorganization,
(i) Northeast Savings will relocate its home office from Hartford, Connecticut
to Saratoga Springs, New York (the "Relocation"), (ii) Shawmut Bank Connecticut,
National Association, a national bank subsidiary of Shawmut ("SBC"), will
acquire each Connecticut branch of Northeast Savings, and Shawmut Bank, National
Association, a national bank subsidiary of Shawmut ("SBM"), will acquire each
Massachusetts branch of Northeast Savings (the "Branch Purchases"), (iii)
Northeast Savings will convert into Shawmut Savings and Loan Association, a New
York stock-form savings and loan association ("SSLA") (the "Conversion"), (iv)
Shawmut Bank New York, National Association ("SBNY") will be chartered (the
"Chartering") and (v) SSLA will be merged with and into SBNY (the "Subsidiary
Merger"). The Bank Reorganization is subject to the prior receipt of certain
regulatory approvals, and there can be no assurance that such approvals will be
obtained or that the Bank Reorganization will be consummated. It is expected
that all requisite regulatory approvals for the Bank Reorganization will be
received prior to, or at the time of, the receipt of all requisite regulatory
approvals for the Merger and, accordingly, that the Bank Reorganization will be
consummated shortly following the Merger. As a result of the conditions set
forth in the letter, dated December 22, 1994, by which the OTS approved the
Merger (the "OTS Approval Letter"), the Merger may not be consummated prior to
receipt of all required regulatory approvals for the Bank Reorganization. See
"-- Regulatory Approvals Required for the Merger."
REGULATORY APPROVALS REQUIRED FOR THE MERGER
The Merger. The Merger is subject to the prior approval of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") under
Section 4 of the BHC Act, which requires that Shawmut obtain the prior approval
of the Federal Reserve Board for the indirect acquisition of certain nonbanking
companies, including a savings association such as Northeast Savings, which are
engaged in activities that the Federal Reserve Board, by order or regulation,
has determined to be so closely related to banking or to managing or controlling
banks as to be a proper incident thereto. Such approval of the Federal Reserve
Board was received on December 14, 1994 and provides, among other things, that
the Merger must be consummated by March 14, 1995, unless such date is extended
by the Federal Reserve Board. In the event
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such an extension would be needed, no assurances can be provided as to when or
whether such extension would be granted.
The Merger is also subject to approval of the OTS under Section 10(e)(2) of
HOLA, which requires the approval of the OTS before a savings and loan holding
company may acquire control of a savings association or a savings and loan
holding company. HOLA directs the OTS to take into consideration the financial
and managerial resources and future prospects of the company and savings
association involved, the effect of the acquisition on the savings association,
the insurance risk to the Bank Insurance Fund (the "BIF") or the Savings
Association Insurance Fund (the "SAIF") of the Federal Deposit Insurance
Corporation (the "FDIC") and the convenience and needs of the community to be
served. The OTS, however, may not approve a transaction such as the Merger if it
(i) would result in a monopoly, or would be in furtherance of any combination or
conspiracy to monopolize or to attempt to monopolize the savings and loan
business in any part of the United States, or (ii) may substantially lessen
competition in any section of the United States or tend to create a monopoly, or
in any other manner would be in restraint of trade, unless the OTS finds that
the anticompetitive effects of such transaction are clearly outweighed in the
public interest by the probable effect of the transaction in meeting the
convenience and needs of the community to be served. The OTS approved the Merger
in the OTS Approval Letter. The OTS Approval Letter also approved the
transactions comprising the Bank Reorganization. The OTS Approval Letter
provides, among other things, that (i) the Merger may not be consummated until
receipt of all necessary regulatory approvals for the Bank Reorganization and
(ii) the Merger and Bank Reorganization must be consummated by April 21, 1994,
unless such date is extended by the OTS for good cause. In the event such an
extension would be needed, no assurances can be provided as to when or whether
such extension would be granted.
In addition, the Merger is subject to the approval of the Massachusetts
Board of Bank Incorporation (the "Massachusetts Board") under Chapter 167A,
Section 2 of the Massachusetts General Laws. In granting its approvals under the
Massachusetts statute, the decision of the Massachusetts Board must be based,
among other things, upon finding whether or not competition among banking
institutions will be unreasonably affected and whether public convenience and
advantage will be promoted. In making such determination, the Massachusetts
Board must consider initial capital investments, job creation plans, consumer
and business services, commitments to maintain and open branch offices within a
bank's delineated local community and such other matters as the Massachusetts
Board may deem necessary or advisable. An application for the foregoing approval
has been submitted. In addition, the Massachusetts Board may not approve the
Merger until it has received notice from the Massachusetts Housing Partnership
Fund Board ("MHP") that Shawmut or SBM has made satisfactory arrangements to
agree to lend to the MHP an amount equal to approximately 90 basis points of the
assets located in Massachusetts to be acquired by Shawmut as a result of the
Merger, for the purpose of financing affordable housing in Massachusetts. It is
anticipated that negotiations between the MHP and Shawmut or SBM in this regard
will be held concurrently with the processing of the application now before the
Massachusetts Board.
The Merger is also subject to the filing of an application with the
Connecticut Banking Commissioner under Section 36-423 of the Banking Law of
Connecticut. Under the Connecticut statute, the Connecticut Banking Commissioner
may disapprove the Merger only if it would result in a monopoly, or would be in
furtherance of any combination or conspiracy to monopolize or attempt to
monopolize the business of banking in the state of Connecticut or if the
Connecticut Banking Commissioner should determine that the effect of the
proposed establishment or acquisition may be substantially to lessen
competition, or would tend to create a monopoly, or would be in restraint of
trade, unless the Connecticut Banking Commissioner finds that the
anticompetitive effects of the merger are clearly outweighed in the public
interest by the probable effect of the merger in meeting the convenience and
needs of the community to be served. In addition, the Connecticut Banking
Commissioner must consider whether: (i) the investment and lending policies of
Northeast Savings are consistent with safe and sound banking practices and will
benefit the economy of Connecticut; (ii) the services of Northeast Savings are
consistent with safe and sound banking practices and will benefit the economy of
Connecticut; (iii) the acquisition will not substantially lessen competition in
the banking industry of Connecticut; and (iv) Shawmut (A) has sufficient capital
to ensure, and agrees to ensure, that Northeast Savings will comply with
applicable minimum capital requirements, and (B) has sufficient managerial
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resources to operate Northeast and Northeast Savings in a safe and sound manner.
The Connecticut Banking Commissioner must also find that the subsidiaries of
Shawmut have a record of compliance with the requirements of the Community
Reinvestment Act of 1977 (the "CRA"), and applicable consumer protection laws;
and Northeast Savings will provide adequate services to meet the banking needs
of all community residents, including low income residents and moderate income
residents, in accordance with a plan submitted by Shawmut to the Connecticut
Banking Commissioner. In making such finding, the Connecticut Banking
Commissioner must consider, among other factors, whether the plan identifies
specific unmet credit and consumer banking needs in the local community and
specifies how such needs will be satisfied, provides for sufficient distribution
of banking services among branches or satellite devices, or both, located in low
income neighborhoods, contains adequate assurances that banking services will be
offered on a nondiscriminatory basis and demonstrates a commitment to extend
credit for housing, small business and consumer purposes in low income
neighborhoods. An application for the foregoing approval has been submitted.
The Bank Reorganization. The transactions that are part of the Bank
Reorganization are also subject to the making of applications to and the receipt
of approvals from a number of regulatory agencies.
The Relocation required the approval of the OTS pursuant to 12 C.F.R.
sec.sec. 545.92 and 545.95. As stated above, the OTS approved the Relocation in
the OTS Approval Letter. In granting its approval under such regulations, the
OTS assessed the overall policies, condition and operation of Northeast Savings
as well as its record of helping to meet the credit needs of its entire
community, including low- and moderate-income neighborhoods.
The Branch Purchases will each require the approval of the Office of the
Comptroller of the Currency (the "OCC") pursuant to (i) 12 U.S.C. sec. 215c and
the Bank Merger Act (Section 18(c)(2) of the Federal Deposit Insurance Act (the
"FDIA")), relating to the acquisition of assets and assumption of liabilities by
national banks, and (ii) Section 5(d)(3) of the FDIA, relating to the assumption
of deposit liabilities of a SAIF member (such as Northeast Savings) by a BIF
member (such as SBC and SBM). Applications for the foregoing approvals have been
filed. In addition, a notice was filed with the OTS with respect to each of the
Branch Purchases pursuant to 12 C.F.R. sec. 562.22(h)(2). In granting its
approvals under 12 U.S.C. sec. 215c and the Bank Merger Act, the OCC must take
into consideration, among other factors, the financial and managerial resources
and future prospects of the institutions and the convenience and needs of the
communities to be served. The Bank Merger Act prohibits the OCC from approving a
transaction if (i) it would result in a monopoly or be in furtherance of any
combination or conspiracy to monopolize or to attempt to monopolize the business
of banking in any part of the United States or (ii) its effect in any section of
the country may be substantially to lessen competition or to tend to create a
monopoly, or if it would in any other manner be a restraint of trade, unless the
OCC finds that the anticompetitive effects are clearly outweighed by the public
interest and the probable effect of the transaction in meeting the convenience
and needs of the communities to be served. A transaction subject to the Bank
Merger Act may not be consummated until the 30th day following the date of
receipt of Bank Merger Act approval, during which time the United States
Department of Justice may challenge the transaction on antitrust grounds, or, if
the OCC has not received any adverse comments from the Department of Justice on
antitrust grounds, such shorter period of time as may be prescribed by the OCC
with the concurrence of the Department of Justice, but in no event less than 15
days after OCC approval, except that the OCC and the Department of Justice may
waive such post-approval waiting period altogether in the case of certain
affiliate transactions. The standards for approval under Section 5(d)(3) of the
FDIA are substantially similar to the standards imposed by the Bank Merger Act.
The Conversion required an application to the New York Banking Department
pursuant to Section 410 of the New York Banking Law and Part 87 of the General
Regulations of the New York Banking Board. Such application has been filed. In
addition, the Conversion must comply with the procedural requirements of the OTS
set forth in Section 5(i)(3) of HOLA.
The Chartering required (i) an application to the OCC to charter SBNY, (ii)
an application to the Federal Reserve Board pursuant to Sections 3(a)(1) and (3)
of the BHC Act for Shawmut to acquire SBNY and for Northeast to become a bank
holding company, (iii) an application to the New York Banking Board
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pursuant to Section 142 of the New York Banking Law to authorize Shawmut to
become a New York bank holding company and an application to the New York
Banking Department pursuant to Section 142-b(1) of the New York Banking Law for
a determination that Shawmut, a non-New York bank holding company, may acquire
SBNY, a national bank located in New York, and (iv) an application to the
Massachusetts Board pursuant to Chapter 167A, Section 2 of the Massachusetts
General Laws to authorize Shawmut to acquire SBNY. Such applications have been
filed. In addition, SBNY must submit an application for subscription for the
capital stock of the Federal Reserve Bank of New York under Section 2 of the
Federal Reserve Act.
In considering a charter application, the OCC must consider, among other
things, (i) the bank's future earnings prospects, (ii) the general character of
its management, (iii) the adequacy of its capital structure, (iv) the
convenience and needs of the community to be served by the bank, (v) the
financial history and condition of the bank and (vi) whether or not the bank has
complied with all provisions of the National Bank Act and whether or not its
corporate powers are consistent with the purposes of the FDIA. On November 21,
1994, the OCC approved the organization of SBNY as an interim national bank.
Certain additional approvals of the OCC are required to complete the
establishment of SBNY.
The standards for approval under Section 3 of the BHC Act are substantially
similar to those standards described above with respect to the Bank Merger Act.
The Federal Reserve Board has the authority to deny an application under Section
3 of the BHC Act if it concludes that the combined organization would have an
inadequate capital position or if the acquiring organization does not meet the
requirements of the CRA. Section 3(d) of the BHC Act as currently in effect
prohibits the Federal Reserve Board from approving the acquisition by a bank
holding company of a bank located in a state other than such bank holding
company's principal state of operations unless the laws of the state in which
the bank to be acquired is located expressly permit such acquisition. For
purposes of Section 3(d) of the BHC Act, Shawmut's principal state of operation
is Massachusetts. New York, which is the state in which SBNY is located, has
enacted legislation that permits the acquisition of a New York bank by a bank
holding company located in another state so long as that state permits a bank
holding company, the principal operations of which are located in New York, to
acquire a bank located in such state under conditions substantially the same as
those imposed by the laws of New York. On January 4, 1995, the New York Banking
Department issued a determination that Massachusetts satisfies the standards of
such legislation. On January 24, 1995, the Federal Reserve Board approved the
application of Shawmut under Section 3 of the BHC Act to acquire SBNY. Under
Section 3 of the BHC Act, the acquisition of a bank may not be consummated until
the 30th day following the date of Federal Reserve Board approval, during which
time the United States Department of Justice may challenge the transaction on
antitrust grounds, or if the Federal Reserve Board has not received any adverse
comments from the Department of Justice on antitrust grounds, such shorter
period of time as may be prescribed by the Federal Reserve Board with the
concurrence of the Department of Justice, but in no event less than 15 days
after Federal Reserve Board approval. The commencement of any antitrust action
would stay the effectiveness of the Federal Reserve Board's approval unless a
court specifically orders otherwise. In its approval of the acquisition of SBNY
by Shawmut, the Federal Reserve Board required such acquisition to be
consummated no later than three months after January 24, 1995, unless such date
is extended by the Federal Reserve Board. In the event such an extension would
be needed, no assurances can be given as to when or whether such extension would
be granted.
New York law requires the New York Banking Board, in determining whether or
not to approve an application under Section 142 of the New York Banking Law, to
take into consideration, among other things, (i) whether the proposed
transaction would be inconsistent with adequate or sound banking or would result
in such a lessening of competition as to be injurious to the interest of the
public or tend toward monopoly and (ii) the public interest and the needs and
convenience thereof. Section 142-b(1) of the New York Banking Law requires any
acquisition of a New York bank by an out-of-state bank holding company to be
approved by the Superintendent of Banks of the State of New York and prohibits
the approval of any such acquisition unless the principal state of operations of
such bank holding company permits a bank holding company, the principal
operations of which are located in New York, to acquire a bank located in such
state under conditions substantially the same as those imposed by the laws of
New York. For purposes of Section 142-b(1) of the New York Banking Law,
Shawmut's principal state of operation is Connecticut. On December 1, 1994, (i)
the New York Banking Board approved Shawmut's application pursuant to Section
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142 of the New York Banking Law to become a New York bank holding company as a
result of Shawmut's acquisition of SBNY and (ii) the Superintendent of Banks of
the State of New York approved Shawmut's application under Section 142-b of the
New York Banking Law to acquire SBNY.
The standards for approval under Massachusetts law are discussed above.
The Subsidiary Merger required (i) an application to the OCC pursuant to 12
U.S.C. sec. 215c and the Bank Merger Act and (ii) an application to the New York
Banking Department pursuant to Section 600(7) of the New York Banking Law and
Part 16 of the General Regulations of the New York Banking Board. Applications
for the foregoing approvals have been submitted. In addition, a notice to the
OTS was filed with respect to the Subsidiary Merger pursuant to 12 C.F.R.
sec. 562.22(h). The standards for approval under 12 U.S.C. sec. 215c and the
Bank Merger Act are discussed above. The standards for approval by the New York
Banking Department are substantially similar to those discussed above with
respect to Section 142 of the New York Banking Law.
The Merger cannot proceed in the absence of the requisite regulatory
approvals for the Merger. In addition, the OTS Approval Letter requires the
receipt of all necessary regulatory approvals for the Bank Reorganization as a
condition to the consummation of the Merger. See "-- Conditions to Consummation
of the Merger" and "-- Waiver and Amendment; Termination." THERE CAN BE NO
ASSURANCE THAT ALL OF REQUIRED REGULATORY APPROVALS WILL BE OBTAINED, AND, IF
THE MERGER IS APPROVED, THERE CAN BE NO ASSURANCE AS TO THE DATE OF ANY SUCH
APPROVAL. THERE CAN ALSO BE NO ASSURANCE THAT ANY SUCH APPROVALS WILL NOT
CONTAIN A CONDITION OR REQUIREMENT THAT CAUSES SUCH APPROVALS TO FAIL TO SATISFY
THE CONDITIONS SET FORTH IN THE MERGER AGREEMENT AND DESCRIBED ABOVE UNDER
"-- CONDITIONS TO CONSUMMATION OF THE MERGER."
Shawmut and Northeast are not aware of any material governmental approvals
or actions that are required for consummation of the Merger (as currently
structured), except as described above. A restructuring of the Merger could
result in different approvals being required. Should any other approval or
action be required, it is presently contemplated that such approval or action
would be sought.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, Northeast has agreed that until the
Effective Time, except as provided in the Merger Agreement or with the prior
consent of Shawmut, Northeast and its subsidiaries will carry on their
respective businesses in the ordinary course consistent with prudent banking
practices. Northeast has agreed to, and to use its best efforts to cause its
subsidiaries to, (i) preserve intact its and their business organizations; (ii)
keep available to itself and Shawmut the present services of its and their
employees; and (iii) preserve intact for itself and Shawmut the goodwill of its
and their customers and others with whom business relationships exist.
The Merger Agreement also contains certain restrictions on the conduct of
Northeast's business pending consummation of the Merger. In particular, the
Merger Agreement provides that, except with the prior written consent of Shawmut
and subject to certain exceptions, Northeast and its subsidiaries may not, among
other things: (i) solely in the case of Northeast, declare or pay any dividends
on, or make any other distributions in respect of, any of its capital stock
except for regular dividends on the Series B Preferred Stock; (ii) (a) adjust,
split, combine or reclassify any shares of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock (other than payment of
regular dividends on the Series B Preferred Stock) or grant any stock
appreciation rights except upon the exercise or fulfillment of rights or options
issued or existing pursuant to plans, programs or arrangements in existence on
the date of the Merger Agreement or (b) repurchase, redeem or otherwise acquire
(except for the acquisition of Trust Account Shares and DPC Shares or as
required by the DEPCO Agreement) any shares of the capital stock of Northeast or
any of its subsidiaries or securities convertible into or exchangeable therefor;
(iii) issue, deliver or sell, or authorize or propose the issuance, delivery or
sale of, any shares of its capital stock (other than payment of regular
dividends on the Series B Preferred Stock) or securities convertible into or
exchangeable therefor or any rights or warrants or options to acquire shares or
enter into any agreement with respect to the foregoing, other than grants of
options to directors and the issuance of common stock upon exercise of options;
(iv) amend its Certificate of Incorporation or By-laws; (v) make any
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capital expenditures other than in the ordinary course of business, as necessary
to maintain existing assets in good repair or certain other contemplated capital
expenditures; (vi) enter into any new or materially alter or expand any present
line of business other than certain contemplated new lines of businesses, or
material alterations or expansions of present lines of business; (vii) acquire
or agree to acquire any business or division thereof or otherwise acquire any
assets (other than in the ordinary course of business); (viii) except as
required by law, take any action that is intended or could reasonably be
expected to result in any of its representations and warranties set forth in the
Merger Agreement being or becoming untrue in any material respect, or in any of
the conditions to the Merger not being satisfied, or in a violation of any
provision of the Merger Agreement; (ix) change its methods of accounting in
effect at March 31, 1994; (x) (a) adopt, amend, renew (for a term longer than
the prior term) or terminate (except as may be required by law) any employee
benefit plan or agreement, arrangement, plan or policy between Northeast or any
of its subsidiaries and any of its current or former directors, officers and
employees, (b) except for normal increases in the ordinary course of business
consistent with past practice or except as required by applicable law, increase
the compensation or fringe benefits of any director, officer or employee or (c)
enter into, modify or renew (for a term longer than the prior term) any
contract, agreement, commitment or arrangement providing for the payment to any
director, officer or employee of compensation or benefits contingent, or the
terms of which are materially altered, upon the occurrence of any of the
transactions contemplated by the Merger Agreement; (xi) take or cause to be
taken any action that would cause the Merger to fail to qualify as a tax-free
reorganization under Section 368 of the Code; (xii) other than in the ordinary
course of business consistent with prudent banking practice dispose or agree to
dispose of its material assets, properties or other rights or agreements; (xiii)
other than in the ordinary course of business consistent with prudent banking
practice, incur any indebtedness for borrowed money, or assume, guarantee,
endorse or otherwise become responsible for the obligations of any other entity;
(xiv) file any application to relocate or terminate the operations of any of
Northeast's or its subsidiaries' banking offices (other than the move of
Northeast's head office to Farmington, Connecticut); (xv) breach or default on
any regulatory agreement or materially breach or default on any material
contract or license to which Northeast or any of its subsidiaries is a party or
by which any of them or their respective properties is bound; (xvi) invest or
commit to invest in real estate or any real estate development project; (xvii)
create, renew, amend or terminate or give notice to do the same to any material
contract, agreement or lease for goods, services or office space to which
Northeast or any of its subsidiaries is a party or by which Northeast or any of
its subsidiaries or their respective property is bound, except that Northeast
may renew contracts, agreements or leases in the ordinary course of business
after consultation with Shawmut; (xviii) settle any claim, action or proceeding
involving any liability of Northeast or any subsidiary of Northeast for material
money damages or material restrictions upon the operation of Northeast or any
subsidiary of Northeast; (xix) take any other action that would materially
adversely affect or materially delay the ability of Shawmut or Northeast to
obtain the requisite regulatory approvals or otherwise materially adversely
affect Shawmut's ability to consummate the transactions contemplated by this
agreement; or (xx) authorize or enter into any agreement or commitment to do any
of the foregoing.
Pursuant to the Merger Agreement, Shawmut has also agreed that until the
Effective Time, except as provided in the Merger Agreement or with the prior
consent of Northeast, Shawmut and its subsidiaries will carry on their
respective businesses in the ordinary course consistent with prudent banking
practice. The Merger Agreement also provides, among other things, that Shawmut
will not and will not permit any of its subsidiaries to: (i) take any action
that is intended or may reasonably be expected to result in any of its
representations and warranties set forth in the Merger Agreement being or
becoming untrue in any material respect, or in any of the conditions to the
Merger not being satisfied, or in a violation of any provision of the Merger
Agreement, except as may be required by applicable law; (ii) take or cause to be
taken any action that would cause the Merger to fail to qualify as a tax-free
reorganization under Section 368 of the Code; (iii) take any action that would
materially adversely affect or materially delay the ability of Shawmut or
Northeast to obtain the regulatory approvals required to consummate the Merger
or otherwise materially adversely affect Shawmut's ability to consummate the
transaction contemplated by this Agreement; (iv) solely in the case of Shawmut,
declare or pay any dividend on, or make any other distributions in respect of,
Shawmut Common Stock except for regular dividends and dividends or distributions
in Shawmut Common Stock; (v) consolidate with or merge into any other person or
convey, transfer or lease its properties and assets substantially as an
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entirety to any person unless such person shall expressly assume the obligations
of Shawmut under the Merger Agreement; or (vi) authorize or enter into any
agreement or commitment to do any of the foregoing.
WAIVER AND AMENDMENT; TERMINATION
Prior to the Effective Time, any provision of the Merger Agreement may be
waived by the party benefitted by the provision or amended or modified
(including the structure of the transaction) by an agreement in writing approved
or authorized by the Boards of Directors of Shawmut and Northeast, provided that
after the vote of the stockholders of Northeast the Merger Agreement may not be
amended to reduce the amount or change the form of the consideration to be
received by Northeast stockholders.
The Merger Agreement may be terminated at any time prior to the Effective
Time, either before or after its approval by the Northeast stockholders, as
follows: (i) by the mutual consent of Shawmut and Northeast if the majority of
the Boards of Directors of each so determines; (ii) by either Shawmut or
Northeast upon written notice to the other (a) 90 days after the date on which
any request or application for a necessary regulatory approval is denied or
withdrawn at the request of the governmental authority that must grant such
approval, unless within such 90-day period a petition for rehearing or an
amended application has been filed with the applicable governmental authority
(or unless the failure to obtain the necessary regulatory approval is due to the
failure of the party seeking to terminate the Merger Agreement to perform or
observe its covenants and agreements set forth in the Merger Agreement) or (b)
if any governmental authority of competent jurisdiction issues a final
nonappealable order enjoining or otherwise prohibiting the consummation of any
of the transactions contemplated by the Merger Agreement; (iii) by either
Shawmut or Northeast if its Board of Directors so determines, in the event that
the Merger has not been consummated by June 30, 1995, unless the failure to
consummate the Merger is due to a breach of an agreement or covenant of the
Merger Agreement by the party seeking to terminate the Merger Agreement; (iv) by
either Shawmut or Northeast, if the Northeast stockholders fail to approve the
Merger Agreement (provided that if Northeast is the terminating party, it is not
in breach of its obligations in the Merger Agreement with respect to other
takeover proposals (as defined below) or the meeting of its stockholders to
approve the Merger Agreement); (v) by either Shawmut or Northeast in the event
of (a) a material breach by the other of any of its representations or
warranties contained in the Merger Agreement which is not cured within 45 days
after written notice of such breach is given to the breaching party or which
breach, by its nature, cannot be cured prior to the Effective Time or (b) a
material breach of any of the covenants or agreements contained in the Merger
Agreement by the other which is not cured within 45 days after written notice of
such breach is given to the breaching party; or (vi) by Northeast, by action of
a majority of its Board of Directors, by giving written notice of such election
to Shawmut within the five day period commencing with the Determination Date, in
the event the Shawmut Common Stock Average Price on the Determination Date is
less than $21.465 per share, provided that no right of termination will arise
under this provision if Shawmut elects within three days of receipt of such
written notice to increase the Exchange Ratio such that the per share value of
the Shawmut Common Stock (valued at the Determination Date) to be paid in
respect of shares of Northeast Common Stock is at least equal to $10.875 per
share. See "-- Exchange Ratio" above.
In the event of the termination of the Merger Agreement by either Shawmut
or Northeast, neither Shawmut nor Northeast will have any further obligations
under the Merger Agreement except (i) for certain specified provisions of the
Merger Agreement relating to confidentiality and expenses; (ii) any payments by
Northeast to Shawmut following the occurrence of a "Purchase Event" described
below; and (iii) that no party will be relieved or released from any liabilities
or damages arising out of its willful breach of any provisions of the Merger
Agreement.
Pursuant to the Merger Agreement, Northeast has agreed to pay Shawmut a fee
of $11,000,000 following the occurrence of a Purchase Event.
A "Purchase Event" means either of the following events or transactions:
(1) The acquisition by any person, other than Shawmut or any
subsidiary of Shawmut, alone or together with such person's affiliates and
associates, or any group, of beneficial ownership of 50% or more of
Northeast Common Stock; or
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(2) Northeast or any subsidiaries of Northeast, without having
received Shawmut's prior written consent, enter into an agreement to engage
in an Acquisition Transaction (as defined below) (except that the
percentage referred to in clause (c) below is 50%) with any person other
than Shawmut or any subsidiaries of Shawmut or the Northeast Board
recommends that the shareholders of Northeast approve or accept any
Acquisition Transaction (except that the percentage referred to in clause
(c) below is 50%) with any person other than Shawmut or any subsidiaries of
Shawmut. Under the Merger Agreement, "Acquisition Transaction" means (a) a
merger or consolidation, or any similar transaction, involving Northeast or
any significant subsidiary of Northeast, (b) a purchase, lease or other
acquisition of all or substantially all of the assets or deposits of
Northeast or any significant subsidiaries of Northeast, or (c) 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 Northeast or a significant subsidiary of Northeast; provided that
the term "Acquisition Transaction" does not include any internal merger or
consolidation involving only Northeast and/or a subsidiary of Northeast.
The right to receive the fee terminates if any of the following occurs
prior to a Purchase Event: (i) the Effective Time, (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of a Preliminary Purchase Event (as defined
below), except a termination by Shawmut pursuant to the Merger Agreement upon a
material breach of a representation, warranty, covenant, or other agreement by
Northeast (unless the breach by Northeast is non-volitional), or (iii) if
termination of the Merger Agreement follows the occurrence of a Preliminary
Purchase Event, (x) the passage of twenty-four months after termination of the
Merger Agreement (eighteen months in the case of a Preliminary Purchase Event
listed in clause (4) or (5) below) if such termination is by Shawmut pursuant to
the Merger Agreement upon a material breach of a representation, warranty,
covenant, or other agreement by Northeast (unless the breach by Northeast is
non-volitional) or upon the failure to obtain the approval of the stockholders
of Northeast for the consummation of the Merger, or (y) if such termination is
otherwise pursuant to the Merger Agreement.
A "Preliminary Purchase Event" means any of the following events or
transactions:
(1) Northeast or any subsidiary of Northeast without having received
Shawmut's prior written consent enters into an agreement to engage in an
Acquisition Transaction with any person other than Shawmut or any
subsidiary of Shawmut or the Northeast Board recommends that the
shareholders of Northeast approve or accept any Acquisition Transaction
with any person other than Shawmut or any subsidiary of Shawmut;
(2) (A) Any person (other than Shawmut or any subsidiary of Shawmut)
acquires beneficial ownership or the right to acquire beneficial ownership
of 10% or more of the outstanding shares of Northeast Common Stock, or (B)
any group, other than a group of which Shawmut or any subsidiary of Shawmut
is a member, beneficially owns 10% or more of the Northeast Common Stock
then outstanding;
(3) Any person other than Shawmut or any subsidiary of Shawmut has
made a bona fide proposal to Northeast or its stockholders, by public
announcement or written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction (including,
without limitation, any situation, which any person other than Shawmut or
any subsidiary of Shawmut has commenced or has filed a registration
statement under the Securities Act with respect to a tender offer or
exchange offer to purchase any shares of Northeast Common Stock such that,
upon consummation of such offer, such person would own or control 10% or
more of the then outstanding shares of Northeast Common Stock (such an
offering referred to herein as a "Tender Offer" or an "Exchange Offer,"
respectively));
(4) After a proposal is made by a third party to Northeast or its
stockholders to engage in an Acquisition Transaction, or such third party
states its intention to Northeast to make such a proposal if the Merger
Agreement terminates, Northeast breaches any representation, covenant or
obligation contained in the Merger Agreement and such breach would entitle
Shawmut to terminate the Merger Agreement (without regard to the cure
periods provided for therein unless such cure is promptly effected without
jeopardizing consummation of the Merger pursuant to the terms of the Merger
Agreement); or
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(5) The holders of Northeast Common Stock do not approve the Merger
Agreement at the Special Meeting or such meeting is not held or is canceled
prior to termination of the Merger Agreement, in each case after any person
(other than Shawmut or any subsidiary of Shawmut) (A) makes, or discloses
an intention to make, a bona fide proposal to engage in an Acquisition
Transaction or (B) commences a Tender Offer or files a registration
statement under the Securities Act with respect to an Exchange Offer.
NO SOLICITATION OF TRANSACTIONS
Northeast has agreed in the Merger Agreement that neither it nor any of its
subsidiaries will authorize or permit any of its officers, directors, employees
or agents directly or indirectly to solicit, initiate or encourage any inquiries
relating to, or the making of any proposal which constitutes, a "takeover
proposal" (as defined below), or, except to the extent legally required for the
discharge of the fiduciary duties of the Northeast Board, as advised in writing
by such board's outside counsel, recommend or endorse any takeover proposal, or
participate in any discussions or negotiations, or provide third parties with
any non-public information, relating to any such inquiry or proposal or
otherwise facilitate any effort or attempt to make or implement a takeover
proposal, provided, however, that Northeast may communicate information about
any such takeover proposal to its stockholders if, in the judgment of the
Northeast Board with the written advice of such Board's outside counsel, such
communication is required under applicable law. Northeast has agreed to cease
any activities, discussions or negotiations previously conducted with any
parties other than Shawmut with respect to any of the foregoing and will demand
the return of any confidential information provided to any other person and will
enforce its rights, under any confidentiality agreement, to the return of any
confidential information in the event any such other person does not return such
information; it will notify Shawmut immediately if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, it,
and will promptly inform Shawmut in writing of the relevant details with respect
to the foregoing. As used in the Merger Agreement, "takeover proposal" means any
tender or exchange offer, proposal for a merger, consolidation or other business
combination involving Northeast or any subsidiary of Northeast or any proposal
or offer to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets or deposits of, Northeast or any subsidiary of
Northeast other than the transactions contemplated or permitted by the Merger
Agreement.
RESALES OF SHAWMUT COMMON STOCK RECEIVED IN THE MERGER
The shares of Shawmut Common Stock to be issued in the Merger will be
registered under the Securities Act and will be freely transferable under the
Securities Act, except for shares issued to any Northeast stockholder who is an
"affiliate" of Northeast for purposes of Rule 145 under the Securities Act.
Affiliates may not sell their shares of Shawmut Common Stock acquired in
connection with the Merger except pursuant to an effective registration
statement under the Securities Act covering such shares or in compliance with
Rule 145 or another applicable exemption from the registration requirements of
the Securities Act. This Proxy Statement/Prospectus does not cover any resales
of Shawmut Common Stock received by persons who may be deemed to be affiliates
of Northeast. Persons who may be deemed to be affiliates of Northeast generally
include individuals or entities that control, are controlled by or are under
common control with Northeast, and may include certain officers and directors as
well as principal stockholders of Northeast.
Northeast has agreed in the Merger Agreement to use its best efforts to
cause each person who is an affiliate (for purposes of Rule 145 of the
Securities Act) of such party to deliver to Shawmut a written agreement intended
to ensure compliance with the Securities Act.
STOCK EXCHANGE LISTING
Shawmut Common Stock is listed on the NYSE. Shawmut has agreed to use its
best efforts to cause the shares of Shawmut 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. The obligations of the parties to
consummate the Merger are subject to approval for listing by the NYSE of such
shares. See "-- Conditions to the Merger" above.
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ANTICIPATED ACCOUNTING TREATMENT
The Merger is expected to qualify as a "purchase" for accounting and
financial reporting purposes. Under the purchase method of accounting, the
assets and liabilities of the company not surviving a merger are, as of the
Effective Time, recorded at their respective fair values and added to those of
the surviving company. Financial statements of the surviving company issued
after consummation of a merger reflect such values and are not restated
retroactively to reflect the historical financial position or results of
operations of the company not surviving.
The unaudited pro forma condensed financial information contained in this
Proxy Statement/Prospectus has been prepared using the purchase method of
accounting to account for the Merger. See "UNAUDITED PRO FORMA CONDENSED
FINANCIAL INFORMATION."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The federal income tax discussion set forth below is included for general
information only. It may not be applicable to certain classes of taxpayers,
including securities dealers, foreign persons, persons who acquired shares of
Northeast Common Stock pursuant to the exercise of employee stock options or
rights or otherwise as compensation and persons who hold shares of Northeast
Common Stock as part of a "straddle" or "conversion" transaction as defined in
Sections 1092(c) and 1258(c) of the Code. Northeast shareholders are urged to
consult their own tax advisers as to the specific tax consequences to them of
the Merger, including the applicability and effect of federal, state, local and
other tax laws.
General. It is intended that the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code, and that,
accordingly, for federal income tax purposes: (i) no gain or loss will be
recognized by Merger Sub, Shawmut or Northeast as a result of the Merger; (ii)
no gain or loss will be recognized by holders of Northeast Common Stock upon the
receipt of Shawmut Common Stock in exchange for Northeast Common Stock in the
Merger (except as discussed below with respect to cash received in lieu of a
fractional share interest in Shawmut Common Stock) as a result of the Merger or
the Bank Reorganization; (iii) the aggregate adjusted tax basis of the shares of
Shawmut Common Stock to be received by each holder of Northeast Common Stock in
the Merger will be the same as the aggregate adjusted tax basis in the shares of
Northeast Common Stock surrendered in exchange therefor (reduced by any amount
allocable to fractional share interests for which cash is to be received); and
(iv) the holding period of the shares of Shawmut Common Stock to be received by
each holder of Northeast Common Stock in the Merger will include the holding
period of the shares of Northeast Common Stock surrendered in exchange therefor,
provided, that such shares of Northeast Common Stock are held as capital assets
at the Effective Time.
The discussion of federal income tax considerations above summarizes the
opinion of Sullivan & Cromwell. Consummation of the Merger is conditioned upon
receipt by each of Shawmut and Northeast of an opinion, dated as of the
Effective Time, of Sullivan & Cromwell, special counsel to Shawmut, describing
certain federal income tax consequences of the Merger. In rendering its opinions
Sullivan & Cromwell is relying on certain assumptions and representations made
by Shawmut and Northeast as provided in the opinion letters.
Consequences of Receipt of Cash in Lieu of Fractional Shares. A holder of
shares of Northeast Common Stock who receives cash in the Merger in lieu of a
fractional share interest in Shawmut Common Stock will be treated for federal
income tax purposes as having received cash in redemption of such fractional
share interest. The receipt of such cash generally should result in capital gain
or loss, in an amount equal to the difference between the amount of cash
received and the portion of such shareholder's adjusted tax basis in the shares
of Northeast Common Stock allocable to the fractional share interest. Such
capital gain or loss will be long-term capital gain or loss if the holding
period (determined as described above) for the fractional shares of Shawmut
Common Stock deemed to be received and then redeemed is more than one year.
HOLDERS OF NORTHEAST COMMON STOCK SHOULD CONSULT THEIR TAX ADVISORS AS TO
THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING
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THE APPLICABILITY AND EFFECT OF ANY FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND
OTHER TAX LAWS.
NO APPRAISAL RIGHTS
Pursuant to Section 262(b) of the Delaware General Corporation law, the
stockholders of a constituent corporation in a merger generally are not entitled
to appraisal rights if the shares of stock they own are, as of the record date
fixed to determine stockholders entitled to notice of and to vote at the meeting
to act upon the agreement providing for such merger, either listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc. (a "NASDAQ/NMS Security"), or held of record by more than 2,000
stockholders. However, stockholders that would otherwise not have appraisal
rights pursuant to the provisions described in the previous sentence are
entitled to appraisal rights if such stockholders are required by the terms of
the merger to accept for their stock anything except (i) shares of the
corporation surviving the merger; (ii) shares of stock which are either listed
on a national securities exchange or designated as a NASDAQ/NMS Security or held
of record by more than 2,000 stockholders; or (iii) cash in lieu of fractional
shares of stock described in (i) and (ii) above or any combination thereof.
Northeast stockholders are not entitled to appraisal rights generally because
the shares of Northeast Common Stock are listed on the NYSE, a national
securities exchange, and such stockholders are not entitled to appraisal rights
in connection with the Merger because the shares of Shawmut Common Stock to be
issued in the Merger will be listed on the NYSE at the Effective Time, subject
to official notice of issuance. In addition, there are more than 2,000 holders
of record of Shawmut Common Stock.
CERTAIN REGULATORY CONSIDERATIONS
SUPERVISION AND REGULATION -- GENERAL
Shawmut is a bank holding company subject to supervision and regulation by
the Federal Reserve Board pursuant to the BHC Act, and files with the Federal
Reserve Board an annual report and such additional reports as the Federal
Reserve Board may require. As a bank holding company, Shawmut's activities and
those of its banking and nonbanking subsidiaries are limited to the business of
banking and activities closely related or incidental to banking, and Shawmut may
not directly or indirectly acquire the ownership or control of more than 5% of
any class of voting shares or substantially all of the assets of any company,
including a bank, without the prior approval of the Federal Reserve Board. As a
result of Shawmut's acquisition of Guardian Bank (now known as Shawmut Bank, FSB
("SBFSB")), a federal savings bank located in Boca Raton, Florida, Shawmut is
subject to supervision and regulation by the OTS as a savings and loan holding
company under HOLA.
Shawmut's banking and savings association subsidiaries (collectively, the
"subsidiary banks") are subject to supervision and examination by various
regulatory authorities. The OCC is the primary bank supervisor of Shawmut's
national bank subsidiaries, SBC and SBM. Shawmut Bank NH ("SBNH"), a state
non-member bank, is supervised by the State of New Hampshire Banking Department
and the FDIC. SBFSB is supervised by the OTS. The deposits of Shawmut's
subsidiary banks are insured by, and therefore the subsidiary banks are subject
to the regulations of, the FDIC and are also subject to requirements and
restrictions under federal and state law, including requirements to maintain
reserves against deposits, restrictions on the types and amounts of loans that
may be granted and the interest that may be charged thereon, and limitations on
the types of investments that may be made and the types of services that may be
offered. Various consumer laws and regulations also affect the operations of
Shawmut's subsidiary banks.
HOLDING COMPANY LIABILITY
Federal Reserve Board policy requires bank holding companies to serve as a
source of financial strength to their subsidiary banks by standing ready to use
available resources to provide adequate capital funds to subsidiary banks during
periods of financial stress or adversity. A bank holding company also could be
liable
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under certain provisions of banking law for the capital deficiencies of an
undercapitalized bank subsidiary. In the event of a bank holding company's
bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, the trustee will be
deemed to have assumed and is required to cure immediately any deficit under any
commitment by the debtor to any of the federal banking agencies to maintain the
capital of an insured depository institution, and any claim for a subsequent
breach of such obligation will generally have priority over most other unsecured
claims.
TRANSACTIONS WITH AFFILIATES
Shawmut's subsidiary banks are subject to restrictions under federal law
which limit certain transactions by each of them with Shawmut and its nonbanking
subsidiaries, including loans, other extensions of credit, investments or asset
purchases. Such transactions by any subsidiary bank with any one affiliate are
limited in amount to 10% of such subsidiary bank's capital and surplus and with
all affiliates to 20% of such subsidiary bank's capital and surplus.
Furthermore, such loans and extensions of credit, as well as certain other
transactions, are required to be secured in accordance with specific statutory
requirements. The purchase of low quality assets from affiliates is generally
prohibited. Federal law also provides that certain transactions with affiliates,
including loans and asset purchases, must be on terms and under circumstances,
including credit standards, that are substantially the same, or at least as
favorable to, the institution as those prevailing at the time for comparable
transactions involving other non-qualified companies or, in the absence of
comparable transactions, on terms and under circumstances, including credit
standards, that in good faith would be offered to, or would apply to,
nonaffiliated companies. Further, Shawmut and its subsidiaries are prohibited
from engaging in certain tie-in arrangements in connection with any extension of
credit, lease or sale of property or furnishing of services.
CAPITAL
Certain regulations of the federal banking agencies require the maintenance
of minimum risk-based capital ratios, which are calculated with reference to
risk-weighted assets, which include on- and off-balance sheet exposures. The
federal banking agencies have established risk-based capital and leverage ratio
guidelines that apply to Shawmut and its subsidiary banks. The minimum total
risk-based capital to risk-weighted assets ratio requirement is 8%, of which
one-half must be comprised of common equity, qualifying perpetual preferred
stock and minority interests in the equity accounts of consolidated
subsidiaries, less deductible intangibles ("Tier 1 capital"). The leverage ratio
guidelines require a minimum ratio of Tier 1 capital to average quarterly
tangible assets of at least 3%. This leverage ratio is the minimum requirement
for the most highly rated banking organizations and other banking organizations
are expected to maintain a ratio at least 100 to 200 basis points higher. The
capital ratios of Shawmut and its subsidiary banks as of December 31, 1994
exceeded all general minimum capital requirements imposed by the federal banking
agencies.
In addition to considering specific minimum capital levels, bank regulators
review capital adequacy in light of a variety of factors, including asset
quality. Therefore, the capital adequacy of a banking organization will be
impacted by, and assessed in relation to, its asset quality. In addition,
institutions which meet minimum regulatory capital requirements but are not
"well capitalized" are subject to certain restrictions and disadvantages, such
as restrictions on the receipt of brokered deposits.
Failure to satisfy the minimum capital standards of the regulatory
guidelines and requirements could subject a banking organization to enforcement
action by the regulatory authorities, including the termination of FDIC deposit
insurance.
REGULATORY RESTRICTIONS ON DIVIDENDS
It is the policy of the Federal Reserve Board that bank holding companies
should pay cash dividends on common stock only out of income available over the
past year and only if prospective earnings retention is consistent with the
organization's expected future needs. The policy further provides that bank
holding companies should not maintain a level of cash dividends that undermines
the bank holding company's ability to serve as a source of strength to its
subsidiary banks. Principal sources of revenues for Shawmut are
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dividends received from its banks and other subsidiaries and interest earned on
short-term investments and advances to subsidiaries. In addition, the OCC and
the FDIC have issued policy statements that provide that insured banks should
generally only pay dividends out of current operating earnings. In addition,
federal law imposes limitations on the payment of dividends by the subsidiaries
of Shawmut that are national banks. Two different calculations are performed to
measure the amount of dividends that may be paid: a recent earnings test and an
undivided profits test. Under the recent earnings test, a dividend may not be
paid if the total of all dividends declared by a national bank in any calendar
year is in excess of the current year's net profits combined with the retained
net profits of the two preceding years unless the bank obtains the approval of
the OCC. Under the undivided profits test, a dividend may not be paid in excess
of a bank's undivided profits then on hand, after deducting bad debts in excess
of the reserve for loan losses. Under the recent earnings test, which is the
more restrictive of the two tests, at January 1, 1995, SBC and SBM could pay up
to $170.8 million and $180.4 million, respectively, in dividends to Shawmut. SBC
and SBM had undivided profits of $319.9 million and $558.1 million,
respectively, at December 31, 1994.
In addition, the Federal regulatory agencies are authorized to prohibit a
banking organization from engaging in an unsafe or unsound banking practice.
Depending upon the circumstances, the agencies could take the position that
paying a dividend would constitute an unsafe or unsound banking practice.
FIRREA
Federal legislation that affects the competitive environment for Shawmut
and its subsidiaries includes FIRREA which, among other things, provides for the
acquisition of thrift institutions by bank holding companies, increases deposit
insurance assessments for insured banks, broadens the enforcement power of
federal bank regulatory agencies, and provides that any FDIC-insured depository
institution may be liable for any loss incurred by the FDIC, or any loss which
the FDIC reasonably anticipates incurring, in connection with the default of any
commonly controlled FDIC-insured depository institution or any assistance
provided by the FDIC to any such institution in danger of default.
FDICIA
FDICIA substantially revised the depository institution regulatory and
funding provisions of FDIA and several other federal banking statutes. Among
other things, FDICIA required the federal banking regulators to broaden the
scope of the regulatory corrective action taken with respect to depository
institutions that do not meet minimum capital requirements and to take such
action promptly.
FDICIA established five capital categories: "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized" and
"critically undercapitalized" and required federal banking regulators to
establish capital measures with respect to each category. Under OCC, FDIC and
OTS regulations, a "well capitalized" institution has a minimum total capital to
total risk-weighted assets ratio of at least 10%, a minimum Tier 1 capital to
total risk-weighted assets ratio of at least 6%, a minimum leverage ratio of at
least 5% and is not subject to any written order, agreement, or directive to
meet and maintain a specific capital level for any capital measure. An
"adequately capitalized" institution has a total capital to total risk-weighted
assets ratio of at least 8%, a Tier 1 capital to total risk-weighted assets
ratio of at least 4%, and a leverage ratio of at least 4% (3% if given the
highest regulatory rating and not experiencing significant growth), but does not
qualify as "well capitalized." An "undercapitalized" institution fails to meet
any one of the three minimum capital requirements. A "significantly
undercapitalized" institution has a total capital to total risk-weighted assets
ratio of less than 6%, a Tier 1 capital to total risk-weighted assets ratio of
less than 3% or a leverage ratio of less than 3%. A "critically
undercapitalized" institution has a ratio of tangible equity to quarterly
average tangible assets of 2% or less. Under certain circumstances, a "well
capitalized," "adequately capitalized" or "undercapitalized" institution may be
required to comply with supervisory actions as if the institution were in the
next lowest capital category. Each of Shawmut's subsidiary banks was considered
well capitalized as of December 31, 1994.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution
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would thereafter be undercapitalized. Undercapitalized depository institutions
are subject to restrictions on borrowing from the Federal Reserve System. In
addition, undercapitalized depository institutions are subject to growth and
activity limitations and are required to submit "acceptable" capital restoration
plans. Such a plan will not be accepted unless, among other things, the
depository institution's holding company guarantees the capital plan, up to an
amount equal to the lesser of 5% of the depository institution's total assets at
the time it became undercapitalized and the amount of the capital deficiency
when the institution fails to comply with the plan. The federal banking agencies
may not accept a capital plan without determining, among other things, that the
plan is based on realistic assumptions and is likely to succeed in restoring the
depository institution's capital. If a depository institution fails to submit an
acceptable plan, it is treated as if it is significantly undercapitalized and
may be placed into conservatorship or receivership.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, more stringent requirements to
reduce total assets, cessation of receipt of deposits from correspondent banks,
further activity restricting prohibitions on dividends to the holding company
and requirements that the holding company divest its bank subsidiary, in certain
instances. Subject to certain exceptions, critically undercapitalized depository
institutions must have a conservator or receiver appointed for them within a
certain period after becoming critically undercapitalized.
Brokered Deposits. FDIC regulations adopted under FDICIA prohibit an
FDIC-insured bank or savings association from accepting brokered deposits (which
term is defined to include any deposit obtained, directly or indirectly, from
any person engaged in the business of placing deposits with, or selling
interests in deposits of, an insured depository institution) unless (i) it is
well capitalized, or (ii) it is adequately capitalized and receives a waiver
from the FDIC. A bank or savings association that is adequately capitalized and
that accepts brokered deposits under a waiver from the FDIC may not pay an
interest rate on any deposit in excess of 75 basis points over certain
prevailing market rates. There are no such restrictions on a bank or savings
association that is well capitalized. Shawmut does not believe that the brokered
deposits regulation will have a material effect on the funding or liquidity of
any of Shawmut's subsidiary banks.
FDIC Insurance Assessments. Shawmut's subsidiaries, the deposits of which
are insured by the FDIC, are subject to FDIC deposit insurance assessments.
The FDIC has adopted a risk-based assessment system under which the
assessment rate for an insured depository institution varies according to the
level of risk involved in its activities. An institution's risk category is
based partly upon whether the institution is well capitalized, adequately
capitalized or less than adequately capitalized. Each insured depository
institution is assigned to one of the following "supervisory subgroups": "A",
"B" or "C". Subgroup "A" institutions are financially sound institutions with
only a few minor weaknesses. Subgroup "B" institutions are institutions that
demonstrate weaknesses which, if not corrected, could result in significant
deterioration. Subgroup "C" institutions are institutions for which there is a
substantial probability that the FDIC will suffer a loss in connection with the
institution unless effective action is taken to correct the areas of weakness.
Based on its capital and supervisory subgroups, each BIF and SAIF member
institution is assigned an annual FDIC assessment rate varying between 0.23
percent and 0.31 percent of deposits. The FDIC has proposed to establish a new
BIF assessment rate schedule providing for assessments of from 0.04 percent to
0.31 percent of deposits, depending on an institution's assigned risk category;
such proposal would not apply to SAIF assessment rates. It remains possible that
assessments will be raised to higher levels in the future. The FDIC is also
authorized to impose special additional assessments.
Conservatorship and Receivership Powers of Federal Banking
Agencies. FDICIA significantly expanded the authority of the federal banking
regulators to place depository institutions into conservatorship or receivership
to include, among other things, appointment of the FDIC as conservator or
receiver of an undercapitalized institution under certain circumstances. In the
event a bank is placed into conservatorship or receivership, the FDIC is
required, subject to certain exceptions, to choose the method for resolving the
institution that is least costly to BIF or SAIF, as the case may be, such as
liquidation. In any event, if any of Shawmut's subsidiary banks were placed into
conservatorship or receivership, because of the cross-guarantee
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provisions of the FDIA, Shawmut, as the sole stockholder of Shawmut's subsidiary
banks, would likely lose its investment in its subsidiary banks.
The FDIC may provide federal assistance to a "troubled institution" without
placing the institution into conservatorship or receivership. In such case,
pre-existing debtholders and shareholders may be required to make substantial
concessions and, insofar as practical, the FDIC will succeed to their interests
in proportion to the amount of federal assistance provided.
Various other legislation, including proposals to overhaul the banking
regulatory system and to limit the investments that a depository institution may
make with insured funds are from time to time introduced in Congress. Shawmut
cannot determine the ultimate effect that FDICIA and the implementing
regulations to be adopted thereunder, or any other potential legislation, if
enacted, would have upon its financial condition or results of operations.
Safety and Soundness Standards. FDICIA requires that federal bank
regulators prescribe by regulation the depository institution and depository
institution holding company standards relating to internal controls, information
systems, internal audit systems, loan documentation, credit underwriting,
interest rate exposure, asset growth, and employee compensation, fees and
benefits as well as standards specifying minimum earnings sufficient to absorb
losses without impairing capital, and, to the extent feasible, a minimum ratio
of market value to book value for publicly traded shares and such other
standards relating to the foregoing as it deems appropriate. A holding company
or institution that fails to comply with such standards will be required to
submit a plan designed to achieve such compliance. If no such plan is submitted
or a failure to implement such a plan exists, the depository institution or
holding company would become subject to additional regulatory action or
enforcement proceedings. Under FDICIA, final regulations under such provisions
should have become effective no later than December 1, 1993. Because the
standards have not yet been prescribed in final form, Shawmut cannot assess the
significance of the impact such standards will have on its operations, which
could be material.
INTERSTATE BANKING AND BRANCHING LEGISLATION
The recently enacted Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Act") authorizes (i) interstate
acquisitions of banks by bank holding companies without geographic limitation
beginning September 29, 1995, (ii) interstate mergers between insured banks with
different home states, subject to the ability of states to opt-out, and (iii)
any state to enact laws permitting de novo branching by banks with a home state
other than such state. Specifically, beginning June 1, 1997, a bank may merge
with a bank with a different home state so long as neither of the home states
have opted out of interstate branching between the date of enactment of the
Interstate Act and May 31, 1997. Once a bank has established branches in a state
through an interstate merger transaction, such bank may establish and acquire
additional branches at any location in that state where any bank involved in the
interstate merger transaction could have established or acquired branches under
applicable Federal or state law. The Interstate Act further provides that states
may enact laws permitting interstate merger transactions prior to June 1, 1997.
If a state opts out of interstate branching within the specified time period, no
bank in any other state may establish a branch in that state, either through an
acquisition or de novo.
DESCRIPTION OF SHAWMUT CAPITAL STOCK
GENERAL
The authorized capital stock of Shawmut consists of 300,000,000 shares of
Shawmut Common Stock and 10,000,000 shares of preferred stock, without par value
("Shawmut Preferred Stock"), issuable in one or more series with such terms and
at such times and for such consideration as the Shawmut Board determines. As of
January 31, 1995, there were issued 121,586,053 shares of Shawmut Common Stock
(including 13,390 shares of treasury stock), 700,000 shares of Shawmut Preferred
Stock designated as Preferred Stock with Cumulative and Adjustable Dividends
(the "Adjustable Preferred"), 575,000 shares of Shawmut Preferred Stock
designated as 9.30% Cumulative Preferred Stock (the "9.30% Cumulative
Preferred") and 500,000
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shares of Shawmut Preferred Stock designated as 9.35% Cumulative Preferred Stock
(the "9.35% Cumulative Preferred") .
As of January 31, 1995, approximately 9,409,380 shares of Shawmut Common
Stock had been reserved for issuance upon the exercise of outstanding stock
options under various employee incentive and purchase plans, 10,314,108 shares
of Shawmut Common Stock were reserved for issuance pursuant to Shawmut's
dividend reinvestment and stock purchase plans. In addition, as of February 6,
1995, 3,000,000 shares of a series of Shawmut Preferred Stock designated as
Series A Junior Participating Preferred Stock (the "Series A Preferred") were
reserved for issuance as provided in the Rights Plan described below. In
connection with the settlement of certain litigation, Shawmut entered into a
Warrant Agreement with Chemical Bank, as Warrant Agent, dated as of January 7,
1994, which provides for the issuance of up to 1,329,115 shares of Shawmut
Common Stock pursuant to the terms and conditions contained therein.
The following description contains a summary of the material features of
the capital stock of Shawmut but does not purport to be complete and is subject
in all respects to the applicable provisions of the Delaware General Corporate
Law (the "DGCL") and is qualified in its entirety by reference to the Restated
Certificate of Incorporation of Shawmut (the "Shawmut Certificate"), including
the Certificates of Designation pursuant to which the Adjustable Preferred, the
9.30% Cumulative Preferred and the 9.35% Cumulative Preferred were issued and
the terms of the Rights Agreement, dated as of February 28, 1989 (the "Shawmut
Rights Agreement"), between Shawmut and Chemical Bank, successor by merger to
Manufacturers Hanover Trust Company, as Rights Agent described below. A copy of
the Shawmut Certificate, each Certificate of Designation and the Shawmut Rights
Agreement is incorporated in this Proxy Statement/Prospectus by reference.
COMMON STOCK
The holders of Shawmut Common Stock are entitled to dividends when and as
declared by the Shawmut Board out of funds legally available therefor. The
Adjustable Preferred, the 9.30% Cumulative Preferred and the 9.35% Cumulative
Preferred have preference over the Shawmut Common Stock with respect to the
payment of dividends. Shawmut is also subject to certain regulatory restrictions
on the payment of dividends. See "CERTAIN REGULATORY CONSIDERATIONS."
The holders of Shawmut Common Stock are entitled to one vote for each share
held on all matters as to which shareholders are entitled to vote. The Shawmut
Common Stock is the only outstanding security of Shawmut entitled to vote for
directors, unless and until Shawmut is in default on the equivalent of six
quarterly dividends payable on any outstanding series of Shawmut Preferred
Stock. See "-- Shawmut Preferred Stock" below.
Except as otherwise provided in the Certificate of Designation providing
for the issue of any series of Shawmut Preferred Stock, in the event of any
liquidation, dissolution or winding up of Shawmut, whether voluntary or
involuntary, after payment shall have been made to the holders of all series of
Shawmut Preferred Stock (including the Adjustable Preferred, the 9.30%
Cumulative Preferred and the 9.35% Cumulative Preferred) of the full
preferential amounts to which such holders are entitled, the holders of shares
of Shawmut Common Stock shall be entitled, to the exclusion of the holders of
Shawmut Preferred Stock, to share, ratably according to the number of shares of
Shawmut Common Stock held by them, in all remaining assets of Shawmut available
for distribution to its shareholders.
Certain business combinations involving Shawmut and any beneficial owner of
10 percent or more of the outstanding voting stock of Shawmut, any affiliate of
Shawmut or any affiliate of such owner must be approved by the holders of 80
percent of the outstanding voting stock, unless approved by a majority of
continuing directors or certain minimum price and procedural requirements are
met. These provisions may have the effect of delaying, deferring or preventing a
change in control of Shawmut. See "COMPARISON OF SHAREHOLDER RIGHTS -- Certain
Business Combinations."
Holders of Shawmut Common Stock are not entitled to cumulative voting
rights, or any preemptive, preferential or subscriptive rights with respect to
any securities of Shawmut, except as described below under "Rights Plan."
Outstanding shares of Shawmut Common Stock are fully paid and nonassessable.
Chemical
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Bank, successor by merger to Manufacturers Hanover Trust Company, is the
transfer agent, registrar and dividend disbursement agent for Shawmut Common
Stock.
RIGHTS PLAN
On February 28, 1989, the Shawmut Board declared a dividend distribution of
one right (a "Shawmut Right") for each outstanding share of Shawmut Common Stock
to shareholders of record at the close of business on March 13, 1989. Prior to
the occurrence of a Distribution Date (described below), Shawmut Rights will be
deemed to be delivered with each share of Shawmut Common Stock issued by
Shawmut, including in connection with the issuance of the shares of Shawmut
Common Stock to be issued in the Merger. Each Shawmut Right entitles the
registered holder to purchase from Shawmut a unit consisting of one
one-hundredth of a share (a "Unit") of Series A Preferred, at a purchase price
of $100 per Unit, subject to adjustment. The description and terms of the
Shawmut Rights are summarized below and are set forth in the Shawmut Rights
Agreement.
At the present time, the Shawmut Rights are attached to all Shawmut Common
Stock certificates representing outstanding shares, and no separate Shawmut
Rights certificates will be distributed. The Shawmut Rights will separate from
the Shawmut Common Stock and a Distribution Date will occur upon the earliest of
(i) 10 business days following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 20% or more of the
outstanding shares of Shawmut Common Stock (the "Stock Acquisition Date"); (ii)
10 business days (or such later date as may be determined by the Shawmut Board)
following the commencement of a tender offer or exchange offer that would result
in a person or group beneficially owning 20% or more of such outstanding shares
of Shawmut Common Stock; and (iii) 10 business days following the determination
by the Shawmut Board, upon a determination of at least a majority of the
unaffiliated "Continuing Directors" who are not officers of Shawmut, that, with
respect to any person who has, alone or together with his affiliates or
associates, become the beneficial owner of 10% or more of the shares of Shawmut
Common Stock outstanding (a) such beneficial ownership by such person is
intended to cause Shawmut to repurchase the Shawmut Common Stock beneficially
owned by such person or to cause pressure on Shawmut to take action or enter
into a transaction or series of transactions intended to provide such person
with short-term financial gain under circumstances where such directors
determine that the best long-term interests of Shawmut and its shareholders
would not be served by taking such action or entering into such transactions or
series of transactions at that time or (b) such beneficial ownership is causing
or reasonably likely to cause a material adverse impact (including, but not
limited to, impairment of relationships with customers, impairment of Shawmut's
ability to maintain its competitive position or impairment of Shawmut's business
reputation or ability to deal with governmental agencies) on the business or
prospects of Shawmut (any such person being referred to herein and in the
Shawmut Rights Agreement as an "Adverse Person").
The Shawmut Rights are not exercisable until the Distribution Date and will
expire at the close of business on March 13, 1999 unless earlier redeemed by
Shawmut as described below.
In the event that (i) a person becomes the beneficial owner of 20% or more
of the then-outstanding shares of Shawmut Common Stock (except pursuant to an
offer for all outstanding shares of Shawmut Common Stock which a majority of the
unaffiliated Continuing Directors who are not officers of Shawmut determines to
be fair to and otherwise in the best interests of Shawmut and its shareholders);
or (ii) the Shawmut Board determines, upon the determination by at least a
majority of the unaffiliated Continuing Directors who are not officers of
Shawmut, that a person is an Adverse Person, each holder of a Shawmut Right will
thereafter have the right to receive, upon exercise, Shawmut Common Stock (or,
in certain circumstances, cash, property or other securities of Shawmut) having
a value (based on the lowest closing price of the Shawmut Common Stock during
the twelve-month period preceding such event) equal to two times the exercise
price of the Shawmut Right. Notwithstanding any of the foregoing, following the
occurrence of any of the events set forth in this paragraph, all Shawmut Rights
that are, or (under certain circumstances specified in the Shawmut Rights
Agreement) were, beneficially owned by any Acquiring Person or Adverse Person
will be null and void. However, Shawmut Rights are not exercisable following the
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occurrence of either of the events set forth above until such time as the
Shawmut Rights are no longer redeemable by Shawmut as set forth below.
In the event that, at any time following the Stock Acquisition Date or the
determination that someone is an Adverse Person (i) Shawmut is acquired in a
merger or other business combination transaction in which Shawmut is not the
surviving company or in which it is the surviving company but the Shawmut Common
Stock is changed or exchanged (other than a merger which follows an offer
described in the preceding paragraph); or (ii) more than 50 percent of Shawmut's
assets, cash flow or earning power is sold or transferred, each holder of a
Shawmut Right (except Shawmut Rights which previously have been voided as set
forth above) will thereafter have the right to receive, upon exercise, common
stock of the acquiring company having a value equal to two times the exercise
price of the Shawmut Right. The events set forth in this paragraph and in the
preceding paragraph are referred to as the "Triggering Events."
In general, at any time until 10 business days following the Stock
Acquisition Date, Shawmut may redeem the Shawmut Rights in whole, but not in
part, at a price of $.01 per Shawmut Right (payable in cash, Shawmut Common
Stock or other consideration deemed appropriate by the Shawmut Board). Under
certain circumstances set forth in the Shawmut Rights Agreement, the decision to
redeem the Shawmut Rights will require the concurrence of a majority of the
Continuing Directors. Shawmut may not redeem the Shawmut Rights if the Shawmut
Board has previously declared a person to be an Adverse Person. Immediately upon
the action of the Shawmut Board ordering redemption of the Shawmut Rights, the
Shawmut Rights will terminate and the only right of the holders of Shawmut
Rights will be to receive the $.01 redemption price.
The term "Continuing Directors" means any member of the Shawmut Board who
was a member of the Shawmut Board prior to the date of the Shawmut Rights
Agreement, and any person who is subsequently elected to the Shawmut Board if
such person is recommended or approved by a majority of the Continuing
Directors, but will not include an Acquiring Person, an Adverse Person, or an
affiliate or associate of any such Person or any representative of any of the
foregoing.
Until a Shawmut Right is exercised, the holder thereof, as such, will have
no rights as a shareholder of Shawmut including, without limitation, the right
to vote or to receive dividends.
Other than those provisions relating to the principal economic terms of the
Shawmut Rights, any of the provisions of the Shawmut Rights Agreement may be
amended by the Shawmut Board prior to the Distribution Date. After the
Distribution Date, the provisions of the Shawmut Rights Agreement may be amended
by the Shawmut Board (in certain circumstances, with the concurrence of the
Continuing Directors) in order to cure any ambiguity, to make changes which do
not adversely affect the interest of holders of Shawmut Rights, or to shorten or
lengthen any time period under the Shawmut Rights Agreement; provided, however,
that no amendment to adjust the time period governing redemption shall be made
at such time as the Shawmut Rights are not redeemable.
The Shawmut Rights have certain anti-takeover effects. The Shawmut Rights
will cause substantial dilution to a person or group that attempts to acquire
Shawmut in a manner defined as a Triggering Event unless the offer is
conditioned on a substantial number of Shawmut Rights being acquired. The
Shawmut Rights, however, should not affect any prospective offeror willing to
make an offer for all outstanding shares of Shawmut Common Stock and other
voting securities at a fair price and otherwise in the best interests of Shawmut
and its shareholders as determined by the Shawmut Board or affect any
prospective offeror willing to negotiate with the Shawmut Board. The Shawmut
Rights should not interfere with any merger or other business combination
approved by the Shawmut Board since the Shawmut Board may, at its option, at any
time until ten business days following the Stock Acquisition Date, redeem all,
but not less than all, of the then outstanding Shawmut Rights at the $.01
redemption price.
SHAWMUT PREFERRED STOCK
The Shawmut Board is authorized in the Shawmut Certificate to issue up to
10,000,000 shares of Shawmut Preferred Stock in series and to determine the
designation of each series, dividend rate, voting rights, conversion or exchange
provisions, redemption provisions, liquidation preferences, sinking fund
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provisions and all other rights pertaining to the Shawmut Preferred Stock. The
following is a brief description of the Adjustable Preferred, 9.30% Cumulative
Preferred and the 9.35% Cumulative Preferred, the only series of Shawmut
Preferred Stock outstanding. The Adjustable Preferred, the 9.30% Cumulative
Preferred and the 9.35% Cumulative Preferred have preference over the Shawmut
Common Stock with respect to the payment of dividends and the distribution of
assets in the event of liquidation, winding up or dissolution of Shawmut.
Dividends on the outstanding Adjustable Preferred, 9.30% Cumulative
Preferred and the 9.35% Cumulative Preferred are cumulative. The dividend rate
on the Adjustable Preferred is established quarterly at the rate of 2.25% below
the highest of (a) the three-month U.S. Treasury bill rate, (b) the U.S.
Treasury ten-year constant maturity rate and (c) the U.S. Treasury twenty-year
constant maturity rate, in each case as defined in the terms of the Adjustable
Preferred, but may not be less than 6% per annum or greater than 12% per annum.
If the equivalent of six quarterly dividends payable on the Adjustable
Preferred, the 9.30% Cumulative Preferred or the 9.35% Cumulative Preferred are
in default, the number of directors of Shawmut will be increased by two and the
holders of all outstanding series of Shawmut Preferred Stock, voting as a single
class without regard to series, will be entitled to elect two additional
directors until all accrued dividends have been paid. In addition, the vote of
the holders of two-thirds of each of the Adjustable Preferred, the 9.30%
Cumulative Preferred and the 9.35% Cumulative Preferred, each voting as a
separate class, is required in order to amend or alter the Shawmut Certificate
in a manner which would adversely affect the preferences, rights, powers or
privileges of the Adjustable Preferred, the 9.30% Cumulative Preferred or the
9.35% Cumulative Preferred, respectively; and the vote of two-thirds of the
Adjustable Preferred, the 9.30% Cumulative Preferred, the 9.35% Cumulative
Preferred and all of the series of Shawmut Preferred Stock ranking on a parity,
either as to dividends or upon liquidation, with the Adjustable Preferred, the
9.30% Cumulative Preferred and the 9.35% Cumulative Preferred, voting together
as a single class, is required in order to reclassify stock of Shawmut into
stock ranking prior, either as to dividends or upon liquidation, to the
Adjustable Preferred, the 9.30% Cumulative Preferred and the 9.35% Cumulative
Preferred, or authorize the creation or issuance of stock, or of a security
convertible into or evidencing a right to purchase stock, ranking prior, either
as to dividends or upon liquidation, to the Adjustable Preferred, the 9.30%
Cumulative Preferred and the 9.35% Cumulative Preferred.
In the event of any liquidation, dissolution or winding up of Shawmut, the
holders of the Adjustable Preferred are entitled to receive $50.00 per share
plus accrued and unpaid dividends and the holders of the 9.30% Cumulative
Preferred and the 9.35% Cumulative Preferred are entitled to receive $250.00 per
share plus accrued and unpaid dividends. Shares of Adjustable Preferred may be
redeemed at the option of Shawmut at a redemption price per share of $50.00 per
share, plus accrued and unpaid dividends.
The shares of the 9.30% Cumulative Preferred are represented by Depositary
Shares (the "9.30% Depositary Shares"). Each 9.30% Depositary Share represents a
one-tenth interest in a share of 9.30% Cumulative Preferred and is not subject
to any mandatory redemption or sinking fund provisions. The 9.30% Cumulative
Preferred is redeemable on at least 30 but not more than 60 days notice, at the
option of Shawmut, as a whole or in part, at any time on and after October 15,
1997 at a redemption price equal to $250 per share plus accrued and unpaid
dividends.
The shares of the 9.35% Cumulative Preferred are represented by Depositary
Shares (the "9.35% Depositary Shares"). Each 9.35% Depositary Share represents a
one-tenth interest in a share of 9.35% Cumulative Preferred and is not subject
to any mandatory redemption or sinking fund provisions. The 9.35% Cumulative
Preferred is redeemable on at least 30 but not more than 60 days notice, at the
option of Shawmut, as a whole or in part, at any time on and after January 15,
2000 at a redemption price equal to $250 per share plus accrued and unpaid
dividends.
COMPARISON OF STOCKHOLDER RIGHTS
Upon the consummation of the transactions contemplated in the Merger
Agreement, the stockholders of Northeast will become stockholders of Shawmut.
Since both Shawmut and Northeast are Delaware
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corporations, Northeast stockholders who receive Shawmut Common Stock will
continue to be subject to the privileges and restrictions provided in the DGCL.
In addition, the rights presently enjoyed by Northeast's stockholders under the
relevant provisions of the Certificate of Incorporation of Northeast (the
"Northeast Certificate") and the By-laws of Northeast (the "Northeast By-laws")
differ in some respects from the rights they would have as stockholders of
Shawmut under the relevant provisions of the Shawmut Certificate and the By-laws
of Shawmut (the "Shawmut By-laws"). This summary contains a list of the material
differences but is not meant to be relied upon as an exhaustive list or a
detailed description of the provisions discussed and is qualified in its
entirety by reference to the Shawmut Certificate, the Shawmut By-laws, the
Northeast Certificate, the Northeast By-laws, the DGCL and the Shawmut Rights
Agreement.
VOTING RIGHTS
Shawmut. Shawmut's Certificate provides that holders of shares of Shawmut
Common Stock are entitled to one vote per share of record for the election of
directors and all other purposes, subject to the voting rights, if any, of
holders of any Shawmut Preferred Stock.
Northeast. The Northeast Certificate provides that holders of shares of
Northeast Common Stock have cumulative voting rights with respect to election of
directors.
Northeast's cumulative voting rights, together with the classification of
the Northeast Board discussed below under "-- Size and Classification of Board
of Directors," increases the difficulty of a stockholder to ensure the election
of a particular director or to gain control of the Northeast Board.
ACTION BY WRITTEN CONSENT
Shawmut. The DGCL provides that, unless otherwise provided in the
certificate of incorporation, stockholders may act by written consent if
consents are signed representing not less than the minimum number of votes that
would be necessary to take such action at a meeting where all shares entitled to
vote were present and voted. The Shawmut Certificate does not provide otherwise.
Northeast. The Northeast Certificate provides that stockholders may not
act by written consent, subject to the rights of holders of any class or series
of Preferred Stock.
The certificate of designation of the outstanding Series B Preferred Stock
permits holders of such series to act by written consent, but only as to any
amendment to the provisions of the Series B Preferred Stock and to the creation,
authorization or issuance of a new series of preferred stock (or increase in the
authorized amount of an existing series of preferred stock) or a class of other
stock with preference or priority over or on a parity with the Series B
Preferred Stock as to the right to receive either dividends or amounts
distributable upon liquidation, dissolution or winding up of Northeast.
In a publicly-held corporation with many stockholders, such as Shawmut, the
practical ability of stockholders to act by written consent in circumstances in
which they could not otherwise call a special meeting, as described below, is
remote.
SPECIAL MEETINGS OF STOCKHOLDERS
Shawmut. Pursuant to the Shawmut By-laws, special meetings of stockholders
may be called by the Shawmut Board, the Chairman of the Board or upon the
written request of seven or more stockholders holding not less than 30% of the
outstanding shares of Shawmut Common Stock.
Northeast. Neither the Northeast Certificate nor the Northeast By-laws
give the right to stockholders to call special meetings.
Thus, under certain circumstances Shawmut stockholders have the right to
have a special meeting called, whereas Northeast stockholders do not have such a
right.
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STOCKHOLDER NOMINATIONS AND PROPOSALS FOR BUSINESS
Shawmut. The Shawmut By-laws establish procedures that must be followed
for stockholders to nominate individuals to the Shawmut Board or to propose
business at the annual meeting of stockholders. In order to nominate individuals
to the Shawmut Board, a stockholder must provide timely notice of such
nomination in writing to the Secretary of Shawmut and a written statement by the
candidate of his or her willingness to serve. Such notice must include the
information required to be disclosed in solicitations for proxies for election
of directors pursuant to Regulation 14A under the Exchange Act, along with the
name, record address, class and number of shares of capital stock of Shawmut
beneficially owned by the stockholder giving such notice.
In order to properly propose that certain business come before the annual
meeting of stockholders, a stockholder must provide timely notice in writing to
the Secretary of Shawmut which notice must include a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting. In addition, the notice must
contain the name, record address, class and number of shares of capital stock of
Shawmut beneficially owned by the stockholder giving such notice and any
material interest of the stockholder in such business.
To be timely, notice must be delivered to Shawmut not less than 50 nor more
than 75 days prior to the meeting at which directors are to be elected or the
proposed business is to be conducted, or, if Shawmut gives less than 65 days'
notice of the meeting, then notice by the stockholder must be received by the
close of business on the 15th day following the earlier of the date notice of
the meeting was mailed or public disclosure of the meeting was made.
Northeast. The Northeast By-laws establish similar procedures that must be
followed for stockholders to nominate individuals to the Northeast Board or to
propose business at the annual meeting of stockholders. The informational
requirements of the Northeast By-laws for nominations to the Northeast Board and
business proposals are essentially the same as those of Shawmut; however, under
the Northeast By-laws, in order to be timely, notice must be delivered to
Northeast not less than 60 days prior to the meeting at which directors are to
be elected or the proposed business is to be conducted, or, if Northeast gives
less than 70 days' notice of the meeting then notice by the stockholder must be
received by the close of business on the 10th day following the date on which
notice of the meeting was mailed to stockholders.
Except for the timing requirements described above for nominating directors
or proposing business at a stockholder meeting and the differences between such
timing requirements for Shawmut and Northeast stockholders, there are no
material differences between Shawmut and Northeast's procedures for nominating
directors or proposing business at a stockholders meeting.
BUSINESS COMBINATIONS
Shawmut. The Shawmut Certificate provides that any "Business Combination"
involving Shawmut and a person who beneficially owns 10% or more of Shawmut's
capital stock or certain affiliates or associates of Shawmut (a "Shawmut Related
Person") must be approved by the holders of at least 80% of the votes entitled
to be cast by the holders of the outstanding shares of Shawmut voting stock (the
"Shawmut Voting Requirement") voting together as a single class. The Shawmut
Voting Requirement does not apply if (i) the Business Combination is approved by
a majority of the "Shawmut Continuing Directors" (defined generally to include
any person who is unaffiliated with, and not a representative of, the Shawmut
Related Person in the Business Combination and who either was a director
immediately prior to the time the Shawmut Related Person became such a person or
was recommended or elected to succeed such a Shawmut Continuing Director by a
majority of the Shawmut Continuing Directors); or (ii) certain "fair price"
(defined generally to mean that the consideration to be received by stockholders
in such Business Combination shall be at least equal to the higher of, and in
the same form as, the consideration paid by the Shawmut Related Person for such
person's acquisition of the applicable Shawmut capital stock within the two year
period immediately prior to the first public announcement of the proposal of the
Business Combination or in the transaction in which such person became a Shawmut
Related Person) and other criteria are met. As defined in the Shawmut
Certificate, a Business Combination includes, among other things, (i) any merger
or consolidation of
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Shawmut with any Shawmut Related Person or affiliate or associate thereof; (ii)
the sale by Shawmut of assets or securities having a fair market value equal to
10% or more of the total shareholders' equity of Shawmut ("Substantial Assets")
to a Shawmut Related Person or an affiliate or associate thereof, (iii) the
acquisition by Shawmut of Substantial Assets from a Shawmut Related Person or an
affiliate or associate thereof; (iv) the adoption of a plan or proposal for the
liquidation or dissolution of Shawmut proposed by or on behalf of a Shawmut
Related Person or an affiliate or associate thereof; (v) any transaction that
has the effect of increasing the proportionate share of any class of equity or
convertible security of Shawmut or any subsidiary that is beneficially owned by
a Shawmut Related Person or any affiliate or associate thereof and (vi) any
agreement or arrangement providing for any of the foregoing. This provision of
the Shawmut Certificate can only be amended or repealed upon the affirmative
vote by the holders of at least 80% of the voting stock entitled to vote unless
such amendment or repeal is unanimously recommended by the Shawmut Board and all
of such directors are Shawmut Continuing Directors.
Northeast. The Northeast Certificate provides that any "Northeast Business
Combination" (as defined below) involving Northeast and any person who, together
with affiliates and associates, beneficially owns 5% or more of Northeast Common
Stock (a "Northeast Related Person") must be approved by the holders of at least
80% of each class of stock of Northeast unless (i) the Northeast Business
Combination was approved by at least two thirds of the Northeast Continuing
Directors (defined generally as a director who was a member of the Northeast
Board immediately prior to the time the Northeast Related Person acquired 5% or
more of Northeast Common Stock), or (ii) that (a) certain "fair price" (defined
generally to mean that the aggregate consideration to be received per share of
capital stock of Northeast in the Northeast Business Combination by the holders
of capital stock of Northeast, other than the Northeast Related Person involved
in the Northeast Business Combination, is in the same form as, and is not less
than, the highest per share price paid by such Related Person in acquiring any
of its holdings of Northeast's capital stock); and (b) the Northeast Business
Combination is approved by the affirmative vote of the holders of not less than
two thirds of each class of stock of Northeast. As defined in the Northeast
Certificate, a Northeast Business Combination means (i) any merger or
consolidation of Northeast with or into a Northeast Related Person, (ii) any
sale, lease, exchange, transfer or other disposition of 10% or more of the
assets of Northeast or of a subsidiary, to a Northeast Related Person, (iii) any
merger or consolidation of a Northeast Related Person with or into Northeast or
a subsidiary of Northeast, (iv) any sale, lease, exchange, transfer or other
disposition of 10% or more of the assets of a Northeast Related Person to
Northeast or a subsidiary of Northeast, (v) the issuance of any securities of
Northeast to a Northeast Related Person, (vi) the acquisition by Northeast or a
subsidiary of Northeast of any securities of a Northeast Related Person, (vii)
any reclassification of Northeast Common Stock or any recapitalization involving
Northeast Common Stock, consummated within five years after a Northeast Related
Person becomes a Northeast Related Person, and (viii) any agreement, contract or
other arrangement providing for any of the foregoing.
This provision of the Northeast Certificate can only be amended or repealed
if it is first proposed by the Northeast Board and thereafter approved by the
affirmative vote of the holders of at least 80% of each class of stock of
Northeast, voting separately as a class, which shall include the affirmative
vote of at least 50% of the outstanding vote of Northeast Common Stock held by
shareholders other than a Related Person; provided, however, that such 80% vote
shall not be required for any such amendment, change or repeal recommended to
shareholders of Northeast by the affirmative vote of not less than two thirds of
the Northeast Continuing Directors and in such event such amendment, change or
repeal so recommended shall require only the vote, if any, required under the
applicable provisions of law.
In addition, the Northeast Certificate provides that the Northeast Board,
when evaluating any offer of another person to (A) make a tender or exchange
offer for any equity security of Northeast, (B) merge or consolidate Northeast
with another corporation or entity or (C) purchase or otherwise acquire all or
substantially all of the properties and assets of Northeast may, in connection
with the exercise of its judgment in determining what is in the best interest of
Northeast and its stockholders, give due consideration to all relevant factors,
including, without limitation, the social and economic effect of acceptance of
such offer on Northeast's present and future customers and employees and those
of its subsidiaries; on the communities in
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which Northeast and its subsidiaries operate or are located; on the ability of
its subsidiary savings association to fulfill the objectives of a savings
association under applicable statutes and regulations.
The Northeast Certificate's business combination provision generally
provides for additional and higher tests to be met for approval of a "Northeast
Business Combination" under the Northeast Certificate than the Shawmut's
Certificate's "Business Combination" provision.
RIGHTS PLANS
Shawmut. On February 28, 1989, the Shawmut Board declared a dividend
distribution of one Shawmut Right for each outstanding share of Shawmut Common
Stock to stockholders of record at the close of business on March 13, 1989. For
a description of the Shawmut Rights and the related Shawmut Rights Agreement,
together with a discussion of the effects of the Shawmut Rights, see
"DESCRIPTION OF SHAWMUT CAPITAL STOCK -- Rights Plan."
Northeast. The Northeast Board has not adopted a stockholder rights plan.
SIZE AND CLASSIFICATION OF BOARD OF DIRECTORS
Shawmut. The Shawmut By-laws provide for not less than three directors.
The Shawmut By-laws also provide that the majority of the directors then in
office may, between annual meetings of stockholders, increase the membership of
the Board by up to eight members. Shawmut currently has 12 directors. The DGCL
contains a provision allowing for the division of a corporation's board of
directors into a maximum of three classes, in which case each class of directors
shall serve for a term of three years, with the terms staggered such that one
class shall come up for election each year. Shawmut has not provided for such a
classification of directors.
Northeast. Northeast's Certificate and By-laws provide for division of the
Northeast Board into three classes, with each class as nearly equal in the
number of directors as the other classes to the extent permitted by the number
of directors constituting the entire Board of Directors. As a result of the
classification of the Northeast Board, any person attempting to have a slate of
nominees elected which would constitute a majority of the Northeast Board would
need at least two Annual Meetings to do so. Northeast's By-laws provide further
that the Northeast Board will consist of twelve directors, subject to the rights
of the holders of any class or series of preferred stock.
Pursuant to the terms of the Series B Preferred Stock, the size of the
Northeast Board has been increased by two members and DEPCO, or a permitted
nominee under the DEPCO Agreement, has the right to elect both of these
directors provided that it holds at least 211,020 shares of Series B Preferred
Stock. If DEPCO and permitted nominees hold less than 211,020 shares but 105,510
shares or more of Series B Preferred Stock, the size of the Northeast Board will
be reduced by one and such holder will have the right to elect only one member
of the Northeast Board. If DEPCO and permitted nominees hold less than 105,510
shares of Series B Preferred Stock, the Northeast Board will be reduced and such
holder will lose the right to elect a member of the Northeast Board. DEPCO
currently has the right to elect two directors of Northeast. However, one of the
two directors elected by DEPCO has recently resigned and, accordingly, the
Northeast Board currently consists of thirteen members.
Any person attempting to have a slate of nominees for Northeast director
elected which would constitute a majority of the Northeast Board would need at
least two Annual Meetings to do so and, as a result, Northeast's classified
board may have certain anti-takeover effects.
REMOVAL OF DIRECTORS
Shawmut. Neither the Shawmut Certificate nor the Shawmut By-laws contains
any provisions regarding removal of directors. Under the DGCL, any director may
be removed, with or without cause, except as described below, by the holders of
a majority of shares then entitled to vote at an election of directors.
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Northeast. The DGCL provides that unless the certificate of incorporation
provides otherwise, in the case of a corporation whose board is classified, as
is Northeast's, stockholders may remove a director only with cause. The
Northeast Certificate provides that subject to the rights of the holders of any
series of Northeast preferred stock outstanding, any director, or the entire
Northeast Board, may be removed from office, only for cause, by affirmative vote
of the holders of a majority of the voting power of all outstanding shares of
capital stock of Northeast entitled to vote generally in the election of
directors, voting together as a single class.
Thus, the Northeast Certificate restricts the ability of Northeast
stockholders to remove directors from office whereas the Shawmut Certificate
does not contain any such restrictions.
INDEMNIFICATION
Shawmut. The Shawmut By-laws provide that Shawmut will, under certain
circumstances, indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason of the fact
that he or she is or was a director, officer, employee or agent of Shawmut, or
is or was serving at the request of Shawmut as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise. Expenses incurred in defending or
investigating such a threatened or pending action, suit or proceeding will be
paid by Shawmut in advance of the final disposition of such action, suit or
proceeding as authorized by the board of directors in the specific case upon
receipt of an undertaking by or on the behalf of the director, officer, employee
or agent to repay such amount in the event that it is determined that he or she
is not entitled to be indemnified.
Northeast. The Northeast Certificate provides that Northeast will, under
certain circumstances, indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative by
reason of the fact that he or she is or was a director or officer of Northeast
or is or was serving at the request of Northeast as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise. The Northeast Certificate does not
require Northeast to indemnify Northeast employees or agents. Expenses incurred
in defending or investigating such a threatened or pending action, suit or
proceeding will be paid by Northeast in advance of the final disposition of such
action, suit or proceeding, provided that, as required by the DGCL, it will
receive an undertaking by or on the behalf of the director or officer to repay
all amounts so advanced if it is determined that he or she is not entitled to be
indemnified. Such expenses will be advanced to directors or officers only in
their capacity as directors or officers (and not in any other capacity in which
service will be rendered by such director or officer, including, for example,
service to an employee benefit plan). Northeast may, however, to the extent
authorized from time to time by its Board of Directors and by the DGCL grant the
right to indemnification and the right to the advancement of expenses to any
employee or agent of Northeast.
Although Shawmut's indemnification obligations described above are slightly
broader than those of Northeast, the practical effect on stockholders is likely
to be minimal.
66
<PAGE> 135
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
NORTHEAST FEDERAL CORP. AND SUBSIDIARIES
BUSINESS FINANCE DIVISION OF BARCLAYS BUSINESS CREDIT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
SEPTEMBER 30, 1994
The following Unaudited Pro Forma Condensed Combining Balance Sheet was
prepared by Shawmut and presents the combined financial position of Shawmut and
Northeast as of September 30, 1994, assuming the Merger had occurred on
September 30, 1994. The Unaudited Pro Forma Condensed Combining Balance Sheet
also gives effect to Shawmut's pending acquisition of substantially all of the
assets, and assumption of certain of the liabilities, of the Business Finance
Division of Barclays Business Credit, Inc. ("Barclays"), assuming such
acquisition and assumption also had occurred on September 30, 1994. Such pro
forma information is based on historical balance sheet data of Shawmut,
Northeast and Barclays as of September 30, 1994 and gives effect to the Merger
and the pending acquisition by Shawmut of Barclays accounted for under the
purchase method of accounting, along with the assumptions and adjustments in the
accompanying notes to the unaudited pro forma condensed financial information.
This Unaudited Pro Forma Condensed Combining Balance Sheet should be read in
conjunction with the Unaudited Pro Forma Condensed Combining Statements of
Income appearing elsewhere in this Proxy Statement/Prospectus and the historical
financial statements and notes thereto of Shawmut, Northeast and Barclays which
are incorporated by reference in this Proxy Statement/Prospectus. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." The Unaudited Pro Forma
Condensed Combining Balance Sheet is presented for informational purposes only
and is not necessarily indicative of the combined financial position that would
have occurred if the Merger and the pending acquisition by Shawmut of Barclays
had been consummated on September 30, 1994 or which may be obtained in the
future.
67
<PAGE> 136
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
NORTHEAST FEDERAL CORP. AND SUBSIDIARIES
BUSINESS FINANCE DIVISION OF BARCLAYS BUSINESS CREDIT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
SHAWMUT/
HISTORICAL NORTHEAST NORTHEAST AGGREGATE
------------------------- PRO FORMA PRO FORMA BARCLAYS PRO FORMA
SHAWMUT NORTHEAST ADJUSTMENTS COMBINED PRO FORMA(5) COMBINED
----------- ---------- ----------- ----------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks................ $ 1,675,479 $ 26,881 $ (41,987)(1b) $ 1,620,068 $ 11,206 $ 1,631,274
(40,305)(1c)
Securities
Available for sale, at fair value.... 2,086,786 163,715 (8,238)(1a) 2,242,263 2,242,263
Held to maturity..................... 8,200,234 1,961,378 (45,023)(1a) 10,116,589 10,116,589
Federal funds sold and securities
purchased under agreement to
resell............................... 278,960 4,270 283,230 283,230
Residential mortgages held for sale.... 99,518 7,003 106,521 106,521
Loans.................................. 17,735,885 971,425 (23,717)(1a) 18,683,593 2,226,079 20,909,672
Less: reserve for credit losses........ 567,805 11,698 579,503 41,366 620,869
----------- ---------- --------- ----------- ---------- -----------
Net loans.............................. 17,168,080 959,727 (23,717) 18,104,090 2,184,713 20,288,803
Rhode Island covered assets............ 86,826 86,826 86,826
Trading account securities............. 41,840 41,840 41,840
Premises and equipment................. 328,466 27,279 (6,000)(1a) 349,745 3,493 353,238
Intangibles............................ 151,506 145,820 (1a) 297,326 225,000 522,326
Other assets........................... 1,320,796 112,626 37,194 (1a) 1,470,616 3,358 1,473,974
----------- ---------- --------- ----------- ---------- -----------
Total assets................... $31,351,665 $3,349,705 $ 17,744 $34,719,114 $2,427,770 $37,146,884
=========== ========== ========= =========== ========== ===========
LIABILITIES
Deposits............................... $19,519,148 $2,375,460 $ 5,162 (1a) $21,899,770 $21,899,770
Other borrowings....................... 7,668,611 731,620 (1,191)(1a) 8,399,040 $1,912,305 10,311,345
Notes and debentures................... 1,633,829 40,305 (40,305)(1c) 1,633,829 400,000 2,033,829
Other liabilities...................... 400,812 67,188 23,640 (1a) 493,640 15,465 509,105
2,000 (1a)
----------- ---------- --------- ----------- ---------- -----------
Total liabilities.............. 29,222,400 3,214,573 (10,694) 32,426,279 2,327,770 34,754,049
----------- ---------- --------- ----------- ---------- -----------
SHAREHOLDERS' EQUITY
Preferred stock........................ 178,185 4 (4)(1b) 178,185 100,000 278,185
Common stock........................... 1,196 136 (136)(1a) 1,276 1,276
80 (1a)
Surplus................................ 1,270,347 188,673 (146,690)(1a) 1,433,837 1,433,837
163,490 (1a)
(41,983)(1b)
Retained earnings...................... 719,229 (53,061) 53,061 (1a) 719,229 719,229
Net unrealized gain (loss) on
securities available for sale........ (39,502) 2,330 (2,330)(1a) (39,502) (39,502)
Unallocated ESOP shares................ (3,842) 3,842 (1a) 0
Stock dividend distributable........... 892 (892)(1a) 0
Treasury stock......................... (190) (190) (190)
----------- ---------- --------- ----------- ---------- -----------
Total shareholders' equity..... 2,129,265 135,132 28,438 2,292,835 100,000 2,392,835
----------- ---------- --------- ----------- ---------- -----------
Total liabilities and
shareholders' equity......... $31,351,665 $3,349,705 $ 17,744 $34,719,114 $2,427,770 $37,146,884
=========== ========== ========= =========== ========== ===========
</TABLE>
See accompanying notes to unaudited pro forma condensed financial information.
68
<PAGE> 137
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
NORTHEAST FEDERAL CORP. AND SUBSIDIARIES
BUSINESS FINANCE DIVISION OF BARCLAYS BUSINESS CREDIT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF INCOME
SEPTEMBER 30, 1994
The following Unaudited Pro Forma Condensed Combining Statement of Income
was prepared by Shawmut and gives effect to the Merger by combining the results
of operations of Shawmut and Northeast for the nine months ended September 30,
1994 and the year ended December 31, 1993, as if the Merger had been consummated
at the beginning of the periods presented. Also presented is the Unaudited Pro
Forma Condensed Combining Statement of Income of Shawmut, Northeast and Barclays
for the same periods, as if the Merger and the pending acquisition by Shawmut of
Barclays had been consummated at the beginning of the periods presented. Income
before cumulative effect of accounting changes per common share and weighted
average common shares outstanding are based on the exchange ratio as specified
in the Merger Agreement. The Unaudited Pro Forma Condensed Combining Statements
of Income give effect to the Merger and the pending acquisition by Shawmut of
Barclays accounted for under the purchase method of accounting, along with the
assumptions and adjustments in the accompanying notes to the unaudited pro forma
condensed financial information. The Unaudited Pro Forma Condensed Combining
Statements of Income should be read in conjunction with the Unaudited Pro Forma
Condensed Combining Balance Sheet appearing elsewhere in this Proxy
Statement/Prospectus and the historical financial statements and notes thereto
of Shawmut, Northeast and Barclays which are incorporated by reference in this
Proxy Statement/Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE." The Unaudited Pro Forma Condensed Combining Statements of Income do
not reflect potential savings that may result from the consolidation of the
operations of Shawmut, Northeast and Barclays. The Unaudited Pro Forma Condensed
Combining Statements of Income are presented for informational purposes only and
are not necessarily indicative of the combined results of operations that would
have occurred if the Merger and the pending acquisition by Shawmut of Barclays
had been consummated at the beginning of the periods indicated or which may be
obtained in the future.
69
<PAGE> 138
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
NORTHEAST FEDERAL CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
SHAWMUT/
HISTORICAL NORTHEAST NORTHEAST
------------------------ PRO FORMA PRO FORMA
SHAWMUT NORTHEAST ADJUSTMENTS COMBINED
---------- --------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans........................................................ $ 952,517 $ 65,380 $ 1,186 (1e) $1,019,083
Securities
Available for sale, at fair value.......................... 110,606 4,924 1,030 (1d) 116,560
Held to maturity........................................... 325,963 69,324 5,628 (1d) 400,915
Residential mortgages held for sale.......................... 13,598 13,598
Federal funds sold and securities purchased
under agreements to resell................................. 4,625 1,626 6,251
Interest-bearing deposits in other banks..................... 7,857 7,857
Trading account securities................................... 659 659
---------- -------- ------- ----------
Total interest and dividend income................... 1,415,825 141,254 7,844 1,564,923
---------- -------- ------- ----------
INTEREST EXPENSE
Deposits..................................................... 283,959 76,742 (1,935)(1h) 358,766
Other borrowings............................................. 264,454 18,016 297 (1i) 282,767
Notes and debentures......................................... 63,261 2,721 (2,721)(1j) 63,261
---------- -------- ------- ----------
Total interest expense............................... 611,674 97,479 (4,359) 704,794
---------- -------- ------- ----------
NET INTEREST INCOME.......................................... 804,151 43,775 12,203 860,129
Provision for credit losses.................................. 3,000 3,800 6,800
---------- -------- ------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES.......................................... 801,151 39,975 12,203 853,329
---------- -------- ------- ----------
NONINTEREST INCOME
Customer service fees........................................ 146,008 5,572 151,580
Trust and agency fees........................................ 87,002 87,002
Gain on sale of loans, net................................... 13,849 13,849
Securities gains, net........................................ 6,649 6,649
Other........................................................ 41,292 9,566 (2,232)(1g) 48,626
---------- -------- ------- ----------
Total noninterest income............................. 274,302 35,636 (2,232) 307,706
---------- -------- ------- ----------
NONINTEREST EXPENSES
Compensation and benefits.................................... 367,263 20,853 388,116
Occupancy and equipment...................................... 115,922 13,108 (450)(1f) 128,580
Foreclosed properties provision and expense.................. 10,218 12,917 23,135
Merger related charges....................................... 100,900 100,900
Restructuring related charges................................ 39,800 39,800
Other........................................................ 212,799 19,911 7,291 (1m) 240,001
---------- -------- ------- ----------
Total noninterest expenses........................... 846,902 66,789 6,841 920,532
---------- -------- ------- ----------
INCOME BEFORE INCOME TAXES................................... 228,551 8,822 3,130 240,503
Income taxes (benefit)....................................... 84,671 (295) 4,168 (1k) 88,544
---------- -------- ------- ----------
NET INCOME................................................... $ 143,880 $ 9,117 $(1,038) $ 151,959
========== ======== ======= ==========
NET INCOME APPLICABLE TO COMMON SHARES....................... $ 132,304 $ 6,496 $ 1,583 (1n) $ 140,383
========== ======== ======= ==========
COMMON SHARE DATA
Net income................................................. $ 1.12 $ 0.46 $ 1.11
Weighted average shares outstanding........................ 118,518 14,039 126,542
</TABLE>
See accompanying notes to unaudited pro forma condensed financial information.
70
<PAGE> 139
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
NORTHEAST FEDERAL CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
SHAWMUT/
HISTORICAL NORTHEAST NORTHEAST
---------------------- PRO FORMA PRO FORMA
SHAWMUT NORTHEAST ADJUSTMENTS COMBINED
---------- --------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans.................................................. $1,242,683 $154,116 $ 1,581 (1e) $1,398,380
Securities
At lower of aggregate cost or fair value............. 236,455 1,373 (1d) 237,828
Held to maturity..................................... 303,217 65,175 7,504 (1d) 375,896
Residential mortgages held for sale.................... 29,636 29,636
Federal funds sold and securities purchased
under agreements to resell........................... 12,590 1,085 13,675
Interest-bearing deposits in other banks............... 839 839
Trading account securities............................. 1,562 1,562
---------- -------- ------- ----------
Total interest and dividend income............ 1,826,982 220,376 10,458 2,057,816
---------- -------- ------- ----------
INTEREST EXPENSE
Deposits............................................... 420,966 121,163 (2,581)(1h) 539,548
Other borrowings....................................... 262,413 23,345 397 (1i) 286,155
Notes and debentures................................... 72,040 3,460 (3,460)(1j) 72,040
---------- -------- ------- ----------
Total interest expense........................ 755,419 147,968 (5,644) 897,743
---------- -------- ------- ----------
NET INTEREST INCOME.................................... 1,071,563 72,408 16,102 1,160,073
Provision for credit losses............................ 55,944 23,300 79,244
---------- -------- ------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES.................................... 1,015,619 49,108 16,102 1,080,829
---------- -------- ------- ----------
NONINTEREST INCOME
Customer service fees.................................. 187,022 10,181 197,203
Trust and agency fees.................................. 116,845 116,845
Securities gains, net.................................. 12,468 5,625 18,093
Other.................................................. 97,471 1,933 (2,975)(1g) 96,429
---------- -------- ------- ----------
Total noninterest income...................... 413,806 17,739 (2,975) 428,570
---------- -------- ------- ----------
NONINTEREST EXPENSES
Compensation and benefits.............................. 500,254 32,324 532,578
Occupancy and equipment................................ 163,792 15,399 (600)(1f) 178,591
Foreclosed properties provision and expense............ 105,173 17,606 122,779
Restructuring related charges.......................... 36,319 36,319
Other.................................................. 334,411 27,850 9,721 (1m) 371,982
---------- -------- ------- ----------
Total noninterest expenses.................... 1,139,949 93,179 9,121 1,242,249
---------- -------- ------- ----------
INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGES......................... 289,476 (26,332) 4,006 267,150
Income taxes (benefit)................................. 6,628 (12,193) 5,491 (1k) (74)
---------- -------- ------- ----------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES................................ $ 282,848 $(14,139) $(1,485) $ 267,224
========== ======== ======== ==========
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES APPLICABLE TO COMMON SHARES.... $ 267,379 $(18,640) $ 3,016 (1n) $ 251,755
========== ======== ======= ==========
COMMON SHARE DATA
Income (loss) before cumulative effect
of accounting changes.............................. $ 2.35 $ (1.75) $ 2.06
Weighted average shares outstanding.................. 113,908 10,649 121,932
</TABLE>
See accompanying notes to unaudited pro forma condensed financial information.
71
<PAGE> 140
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
NORTHEAST FEDERAL CORP. AND SUBSIDIARIES
BUSINESS FINANCE DIVISION OF BARCLAYS BUSINESS CREDIT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
SHAWMUT/
HISTORICAL NORTHEAST NORTHEAST BARCLAYS AGGREGATE
---------------------- PRO FORMA PRO FORMA PRO PRO FORMA
SHAWMUT NORTHEAST ADJUSTMENTS COMBINED FORMA(5) COMBINED
---------- --------- ------------ ---------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans............................................ $ 952,517 $ 65,380 $ 1,186 (1e) $1,019,083 $122,125 $1,141,208
Securities.......................................
Available for sale, at fair value.............. 110,606 4,924 1,030 (1d) 116,560 116,560
Held to maturity............................... 325,963 69,324 5,628 (1d) 400,915 400,915
Residential mortgages held for sale.............. 13,598 13,598 13,598
Federal funds sold and securities purchased
under agreements to resell..................... 4,625 1,626 6,251 6,251
Interest-bearing deposits in other banks......... 7,857 7,857 7,857
Trading account securities....................... 659 659 659
---------- -------- ------- ---------- -------- ----------
Total interest and dividend income....... 1,415,825 141,254 7,844 1,564,923 122,125 1,687,048
---------- -------- ------- ---------- -------- ----------
INTEREST EXPENSE
Deposits......................................... 283,959 76,742 (1,935)(1h) 358,766 358,766
Other borrowings................................. 264,454 18,016 297 (1i) 282,767 65,850 348,617
Notes and debentures............................. 63,261 2,721 (2,721)(1j) 63,261 63,261
---------- -------- ------- ---------- -------- ----------
Total interest expense................... 611,674 97,479 (4,359) 704,794 65,850 770,644
---------- -------- ------- ---------- -------- ----------
NET INTEREST INCOME.............................. 804,151 43,775 12,203 860,129 56,275 916,404
Provision for credit losses...................... 3,000 3,800 6,800 3,300 10,100
---------- -------- ------- ---------- -------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES.............................. 801,151 39,975 12,203 853,329 52,975 906,304
---------- -------- ------- ---------- -------- ----------
NONINTEREST INCOME
Customer service fees............................ 146,008 5,572 151,580 10,250 161,830
Trust and agency fees............................ 87,002 87,002 87,002
Gain on sale of loans, net....................... 13,849 13,849 13,849
Securities gains, net............................ 6,649 6,649 6,649
Other............................................ 41,292 9,566 (2,232)(1g) 48,626 48,626
---------- -------- ------- ---------- -------- ----------
Total noninterest income................. 274,302 35,636 (2,232) 307,706 10,250 317,956
---------- -------- ------- ---------- -------- ----------
NONINTEREST EXPENSES
Compensation and benefits........................ 367,263 20,853 388,116 22,000 410,116
Occupancy and equipment.......................... 115,922 13,108 (450)(1f) 128,580 4,900 133,480
Foreclosed properties provision and expense...... 10,218 12,917 23,135 23,135
Merger related charges........................... 100,900 100,900 100,900
Restructuring related charges.................... 39,800 39,800 39,800
Other............................................ 212,799 19,911 7,291 (1m) 240,001 9,950 249,951
---------- -------- ------- ---------- -------- ----------
Total noninterest expenses............... 846,902 66,789 6,841 920,532 36,850 957,382
---------- -------- ------- ---------- -------- ----------
INCOME BEFORE INCOME TAXES....................... 228,551 8,822 3,130 240,503 26,375 266,878
Income taxes (benefit)........................... 84,671 (295) 4,168 (1k) 88,544 10,550 99,094
---------- -------- ------- ---------- -------- ----------
NET INCOME....................................... $ 143,880 $ 9,117 $(1,038) $ 151,959 $ 15,825 $ 167,784
========== ======== ======= ========== ======== ==========
NET INCOME APPLICABLE TO COMMON SHARES........... $ 132,304 $ 6,496 $ 1,583 (1n) $ 140,383 $ 8,887 $ 149,270
========== ======== ======= ========== ======== ==========
COMMON SHARE DATA
Net income..................................... $ 1.12 $ 0.46 $ 1.11 $ 1.18
Weighted average shares outstanding............ 118,518 14,039 126,542 126,542
</TABLE>
See accompanying notes to unaudited pro forma condensed financial information.
72
<PAGE> 141
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
NORTHEAST FEDERAL CORP. AND SUBSIDIARIES
BUSINESS FINANCE DIVISION OF BARCLAYS BUSINESS CREDIT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
SHAWMUT/
HISTORICAL NORTHEAST NORTHEAST BARCLAYS AGGREGATE
---------------------- PRO FORMA PRO FORMA PRO PRO FORMA
SHAWMUT NORTHEAST ADJUSTMENTS COMBINED FORMA(5) COMBINED
---------- --------- ----------- --------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans......................................... $1,242,683 $154,116 $ 1,581 (1e) $1,398,380 $123,550 $1,521,930
Securities....................................
At lower of aggregate cost or fair value.... 236,455 1,373 (1d) 237,828 237,828
Held to maturity............................ 303,217 65,175 7,504 (1d) 375,896 375,896
Residential mortgages held for sale........... 29,636 29,636 29,636
Federal funds sold and securities purchased
under agreements to resell.................. 12,590 1,085 13,675 13,675
Interest-bearing deposits in other banks...... 839 839 839
Trading account securities.................... 1,562 1,562 1,562
---------- -------- ------- ---------- -------- ----------
Total interest and dividend income.... 1,826,982 220,376 10,458 2,057,816 123,550 2,181,366
---------- -------- ------- ---------- -------- ----------
INTEREST EXPENSE
Deposits...................................... 420,966 121,163 (2,581)(1h) 539,548 539,548
Other borrowings.............................. 262,413 23,345 397 (1i) 286,155 65,000 351,155
Notes and debentures.......................... 72,040 3,460 (3,460)(1j) 72,040 72,040
---------- -------- ------- ---------- -------- ----------
Total interest expense................ 755,419 147,968 (5,644) 897,743 65,000 962,743
---------- -------- ------- ---------- -------- ----------
NET INTEREST INCOME........................... 1,071,563 72,408 16,102 1,160,073 58,550 1,218,623
Provision for credit losses................... 55,944 23,300 79,244 4,700 83,944
---------- -------- ------- ---------- -------- ----------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT
LOSSES...................................... 1,015,619 49,108 16,102 1,080,829 53,850 1,134,679
---------- -------- ------- ---------- -------- ----------
NONINTEREST INCOME
Customer service fees......................... 187,022 10,181 197,203 13,250 210,453
Trust and agency fees......................... 116,845 116,845 116,845
Securities gains, net......................... 12,468 5,625 18,093 18,093
Other......................................... 97,471 1,933 (2,975)(1g) 96,429 96,429
---------- -------- ------- ---------- -------- ----------
Total noninterest income.............. 413,806 17,739 (2,975) 428,570 13,250 441,820
---------- -------- ------- ---------- -------- ----------
NONINTEREST EXPENSES
Compensation and benefits..................... 500,254 32,324 532,578 25,500 558,078
Occupancy and equipment....................... 163,792 15,399 (600)(1f) 178,591 6,500 185,091
Foreclosed properties provision and expense... 105,173 17,606 122,779 122,779
Restructuring related charges................. 36,319 36,319 36,319
Other......................................... 334,411 27,850 9,721 (1m) 371,982 16,100 388,082
---------- -------- ------- ---------- -------- ----------
Total noninterest expenses............ 1,139,949 93,179 9,121 1,242,249 48,100 1,290,349
---------- -------- ------- ---------- -------- ----------
INCOME (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGES..... 289,476 (26,332) 4,006 267,150 19,000 286,150
Income taxes (benefit)........................ 6,628 (12,193) 5,491 (1k) (74) 7,600 7,526
---------- -------- ------- ---------- -------- ----------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES.......................... $ 282,848 $(14,139) $(1,485) $ 267,224 $ 11,400 $ 278,624
========== ======== ======= ========== ======== ==========
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES APPLICABLE TO COMMON
SHARES...................................... $ 267,379 $(18,640) $ 3,016 (1n) $ 251,755 $ 2,150 $ 253,905
========== ======== ======= ========== ======== ==========
COMMON SHARE DATA
Income (loss) before cumulative effect of
accounting changes........................ $ 2.35 $ (1.75) $ 2.06 $ 2.08
Weighted average shares outstanding......... 113,908 10,649 121,932 121,932
</TABLE>
See accompanying notes to unaudited pro forma condensed financial information.
73
<PAGE> 142
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
NORTHEAST FEDERAL CORP. AND SUBSIDIARIES
BUSINESS FINANCE DIVISION OF BARCLAYS BUSINESS CREDIT, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
NOTE 1:
The pro forma adjustments are based on the best available preliminary
information as of September 30, 1994 and may be different from the actual
adjustments to reflect the fair value of the net assets purchased as of the date
of acquisition. The number of shares of Shawmut Common Stock to be issued is
based upon the number of shares of Northeast Common Stock, stock options and
warrants outstanding at September 30, 1994, adjusted for the proceeds of the
exercise price of stock options and warrants.
1(a) Acquisition of Northeast:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Purchase Price:
8,023,915 shares of Shawmut common stock issued with a value of
$21.465 per share, adjusted for the exercise price of stock
options and warrants.......................................... $163,570
Estimated direct acquisition expenses............................ 2,000
--------
Total purchase price..................................... 165,570
--------
Estimated fair value of net assets purchased:
Historical net assets of Northeast at September 30, 1994
applicable to common equity interests......................... 93,145
Add (deduct) adjustments to reflect fair value:
Securities:
Available for sale............................................ (8,238)
Held to maturity.............................................. (45,023)
Loans............................................................ (23,717)
Premises and equipment........................................... (6,000)
Other assets:
Other real estate owned....................................... (254)
Mortgage servicing rights..................................... 23,803
Write-off of deferred tax asset............................... (21,171)
Tax effects of purchase adjustments........................... 34,816
--------
Subtotal other assets......................................... 37,194
--------
Deposits......................................................... (5,162)
Other borrowings (FHLB advances)................................. 1,191
Other liabilities (acquisition related charges).................. (23,640)
--------
Estimated fair value of net assets................................. 19,750
--------
Excess of purchase price over fair value of identifiable net
assets........................................................... $145,820
========
</TABLE>
The adjustments to fair value for securities, loans, deposits, mortgaging
service rights and premises and equipment will be amortized in relation to the
expected life or maturity of the related asset or liability. The excess of
purchase price over the fair value of identifiable net assets will be amortized
generally over 15 years.
1(b) Represents the redemption of the Series B Preferred Stock assumed to occur
upon the consummation of the Merger. The provisions of the DEPCO Agreement
require Northeast to make an offer to repurchase the Series B Preferred
Stock not less than 45 days following a change in control of Northeast. The
terms of the Series B Preferred Stock require 45 days notice prior to
redemption. Shawmut intends to redeem the Series B Preferred Stock as soon
as practicable following the consummation of the Merger which is
anticipated to be on or close to 45 days following consummation of Merger.
1(c) Represents the redemption of the Northeast 9% Sinking Fund Uncertificated
Debentures, due May 8, 2012 (the "Debentures") assumed to occur upon the
consummation of the Merger. The Debentures
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<PAGE> 143
were originally issued in connection with the acquisition of assets from
four Rhode Island financial institutions and in connection with the
repurchase of adjustable rate preferred stock of Northeast.
1(d) Represents the accretion of the adjustment to reflect the fair value of
securities, accreted over an estimated remaining life of six years.
1(e) Represents the accretion of the adjustment to reflect the fair value of
loans, accreted over an estimated remaining life of fifteen years.
1(f) Represents depreciation expense reduction related to the adjustment to
reflect the fair value of premises and equipment, over an estimated
remaining life of ten years.
1(g) Represents the amortization of the adjustment to reflect the fair value of
purchased mortgage servicing rights, amortized over an estimated remaining
life of eight years.
1(h) Represents the amortization of the adjustment to reflect the fair value of
deposits, amortized over an estimated remaining life of two years.
1(i) Represents the amortization of the adjustment to reflect the fair value of
other borrowings, amortized over an estimated remaining life of three
years.
1(j) Represents the interest adjustment due to the pro forma redemption of the
Debentures as described in 1(c) above.
1(k) Represents the adjustment of deferred taxes related to the
amortization/accretion of fair value adjustments in items 1(c) through 1(j)
above, estimated at a 40 percent combined effective income tax rate.
1(m) Represents the amortization of the excess of purchase price over fair value
of identifiable net assets over a fifteen year period.
1(n) Represents the adjustments to net income applicable to common shares and
income (loss) before cumulative effect of accounting changes applicable to
common shares due to the pro forma redemption of the Series B Preferred
Stock as described in 1(b) above.
NOTE 2:
Certain reclassifications have been made to the accounts of Northeast and
Barclays in the accompanying Unaudited Pro Forma Condensed Combining Balance
Sheet and Unaudited Pro Forma Condensed Combining Statements of Income to
conform to Shawmut presentation. Pro forma results of operations do not reflect
the following: the cumulative effect of an accounting change due to the adoption
of Statement of Financial Accounting Standards (FAS) No. 109 of $52,800,000 for
Shawmut for the year ended December 31, 1993 and $4,299,000 for Barclays for the
year ended December 31, 1993; and the cumulative effect of an accounting change
due to the adoption of FAS No. 112 of $6,600,000 for Shawmut for the year ended
December 31, 1993.
NOTE 3:
The pro forma shareholders' equity accounts of Shawmut and Northeast have
been adjusted in the accompanying Unaudited Pro Forma Condensed Combining
Balance Sheet (see Note 1) to reflect the issuance of shares of Shawmut Common
Stock in exchange for all of the outstanding shares of Northeast Common Stock,
stock options and warrants and the elimination of Northeast's shareholders'
equity accounts in accordance with the purchase method of accounting.
NOTE 4:
The Exchange Ratio of .507 (based on a Shawmut Common Stock Average Price
of $21.465) reflected in the unaudited pro forma condensed financial information
is the highest Exchange Ratio pursuant to the calculation as set forth in the
Merger Agreement (see "THE MERGER -- Exchange Ratio"). As discussed
under -- "Exchange Ratio", if the Shawmut Common Stock Average Price is less
than $21.465, the Exchange Ratio will be .507. In such event, the Merger
Agreement provides that Northeast may terminate the Merger Agreement, unless
Shawmut exercises its option to increase the consideration to be received by
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<PAGE> 144
Northeast stockholders to adjust the Exchange Ratio to equal a number equal to
$10.875 divided by the Shawmut Common Stock Average Price. If the Shawmut Common
Stock Average Price were greater or equal to $26.235 the Exchange Ratio would be
.415, which is the lowest Exchange Ratio possible pursuant to the calculation as
set forth in the Merger Agreement. If the Exchange Ratio were .415 the number of
shares of Shawmut Common Stock assumed to be issued would be 6,567,899.
NOTE 5:
Shawmut has agreed to acquire certain net assets from Barclays (see below)
totaling $2,112,305,000 for a premium of $290,000,000. Funding assumptions for
this transaction are as follows:
-- Proceeds from the issuance of Shawmut preferred stock of $100,000,000;
-- Proceeds from the issuance of SBC subordinated notes of $200,000,000;
-- Proceeds from the issuance of SBC senior bank notes of $200,000,000; and
-- Proceeds from other funding sources (primarily repurchase agreements,
federal funds purchased and FHLB borrowings) of $1,912,305,000.
Expenses of $5,000,000 relating to the transaction are included in the
amount of estimated goodwill. The excess of purchase price and acquisition costs
over the book value of net assets acquired ($295,000,000) has been allocated
between loan premium ($70,000,000) and goodwill ($225,000,000). The assets and
liabilities of Barclays will be recorded at estimated fair value upon closing
and, as a result, the pro forma amounts of loan premium and goodwill may be
different. A detailed analysis of the net assets acquired as of September 30,
1994 and pro forma adjustments follows (000's):
<TABLE>
<CAPTION>
BARCLAYS
PRO FORMA BARCLAYS
BARCLAYS ADJUSTMENTS PRO FORMA
-------- ----------- ---------
<S> <C> <C> <C>
Cash.................................................. $ 1,206 $ 10,000 $ 11,206
Loans................................................. 2,156,079 70,000 2,226,079
Reserve for credit losses............................. (41,366) (41,366)
Premises and equipment................................ 3,493 3,493
Goodwill.............................................. 225,000 225,000
Other assets.......................................... 3,358 3,358
---------- ----------- ----------
Total assets................................ 2,122,770 305,000 2,427,770
---------- ----------- ----------
Other liabilities..................................... 10,465 5,000 15,465
Other borrowings...................................... 1,912,305 1,912,305
Notes and debentures.................................. 400,000 400,000
Preferred stock....................................... 100,000 100,000
---------- ----------- ----------
Total liabilities and capital............... 10,465 2,417,305 2,427,770
---------- ----------- ----------
$2,112,305 $(2,112,305) $ 0
========== =========== ==========
</TABLE>
For purposes of the Unaudited Pro Forma Condensed Combining Statement of
Income, the loan premium is being amortized over an estimated life of four years
and goodwill is being amortized over an estimated twenty-five year period. Net
income applicable to common shares and income (loss) before cumulative effect of
accounting changes applicable to common shares have been reduced by the assumed
dividend declared on the Shawmut preferred stock (9.25% estimated annual
dividend rate) to be issued.
Adjustments to increase interest expense in the amounts of $15,800,000 and
$11,850,000 for the year ended December 31, 1993 and the nine months ended
September 30, 1994, respectively, have been assumed to reflect an estimate of
the interest expense on $200,000,000 of SBC subordinated notes (7.90% estimated
annual interest rate) to be issued. Excluded from Barclays financial information
are the results of operations of a leasing division which was sold in 1994 and
will not have an ongoing effect on the results of operations in the
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<PAGE> 145
future. Further, noninterest income for the year ended December 31, 1993 does
not include approximately $6,300,000 related to a litigation settlement that
will not have an ongoing effect on the results of operations in the future.
VALIDITY OF SECURITIES
The validity of the shares of Shawmut Common Stock and associated Shawmut
Rights to be issued in connection with the Merger has been passed upon by
Sullivan & Cromwell, New York, New York, special counsel to Shawmut. The opinion
of Sullivan & Cromwell was conditioned upon, and subject to the assumption that,
such Shawmut Common Stock and associated Shawmut Rights will be duly issued and
delivered as contemplated by the Merger Agreement.
EXPERTS
The consolidated financial statements of Shawmut incorporated in this Proxy
Statement/Prospectus by reference to Shawmut's Annual Report on Form 10-K for
the year ended December 31, 1993 and the consolidated financial statements of
Shawmut incorporated in this Proxy Statement/Prospectus by reference to
Shawmut's current report on Form 8-K, dated August 2, 1994, have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of Cohasset incorporated herein by
reference to Shawmut's Current Report on Form 8-K, dated March 28, 1994, have
been audited by Wolf & Company, P.C., independent accountants, and have been so
included in reliance upon the report of Wolf & Company, P.C. incorporated by
reference herein, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of West Newton incorporated herein by
reference to Shawmut's Current Report on Form 8-K, dated March 28, 1994, have
been audited by Wolf & Company, P.C., independent accountants, and have been so
included in reliance upon the report of Wolf & Company, P.C. incorporated by
reference herein, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of Northeast and subsidiaries as of
December 31, 1993 and for the year then ended, included in Northeast's Annual
Report on Form 10-K for the year ended December 31, 1993 incorporated by
reference into this Proxy Statement/Prospectus, have been incorporated by
reference herein and in the Registration Statement of which the Proxy
Statement/Prospectus is a part in reliance upon the report of Deloitte & Touche,
LLP, independent accountants, dated January 21, 1993 (February 9, 1994 as to
Note 26), and upon the authority of said firm as experts in accounting and
auditing. Such consolidated financial statements of Northeast, updated for
subsequent events, are included in the Current Report on Form 8-K dated January
11, 1995 of Shawmut National Corporation; the report of Deloitte & Touche, LLP,
independent accountants, with respect thereto dated January 21, 1994 (August 12,
1994 as to Note 26) is also included therein. Shawmut's Current Report on Form
8-K dated January 11, 1995 has been incorporated by reference into this Proxy
Statement/Prospectus. The consolidated financial statements of Northeast and
subsidiaries as of December 31, 1992 and for the nine months ended December 31,
1992 and for the year ended March 31, 1992, included in Northeast's Annual
Report on Form 10-K for the year ended December 31, 1993 incorporated by
reference into this Proxy Statement/Prospectus, have been incorporated by
reference herein and in the Registration Statement of which the Proxy
Statement/Prospectus is a part in reliance upon the report of Coopers & Lybrand,
LLP, independent accountants, and upon the authority of said firm as experts in
accounting and auditing.
The financial statements of the Business Finance Division of Barclays
Business Credit, Inc. incorporated in this Proxy Statement/Prospectus by
reference to Shawmut's Current Report on Form 8-K, dated January 11, 1995, have
been so incorporated in reliance upon the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
77
<PAGE> 146
ANNEX A
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
SHAWMUT NATIONAL CORPORATION
AND
NORTHEAST FEDERAL CORP.
DATED AS OF JUNE 11, 1994
- --------------------------------------------------------------------------------
<PAGE> 147
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 11, 1994 (this "Agreement"),
by and between Shawmut National Corporation, a Delaware corporation ("Parent"),
and Northeast Federal Corp., a Delaware corporation ("Target").
WHEREAS, the Boards of Directors of Parent and Target have determined that
it is in the best interests of their respective companies and their shareholders
to consummate the business combination transaction provided for herein in which
a subsidiary of Parent ("Merger Sub") will, subject to the terms and conditions
set forth herein, merge (the "Merger") with and into Target; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, in
accordance with the Delaware General Corporation Law (the "DGCL"), at the
Effective Time (as defined in Section 1.2 hereof), Merger Sub shall merge with
and into Target. Target shall be the surviving corporation (hereinafter
sometimes called the "Surviving Corporation") in the Merger, and shall continue
its corporate existence under the laws of the State of Delaware as a wholly
owned subsidiary of Parent. Upon consummation of the Merger, the separate
corporate existence of Merger Sub shall terminate.
1.2 Effective Time. The Merger shall become effective as set forth in the
certificate of merger (the "Certificate of Merger") which shall be filed with
the Secretary of State of the State of Delaware (the "Secretary") on the Closing
Date (as defined in Section 9.1 hereof). The term "Effective Time" shall be the
date and time when the Merger becomes effective, as set forth in the Certificate
of Merger.
1.3 Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects set forth in Sections 259 and 261 of the DGCL.
1.4 Conversion of Target Common Stock; Target Preferred Stock. (a) At the
Effective Time, subject to Section 2.2(e) hereof, each share of the common
stock, par value $0.01 per share, of Target (the "Target Common Stock") issued
and outstanding immediately prior to the Effective Time (other than shares of
Target Common Stock held (x) in Target's treasury or (y) directly or indirectly
by Parent or Target or any of their respective Subsidiaries (as defined below)
(except for Trust Account Shares and DPC Shares, as such terms are defined in
Section 1.4(b) hereof)) shall, by virtue of this Agreement and without any
action on the part of the holder thereof, be converted into the number of shares
(the "Exchange Ratio") of common stock, par value $.01 per share, of Parent
("Parent Common Stock") (together with the number of Parent Rights (as defined
in Section 4.2 hereof) associated therewith) determined as follows:
(i) if the Parent Common Stock Average Price (as defined in Section
8.1(g) hereof) is greater than or equal to $26.235, the Exchange Ratio will
be .415;
(ii) if the Parent Common Stock Average Price is less than $26.235 but
equal to or greater than $21.465, the Exchange Ratio will be (i) $10.875
divided by (ii) the Parent Common Stock Average Price; or
(iii) if the Parent Common Stock Average Price is less than $21.465,
the Exchange Ratio will be .507.
All of the shares of Target Common Stock converted into Parent Common Stock
pursuant to this Article I shall no longer be outstanding and shall
automatically be cancelled and shall cease to exist, and each certificate (each
a "Certificate") previously representing any such shares of Target Common Stock
shall
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<PAGE> 148
thereafter represent the right to receive (i) a certificate representing the
number of whole shares of Parent Common Stock and (ii) cash in lieu of
fractional shares into which the shares of Target Common Stock represented by
such Certificate have been converted pursuant to this Section 1.4(a) and Section
2.2(e) hereof. Certificates previously representing shares of Target Common
Stock shall be exchanged for certificates representing whole shares of Parent
Common Stock and cash in lieu of fractional shares issued, in consideration
therefor upon the surrender of such Certificates in accordance with Section 2.2
hereof, without any interest thereon. If prior to the Effective Time Parent
should split or combine its common stock, or pay a dividend or other
distribution in such common stock, then the Exchange Ratio shall be
appropriately adjusted to reflect such split, combination, dividend or
distribution.
(b) At the Effective Time, all shares of Target Common Stock that are owned
by Target as treasury stock and all shares of Target Common Stock that are owned
directly or indirectly by Parent or Target or any of their respective
Subsidiaries (other than shares of Target 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, and shares of Parent Common Stock which are similarly held, whether held
directly or indirectly by Parent or Target or any of their respective
subsidiaries, as the case may be, being referred to herein as "Trust Account
Shares") and other than any shares of Target Common Stock held by Parent or
Target or any of their respective Subsidiaries in respect of a debt previously
contracted (any such shares of Target Common Stock, and shares of Parent Common
Stock which are similarly held, whether held directly or indirectly by Parent or
Target or any of their respective subsidiaries, being referred to herein as "DPC
Shares")) shall be cancelled and shall cease to exist and no stock of Parent or
other consideration shall be delivered in exchange therefor. All shares of
Parent Common Stock that are owned by Target or any of its Subsidiaries (other
than Trust Account Shares and DPC Shares) shall become treasury stock of Parent.
(c) At and after the Effective Time each share of the $8.50 Cumulative
Preferred Stock, Series B, of Target (the "Target Series B Preferred Stock"),
outstanding shall remain outstanding.
1.5 Conversion of Merger Sub Common Stock. Each of the 100 shares of the
common stock, par value $1.00 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall by virtue of this Agreement and
without any action on the part of the holder thereof, be converted into and
exchangeable for one share common stock, par value $1.00, of the Surviving
Corporation, which shall thereafter constitute all of the issued and outstanding
shares of Common Stock of the Surviving Corporation.
1.6 Options and Warrants. At the Effective Time, each option and warrant
granted by Target to purchase shares of Target Common Stock which is outstanding
and unexercised immediately prior thereto shall be converted automatically into
an option or warrant, as the case may be, to purchase shares of Parent Common
Stock in an amount and at an exercise price determined as provided below (and,
in the case of options, otherwise subject to the terms of the 1983 Stock Option
Plan of Target, The 1986 Stock Option Plan of Target, the Target 1993 Stock
Option Plan, or the Target 1993 Stock Option Plan for Three Year Term Outside
Directors, as the case may be (each a "Target Stock Option Plan"; collectively
the "Target Stock Option Plans") or, in the case of warrants, otherwise subject
to the terms of the Stock Warrants, each dated April 22, 1992, of Target (the
"Target Warrants")):
(a) The number of shares of Parent Common Stock to be subject to the
new option or warrant shall be equal to the product of the number of shares
of Target Common Stock subject to the original option or warrant and the
Exchange Ratio, provided that any fractional shares of Parent Common Stock
resulting from such multiplication shall be rounded to the nearest whole
share; and
(b) The exercise price per share of Parent Common Stock under the new
option or warrant shall be equal to the exercise price per share of Target
Common Stock under the original option or warrant divided by the Exchange
Ratio, provided that such exercise price shall be rounded to the nearest
cent.
The adjustment provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code")) shall be and is intended to be effected in a manner
which is consistent with Section 424(a) of the Code. The duration and other
terms of the
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<PAGE> 149
new option or warrant shall be the same as the original option or warrant,
except that all references to Target shall be deemed to be references to Parent.
1.7 Certificate of Incorporation. At the Effective Time, the Certificate
of Incorporation of Target, as in effect at the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation.
1.8 By-Laws. At the Effective Time, the By-Laws of Merger Sub, 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.
1.9 Directors and Officers. The directors and officers of Merger Sub
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and By-Laws of the Surviving Corporation until
their respective successors are duly elected or appointed and qualified,
provided that so long as the Target Series B Preferred Stock is outstanding by
the terms thereof, and DEPCO or any Nominee (each as defined in Section 3.27) is
entitled to elect directors of Target pursuant to the terms of the Target Series
B Preferred Stock, the directors elected by the holders of the Target Series B
Preferred Stock shall be directors of the Surviving Corporation.
1.10 Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code, and that this
Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
ARTICLE II
EXCHANGE OF SHARES
2.1 Parent to Make Shares Available. As of the Effective Time, Parent
shall deposit, or shall cause to be deposited, with a bank or trust company
selected by Parent (which may be a Subsidiary of Parent) (the "Exchange Agent"),
for the benefit of the holders of Certificates, for exchange in accordance with
this Article II, certificates representing the shares of Parent Common Stock and
the cash in lieu of fractional shares (such cash and certificates for shares of
Parent 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 Target Common Stock.
2.2 Exchange of Shares. (a) As soon as practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of a Certificate or
Certificates a form letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon actual receipt of the Certificates by the Exchange Agent) and
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing the shares of Parent Common Stock and cash in lieu
of fractional shares, if any, into which the shares of Target Common Stock
previously represented by such Certificate or Certificates shall have been
converted pursuant to this Agreement. Upon proper surrender to the Exchange
Agent of a Certificate for exchange and cancellation, together with such
properly completed letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor (x) a certificate
representing that number of whole shares of Parent Common Stock to which such
holder of Target Common Stock shall have become entitled pursuant to the
provisions of Article I hereof and (y) a check representing the amount of cash
in lieu of fractional shares, if any, which such holder has the right to receive
in respect of the Certificate surrendered pursuant to the provisions of this
Article II, and the Certificate so surrendered shall forthwith be cancelled. No
interest will be paid or accrued on the cash in lieu of fractional shares and
unpaid dividends and distributions, if any, payable to holders of Certificates.
Notwithstanding anything to the contrary contained herein, no certificate
representing Parent Common Stock or cash in lieu of a fractional share interest
shall be delivered to a person who is an Affiliate (as defined in Section 6.5)
of Target unless such Affiliate has theretofore executed and delivered to Parent
the agreement referred to in Section 6.5.
A-3
<PAGE> 150
(b) No dividends or other distributions payable after the Effective Time
with respect to Parent Common Stock shall be paid to the holder of any
unsurrendered Certificate until the holder thereof shall duly 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 dividends or other distributions, without any
interest thereon, which became payable with respect to the shares of Parent
Common Stock represented by such Certificate after the Effective Time but on or
before the time of such surrender. No holder of an unsurrendered Certificate
shall be entitled, until the surrender of such Certificate, to vote the shares
of Parent Common Stock into which his or her Target Common Stock shall have been
converted.
(c) If any certificate representing shares of Parent Common Stock is to be
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the Certificate so surrendered shall be properly endorsed (or accompanied
by an appropriate instrument of transfer) and otherwise in proper form for
transfer, and that the person requesting such exchange shall pay to the Exchange
Agent in advance any transfer or other taxes required by reason of the issuance
of a certificate representing shares of Parent Common Stock in any name other
than that of the registered holder of the Certificate surrendered, or required
for any other reason, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of Target of the shares of Target Common Stock which were issued
and outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates representing such shares are presented for transfer to the
Exchange Agent, they shall be cancelled and exchanged for certificates
representing shares of Parent Common Stock as provided in this Article II.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of Parent Common Stock
shall be issued upon the surrender for exchange of Certificates, no dividend or
distribution with respect to Parent Common Stock shall be payable on or with
respect to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a shareholder of
Target. In lieu of the issuance of any such fractional share, Parent shall pay
to each former stockholder of Target who otherwise would be entitled to receive
a fractional share of Parent Common Stock an amount in cash determined by
multiplying (i) the average of the closing-sale prices of Parent Common Stock on
the New York Stock Exchange as reported by The Wall Street Journal for the five
trading days immediately preceding the date of the Effective Time by (ii) the
fraction of a share of Parent Common Stock to which such holder would otherwise
be entitled to receive pursuant to Section 1.4 hereof.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of Target for six months after the Effective Time shall be paid to
Parent. Any stockholders of Target who have not theretofore complied with this
Article II shall thereafter look only to Parent for payment of their shares of
Parent Common Stock, cash in lieu of fractional shares and unpaid dividends and
distributions on the Parent Common Stock deliverable in respect of each share of
Target Common Stock such stockholder holds as determined pursuant to this
Agreement, in each case, without any interest thereon. Notwithstanding the
foregoing, none of Parent, Target, the Exchange Agent or any other person shall
be liable to any former holder of shares of Target Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(g) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond in such amount as Parent may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of Parent Common Stock and cash in lieu of
fractional shares and unpaid dividends and distributions on Parent Common Stock
deliverable in respect thereof pursuant to this Agreement.
A-4
<PAGE> 151
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET
Target hereby represents and warrants to Parent and Merger Sub as follows:
3.1 Corporate Organization. (a) Target is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Target has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not have a Material Adverse Effect (as defined below) on Target. As used
in this Agreement, the term "Material Adverse Effect" means, with respect to
Parent, Target or the Surviving Corporation, as the case may be, a material
adverse effect on the business, properties, assets, liabilities, prospects,
results of operations or financial condition of such party and its Subsidiaries
taken as a whole or the ability of any party to consummate the transactions
contemplated hereby on the terms hereof, it being understood that a Material
Adverse Effect will not include a change with respect to, or effect on, such
entity resulting from a change in law, rule, regulation, generally accepted or
regulatory accounting principles, or a change with respect to, or effect on,
such entity resulting from any other matter affecting financial institutions or
their holding companies generally. As used in this Agreement, the word
"Subsidiary" when used with respect to any party means any corporation,
partnership or other organization, whether incorporated or unincorporated, which
is consolidated with such party for financial reporting purposes or of which the
party holds 25% or more of the shares. Target is duly registered as a savings
and loan holding company under the Home Owners' Loan Act, as amended ("HOLA").
The copies of the Certificate of Incorporation and By-laws of Target which have
previously been delivered to Parent are true, complete and correct copies of
such documents as in effect as of the date of this Agreement.
(b) Northeast Savings, F.A. ("Target Bank") is a federal savings and loan
association or savings bank duly organized, validly existing and in good
standing under the laws of the United States. The deposit accounts of Target
Bank are insured by the Federal Deposit Insurance Corporation (the "FDIC")
through the Savings Association Insurance Fund (the "SAIF") to the fullest
extent permitted by law, and all premiums and assessments required in connection
therewith have been paid by Target Bank. Target Bank is the only direct
Subsidiary of Target, and is the only Subsidiary of Target that is a
"Significant Subsidiary" as such term is defined in Regulation S-X promulgated
by the Securities and Exchange Commission (the "SEC"). Target Bank 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 the location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not have a
Material Adverse Effect on Target. The copies of the Federal Stock Charter and
By-laws of Target Bank which have previously been delivered to Parent are true,
complete and correct copies of such documents as in effect as of the date of
this Agreement.
(c) The minute books of Target and Target Bank accurately reflect in all
material respects all corporate actions held or taken since January 1, 1989 of
their respective stockholders and Boards of Directors (including committees of
their respective Boards of Directors).
3.2 Capitalization. (a) The authorized capital stock of Target consists
of 25,000,000 shares of Target Common Stock and 15,000,000 shares of preferred
stock, par value $.01 per share ("Target Preferred Stock"). As of March 31,
1994, there are (x) 13,519,193 shares of Target Common Stock issued and
outstanding and no shares of Target Common Stock held in Target's treasury and
402,576 shares of Target Series B Preferred Stock issued and outstanding, (y) no
shares of Target Common Stock reserved for issuance upon exercise of outstanding
stock options or warrants or otherwise except for (i) 1,497,292 shares of Target
Common Stock reserved for issuance pursuant to the Target Stock Option Plans and
(ii) 800,000 shares of Target Common Stock reserved for issuance pursuant to the
Target Warrants and (z), except for the 402,576 shares of Target Series B
Preferred Stock issued and outstanding and shares of such stock which may be
issued in payment for dividends on the Target Series B Preferred Stock, no
shares of Target Preferred Stock
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are issued or outstanding or reserved for issuance. All of the issued and
outstanding shares of Target Common Stock and Target Series B Preferred Stock
have been duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights, with no personal liability attaching to the
ownership thereof. Except as referred to above or reflected in Section 3.2(a) of
the Disclosure Schedule which is being delivered to Parent concurrently herewith
(the "Target Disclosure Schedule"), Target 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 Target
Common Stock or Target Preferred Stock or any other equity security of Target or
any securities representing the right to purchase or otherwise receive any
shares of Target Common Stock or any other equity security of Target. The names
of the optionees, the date of each option to purchase Target Common Stock
granted, the number of shares subject to each such option, the expiration date
of each such option, and the price at which each such option may be exercised
under the Target Stock Option Plans are set forth in Section 3.2(a) of the
Target Disclosure Schedule. Except as set forth in Section 3.2(a) of the Target
Disclosure Schedule, since March 31, 1994, Target has not issued any shares of
its capital stock or any securities convertible into or exercisable for any
shares of its capital stock, other than pursuant to the exercise of employee or
director stock options granted prior to such date and except for Series B
Preferred Stock issued in payment of dividends on outstanding shares of Series B
Preferred Stock. Section 3.2(a) of the Target Disclosure Schedule sets forth the
number of shares of Target Common Stock issued and outstanding as of the date of
this Agreement. Target has reserved an adequate number of shares to cover
exercise of options under the currently outstanding options granted pursuant to
the Target Stock Option Plans.
(b) Section 3.2(b) of the Target Disclosure Schedule sets forth a true and
correct list of all of the Target Subsidiaries as of the date of this Agreement.
Except as set forth in Section 3.2(b) of the Target Disclosure Schedule, Target
owns, directly or indirectly, all of the issued and outstanding shares of
capital stock of each of the Target Subsidiaries, free and clear of all liens,
charges, encumbrances and security interests whatsoever, and all of such shares
are duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof. Each Target Subsidiary is duly organized and validly existing as a
corporation or partnership under the laws of its jurisdiction of organization.
No Target Subsidiary has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of capital stock or any other equity security
of such Subsidiary or any securities representing the right to purchase or
otherwise receive any shares of capital stock or any other equity security of
such Subsidiary. Assuming compliance by Parent with Section 1.6 hereof and
except pursuant to the DEPCO Agreement (as defined in Section 3.27), at the
Effective Time, there will not be any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character by which Target or
any of its Subsidiaries will be bound calling for the purchase or issuance of
any shares of the capital stock of Target or any of its Subsidiaries.
3.3 Authority; No Violation. (a) Target 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 Target. The Board of Directors of
Target has directed that this Agreement and the transactions contemplated hereby
be submitted to Target's stockholders for approval at a meeting of such
stockholders and, except for the adoption of this Agreement by the requisite
vote of Target's stockholders, no other corporate proceedings on the part of
Target are necessary to approve this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Target and constitutes a valid and binding obligation
of Target.
(b) Except as set forth in Section 3.3(b) of the Target Disclosure
Schedule, neither the execution and delivery of this Agreement by Target nor the
consummation by Target of the transactions contemplated hereby or thereby, nor
compliance by Target with any of the terms or provisions hereof or thereof, will
(i) violate any provision of the Certificate of Incorporation or By-Laws of
Target or the certificate of incorporation, by-laws or similar governing
documents of Target Bank or (ii) assuming that the consents and approvals
referred to in Section 3.4 hereof are duly obtained, (x) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Target or Target Bank, or any of their
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respective properties or assets, or (y) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of Target or Target
Bank 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 Target or Target Bank 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, would not
have or be reasonably likely to have a Material Adverse Effect on Target.
3.4 Consents and Approvals. Except for (a) the filing of applications and
notices, as applicable, with the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the Bank Holding Company Act of 1956,
as amended (the "BHC Act") and approval of such applications and notices, (b)
the filing of applications with the Office of Thrift Supervision (the "OTS")
under the HOLA and approval of such applications, (c) the filing of any required
applications or notices with any state agencies and approval of such
applications (the "State Approvals"), (d) the filing with the SEC of a proxy
statement in definitive form relating to any meeting of Target's stockholders to
be held in connection with this Agreement and the transactions contemplated
hereby (the "Proxy Statement"), (e) the approval of this Agreement by the
requisite vote of the stockholders of Target, (f) the filing of the Certificate
of Merger with the Secretary pursuant to the DGCL, and (g) such filings,
authorizations or approvals as may be set forth in Section 3.4 of the Target
Disclosure Schedule, no consents or approvals of or filings or registrations
with any court, administrative agency or commission or other governmental
authority or instrumentality (each a "Governmental Entity") or with any third
party are necessary in connection with (1) the execution and delivery by Target
of this Agreement and (2) the consummation by Target of the Merger and the other
transactions contemplated hereby.
3.5 Loan Portfolio; Reports. (a) Except as set forth in Section 3.5(a) of
the Target Disclosure Schedule, as of March 31, 1994, neither Target nor any of
its Subsidiaries is a party to any written or oral (i) loan agreement, note or
borrowing arrangement (including, without limitation, leases, credit
enhancements, commitments, guarantees and interest-bearing assets)
(collectively, "Loans"), other than Loans the unpaid principal balance of which
does not exceed $100,000, under the terms of which the obligor was, as of March
31, 1994, over 90 days delinquent in payment of principal or interest or in
default under any other provision, or (ii) Loan to any director, executive
officer or ten percent stockholder of Target or any of its Subsidiaries or, to
the knowledge of Target, any person, corporation or enterprise controlling,
controlled by or under common control with any of the foregoing. Section 3.5(a)
of the Target Schedule sets forth (i) all of the Loans of Target or any of its
Subsidiaries the unpaid principal amount in excess of (A) $100,000 that as of
the date of this Agreement are internally classified as "Substandard,"
"Doubtful," "Loss," or "Classified," (B) $100,000 that as of the date of this
Agreement are internally classified as "Criticized," "Other Loans Especially
Mentioned" or "Special Mention", (C) $750,000 that as of the date of this
Agreement are internally classified as "Credit Risk Assets," "Concerned Loans,"
"Watch List" or words of similar import, in each case together with the
principal amount of and accrued and unpaid interest on each such Loan and the
identity of the borrower thereunder, and (ii) by category of Loan (i.e.,
commercial, consumer, etc.), all of the other Loans of Target and its
Subsidiaries that as of the date of this Agreement are classified as such,
together with the aggregate principal amount of and accrued and unpaid interest
on such Loans by category. Target shall promptly inform Parent of any Loan that
becomes classified in the manner described in the previous sentence, or any Loan
the classification of which is changed, at any time after the date of this
Agreement. Target and its Subsidiaries have internally classified, in the manner
described above, all Loans that any auditor or government examiner has
criticized or classified, and the internal classification of such Loans is at
least as strict as the criticism or classification thereof by an auditor or
government examiner.
(b) Target and Target Bank 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, 1990 with (i) the
Federal Reserve Board, (ii) the FDIC, (iii) the OTS, (iv) any state regulatory
authority (each a
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"State Regulator") and (v) any self-regulatory organization ("SRO")
(collectively "Regulatory Agencies"), and all other material reports and
statements required to be filed by them since January 1, 1989, including,
without limitation, any report or statement required to be filed pursuant to the
laws, rules or regulations of the United States, any state, the Federal Reserve
Board, the FDIC, the OTS, any State Regulator or any SRO, and have paid all fees
and assessments due and payable in connection therewith. Except for normal
examinations conducted by a Regulatory Agency in the regular course of the
business of Target and its Subsidiaries, and except as otherwise disclosed in
Section 3.5(b) of the Target Disclosure Schedule, no Regulatory Agency has
initiated any proceeding or, to the best knowledge of Target, investigation into
the business or operations of Target or any of its Subsidiaries since January 1,
1989. Except as otherwise disclosed in Section 3.5(b) of the Target Disclosure
Schedule, there is no material unresolved violation, criticism, or exception by
any Regulatory Agency with respect to any report or statement relating to any
examinations of Target or any of its Subsidiaries.
3.6 Financial Statements. Target has previously delivered to Parent copies
of (a) the consolidated balance sheets of Target and its Subsidiaries as of
December 31, for the fiscal years ended December 31, 1992 and 1993, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for each of the fiscal years in the three year period ended December
31, 1993, as reported in Target's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993 filed with the SEC under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), accompanied by the audit reports of
Deloitte & Touche or Coopers & Lybrand, independent public accountants with
respect to Target, and (b) the unaudited consolidated balance sheets of Target
and its Subsidiaries as of March 31, 1993 and March 31, 1994 and the related
unaudited consolidated statements of income, cash flows and changes in
stockholders' equity for the three month periods then ended as reported in
Target's Quarterly Report on Form 10-Q for the period ended March 31, 1994 filed
with the SEC under the Exchange Act. The March 31, 1994 consolidated balance
sheet of Target (including the related notes, where applicable) fairly presents
the consolidated financial position of Target 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, and the
financial statements referred to in Section 6.8 hereof will fairly present
(subject, in the case of the unaudited statements, to recurring audit
adjustments normal in nature and amount), the results of the consolidated
operations and consolidated financial position of Target and its Subsidiaries
for the respective fiscal periods or as of the respective dates therein set
forth; each of such statements (including the related notes, where applicable)
comply, and the financial statements referred to in Section 6.8 hereof will
comply, in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto and
each of such statements (including the related notes, where applicable) has
been, and the financial statements referred to in Section 6.8 hereof will be,
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except in the case of
unaudited statements, as permitted by Form 10-Q. The books and records of Target
and Target Bank 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 Target nor any Target Subsidiary nor any of
their respective officers or directors has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees in
connection with any of the transactions contemplated by this Agreement, except
that Target has engaged, and will pay a fee or commission to, Lehman Brothers
Inc. ("Lehman Brothers") in accordance with the terms of a letter agreement
between Lehman Brothers and Target, a true, complete and correct copy of which
has been previously delivered by Target to Parent.
3.8 Absence of Certain Changes or Events. (a) Except as may be set forth
in Section 3.8(a) of the Target Disclosure Schedule or as disclosed in Target's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1994, true,
complete and correct copies of which have previously been delivered to Parent,
since December 31, 1993, (i) neither Target nor any of its Subsidiaries has
incurred any material liability, except in the ordinary course of its business
consistent with prudent banking practices, and (ii) no events have occurred
which have had, individually or in the aggregate, a Material Adverse Effect on
Target.
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(b) Except as set forth in Section 3.8(b) of the Target Disclosure Schedule
or as disclosed in Target's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1994, since December 31, 1993, Target and its Subsidiaries have
carried on their respective businesses in the ordinary and usual course
consistent with prudent banking practices.
(c) Except as set forth in Section 3.8(c) of the Target Disclosure
Schedule, since December 31, 1993, neither Target nor any of its Subsidiaries
has (i) except for normal increases in the ordinary course of business
consistent with past practice or except as required by applicable law, increased
the wages, salaries, compensation, pension, or other fringe benefits or
perquisites payable to any executive officer, employee, or director from the
amount thereof in effect as of December 31, 1993, 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 year-end bonuses for fiscal 1993
and 1994 as listed in Section 3.8 of the Target Disclosure Schedule or (ii)
suffered any strike, work stoppage, slow-down, or other labor disturbance.
3.9 Legal Proceedings. (a) Except as set forth in Section 3.9(a) of the
Target Disclosure Schedule, neither Target nor any of its Subsidiaries is a
party to any, and there are no pending or, to the best of Target's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against
Target or any of its Subsidiaries as to which there is a reasonable probability
of an adverse determination and (i) which, if adversely determined, would,
individually or in the aggregate, have a Material Adverse Effect on Target or
the Surviving Corporation or (ii) challenging the validity or propriety of the
transactions contemplated by this Agreement.
(b) Except as otherwise disclosed in Section 3.9(b) of the Target
Disclosure Schedule, there is no injunction, order, judgment, decree, or
regulatory restriction imposed upon Target, any of its Subsidiaries or the
assets of Target or any of its Subsidiaries which has had, or might reasonably
be expected to have, a Material Adverse Effect on Target or the Surviving
Corporation.
(c) Section 3.9(c) of the Target Disclosure Schedule sets forth all pending
litigation involving any claim against the Target Bank or any of its
Subsidiaries, whether directly or by counterclaim, involving a "lender
liability" cause of action.
3.10 Taxes and Tax Returns. (a) Except as may be reflected in Section 3.10
of the Target Disclosure Schedule or, in the aggregate, otherwise would not have
a Material Adverse Effect on Target, Parent or the Surviving Corporation, each
of Target and its Subsidiaries has duly filed all Federal, state, and to the
best of its knowledge, county, local and foreign Tax returns (including, without
limitation, information returns and returns of estimated tax) required to be
filed by it on or prior to the date hereof (all such returns being accurate and
complete) and has duly paid or made adequate provision for the payment of all
Taxes (as defined below) that have been incurred by it or are due or claimed to
be due from it by Federal, state, county, local or foreign taxing authorities on
or prior to the date of this Agreement (including, without limitation, if and to
the extent applicable, those due in respect of its properties, income, business,
capital stock, deposits, franchises, licenses, sales and payrolls) other than
Taxes that are being contested in good faith (and which are set forth in Section
3.10 of the Target Disclosure Schedule). The income tax returns of Target and
its Subsidiaries have been examined by the Internal Revenue Service (the "IRS")
for all years through and including 1979, and the deficiencies (if any) asserted
as a result of such examination either, in the aggregate, were not material, or
have been satisfied. Except as may be reflected in Section 3.10 of the Target
Disclosure Schedule there are no material disputes pending, or claims asserted
for, Taxes or assessments upon Target or any of its Subsidiaries, nor does
Target or any of its Subsidiaries have outstanding any currently effective
waivers extending the statutory period of limitation applicable to any Federal,
state, county, local or foreign income tax return for any period. In addition,
(i) proper and accurate amounts have been withheld by Target and its
Subsidiaries from their employees, customers, depositors, shareholders and
others from whom they are required to withhold Tax in compliance with all
applicable Federal, state, county, local and foreign laws, except where the
failures to do so would not, in the aggregate, have a Material Adverse Effect on
Target, Parent or the Surviving Corporation and (ii) there are no Tax liens upon
any property or assets of the Target or its Subsidiaries except liens for
current Taxes not yet due. Except as, in the aggregate, would not have a
Material Adverse Effect on Target, Parent or the Surviving Corporation, or as
disclosed in Section 3.10 of the Target Disclosure Schedule, to the
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best of its knowledge, (i) no property of Target or any of its Subsidiaries is
property that Target or any of its Subsidiaries is or will be required to treat
as being owned by another person pursuant to the provisions of Section 168(f)(8)
of the Internal Revenue Code of 1954, as amended (as in effect prior to its
amendment by the Tax Reform Act of 1986) or is "tax-exempt use property" within
the meaning of Section 168(h) of the Code; (ii) neither Target nor any of its
Subsidiaries has been required to include in income any adjustment pursuant to
Section 481 of the Code by reason a voluntary change in accounting method
initiated by Target or any of its Subsidiaries, and the Internal Revenue Service
has not initiated or proposed any such adjustment or change in accounting
method; and (iii) neither Target nor any of its Subsidiaries has entered into a
transaction which is being accounted for as an installment obligation under
Section 453 of the Code.
(b) As used in this Agreement, the term "Tax" or "Taxes" means all Federal,
state, county, local, and foreign income, excise, gross receipts, ad valorem,
profits, gains, transfer gains, property, sales, transfer, use, payroll,
employment, severance, withholding, backup withholding, intangibles, franchise,
and other taxes, governmental charges, levies or like assessments together with
all penalties and additions to Tax and interest thereon.
(c) Target Bank, at the close of its most recent taxable year, qualified,
and on the Closing Date will qualify either as a "domestic building and loan
association" within the meaning of Section 7701(a)(19) of the Code or as a
"mutual savings bank" within the meaning of Section 591(b) of the Code that
meets the requirements of Section 7701(a)(19)(C) of the Code.
3.11 Employees. (a) The Target Reports (as defined in Section 3.12 hereof)
accurately describe all bonus, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock and stock option plans, all employment or severance
contracts, other material employee benefit plans and any applicable "change of
control" or similar provisions in any plan, contract or arrangement which cover
employees or former employees of Target or its Subsidiaries (collectively, the
"Compensation and Benefit Plans") required to be described in such Target
Reports. The Compensation and Benefit Plans and all other benefit plans,
contracts or arrangements covering directors, employees or former employees of
Target or its Subsidiaries (the "Employees"), including, but not limited to,
"employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), are listed in
Section 3.11 of the Target Disclosure Schedule. True and complete copies of all
Compensation and Benefit Plans and such other benefit plans, contracts or
arrangements, including, but not limited to, any trust instruments and/or
insurance contracts, if any, forming a part of any such plans and agreements,
and all amendments thereto, including but not limited to (i) the actuarial
report for such plan (if applicable) for each of the last two years, and (ii)
the most recent determination letter from the IRS (if applicable) for such plan,
have heretofore been delivered to Parent.
(b) All employee benefit plans, other than "multiemployer plans" within the
meaning of Sections 3(37) or 4001(a)(3) of ERISA, covering Employees (the
"Plans"), to the extent subject to ERISA, are in substantial compliance with
ERISA. Each Plan which is an "employee pension benefit plan" within the meaning
of Section 3(2) of ERISA ("Pension Plan") and which is intended to be qualified
under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), has received a favorable determination letter from the IRS, and Target
is not aware of any circumstances likely to result in revocation of any such
favorable determination letter. The 1985 Target Employee Stock Ownership Plan
satisfies the requirements for an employee stock ownership plan under Section
4975(e)(7) of the Code. There is no material pending or threatened litigation
relating to the Plans. Neither Target nor any of its Subsidiaries has engaged in
a transaction with respect to any Plan that, assuming the taxable period of such
transaction expired as of the date hereof, could subject Target or any of its
Subsidiaries to a tax or penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA in an amount which would be material.
(c) No liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by Target or any of its Subsidiaries with respect to any
ongoing, frozen or terminated "single-employer plan", within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them,
or the single-employer plan of any entity which is considered one employer with
Target or any of its Subsidiaries under Section 4001 of ERISA or Section 414 of
the Code (an "ERISA Affiliate"). Target and its
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Subsidiaries have not incurred and do not expect to incur any withdrawal
liability with respect to a multiemployer plan under Subtitle E of Title IV of
ERISA (regardless of whether based on contributions of an ERISA Affiliate). No
notice of a "reportable event", within the meaning of Section 4043 of ERISA for
which the 30-day reporting requirement has not been waived, has been required to
be filed for any Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(d) All contributions required to be made under the terms of any Plan have
been timely made. Neither any Pension Plan nor any single-employer plan of an
ERISA Affiliate has an "accumulated funding deficiency" (whether or not waived)
within the meaning of Section 412 of the Code or Section 302 of ERISA. Neither
Target nor its Subsidiaries has provided, or is required to provide, security to
any Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant
to Section 401(a)(29) of the Code.
(e) Under each Pension Plan which is a single-employer plan, as of the last
day of the most recent plan year ended prior to the date hereof, the actuarially
determined present value of all "benefit liabilities", within the meaning of
Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in the Plan's most recent actuarial valuation), did not
exceed the then current value of the assets of such Plan, and there has been no
material change in the financial condition of such Plan since the last day of
the most recent Plan Year. The withdrawal liability of Target and its
Subsidiaries under each Benefit Plan which is a multiemployer plan to which
Target, its Subsidiaries or an ERISA Affiliate has contributed during the
preceding 12 months, determined as if a "complete withdrawal", within the
meaning of Section 4203 of ERISA, had occurred as of the date hereof, does not
exceed $100,000.
(f) Neither Target nor its Subsidiaries has any obligations for retiree
health and life benefits under any Plan, except as set forth in Section 3.11 of
the Target Disclosure Schedule. Except as set forth in Section 3.11 of the
Target Disclosure Schedule, there are no restrictions on the rights of Target or
its Subsidiaries to amend or terminate any such Plan without incurring any
liability thereunder.
(g) Target and its Subsidiaries have no material unfunded liabilities with
respect to any Pension Plan which covers foreign Employees.
(h) Neither Target nor any of its Subsidiaries is a party to, or is bound
by, any collective bargaining agreement, contract, or other agreement or
understanding with a labor union or labor organization, nor is Target or any of
its Subsidiaries the subject of any material proceeding asserting that Target or
any such Subsidiary has committed an unfair labor practice or seeking to compel
Target or such Subsidiary to bargain with any labor organization as to wages or
conditions of employment, nor is there any strike involving Target or any of its
Subsidiaries pending or, to the best of Target's knowledge, threatened, nor is
Target aware of any activity involving its or any of its Subsidiaries' employees
seeking to certify a collective bargaining unit or engaging in any other
organizational activity.
3.12 SEC Reports. Target has made or will make available to Parent an
accurate and complete copy of each (a) registration statement, prospectus,
report, schedule, proxy statement, information statement or other stockholder
communication used, circulated or filed after January 1, 1990 by Target, and no
such registration statement, prospectus, report, schedule, proxy statement,
information statement or communication, each in the form (including exhibits and
amendments thereto) filed with the SEC (or if not so filed, in the form first
used or circulated) (collectively, the "Target Reports"), contained, as of its
date, 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.
Target has timely filed, and will timely file, all Target Reports and other
documents required to be filed by it under the Securities Act of 1933, as
amended (the "Securities Act") and the Exchange Act, and, as of their respective
dates, all Target Reports complied in all material respects with the published
rules and regulations of the SEC with respect thereto.
3.13 Target Information. The information relating to or provided by Target
and its Subsidiaries to be contained or incorporated by reference in the Proxy
Statement and the registration statement on Form S-4 (the "S-4") in which the
Proxy Statement will be included as a prospectus, or in any other document filed
with any other regulatory agency in connection herewith, will not contain any
untrue statement of a material
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fact or omit to state a material fact necessary to make the statements therein
not misleading. The Proxy Statement (except for such portions thereof that
relate only to Parent or any of its Subsidiaries) will comply in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
3.14 Compliance with Applicable Law. Except as disclosed in Section 3.14
of the Target Disclosure Schedule, Target and each of its Subsidiaries hold, and
have at all times held, all material licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied with and are not in default in any
respect under any, applicable laws, statutes, orders, rules, regulations,
policies and/or guidelines of any Governmental Entity relating to Target or any
of its Subsidiaries, except where the failure to hold such license, franchise,
permit or authorization or such noncompliance or default would not, individually
or in the aggregate, have a Material Adverse Effect on Target or the Surviving
Corporation, and neither Target nor any of its Subsidiaries knows of, or has
received notice of, any violations of any of the above.
3.15 Certain Contracts. (a) Except as set forth in Section 3.15(a) of the
Target Disclosure Schedule, neither Target nor any of its Subsidiaries is a
party to or bound by any contract, arrangement, commitment or understanding
(whether written or oral) (i) with respect to the employment of any directors,
officers, employees or consultants, (ii) which, upon the consummation of the
transactions contemplated by this Agreement will (either alone or upon the
occurrence of any additional acts or events) result in any payment (whether of
severance pay or otherwise) becoming due from Parent, Target, Target Bank, the
Surviving Corporation or any of their respective Subsidiaries to any officer or
employee thereof, (iii) which is a material contract (as defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this
Agreement that has not been filed or incorporated by reference in the Target
Reports filed with the SEC during 1994, (iv) which is a consulting agreement
(including data processing, software programming and licensing contracts) not
terminable on 60 days or less notice involving the payment of more than $100,000
per annum, in the case of any such agreement with an individual, or $500,000 per
annum, in the case of any other such agreement, (v) which materially restricts
the conduct of any line of business by Target or Target Bank, or (vi) (including
any stock option plan, stock appreciation rights plan, restricted stock plan or
stock purchase plan) any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. Target has previously delivered to Parent true
and correct copies of all employment, consulting and deferred compensation
agreements which are in writing and to which Target or any of its Subsidiaries
is a party. Each contract, arrangement, commitment or understanding of the type
described in this Section 3.15(a), whether or not set forth in Section 3.15(a)
of the Target Disclosure Schedule, is referred to herein as a "Target Contract,"
and neither Target nor any of its Subsidiaries knows of, or has received notice
of, any material violation of the above.
(b) Except as set forth in Section 3.15(b) of the Target Disclosure
Schedule, (i) each Target Contract is valid and binding and in full force and
effect, (ii) Target and each of its Subsidiaries has in all material respects
performed all obligations required to be performed by it to date under each
Target Contract, except where such noncompliance, individually or in the
aggregate, would not have a Material Adverse Effect on Target, and (iii) no
event or condition exists which constitutes or, after notice or lapse of time or
both, would constitute, a material default on the part of Target or any of its
Subsidiaries under any such Target Contract, except where such default,
individually or in the aggregate, would not have a Material Adverse Effect on
Target.
3.16 Agreements with Regulatory Agencies. Except as disclosed in the
Target Reports or as set forth in Section 3.16 of the Target Disclosure
Schedule, neither Target nor any of its Subsidiaries is subject to any
cease-and-desist or other order issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding with, or is a party
to any commitment letter or similar undertaking to, or is subject to any order
or directive by, or is a recipient of any extraordinary supervisory letter from,
or has adopted any board resolutions at the request of (each, whether or not set
forth on Section 3.16 of the Target Disclosure Schedule, a "Regulatory
Agreement"), any Regulatory Agency or other Governmental Entity that restricts
the conduct of its business or that in any manner relates to its capital
adequacy, its credit policies, its
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management or its business, nor has Target or any of its Subsidiaries been
advised by any regulatory Agency or other Governmental Entity that it is
considering issuing or requesting any Regulatory Agreement.
3.17 Investment Securities. Section 3.17 of the Target Disclosure Schedule
sets forth the book and market value as of March 31, 1994 of the investment
securities, mortgage backed securities and securities held for sale of Target
and its Subsidiaries. Section 3.17 of the Target Disclosure Schedule sets forth
an investment securities report which includes security descriptions, CUSIP
numbers, pool face values, book values, coupon rates, market values, book yields
and weighted average coupon, in each case as of March 31, 1994.
3.18 Intellectual Property. Except where there would be no Material
Adverse Effect on Target, Target and each of its Subsidiaries owns or possesses
valid and binding licenses and other rights to use without payment all material
patents, copyrights, trade secrets, trade names, servicemarks and trademarks
used in its businesses and neither Target nor any of its Subsidiaries has
received any notice of conflict with respect thereto that asserts the right of
others. Target and each of its Subsidiaries have in all material respects
performed all the obligations required to be performed by them and are not in
default in any material respect under any contract, agreement, arrangement or
commitment relating to any of the foregoing, except where such nonperformance or
default would not, individually or in the aggregate, have a Material Adverse
Effect on Target.
3.19 Undisclosed Liabilities. Except (a) as set forth in Section 3.19 of
the Target Disclosure Schedule, (b) for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of Target
included in its Form 10-Q for the period ended March 31, 1994 and (c) for
liabilities incurred in the ordinary course of business consistent with past
practice since March 31, 1994, neither Target nor any of its Subsidiaries has
incurred any liability of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether due or to become due) that, either alone or
when combined with all similar liabilities, is, or could reasonably be expected
to have, a Material Adverse Effect on Target or the Surviving Corporation.
3.20 Takeover Restrictions. (a) The Board of Directors of Target has
approved the transactions contemplated by this Agreement such that the
supermajority vote provisions of Section 203 of the DGCL and Section 8 of
Target's Certificate of Incorporation will not apply to this Agreement or any of
the transactions contemplated hereby.
(b) No "business combination", "moratorium", "control share", or other
federal or state antitakeover statute or regulation (collectively, "Antitakeover
Provisions") other than HOLA or the Federal Deposit Insurance Act (i) prohibits
or restricts Target's ability to perform its obligations under this Agreement,
or its ability to consummate the transactions contemplated hereby, (ii) would
have the effect of invalidating or voiding this Agreement, or any provision
hereof, (iii) would subject Parent or Merger Sub to any material impediment or
condition in connection with the exercise of any of its rights under this
Agreement, or (iv) would provide any rights to, or permit the exercise of rights
by, Target's stockholders.
3.21 Administration of Fiduciary Accounts. Each of Target and Target Bank
has properly administered in all material respects all accounts for which it
acts as a fiduciary, including but not limited to 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
and applicable state and federal law and regulation and common law. Neither
Target nor Target Bank nor any of their respective directors, officers or
employees has committed any breach of trust with respect to any such fiduciary
account which has had or could reasonably be expected to have a Material Adverse
Effect on Target, 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.
3.22 Environmental Matters. Except as set forth in Section 3.22 of the
Target Disclosure Schedule, to the knowledge of Target:
(a) Each of Target, its Subsidiaries, the Participation Facilities and the
Loan/Fiduciary Properties (each as hereinafter defined) are, and have been, in
compliance with all applicable laws, rules, regulations, standards and
requirements of all federal, state, local and foreign laws and regulations
relating to pollution or protection of human health or the environment
(including without limitation, laws and regulations relating to
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emissions, discharges, releases or threatened releases of Hazardous Material or
petroleum or petroleum products, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Material or petroleum or petroleum products), except for
violations which, either individually or in the aggregate, have not had and
cannot reasonably be expected to have a Material Adverse Effect on Target;
(b) There is no suit, claim, action, proceeding, investigation or notice
pending or threatened (or past or present actions, activities, circumstances,
conditions, events or incidents that could form the basis of any such suit,
claim, action, proceeding, investigation or notice), before any Governmental
Entity or other forum in which Target, any of its Subsidiaries, any
Participation Facility or any Loan/Fiduciary Property (or person or entity whose
liability for any such suit, claim, action, proceeding, investigation or notice
Target, any of its Subsidiaries, Participation Facility or Loan/Fiduciary
Property has or may have retained or assumed either contractually or by
operation of law), has been or, with respect to threatened suits, claims,
actions, proceedings, investigations or notices may be, named as a defendant (x)
for alleged noncompliance (including by any predecessor), with any environmental
law, rule or regulation or (y) relating to the release or threatened release
into the environment of any Hazardous Material (as hereinafter defined) or
petroleum or petroleum products whether or not occurring at or on a site owned,
leased or operated by Target or any of its Subsidiaries, any Participation
Facility or any Loan/Fiduciary Property, except where such noncompliance or
release has not had, and cannot be reasonably expected to have, either
individually or in the aggregate, a Material Adverse Effect on Target;
(c) During the period of (x) Target's or any of its Subsidiaries' ownership
or operation of any of their respective current properties, (y) Target's or any
of its Subsidiaries' participation in the management of any Participation
Facility, or (z) Target's or any of its Subsidiaries' holding of a security or
other interest in a Loan/Fiduciary Property, there has been no release of
Hazardous Material or petroleum or petroleum products in, on, under or affecting
any such property, except where such release or threatened release has not had
and cannot reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on Target. Prior to the period of (x)
Target's or any of its Subsidiaries' ownership or operation of any of their
respective current properties, (y) Target's or any of its Subsidiaries'
participation in the management of any Participation Facility, or (z) Target's
or any of its Subsidiaries' holding of a security or other interest in a
Loan/Fiduciary Property, there was no release or threatened release of Hazardous
Material or petroleum or petroleum products in, on, under or affecting any such
property, Participation Facility or Loan/Fiduciary Property, except where such
release has not had and cannot be reasonably expected to have, either
individually or in the aggregate, a Material Adverse Effect on Target; and
(d) The following definitions apply for purposes of this Section 3.22: (x)
"Loan/Fiduciary Property" means any property owned or controlled by Target or
any Target Subsidiary or in which Target or any of its Subsidiaries holds a
security or other interest, and, where required by the context, said term means
the owner or operator of such property; (y) "Participation Facility" means any
facility in which Target or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such property; and (z) "Hazardous Material" means any pollutant,
contaminant, waste or hazardous or toxic substance.
3.23 Derivative Transactions. Section 3.23 of the Target Disclosure
Schedule sets forth the market value, as of May 31, 1994, of all holdings by
Target or any of its Subsidiaries of positions in forwards, futures, options on
futures, swaps and any other instrument within the scope of Target's
Board-approved investment policy ("Derivative Instruments"). Except as set forth
in Section 3.23 of the Target Disclosure Schedule, since December 31, 1993
neither Target nor any of its Subsidiaries has engaged in any transactions in or
involving Derivative Instruments except as agent on the order and for the
account of others. None of the counterparties to any contract or agreement with
respect to any such instrument is in default with respect to such contract or
agreement and no such contract or agreement, were it to be a Loan held by Target
or any of its Subsidiaries, would be classified as "Other Loans Especially
Mentioned," "Special Mention," "Substandard," "Doubtful," "Loss," "Classified,"
"Criticized," "Credit Risk Assets," "Concerned Loans" or words of similar
import. The financial position of Target and its Subsidiaries on a consolidated
basis under or with respect to each such instrument has been reflected in the
books and records of Target and such Subsidiaries in
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accordance with GAAP consistently applied, and no open exposure of Target or any
of its Subsidiaries with respect to any such instrument (or with respect to
multiple instruments with respect to any single counterparty) exceeds $500,000.
3.24 Accuracy of Information. The statements contained in this Agreement,
the Target Disclosure Schedules or in any other written document delivered by or
on behalf of Seller pursuant to the terms of this Agreement are true and
correct, and such statements and documents do not omit any fact necessary to
make the statements contained therein not misleading.
3.25 Opinion. Target has received an opinion, dated the date of this
Agreement, from Lehman Brothers to the effect that, subject to the terms,
conditions and qualifications set forth therein, as of the date thereof the
consideration to be received by the stockholders of Target pursuant to the
Merger is fair to such stockholders from a financial point of view.
3.26 Assistance Agreements. Except as set forth in Section 3.26 of the
Target Disclosure Schedule, neither Target nor any of its Subsidiaries is a
party to any agreement or arrangement entered into in connection with the
consummation of a federally or state assisted acquisition of a depository
institution pursuant to which Target or any of its Subsidiaries is entitled to
receive financial assistance or indemnification from any governmental agency.
3.27 DEPCO Directors. On the date hereof, (i) the Rhode Island Depositors
Economic Protection Corporation ("DEPCO") or any "Nominee" as defined in the
Stock and Warrant Purchase Agreement dated as of April 21, 1992, by and between
DEPCO and Target (the "DEPCO Agreement") (A) owns all of the issued and
outstanding shares of Target's Series B Preferred Stock and (B) has the right to
elect and has elected at least one current member of Target's Board of Directors
and (ii) on the date hereof, and at all times through and including the
Effective Date, the Directors elected by DEPCO or any "Nominee" as defined in
the DEPCO Agreement pursuant to the terms of the Target Series B Preferred Stock
shall represent less than 20% of the members of Target's Board of Directors.
3.28 Qualified Thrift Lender. Target Bank is a "qualified thrift lender"
within the meaning set forth in Section 10(m) of HOLA.
3.29 Knowledge as to Conditions. Target knows of no reason why the
Requisite Regulatory Approvals (as defined below) should not be obtained.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Target as follows:
4.1 Corporate Organization. (a) Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Parent has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not have a Material Adverse Effect on Parent. Parent is duly registered as
a bank holding company under the BHC Act. The Certificate of Incorporation and
By-laws of Parent, copies of which have previously been made available to
Target, are true, complete and correct copies of such documents as in effect as
of the date of this Agreement.
(b) Merger Sub is or will be a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
(c) Each Significant Subsidiary of Parent is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each Significant Subsidiary of Parent has the corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as it is now being conducted, and is duly licensed or qualified to do
business in each jurisdiction in which the nature of the
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business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not have a
Material Adverse Effect on Parent.
4.2 Capitalization. (a) The authorized capital stock of Parent consists of
150,000,000 shares of Parent Common Stock and 10,000,000 shares of preferred
stock, without par value ("Parent Preferred Stock"). At the close of business on
March 31, 1994 there were 95,927,307 shares of Parent Common Stock, 700,000
shares of Parent Preferred Stock (of stated value of $50.00 per share), and
5,750,000 shares of Parent Depositary Shares (each representing a one-tenth
interest in a share of 9.30% cumulative preferred stock ($250 stated value))
issued and outstanding, and 543 shares of Parent Common Stock held in Parent's
treasury. On March 31, 1994, no shares of Parent Common Stock or Parent
Preferred Stock were reserved for issuance, except that 13,052,807 shares of
Parent Common Stock were reserved for issuance pursuant to Parent's dividend
reinvestment and stock purchase plans, 6,115,251 shares of Parent Common Stock
were reserved for issuance upon the exercise of stock options pursuant to the
Parent Stock Option and Restricted Stock Award Plan and the Parent 1989
Nonemployee Directors' Restricted Stock Plan (collectively, the "Parent Stock
Plans"), 9,357,452 shares of Parent Common Stock were reserved for issuance upon
consummation of the merger of New Dartmouth Bank ("New Dartmouth") with a
Subsidiary of Parent, pursuant to the Agreement and Plan of Merger, dated as of
March 23, 1993, as amended, between Parent and New Dartmouth, 8,453,445 shares
of Parent Common Stock were reserved for issuance upon consummation of the
merger of Peoples Bancorp of Worcester, Inc. ("Peoples") with a Subsidiary of
Parent, pursuant to the Agreement and Plan of Merger dated as of August 26,
1993, as amended, between Parent and Peoples, 7,627,301 shares of Parent Common
Stock were reserved for issuance upon consummation of the merger of Gateway
Financial Corporation ("Gateway") with a Subsidiary of Parent, pursuant to the
Agreement and Plan of Merger between Parent, Shawmut Service Corporation and
Gateway dated as of November 5, 1993, and 1,500,000 shares of Parent Series A
Junior Participating Preferred Stock were reserved for issuance upon exercise of
the rights (the "Parent Rights") distributed to holders of Parent Common Stock
pursuant to the Shareholder Rights Agreement, dated as of February 28, 1989,
between Parent and Manufacturers Hanover Trust Company, as Rights Agent (the
"Parent Shareholder Rights Agreement"). In addition, Parent has issued and
outstanding 1,329,115 warrants to purchase Parent Common Stock. All of the
issued and outstanding shares of Parent Common Stock and Parent Preferred Stock
have been duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights, with no personal liability attaching to the
ownership thereof. As of the date of this Agreement, except as referred to above
or reflected in Section 4.2(a) of the Disclosure Schedule which is being
delivered by Parent to Target herewith (the "Parent Disclosure Schedule") and
except for the Parent Shareholder Rights Agreement, Parent does not have and is
not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of any shares of Parent Common Stock or Parent Preferred Stock or any other
equity securities of Parent or any securities representing the right to purchase
or otherwise receive any shares of Parent Common Stock or Parent Preferred
Stock. The shares of Parent Common Stock to be issued pursuant to the Merger
will be duly authorized and validly issued and, at the Effective Time, all such
shares will be fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof.
(b) Section 4.2(b) of the Parent Disclosure Schedule sets forth a true and
correct list of all of the Parent Subsidiaries as of the date of this Agreement.
Except as set forth in Section 4.2(b) of the Parent Disclosure Schedule, Parent
owns, directly or indirectly, all of the issued and outstanding shares of
capital stock of each of the Parent Subsidiaries, free and clear of all liens,
charges, encumbrances and security interests whatsoever, and all of such shares
are duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof. No Parent Subsidiary has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character with any
party that is not a direct or indirect Subsidiary of Parent 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.
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4.3 Authority; No Violation. (a) Parent has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of Parent, and no other corporate
proceedings on the part of Parent are necessary to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Parent and constitutes a valid and binding obligation of Parent.
(b) Except as set forth in Section 4.3(b) of the Parent Disclosure
Schedule, neither the execution and delivery of this Agreement by Parent, nor
the consummation by Parent or Merger Sub, as the case may be, of the
transactions contemplated hereby or thereby, nor compliance by Parent or Merger
Sub with any of the terms or provisions hereof or thereof, will (i) violate any
provision of the Certificate of Incorporation or By-Laws of Parent or the
Certificate of Incorporation or By-Laws of Merger Sub, as the case may be, or
(ii) assuming that the consents and approvals referred to in Section 4.4 are
duly obtained, (x) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to Parent or any of its
Significant Subsidiaries or any of their respective properties or assets, or (y)
violate, conflict with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, or result in the
termination of or a right of termination or cancellation under, accelerate the
performance required by, or result in the creation of any lien, pledge, security
interest, charge or other encumbrance upon any of the respective properties or
assets of Parent or any of its Subsidiaries under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Parent or any of its
Subsidiaries is a party, or by which they or any of their respective properties
or assets may be bound or affected, except (in the case of clause (y) above) for
such violations, conflicts, breaches or defaults which either individually or in
the aggregate will not have a Material Adverse Effect on Parent.
4.4 Consents and Approvals. Except for (i) the filing of applications and
notices, as applicable, with the Federal Reserve Board under the BHC Act and
approval of such applications and notices, (ii) the filing of applications with
the OTS under HOLA and approval of such applications, (iii) the State Approvals,
(iv) the filing with the SEC of the S-4, (v) the approval of this Agreement by
Parent as the sole stockholder of Merger Sub, (vi) the filing of the Certificate
of Merger with the Secretary pursuant to the DGCL, (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
Parent Common Stock pursuant to this Agreement, and (viii) such filings,
authorizations or approvals as may be set forth in Section 4.4 of the Parent
Disclosure Schedule, no consents or approvals of or filings or registrations
with any Governmental Entity or with any third party are necessary in connection
with (1) the execution and delivery by Parent of this Agreement and (2) the
consummation by Parent and Merger Sub of the Merger and the other transactions
contemplated hereby. The affirmative vote of the holders of the outstanding
shares of Parent Common Stock is not required to approve this Agreement or the
transactions contemplated hereby.
4.5 Financial Statements. Parent has previously delivered to Target copies
of (a) the consolidated balance sheets of Parent and its Subsidiaries as of
December 31 for the fiscal years 1992 and 1993 and the related consolidated
statements of income, changes in shareholders' equity and cash flows for the
fiscal years 1991 through 1993, inclusive, as reported in Parent's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993 filed with the SEC
under the Exchange Act, in each case accompanied by the audit report of Price
Waterhouse, independent public accountants with respect to Parent, and (b) the
unaudited consolidated balance sheet of Parent and its Subsidiaries as of March
31, 1994 and March 31, 1993 and the related unaudited consolidated statements of
income, changes in shareholders' equity and cash flows for the three month
periods then ended as reported in Parent's Quarterly Report on Form 10-Q for the
period ended March 31, 1994 filed with the SEC under the Exchange Act. The
December 31, 1993 consolidated balance sheet of Parent (including the related
notes, where applicable) fairly presents the consolidated financial position of
Parent and its Subsidiaries as of the date thereof, and the other financial
statements referred to in this Section 4.5 (including the related notes, where
applicable) fairly present and the financial statements referred to in Section
6.8 hereof will fairly present (subject, in the case of the unaudited
statements, to recurring audit adjustments normal in nature and amount), the
results of the consolidated operations and
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changes in shareholders' equity and consolidated financial position of Parent
and its Subsidiaries for the respective fiscal periods or as of the respective
dates therein set forth; each of such statements (including the related notes,
where applicable) comply, and the financial statements referred to in Section
6.8 hereof will comply, in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto; and each of such statements (including the related notes, where
applicable) has been, and the financial statements referred to in Section 6.8
hereof will be, prepared in accordance with GAAP consistently applied during the
periods involved, except as indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q. The books and records of Parent
and its Significant 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.
4.6 Broker's Fees. Neither Parent, Merger Sub nor any Parent Subsidiary,
nor any of their respective officers or directors, has employed any broker or
finder or incurred any liability for any broker's fees, commissions or finder's
fees in connection with any of the transactions contemplated by this Agreement,
except that Parent has engaged, and will pay a financial advisory service fee
to, Morgan Stanley & Co. Incorporated.
4.7 Absence of Certain Changes or Events. Except as may be set forth in
Section 4.7 of the Parent Disclosure Schedule, or as disclosed in Parent's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1994 or in any
Current Reports of Parent on Form 8-K filed prior to the date of this Agreement,
true, complete and correct copies of which have previously been delivered to
Target, since December 31, 1993, no event has occurred which has had or is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Parent.
4.8 Legal Proceedings. Except as set forth in Section 4.8 of the Parent
Disclosure Schedule or in Parent's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994, neither Parent nor any of its Subsidiaries is a party to
any and there are no pending or, to the best of Parent's knowledge, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against Parent or any of
its Subsidiaries as to which there is a reasonable probability of an adverse
determination and (i) which, if adversely determined, would, individually or in
the aggregate, have a Material Adverse Effect on Parent or (ii) challenging the
validity or propriety of the transactions contemplated by this Agreement. There
is no injunction, order, judgment, decree, or regulatory restriction imposed
upon Parent, any of its Subsidiaries or the assets of Parent or any of its
Subsidiaries which has had, or might reasonably be expected to have, a Material
Adverse Effect on Parent.
4.9 Compliance with Applicable Law. Parent and each of its Subsidiaries
hold, and have at all times held, all material licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied with and are not in default in any
respect under any, applicable laws, statutes, orders, rules, regulations,
policies and/or guidelines of any Governmental Entity relating to Parent or any
of its Subsidiaries, except where the failure to hold such license, franchise,
permit or authorization or such noncompliance or default would not, individually
or in the aggregate, have a Material Adverse Effect on Parent, and neither
Parent nor any of its Subsidiaries knows of, or has received notice of violation
of, any material violations of any of the above.
4.10 SEC Reports. Parent has made or will make available to Target an
accurate and complete copy of each (a) registration statement, prospectus,
report, schedule, proxy statement, information statement or other stockholder
communication used, circulated or filed after January 1, 1990 by Parent, and no
such registration statement, prospectus, report, schedule, proxy statement,
information statement or other stockholder communication used, each in the form
(including exhibits and amendments thereto) filed with the SEC (or if not so
filed, in the form first used or circulated) (collectively, the "Parent
Reports"), contained, as of its date, 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. Parent has timely filed, and will timely file,
all Parent Reports and other documents required to be filed by it under the
Securities Act and the Exchange Act, and, as of their respective dates, all
Parent Reports complied in all material respects with the published rules and
regulations of the SEC with respect thereto.
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4.11 Parent Information. The information relating to or provided by Parent
and its Subsidiaries to be contained or incorporated by reference in the 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 not misleading. The S-4 (except for such portions thereof that relate
only to Target or any of its Subsidiaries) will comply in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder.
4.12 Accuracy of Information. The statements contained in this Agreement,
the Parent Disclosure Schedule or in any other written document delivered by or
on behalf of Parent pursuant to the terms of this Agreement are true and correct
in all material respects, and such statements and documents do not omit any
material fact necessary to make the statements contained therein not misleading.
4.13 Undisclosed Liabilities. Except (a) as set forth in Section 4.13 of
the Parent Disclosure Schedule, (b) for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of Parent
included in its Form 10-Q for the quarter ended March 31, 1994 and (c) for
liabilities incurred in the ordinary course of business consistent with past
practice, since December 31, 1993, neither Parent nor any of its Subsidiaries
has incurred any liability of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether due or to become due) that, either alone or
when combined with all similar liabilities, is, or could reasonably be expected
to have a Material Adverse Effect.
4.14 Knowledge as to Conditions. Parent knows of no reason why the
Requisite Regulatory Approvals should not be obtained.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of Target. During the period from the date of this Agreement
and continuing until the Effective Time, except as expressly contemplated or
permitted by this Agreement or with the prior written consent of Parent, Target
and its Subsidiaries shall carry on their respective businesses in the ordinary
course and consistent with prudent banking practice. Target will, and will use
its best efforts to cause each of its Subsidiaries, to (x) preserve intact its
and their business organizations, (y) keep available to itself and Parent the
present services of its and their employees and (z) preserve intact for itself
and Parent the goodwill of its and their customers and others with whom business
relationships exist. Without limiting the generality of the foregoing, and
except as consented to in writing by Parent, Target shall not, and shall not
permit any of its Subsidiaries to:
(a) solely in the case of Target, declare or pay any dividends on, or make
other distributions in respect of, any of its capital stock except for regular
dividends on Target Series B Preferred Stock;
(b) (i) adjust, split, combine or reclassify any shares of its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock (other
than payment of regular dividends on Target Series B Preferred Stock) or grant
any stock appreciation rights except upon the exercise or fulfillment of rights
or options issued or existing pursuant to employee or director benefit plans,
programs or arrangements, all to the extent outstanding and in existence on the
date of this Agreement and listed in Section 3.11 of the Target Disclosure
Schedule, or (ii) repurchase, redeem or otherwise acquire (except for the
acquisition of Trust Account Shares and DPC Shares, as such terms are defined in
Section 1.4(b) hereof or as required by the DEPCO Agreement) any shares of the
capital stock of Target or any Target Subsidiary, or any securities convertible
into or exercisable for any shares of the capital stock of Target or any Target
Subsidiary;
(c) issue, deliver or sell, or authorize or propose the issuance, delivery
or sale of, any shares of its capital stock (other than payment of regular
dividends on Target Series B Preferred Stock) or any securities convertible into
or exercisable for, or any rights, warrants or options to acquire, any such
shares, or enter into any agreement with respect to any of the foregoing, other
than the grant of options required pursuant to the Subsequent Grant provision of
the Target 1993 Stock Option Plan For Three Year Term Outside Directors
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(the "Subsequent Options") and the issuance of Target Common Stock upon exercise
of Subsequent Options, the issuance of Target Common Stock upon exercise of
Subsequent Options, the issuance of Target Common Stock pursuant to stock
options or similar rights to acquire Target Common Stock granted pursuant to the
Target Stock Option Plans and outstanding prior to the date of this Agreement or
pursuant to the Target Warrants, in each case in accordance with their terms on
the date hereof;
(d) amend its Certificate of Incorporation, By-laws or other similar
governing documents;
(e) authorize or permit any of its officers, directors, employees or agents
directly or indirectly to solicit, initiate or encourage any inquiries relating
to, or other making of any proposal which constitutes, a "takeover proposal" (as
defined below), or, except to the extent legally required for the discharge of
the fiduciary duties of the Board of Directors of Target as advised in writing
by such Board's outside counsel, recommend or endorse any takeover proposal, or
participate in any discussions or negotiations, or provide third parties with
any nonpublic information, relating to any such inquiry or proposal or otherwise
facilitate any effort or attempt to make or implement a takeover proposal;
provided, however, that Target may communicate information about any such
takeover proposal to its stockholders if, in the judgment of Target's Board of
Directors with the written advice of such Board's outside counsel, such
communication is required under applicable law. Target will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
previously conducted with any parties other than Parent with respect to any of
the foregoing and shall demand the return of any confidential information
provided to any other person and will enforce its rights, under any
confidentiality agreement, to the return of any confidential information in the
event any such other person does not return such information. Target will take
all actions necessary or advisable to inform the appropriate individuals or
entities referred to in the first sentence of this Section 5.1(e) of the
obligations undertaken in this Section 5.1(e). Target will notify Parent
immediately if any such inquiries or takeover proposals are received by, any
such information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, Target, and Target will promptly
inform Parent in writing of all of the relevant details with respect to the
foregoing. As used in this Agreement, "takeover proposal" shall mean any tender
or exchange offer, proposal for a merger, consolidation or other business
combination involving Target or any Subsidiary of Target or any proposal or
offer to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets or deposits of, Target or any Subsidiary of
Target other than the transactions contemplated or permitted by this Agreement;
(f) except as set forth in Section 5.1 of the Target Disclosure Schedule,
make any capital expenditures other than in the ordinary course of business, as
necessary to maintain existing assets in good repair or capital expenditures
contemplated by the Target Business Plan dated as of April 15, 1994 previously
furnished to Parent (the "Business Plan");
(g) enter into any new, or materially alter or expand any present line of
business other than new lines of businesses, or material alterations or
expansions of present lines of business contemplated by the Business Plan;
(h) acquire or agree to acquire, by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or (other than in
the ordinary course of business) otherwise acquire any assets, other than in
connection with foreclosures, settlements in lieu of foreclosure or troubled
loan or debt restructurings in the ordinary course of business consistent with
prudent banking practices, which would be material, individually or in the
aggregate, to Target or Target Bank, as the case may be;
(i) except as required by law, take any action that is intended or could
reasonably be expected to result in any of its representations and warranties
set forth in this Agreement being or becoming untrue in any material respect, 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;
(j) change its methods of accounting in effect at March 31, 1994, except as
required by changes in GAAP or regulatory accounting principles as concurred in
by Target's independent auditors;
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(k) except as set forth in Section 5.1 of the Target Disclosure Schedule,
(i) except as required by applicable law or to maintain qualification pursuant
to the Code, adopt, amend, renew (for a term longer than the prior term) or
terminate any Plan or any agreement, arrangement, plan or policy between Target
or any Subsidiary of Target and one or more of its current or former directors,
officers or employees or (ii) except as set forth in Section 5.1 of the Target
Disclosure Schedule, except for normal increases in the ordinary course of
business consistent with past practice or except as required by applicable law,
increase in any manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any plan or agreement as
in effect as of the date hereof (including, without limitation, the granting of
stock options, stock appreciation rights, restricted stock, restricted stock
units or performance units or shares) or (iii) enter into, modify or renew (for
a term longer than the prior term) any contract, agreement, commitment or
arrangement providing for the payment to any director, officer or employee of
such party of compensation or benefits contingent, or the terms of which are
materially altered, upon the occurrence of any of the transactions contemplated
by this Agreement;
(l) take or cause to be taken any action which would disqualify the Merger
as a tax free reorganization under Section 368 of the Code;
(m) other than activities in the ordinary course of business consistent
with prudent banking practice, sell, lease, encumber, assign or otherwise
dispose of, or agree to sell, lease, encumber, assign or otherwise dispose of,
any of its material assets, properties or other rights or agreements;
(n) other than in the ordinary course of business consistent with prudent
banking practice or to cover expenses and obligations under this Agreement,
incur any indebtedness for borrowed money, assume, guarantee, endorse or
otherwise as an accommodation become responsible for the obligations of any
other individual, corporation or other entity;
(o) file any application to relocate or terminate the operations of any
office of it or any of its Subsidiaries (other than the previously announced
move of Target's head office to Farmington, Connecticut);
(p) commit any act or omission which constitutes a breach or default by
Target or any of its Subsidiaries under any Regulatory Agreement or a material
breach or default by Target or any of its Subsidiaries under any material
contract or material license to which Target or any of its Subsidiaries is a
party or by which any of them or their respective properties is bound;
(q) make any equity investment or commitment to make such an investment in
real estate or in any real estate development project, other than in connection
with foreclosure, settlements in lieu of foreclosure or troubled loan or debt
restructurings in the ordinary course of business consistent with prudent
banking practices;
(r) create, renew, amend or terminate or give notice of a proposed renewal,
amendment or termination of, any material contract, agreement or lease for
goods, services or office space to which Target or any of its Subsidiaries is a
party or by which Target or any of its Subsidiaries or their respective
properties is bound except that Target may renew contracts, agreements or leases
in the ordinary course of business after consultation with Parent;
(s) settle any claim, action or proceeding involving any liability of
Target or any Subsidiary of Target for material money damages or material
restrictions upon the operation of Target or any Subsidiary of Target;
(t) take any other action that would materially adversely affect or
materially delay the ability of Parent or Target to obtain the Requisite
Regulatory Approvals (as defined below) or otherwise materially adversely affect
Parent's ability to consummate the transactions contemplated by this Agreement;
or
(u) authorize or enter into any agreement or commitment to do any of the
foregoing.
5.2 Covenants of Parent. During the period from the date of this Agreement
and continuing until the Effective Time, except as expressly contemplated or
permitted by this Agreement or with the prior written consent of Target, Parent
and its Subsidiaries shall carry on their respective businesses in the ordinary
course
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consistent with prudent banking practice. Without limiting the generality of the
foregoing, and except as consented to in writing by Target, Parent shall not,
and shall not permit any of its Subsidiaries to:
(a) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect, 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;
(b) take or cause to be taken any action which would disqualify the Merger
as a tax free reorganization under Section 368 of the Code;
(c) take any other action that would materially adversely affect or
materially delay the ability of Parent or Target to obtain the Requisite
Regulatory Approvals or otherwise materially adversely affect Parent's ability
to consummate the transactions contemplated by this Agreement;
(d) solely in the case of Parent, declare or pay any dividend on, or make
any other distributions in respect of, the Parent Common Stock except for
regular dividends and dividends or distributions in Parent Common Stock;
(e) consolidate with or merge into any other person or convey, transfer or
lease its properties and assets substantially as an entirety to any person
unless such person shall expressly assume the obligations of Parent hereunder;
or
(f) authorize or enter into any agreement or commitment to do any of the
foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Regulatory Matters. (a) Target shall promptly prepare and file with
the SEC the Proxy Statement and Parent shall promptly prepare and file with the
SEC the S-4, in which the Proxy Statement will be included as a prospectus. Each
of Parent and Target shall use all reasonable efforts to have the S-4 declared
effective under the Securities Act as promptly as practicable after such filing,
and Target shall thereafter mail the Proxy Statement to its stockholders. Parent
shall also use all reasonable efforts to obtain all necessary state securities
law or "Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement, and Target shall furnish all information
concerning Target and the holders of Target Common 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 promptly to prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
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) (it being understood that
any amendments to the S-4 or a resolicitation of proxies as a consequence of an
acquisition agreement by Parent or any of its Subsidiaries shall not violate
this covenant). Target and Parent 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 Target or Parent, as the case may be, and any of their respective
Subsidiaries, which appear in any filing made with, or written materials
submitted to, any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement; provided, however, that nothing
contained herein shall be deemed to provide either party with a right to review
any information provided to any Governmental Entity on a confidential basis in
connection with the transactions contemplated hereby. 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.
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(c) Parent and Target 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 Proxy Statement, the S-4 or any other statement, filing,
notice or application made by or on behalf of Parent, Target or any of their
respective Subsidiaries to any Governmental Entity in connection with the Merger
and the other transactions contemplated by this Agreement.
(d) Parent and Target shall promptly advise each other upon receiving any
communication from any Governmental Entity whose consent or approval is required
for consummation of the transactions contemplated by this Agreement which causes
such party to believe that there is a reasonable likelihood that any Requisite
Regulatory Approval will not be obtained or that the receipt of any such
approval will be materially delayed.
6.2 Access to Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, Target shall, and shall
cause each of its Subsidiaries to, afford to the officers, employees,
accountants, counsel and other representatives of Parent, 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,
Target shall, and shall cause its Subsidiaries to, make available to Parent (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, savings and loan or savings
association laws (other than reports or documents which Target is not permitted
to disclose under applicable law) and (ii) all other information concerning its
business, properties and personnel as Parent may reasonably request. Neither
Target nor any of its Subsidiaries shall be required to provide access to or to
disclose information where such access or disclosure would violate or prejudice
the rights of Target's 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. Parent will hold all
such information in confidence to the extent required by, and in accordance
with, the provisions of the confidentiality agreement between Parent and Target
(the "Confidentiality Agreement").
(b) Upon reasonable notice and subject to applicable laws relating to the
exchange of information, Parent shall, and shall cause its Subsidiaries to,
afford to the officers, employees, accountants, counsel and other
representatives of Target, access, during normal business hours during the
period prior to the Effective Time, to such information regarding Parent and its
Subsidiaries as shall be reasonably necessary for Target to fulfill its
obligations pursuant to this Agreement to prepare the Proxy Statement or which
may be reasonably necessary for Target to confirm that the representations and
warranties of Parent contained herein are true and correct and that the
covenants of Parent contained herein have been performed in all material
respects. Neither Parent nor any of its Subsidiaries shall be required to
provide access to or to disclose information where such access or disclosure
would violate or prejudice the rights of Parent's 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.
(c) All information furnished by Parent to Target or its representatives
pursuant hereto shall be treated as the sole property of Parent and, if the
Merger shall not occur, Target and its representatives shall return to Parent
all of such written information and all documents, notes, summaries or other
materials containing, reflecting or referring to, or derived from, such
information. Target shall, and shall use its best efforts to cause its
representatives to, keep confidential all such information, and shall not
directly or indirectly use such information for any competitive or other
commercial purpose. The obligation to keep such information confidential shall
continue for five years from the date the proposed Merger is abandoned and shall
not apply to (i) any information which (x) was legally in Target's possession
prior to the disclosure thereof by Parent; (y) was then generally known to the
public; or (z) was disclosed to Target by a third party not bound by an
obligation of confidentiality or (ii) disclosures made as required by law. It is
further agreed that, if in the absence of a protective order or the receipt of a
waiver hereunder Target is nonetheless, in the written opinion
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of its outside counsel, compelled to disclose information concerning Parent to
any tribunal or governmental body or agency or else stand liable for contempt or
suffer other censure or penalty, Target may disclose such information to such
tribunal or governmental body or agency without liability hereunder.
(d) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.
(e) Within ten business days of the date of this Agreement, Target shall
deliver to Parent amended Section 3.17 of the Target Disclosure Statement
setting forth an investment securities report which includes pay down factors,
paydown speeds, durations, and weighted average life, in each case as of March
31, 1994.
6.3 Stockholders Meeting. Target shall take all steps necessary to duly
call, give notice of, convene and hold a meeting of its stockholders to be held
as soon as is reasonably practicable after the date on which the S-4 becomes
effective for the purpose of voting upon the approval of this Agreement. Target
will, through its Board of Directors, except to the extent legally required for
the discharge of the fiduciary duties of such board as advised in writing by
such Board's outside counsel, recommend to its stockholders approval of this
Agreement and the transactions contemplated hereby and such other matters as may
be submitted to its stockholders in connection with this Agreement. Target and
Parent shall coordinate and cooperate with respect to the foregoing matters.
6.4 Legal Conditions to Merger. Each of Parent and Target 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 which 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 consent, authorization, order or approval of, or any exemption by, any
Governmental Entity and any other third party which is required to be obtained
by Target or Parent or any of their respective Subsidiaries in connection with
the Merger and the other transactions contemplated by this Agreement.
6.5 Affiliates. Target shall use its best efforts to cause each director,
executive officer and other person who is an "affiliate" (for purposes of Rule
145 under the Securities Act) of Target (each an "Affiliate") to deliver to
Parent, as soon as practicable after the date of this Agreement, and prior to
the date of the stockholders meeting called by Target to approve this Agreement,
a written agreement, in substantially the form of Exhibit 6.5 hereto.
6.6 Stock Exchange Listing. Parent shall use its best efforts to cause the
shares of Parent Common Stock to be issued in the Merger to be approved for
listing on the New York Stock Exchange, Inc. (the "NYSE"), subject to official
notice of issuance, prior to the Effective Time.
6.7 Indemnification; Directors' and Officers' Insurance. (a) In the event
of any threatened or actual claim, action, suit, proceeding or investigation,
whether civil, criminal or administrative, including, without limitation, any
such claim, action, suit, proceeding or investigation in which any person who is
now, or has been at any time prior to the date of this Agreement, or who becomes
prior to the Effective Time, a director or officer or employee of Target or any
of its Subsidiaries (the "Indemnified Parties") is, or is threatened to be, made
a party based in whole or in part on, or arising in whole or in part out of, or
pertaining to any action or omission by such person in his or her capacity as a
director, officer or employee of Target, any of the Target Subsidiaries or any
of their respective predecessors, whether in any case asserted or arising before
or after the Effective Time, the parties hereto agree to cooperate and use their
best efforts to defend against and respond thereto. It is understood and agreed
that after the Effective Time, Parent shall indemnify and hold harmless, as and
to the fullest extent provided in Target's Certificate of Incorporation and
Bylaws and permitted by Delaware law, each such Indemnified Party against any
losses, claims, damages, liabilities, costs, expenses (including, to the extent
so provided and permitted, reasonable attorney's fees and expenses in advance of
the final disposition of any claim, suit, proceeding or investigation upon
receipt of any undertaking required by applicable law or Target's Certificate of
Incorporation or Bylaws), judgments, fines and amounts paid in settlement in
connection with any such threatened or actual claim, action, suit, proceeding or
investigation, and in the event of any such threatened or actual claim, action,
suit, proceeding or investigation (whether
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asserted or arising before or after the Effective Time), an Indemnified Party
may retain counsel reasonably satisfactory to him or her after consultation with
Parent; provided, however, that (1) Parent shall have the right to assume the
defense thereof and upon such assumption Parent shall not be liable to any
Indemnified Party for any legal expenses of other counsel or any other expenses
subsequently incurred by any Indemnified Party in connection with the defense
thereof, except that if Parent elects not to assume such defense or counsel for
the Indemnified Parties reasonably advises the Indemnified Parties that there
are issues which raise conflicts of interest between Parent and the Indemnified
Parties, the Indemnified Parties may retain counsel reasonably satisfactory to
them after consultation with Parent, and Parent shall pay the reasonable fees
and expenses of such counsel for the Indemnified Parties, (2) Parent shall be
obligated pursuant to this paragraph to pay for only one firm of counsel for all
Indemnified Parties, (3) Parent shall not be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld) and (4) Parent shall have no obligation hereunder to any Indemnified
Party when and if a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final and nonappealable, that
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited under applicable law. Any Indemnified Party wishing to claim
Indemnification under this Section 6.7, upon learning of any such claim, action,
suit, proceeding or investigation, shall notify Parent thereof, provided that
the failure to so notify shall not affect the obligations of Parent under this
Section 6.7 except to the extent such failure to notify materially prejudices
Parent. Parent's obligations under this Section 6.7 continue in full force and
effect for a period of six (6) years from the Effective Time; provided, however,
that all rights to indemnification in respect of any claim (a "Claim") asserted
or made within such period shall continue until the final disposition of such
Claim.
(b) Parent shall use its best efforts to cause the persons serving as
officers and directors of Target immediately prior to the Effective Time to be
covered for a period of four (4) years from the Effective Time by the directors'
and officers' liability insurance policy maintained by Target (provided that
Parent may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions, including limits, deductibles and prior
acts coverage, which are not less advantageous than such policy) with respect to
acts or omissions occurring prior to the Effective Time which were committed by
such officers and directors in their capacity as such; provided, however, that,
in the event that the annual amount Parent would be required to expend would be
more than 200% of the current annual amount expended by Target (the "Insurance
Amount") to maintain insurance coverage for such persons under Target's current
policies, Parent may self insure; and further provided that if Parent is unable
to maintain or obtain the insurance called for by this Section 6.7(b), Parent
shall use its best efforts to obtain as much comparable insurance as available
for the Insurance Amount. Nothing in this Section 6.7(b) shall be deemed to
modify any existing contractual obligations under any agreements of Target or
any of its Subsidiaries.
(c) In the event Parent or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Parent
assume the obligations set forth in this section.
(d) The provisions of this Section 6.7 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
6.8 Subsequent Financial Statements. As soon as reasonably available, but
in no event more than 45 days after the end of each fiscal quarter ending after
the date of this Agreement, Parent will deliver to Target and Target will
deliver to Parent their respective Quarterly Reports on Form 10-Q, as filed with
the SEC under the Exchange Act.
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, or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement and their respective Subsidiaries shall take all such necessary action
as may be reasonably requested by, and at the sole expense of, Parent.
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6.10 Advice of Changes. Parent and Target shall promptly advise the other
party of any change or event having a Material Adverse Effect on it or which it
believes would or would be reasonably likely to cause or constitute a material
breach of any of its representations, warranties or covenants contained herein.
From time to time prior to the Effective Time, each party will promptly
supplement or amend the Disclosure Schedules delivered in connection with the
execution of this Agreement to reflect any matter which, if existing, occurring
or known at the date of this Agreement, would have been required to be set forth
or described in such Disclosure Schedules or which is necessary to correct any
information in such Disclosure Schedules which has been rendered inaccurate
thereby. No supplement or amendment to such Disclosure Schedules shall have any
effect for the purpose of determining satisfaction of the conditions set forth
in Section 7.2(a) or 7.3(a) hereof, as the case may be, or the compliance by
Target or Parent, as the case may be, with the respective covenants set forth in
Sections 5.1 and 5.2 hereof.
6.11 Current Information. During the period from the date of this
Agreement to the Effective Time, Target will cause one or more of its designated
representatives to confer on a regular and frequent basis (not less than
monthly) with representatives of Parent and to report (i) the general status of
the ongoing operations of Target and its Subsidiaries and (ii) the status of,
and the action proposed to be taken with respect to, those Loans held by Target
or any Target Subsidiary which, individually or in combination with one or more
other Loans to the same borrower thereunder, have an unpaid principal amount of
$100,000 or more and are non-performing assets. Target will promptly notify
Parent of any material change in the normal course of business or in the
operation of the properties of Target or any of its Subsidiaries and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of significant litigation involving Target or any of its Subsidiaries, and will
keep Parent fully informed of such events.
6.12 Termination of Regulatory Agreements. Target shall, and shall cause
Target Bank to, use its reasonable best efforts in cooperation with Parent to
confirm that all Regulatory Agreements to which Target or Target Bank is or
becomes subject to will be terminated and of no further force and effect at or
prior to the Effective Time.
6.13 Tax Returns. Target shall prepare and file, as approved and directed
by Parent, any Tax returns (including, without limitation, New York Real
Property Transfer and Transfer Gains Tax pre-clearance forms) with respect to
the Merger as Parent shall reasonably request.
6.14 Employee Benefit Plans; Existing Agreements. (a) Except as otherwise
provided herein, the employees of Target and its Subsidiaries (the "Target
Employees") shall be entitled to participate in Parent's employee benefit plans
in which similarly situated employees of Parent participate, to the same extent
as comparable employees of Parent. As soon as administratively practicable after
the Effective Time, Parent shall permit the Target Employees to participate in
Parent's group hospitalization, medical, life and disability insurance plans,
defined benefit pension plan, thrift plan, severance plan and similar plans, on
the same terms and conditions as applicable to comparable employees of Parent
and its Subsidiaries (including the waiver of pre-existing condition
prohibitions), giving effect to years of service with Target and its
Subsidiaries (to the extent Target gave effect) as if such service were with
Parent, for purposes of eligibility and vesting, but not for benefit accrual
purposes (except as regards to vacation, severance and short-term disability
accruals or for purposes of determining employer contributions for retiree
medical benefits). Notwithstanding anything in this Section 6.14 to the
contrary, participation by Target Employees in employee benefit plans and
programs of Parent with respect to which eligibility for employees of Parent to
participate is at the discretion of Parent shall be at the sole discretion of
Parent.
(b) Following the Effective Time, Parent shall honor and shall cause the
Surviving Corporation to honor in accordance with their terms all individual
employment, severance and other compensation agreements existing prior to the
execution of this Agreement, which are between Target and any director, officer
or employee thereof and which have been disclosed in the Target Disclosure
Schedule.
(c) To the extent not duplicative of any agreement or arrangement described
in paragraph (b) above, Parent agrees to make the payments and provide the
benefits set forth on Exhibit 6.14(c)(1) to the employees of Target or Target
Bank (the names of which shall be set forth on Section 3.11 of the Target
Disclosure
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Schedule). Parent further agrees to honor and cause the Surviving Corporation to
honor the retirement plan, in substantially the form attached as Exhibit
6.14(c)(2) hereto, previously adopted for the members of the board of directors
of Target.
(d) Notwithstanding anything in this Section 6.14 to the contrary, Parent
shall have sole discretion with respect to the determination as to whether to
terminate, merge or continue any employee benefit plans and programs of Target;
provided, however, that Parent shall continue to maintain Target plans (other
than stock-based or incentive plans) until Target Employees are permitted to
participate in Parent's plans.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the affirmative vote of the holders of at least a majority of the
outstanding shares of Target Common Stock entitled to vote thereon.
(b) NYSE Listing. The shares of Parent Common Stock which shall be issued
to the stockholders of Target 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; and the parties shall have procured all other regulatory
approvals, consents or waivers of governmental authorities that are necessary to
the consummation of this Agreement (other than immaterial consents, the failure
to obtain which would not have a Material Adverse Effect on Parent (on a
combined basis giving effect to the Merger)); provided, however, that no
approval, consent or waiver referred to in this Section 7.1(c) shall be deemed
to have been received if it shall include any condition or requirement that, in
the opinion of Parent, would so materially adversely affect the economic or
business benefits of the transactions contemplated by this Agreement to Parent
as to render inadvisable the consummation of the Merger; provided further, that
no condition or requirement which does no more than subject Parent or Target to
legal requirements generally applicable to a bank holding company under the BHC
Act or savings and loan holding company under HOLA as a matter of law shall be
deemed to affect materially and adversely the economic or business benefits of
the transactions contemplated by this Agreement (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 preventing the consummation of the Merger or any of the
other transactions contemplated by this Agreement (an "Injunction") shall be in
effect. No statute, rule, regulation, order, injunction or decree shall have
been enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits, restricts or makes illegal consummation of the Merger.
(f) Federal Tax Opinion. Parent and Target shall have received an opinion
of Sullivan & Cromwell, counsel to Parent, in form and substance reasonably
satisfactory to Parent and Target, dated as of the Closing Date, substantially
to the effect that, on the basis of facts, representations and assumptions set
forth in such
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opinion, the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368 of the Code and that
accordingly:
(i) No gain or loss will be recognized by Parent, Merger Sub or Target
as a result of the Merger; and
(ii) No gain or loss will be recognized by the stockholders of Target
who or which exchange their Target Common Stock solely for Parent Common
Stock pursuant to the Merger (except with respect to cash received in lieu
of a fractional share interest in Parent Common Stock).
In rendering such opinion, Sullivan & Cromwell may require and rely upon
representations contained in certificates of officers of Parent, Merger Sub,
Target and others.
7.2 Conditions to Obligations of Parent. The obligation of Parent to
effect the Merger is also subject to the satisfaction or waiver by Parent at or
prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Target set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date. Parent shall have received a
certificate signed on behalf of Target by the Chief Executive Officer and the
Chief Financial Officer of Target to the foregoing effect.
(b) Performance of Obligations of Target. Target shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Parent shall have received a
certificate signed on behalf of Target by the Chief Executive Officer and the
Chief Financial Officer of Target to such effect.
(c) Consents Under Agreements. The consent, approval or waiver of each
person (other than the Governmental Entities referred to in Section 7.1(c))
whose consent or approval shall be required in order to permit the succession by
the Surviving Corporation pursuant to the Merger to any obligation, right or
interest of Target or any Subsidiary of Target under any loan or credit
agreement, note, mortgage, indenture, lease, license or other agreement or
instrument shall have been obtained, except where the failure to obtain such
consent, approval or waiver would not materially adversely affect the economic
or business benefits of the transactions contemplated by this Agreement to
Parent as to render inadvisable the consummation of the Merger.
(d) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
(e) DEPCO Directors. (i) DEPCO or any "Nominee" as defined in the DEPCO
Agreement (A) shall own all of the issued and outstanding shares of Target
Series B Preferred Stock and (B) shall have the right to elect and shall have
elected at least one current member of Target's Board of Directors and (ii) the
Directors elected by DEPCO or any "Nominee" as defined in the DEPCO Agreement
pursuant to the Target Series B Preferred Stock shall represent less than 20% of
the number of Target's Board of Directors.
(f) Accountant's Letter. Target shall have caused to be delivered to
Parent letters from Target's independent public accountants dated the date on
which the S-4 or last amendment thereto shall become effective, and dated the
Closing Date, and addressed to Parent and Target, with respect to Target's
consolidated financial position and results of operation, which letters shall be
based upon SAS 72 and certain agreed upon procedures to be specified by Parent,
which procedures shall be consistent with applicable professional standards for
letters delivered by independent accountants in connection with comparable
transactions.
7.3 Conditions to Obligations of Target. The obligation of Target to
effect the Merger is also subject to the satisfaction or waiver by Target at or
prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Parent set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though
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made on and as of the Closing Date. Target shall have received a certificate
signed on behalf of Parent by the Chief Executive Officer and the Chief
Financial Officer of Parent to the foregoing effect.
(b) Performance of Obligations of Parent. Parent shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Target shall have received a
certificate signed on behalf of Parent by the Chief Executive Officer and the
Chief Financial Officer of Parent to such effect.
(c) Consents Under Agreements. The consent or approval of each person
(other than the Governmental Entities referred to in Section 7.1(c)) whose
consent or approval shall be required in connection with the transactions
contemplated hereby under any loan or credit agreement, note, mortgage,
indenture, lease, license or other agreement or instrument to which Parent or
any of its Subsidiaries is a party or is otherwise bound, except those for which
failure to obtain such consents and approvals would not, individually or in the
aggregate, have a material adverse effect on the business, operations or
financial condition of Parent and its Subsidiaries taken as a whole (after
giving effect to the transactions contemplated hereby), shall have been
obtained.
(d) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
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 Target:
(a) by mutual consent of Parent and Target 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 Parent or Target upon written notice to the other party (i)
ninety (90) days after the date on which any request or application for a
Requisite Regulatory Approval shall have been denied or withdrawn at the request
or recommendation of the Governmental Entity which must grant such Requisite
Regulatory Approval, unless within the 90-day period following such denial or
withdrawal a petition for rehearing or an amended application has been filed
with the applicable Governmental Entity, provided, however, that no party shall
have the right to terminate this Agreement pursuant to this Section 8.1(b) (i)
if such denial or request or recommendation for withdrawal 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 or (ii) if any
Governmental Entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the consummation of any
of the transactions contemplated by this Agreement;
(c) by either Parent or Target if the Merger shall not have been
consummated on or before June 30, 1995, 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 Parent or Target (provided that if the terminating party is
Target, Target shall not be in material breach of any of its obligations under
Section 5.1(e) or 6.3) if any approval of the stockholders of Target required
for the consummation of the Merger shall not have been obtained by reason of the
failure to obtain the required vote at a duly held meeting of stockholders or at
any adjournment or postponement thereof;
(e) by either Parent or Target (provided that the terminating party is not
then in material breach of any representation, warranty, covenant or other
agreement contained herein) if there shall have been a material breach of any of
the representations or warranties set forth in this Agreement on the part of the
other party, which breach is not cured within forty-five (45) days following
written notice to the party committing such breach, or which breach, by its
nature, cannot be cured prior to the Closing;
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(f) by either Parent or Target (provided that the terminating party is not
then in material breach of any representation, warranty, covenant or other
agreement contained herein) if there shall have been a material breach of any of
the covenants or agreements set forth in this Agreement on the part of the other
party, which breach shall not have been cured within forty-five (45) days
following receipt by the breaching party of written notice of such breach from
the other party hereto; or
(g) (i) by Target, if (either before or after the approval by the
stockholders of this Agreement) its Board of Directors so determines by a vote
of a majority of the members of its entire Board, at any time during the
five-day period commencing with the Determination Date, if the Parent Common
Stock Average Price on the Determination Date shall be less than $21.465;
subject, however, to subsection (g)(ii).
(ii) If Target elects to exercise its termination right pursuant to
subsection (g)(i), it shall give prompt written notice to Parent (provided that
such notice of election to terminate may be withdrawn at any time within the
aforementioned five-day period). During the three-day period commencing with its
receipt of such notice, Parent shall have the option of increasing the
consideration to be received by holders of Target Common Stock hereunder by
adjusting the Exchange Ratio to equal a number equal to $10.875 divided by the
Parent Common Stock Average Price. If Parent makes an election contemplated by
this subsection (g)(ii) within such three-day period, it shall give prompt
written notice to Target of such election and the revised Exchange Ratio,
whereupon no termination shall have occurred pursuant to this subsection (g) and
this Agreement shall remain in effect in accordance with its terms (except as
the Exchange Ratio shall have been so modified), and any references in this
Agreement to "Exchange Ratio" shall thereafter be deemed to refer to the
Exchange Ratio as adjusted pursuant to this subsection (g).
For purposes of this subsection (g), the following terms shall have the
meanings indicated:
"Determination Date" means the date on which the last regulatory approval
required to consummate the Merger has been obtained and all statutory waiting
periods in respect thereof have expired.
"Parent Common Stock Average Price" means the average of the daily closing
sales prices of Parent Common Stock as reported on the NYSE Composite
Transactions reporting system (as reported by The Wall Street Journal or, if not
reported thereby, another authoritative source as chosen by Parent) for the 15
consecutive full trading days in which such shares are traded on the NYSE ending
at the close of trading on the trading day immediately prior to the
Determination Date.
8.2 Fee. (a) Target hereby agrees to pay Parent and Parent shall be
entitled to payment of, a fee (the "Fee") of $11,000,000 following the
occurrence of a Purchase Event (as defined below); provided that Parent shall
have sent written notice of such entitlement within 90 days following such
Purchase Event. Such payment shall be made in immediately available funds within
five business days after delivery of such notice. The right to receive the Fee
shall terminate if any of the following (a "Fee Termination Event") occurs prior
to a Purchase Event: (i) the Effective Time of the Merger, (ii) termination of
this Agreement in accordance with the provisions hereof if such termination
occurs prior to the occurrence of a Preliminary Purchase Event, except a
termination by Parent pursuant to Sections 8.1(e) or (f) hereof (unless the
breach by Target is non-volitional), or (iii) if termination of this Agreement
follows the occurrence of a Preliminary Purchase Event (x) the passage of
twenty-four months after termination of this Agreement (eighteen months in the
case of a Preliminary Purchase Event listed in subsection (c)(iv) or (c)(v)) if
such termination is by Parent pursuant to Sections 8.1(e) or (f) of this
Agreement (unless the breach by Target is non-volitional) or pursuant to Section
8.1(d), or (y) if such termination is otherwise pursuant to Section 8.1. The
"Last Preliminary Purchase Event" shall mean the last Preliminary Purchase Event
to expire.
(c) The term "Preliminary Purchase Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Target or any of the Target Subsidiaries without having received
Parent's prior written consent, shall have entered into an agreement to
engage in an Acquisition Transaction (as defined below) 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 "Securities Exchange Act") and the
rules and regulations thereunder) other than Parent or any of the Parent
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Subsidiaries or the Board of Directors of Target shall have recommended
that the shareholders of Target approve or accept any Acquisition
Transaction with any person other than Parent or any Parent Subsidiary. For
purposes of this Agreement, "Acquisition Transaction" shall mean (A) a
merger or consolidation, or any similar transaction, involving Target or
any Target Significant Subsidiary, (B) a purchase, lease or other
acquisition of all or substantially all of the assets or deposits of Target
or any Target Significant Subsidiary, (C) 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 Target or a
Target Significant Subsidiary; provided that the term "Acquisition
Transaction" does not include any internal merger or consolidation
involving only Target and/or Target Subsidiaries;
(ii) (A) Any person (other than Parent or any Parent Subsidiary) shall
have acquired beneficial ownership or the right to acquire beneficial
ownership of 10% or more of the outstanding shares of Target Common Stock
(the term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the Securities Exchange Act,
and the rules and regulations thereunder), or (B) any group (as such term
"group" is defined in Section 13(d)(3) of the Securities Exchange Act),
other than a group of which Parent or any Parent Subsidiary is a member,
shall have been formed that beneficially owns 10% or more of the Target
Common Stock then outstanding;
(iii) Any person other than Parent or any Parent Subsidiary shall have
made a bona fide proposal to Target or its shareholders, by public
announcement or written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction (including,
without limitation, any situation which any person other than Parent or any
Parent Subsidiary shall have commenced (as such term is defined in Rule
14d-2 under the Securities Exchange Act) or shall have filed a registration
statement under the Securities Act with respect to, a tender offer or
exchange offer to purchase any shares of Target Common Stock such that,
upon consummation of such offer, such person would own or control 10% or
more of the then outstanding shares of Target Common Stock (such an
offering referred to herein as a "Tender Offer" or an "Exchange Offer",
respectively));
(iv) After a proposal is made by a third party to Target or its
shareholders to engage in an Acquisition Transaction, or such third party
states its intention to Target to make such a proposal if the Plan
terminates, Target shall have breached any representation, covenant or
obligation contained in this Agreement and such breach would entitle Parent
to terminate this Agreement under Sections 8.01(e) or (f) of this Agreement
(without regard to the cure periods provided for therein unless such cure
is promptly effected without jeopardizing consummation of the Merger
pursuant to the terms of this Agreement); or
(v) the holders of Target Common Stock shall not have approved this
Agreement at the meeting of such stockholders held for the purpose of
voting on this Agreement or such meeting shall not have been held or shall
have been canceled prior to termination of this Agreement, in each case
after any person (other than Parent or any Parent Subsidiary) shall have
(A) made, or disclosed an intention to make, a bona fide proposal to engage
in an Acquisition Transaction or (B) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect to an Exchange
Offer.
(d) The Term "Purchase Event" shall mean either of the following events or
transactions occurring after the date hereof:
(i) The acquisition by any person, other than Parent or any Parent
Subsidiary, alone or together with such person's affiliates and associates,
or any group (as defined in Section 13(d)(3) of the Securities Exchange
Act), of beneficial ownership of 50% or more of the Target Common Stock; or
(ii) The occurrence of a Preliminary Purchase Event described in
Section 8.2(c)(i) except that the percentage referred to in clause (C)
shall be 50%.
(e) Target shall notify Parent promptly in writing of its knowledge of the
occurrence of any Preliminary Purchase Event or Purchase Event; provided,
however, that the giving of such notice by Target shall not be a condition to
the right of Parent to the Fee.
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8.3 Effect of Termination. (a) In the event of termination of this
Agreement by either Parent or Target as provided in Section 8.1, this Agreement
shall forthwith become void and have no effect except (i) the last sentence of
Section 6.2(a), and Sections 6.2(c), 8.2, 8.3, 9.3 and 9.4, shall survive any
termination of this Agreement, and (ii) notwithstanding anything to the contrary
contained in this Agreement, no party shall be relieved or released from any
liabilities or damages arising out of its willful breach of any provision of
this Agreement.
8.4 Amendment. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the common stockholders of
Target; provided, however, that after any approval of the transactions
contemplated by this Agreement by Target's common stockholders, there may not
be, without further approval of such stockholders, any amendment of this
Agreement which reduces the amount or changes the form of the consideration to
be delivered to the Target stockholders hereunder other than as contemplated by
this Agreement. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
8.5 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
Target's common stockholders, there may not be, without further approval of such
stockholders, any extension or waiver of this Agreement or any portion thereof
which reduces the amount or changes the form of the consideration to be
delivered to the Target stockholders hereunder other than as contemplated by
this Agreement. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party, but such extension or waiver or failure to
insist on strict compliance with an obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure.
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 to
be selected by Parent, which shall be the tenth business day after the
satisfaction or waiver (subject to applicable law) of the latest to occur of the
conditions set forth in Article VII hereof (the "Closing Date"), at the offices
of Parent, unless another time, date or place is agreed to in writing by the
parties hereto.
9.2 Alternative Structure. Notwithstanding anything to the contrary
contained in this Agreement, prior to the Effective Time, Parent shall be
entitled to revise the structure of the Merger and related transactions provided
that each of the transactions comprising such revised structure shall (i) not
subject any of the stockholders of Target to adverse tax consequences or change
the amount of consideration to be received by such stockholders and (ii) be
capable of consummation without material delay. This Agreement and any related
documents shall be appropriately amended in order to reflect any such revised
structure.
9.3 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 shall survive the Effective
Time, except for those covenants and agreements contained herein and therein
which by their terms apply in whole or in part after the Effective Time.
9.4 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall he paid by the party
incurring such expense, provided, however, that the costs and expenses of
printing and mailing the Proxy Statement, and all filing and other fees paid to
the SEC in connection with the Merger, shall be borne equally by Parent and
Target, provided, further, however, that in
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the event of termination of this Agreement in accordance with the provisions
hereof, except a termination by Parent pursuant to Section 8.1(e) or (f) hereof,
Parent shall pay for the accountant's letters pursuant to Section 7.2(f).
9.5 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Parent, to:
Shawmut National Corporation
777 Main Street
Hartford, CT 06115
Fax: (203) 728-4205
Attn: Chief Executive Officer
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Fax: (212) 558-3588
Attn: Donald J. Toumey, Esq.
and
(b) if to Target, to:
Northeast Federal Corp.
50 State House Square
Hartford, CT 06103
Fax: (203) 280-0008
Attn: Chief Executive Officer
with a copy to:
Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Fax: (202) 966-9409
Attn: Thomas J. Haggerty, Esq.
9.6 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."
9.7 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.
9.8 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, other than the
Confidentiality Agreement.
A-33
<PAGE> 180
9.9 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and wholly to be performed in such state.
9.10 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that the provisions contained in the last
sentence of Section 6.2(a) and in Section 6.2(c) of this Agreement were not
performed in accordance with its specific terms or was otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of the last sentence of Section 6.2(a) and
Section 6.2(c) of this Agreement and to enforce specifically the terms and
provisions thereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
9.11 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
9.12 Publicity. Except as otherwise required by law or the rules of the
NYSE or the National Association of Securities Dealers, so long as this
Agreement is in effect, neither Parent nor Target shall, or shall permit any of
its Subsidiaries to, issue or cause the publication of any press release or
other written statement for general circulation with respect to the transactions
contemplated by this Agreement, without the consent of the other party, which
consent shall not be unreasonably withheld.
9.13 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder 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, and any purported such assignment shall be null and void. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns. Except as otherwise specifically provided in Section 6.7 hereof, this
Agreement (including the documents and instruments referred to herein) is not
intended to, and shall not, confer upon any person other than the parties hereto
any rights or remedies hereunder.
IN WITNESS WHEREOF, Parent and Target have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
SHAWMUT NATIONAL CORPORATION
By /s/ GUNNAR S. OVERSTROM, JR.
--------------------------------------
Name: Gunnar S. Overstrom, Jr.
Title: President and Chief Operating
Officer
NORTHEAST FEDERAL CORP.
By /s/ KIRK WALTERS
--------------------------------------
Name: Kirk Walters
Title: Chairman of the Board,
President and
Chief Executive Officer
A-34
<PAGE> 181
ANNEX B
LEHMAN BROTHERS INC.
February 10, 1995
Board of Directors
Northeast Federal Corp.
50 State House Square
Hartford, CT 06103
Members of the Board:
We understand that Northeast Federal Corp. (the "Company") and Shawmut
National Corporation ("Shawmut") have entered into a definitive merger agreement
pursuant to which the Company will be merged with and into Shawmut and each
share of common stock of the Company will be converted into the right to receive
the number of shares of the common stock of Shawmut determined by dividing
$10.875 by the average closing price per share of Shawmut's common stock for the
fifteen trading days ending on the business day prior to the date on which the
last regulatory approval required to consummate the proposed merger has been
obtained and all statutory waiting periods in respect thereof have expired (the
"Proposed Transaction"). The terms and conditions of the Proposed Transaction
are set forth in more detail in the Agreement and Plan of Merger, dated as of
June 11, 1994, by and between the Company and Shawmut (the "Agreement").
We have been requested by the Company to render our opinion with respect to
the fairness, from a financial point of view, to the Company's stockholders of
the consideration to be offered in the Proposed Transaction. We have not been
requested to opine as to, and our opinion does not in any manner address, the
Company's underlying business decision to proceed with or effect the Proposed
Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement,
(2) the Form 10-K for the twelve months ended December 31, 1993 for the Company
and Shawmut, the earnings press release for the year ended December 31, 1994 for
the Company and Shawmut, the interim reports on Form 10-Q for the Company and
Shawmut for the quarters ended March 31, 1994, June 30, 1994 and September 30,
1994 and such other publicly available information concerning the Company and
Shawmut which we believe to be relevant to our inquiry, (3) financial and
operating information with respect to the business, operations and prospects of
the Company furnished to us by the Company, (4) financial and operating
information with respect to the business, operations, and prospects of Shawmut
furnished to us by Shawmut, (5) trading history for the past three years
(through February 9, 1995) and market valuation of the Company's common stock
and Shawmut's common stock and a comparison of those trading histories with
those of other companies which we deemed relevant, (6) a comparison of the
historical financial results and present financial condition of the Company with
those of other companies which we deemed relevant, and (7) a comparison of the
financial terms of the Proposed Transaction with the financial terms of certain
other recent transactions which we deemed relevant. In addition, we have had
discussions with the management of the Company and Shawmut concerning their
respective businesses, operations, assets, financial conditions and prospects
and undertook such other studies, analyses and investigations as we deemed
appropriate.
We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our opinion without
independent verification and have further relied upon the assurances of
management of the Company and Shawmut that they are not aware of any facts that
would make such information inaccurate or misleading. With respect to the
financial projections of the Company, upon advice of the Company, we have
assumed that such projections have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
management of the Company, as to the future financial performance of the
Company, and we have relied upon such projections in arriving at our
B-1
<PAGE> 182
opinion. In arriving at our opinion, we have not conducted a physical inspection
of the properties and facilities of the Company or Shawmut and have not made nor
obtained any evaluations or appraisals of the assets or liabilities of the
Company or Shawmut. In addition, in arriving at our opinion, we have not
considered the potential effects to the Company of pending litigation. Upon
advice of the Company, we have assumed that the merger will qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended, and therefore as a tax-free transaction. Our opinion is
necessarily based upon market, economic, regulatory and other conditions as they
exist on, and can be evaluated as of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
offered to the stockholders of the Company in the Proposed Transaction is fair
to such stockholders.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In addition, the Company has
agreed to indemnify us for certain liabilities that might arise out of the
rendering of this opinion. We also have performed various investment banking
services for the Company in the past (including acting as financial advisor for
the reclassification of the Company's $2.25 Cumulative Convertible Preferred
Stock, Series A, completed in May 1993) and have received customary fees for
such services. In the ordinary course of our business, we actively trade in the
debt and equity securities of the Company and Shawmut 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 solely for the use and benefit of the Board of Directors of
the Company. This opinion is not intended to be and does not constitute a
recommendation to any stockholder of the Company as to how such stockholder
should vote with respect to the Proposed Transaction.
Very truly yours,
LEHMAN BROTHERS INC.
B-2
<PAGE> 183
APPENDIX FOR FIGURE 1.
- ----------------------
Chart setting forth the value given to holders of Northeast Common Stock at
various Shawmut Common Stock Average Prices. Below a Shawmut Common Stock
Average Price of $21.465, the transaction is subject to termination. Between
$21.465 and $26.235, the value is $10.875. Above a Shawmut Common Stock Average
Price of $26.235, the value increases above $10.875.
<PAGE> 184
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation -- a "derivative action"),
if they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. A similar standard is applicable in the case of derivative
actions, except that indemnification only extends to expenses (including
attorneys' fees) incurred in connection with the defense or settlement of such
action, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's charter, by-laws,
disinterested director vote, stockholder vote, agreement or otherwise. Sections
14-24 of Shawmut's By-laws provide for the indemnification of its directors and
officers as authorized by Section 145 of the Delaware General Corporation Law.
Article Fifth of Shawmut's Restated Certificate of Incorporation provides
that no director of Shawmut shall be personally liable to Shawmut or its
stockholders for monetary damages for any breach of his fiduciary duty as a
director except for liability (1) for any breach of the director's duty of
loyalty to Shawmut or its stockholders, (2) for acts or omissions that are not
in good faith or involve intentional misconduct or a knowing violation of the
law, (3) under Section 174 of the Delaware General Corporation Law or (4) for
any transaction from which the director derived an improper personal benefit.
The directors and officers of Shawmut and its subsidiaries are insured
(subject to certain exceptions and deductions) against liabilities which they
may incur in their capacity as such, including liabilities under the Securities
Act of 1933, under liability insurance policies carried by Shawmut. In addition,
Shawmut has entered into indemnification agreements with the directors of
Shawmut which provide that Shawmut will honor its obligations pursuant to its
By-laws within 30 days of written demand and will, under certain circumstances,
provide security for its obligations to indemnify.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
<TABLE>
<C> <S> <C>
2(a) -- Agreement and Plan of Merger, dated as of June 11, 1994, by and among Shawmut
National Corporation and Northeast Federal Corp. is included as Annex A to the
Proxy Statement/ Prospectus which is part of this Registration Statement.
2(b) -- Purchase and Assumption Agreement, dated November 12, 1994, among Barclays
Business Credit Inc., Barclays Bank PLC, Shawmut National Corporation and Shawmut
Bank Connecticut, N.A. previously filed and incorporated by reference to Exhibit
99.2 Shawmut National Corporation's Current Report on Form 8-K (file no. 1-10102)
filed January 6, 1995.
3(a) -- Restated Certificate of Incorporation, previously filed and incorporated by
reference to Exhibit 3(i).1 to Shawmut National Corporation's Current Report on
Form 8-K (file no. 1-10102) filed December 29, 1994.
3(b) -- Certificate of Amendment to the Restated Certificate of Incorporation, previously
filed and incorporated by reference to Exhibit 3(i).2 to Shawmut National
Corporation's Current Report on Form 8-K (file no. 1-10102) filed December 29,
1994.
3(c) -- By-laws, as amended, previously filed and incorporated by reference to Shawmut
National Corporation's Quarterly Report on Form 10-Q filed November 12, 1993.
4(a) -- Shareholder Rights Plan, previously filed and incorporated by reference to Shawmut
National Corporation's Registration Statement on Form 8-A (file no. 1-10102) filed
March 7, 1989, amended as of February 20, 1995 and incorporated by reference to
Exhibit 99.3 to Shawmut National Corporation's Current Report on Form 8-K (file
no. 1-10102) filed March 2, 1995.
4(b) -- Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock, previously filed and incorporated by reference to
Exhibit 3(i).3 to Shawmut National Corporation's Current Report on Form 8-K (file
no. 1-10102) filed December 29, 1994.
</TABLE>
II-1
<PAGE> 185
<TABLE>
<C> <S> <C>
4(c) -- Amended Certificate of Designation, Preferences, and Rights of Series A Junior
Participating Preferred Stock previously filed and incorporated by reference to
Exhibit 3.1 to Shawmut National Corporation's Current Report on Form 8-K (file no.
1-10102) filed February 7, 1995.
4(d) -- Certificate of Designation of 9.30% Cumulative Preferred Stock, previously filed
and incorporated by reference to Exhibit 3(i).4 to Shawmut National Corporation's
Current Report on Form 8-K (file no. 1-10102) filed December 29, 1994.
4(e) -- Certificate of Correction of Certificate of Designation of 9.30% Cumulative
Preferred Stock, previously filed and incorporated by reference to Exhibit 3(i).6
to Shawmut National Corporation's Current Report on Form 8-K (file no. 1-10102)
filed December 29, 1994.
4(f) -- Amended Certificate of Designation of the 9.30% Cumulative Preferred Stock,
previously filed and incorporated by reference to Exhibit 3(i).5 to Shawmut
National Corporation's Current Report on Form 8-K (file no. 1-10102) filed
December 29, 1994.
4(g) -- Certificate of Designation of 9.35% Cumulative Preferred Stock, previously filed
and incorporated by reference to Exhibit 4.04 to Shawmut National Corporation's
Current Report on Form 8-K filed January 26, 1995.
5 -- Opinion of Sullivan & Cromwell.**
8 -- Opinion of Sullivan & Cromwell.*
10(a) -- Agreement and Plan of Merger, dated as of February 20, 1995, by and among Fleet
Financial Group Inc. and Shawmut National Corporation, previously filed and
incorporated by reference to Exhibit 2.1 to Shawmut National Corporation's Current
Report on Form 8-K (file no. 1-10102) filed March 2, 1995.
10(b) -- Stock Option Agreement, dated as of February 20, 1995, between Fleet Financial
Group, Inc. as Issuer and Shawmut National Corporation as Grantee, previously
filed and incorporated by reference to Exhibit 99.2 to Shawmut National
Corporation's Current Report on Form 8-K (file no. 1-10102) filed March 2, 1995.
10(c) -- Stock Option Agreement, dated as of February 20, 1995, between Shawmut National
Corporation as Issuer and Fleet Financial Group, Inc. as Grantee, previously filed
and incorporated by reference to Exhibit 99.1 to Shawmut National Corporation's
Current Report on Form 8-K (file no. 1-10102) filed March 2, 1995.
23(a) -- Consent of Price Waterhouse LLP, Hartford, Connecticut (for Shawmut National
Corporation).**
23(b) -- Consent of Price Waterhouse LLP, Hartford, Connecticut (for the Business Finance
Division of Barclays Business Credit, Inc.).**
23(c) -- Consent of Deloitte & Touche, LLP, Hartford, Connecticut.**
23(d) -- Consent of Coopers & Lybrand, LLP, Hartford, Connecticut.**
23(e) -- Consent of Wolf & Company, P.C., Boston, Massachusetts.**
23(f) -- Consent of Wolf & Company, P.C., Boston, Massachusetts.**
23(g) -- Consent of Lehman Brothers Inc.**
23(h) -- Consent of Sullivan & Cromwell (included in Exhibit 5).
23(i) -- Consent of Sullivan & Cromwell (included in Exhibit 8).
23(j) -- Consent of Price Waterhouse LLP, Hartford, Connecticut (for Shawmut National
Corporation).*
23(k) -- Consent of Price Waterhouse LLP, Hartford, Connecticut (for the Business Finance
Division of Barclays Business Credit, Inc.).*
23(l) -- Consent of Deloitte and Touche, LLP, Hartford, Connecticut.*
23(m) -- Consent of Coopers & Lybrand, LLP, Hartford, Connecticut*
23(n) -- Consent of KPMG Peat Marwick, LLP, Providence, Rhode Island.*
23(o) -- Consent of Lehman Brothers Inc.*
24 -- Powers of Attorney.**
99(a) -- Opinion of Lehman Brothers Inc. is included as Annex B to the Proxy
Statement/Prospectus which is part of this Registration Statement.**
99(b) -- Form of Proxy/Voting Authorization for Northeast Common Stock.**
99(c) -- Form of Proxy/Voting Authorization for Northeast Common Stock for stock held under
the
Thrift and Profit Sharing Plan for Employees of Northeast Savings, F.A.**
99(d) -- Form of Proxy/Voting Authorization for Northeast Common Stock for stock held under
the
1985 Northeast Savings, F.A. Employee Stock Ownership Plan.**
</TABLE>
- ---------------
* Filed herewith.
** Previously filed.
II-2
<PAGE> 186
<TABLE>
<C> <S> <C>
99(e) -- Opinion of Lehman Brothers Inc. is included as Annex A to the Proxy
Statement/Prospectus Supplement which is part of this Registration Statement.*
99(f) -- Form of Proxy/Voting Authorization for Northeast Common Stock.*
99(g) -- Form of Proxy/Voting Authorization for Northeast Common Stock for stock held under
the Thrift and Profit Sharing Plan for Employees of Northeast Savings, F.A.*
99(h) -- Form of Proxy/Voting Authorization for Northeast Common stock for stock held under
the 1985 Northeast Savings, F.A. Employee Stock Ownership Plan.*
</TABLE>
- ---------------
* Filed herewith.
** Previously filed.
ITEM 22. UNDERTAKINGS.
(a) 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, as amended (the "Act");
(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) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the 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.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to section 15(d) of the Securities Exchange Act of 1934) which
is incorporated by reference in the 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.
(c) The undersigned Registrant hereby undertakes as follows: 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
issuer 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.
(d) The undersigned Registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (c) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Act, each such post-effective amendment shall be deemed to be a new
II-3
<PAGE> 187
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.
(e) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to any existing provision or arrangement or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(f) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 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 statements through the date
of responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 188
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Hartford,
State of Connecticut, on April 28, 1995.
SHAWMUT NATIONAL CORPORATION
By: /s/ JOEL B. ALVORD
------------------------------------
JOEL B. ALVORD
Chairman and Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1993, as amended,
this Registration Statement has been signed below by the following persons in
the capacities indicated on April 28, 1995.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ----------------------------------------------- -----------------------------------------------
<C> <S>
/s/ Joel B. Alvord Chairman, Chief Executive Officer, and Director
- ----------------------------------------------- (Principal Executive Officer)
Joel B. Alvord
*GUNNAR S. OVERSTROM, JR. President, Chief Operating Officer and Director
- -----------------------------------------------
Gunnar S. Overstrom, Jr.
*SUSAN E. LESTER Chief Financial Officer (Principal Financial
- ----------------------------------------------- Officer
Susan E. Lester and Principal Accounting Officer)
*STILLMAN B. BROWN Director
- -----------------------------------------------
Stillman B. Brown
*JOHN T. COLLINS Director
- -----------------------------------------------
John T. Collins
*FERDINAND COLLOREDO-MANSFELD Director
- -----------------------------------------------
Ferdinand Colloredo-Mansfeld
*BERNARD M. FOX Director
- -----------------------------------------------
Bernard M. Fox
*ROBERT J. MATURA Director
- -----------------------------------------------
Robert J. Matura
</TABLE>
II-5
<PAGE> 189
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ----------------------------------------------- -----------------------------------------------
<S> <C>
Director
- -----------------------------------------------
Lois D. Rice
*MAURICE SEGALL Director
- -----------------------------------------------
Maurice Segall
*SAMUEL O. THIER Director
- -----------------------------------------------
Samuel O. Thier
*PAUL R. TREGURTHA Director
- -----------------------------------------------
Paul R. Tregurtha
*WILSON WILDE Director
- -----------------------------------------------
Wilson Wilde
*By: /s/ HARRIET MUNRETT WOLFE
- -----------------------------------------------
(Harriet Munrett Wolfe,
Attorney-in-Fact)
</TABLE>
II-6
<PAGE> 190
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ---------------------------------------------------------------------- ------------
<C> <C> <S> <C>
2(a) -- Agreement and Plan of Merger, dated as of June 11, 1994, by and among
Shawmut National Corporation and Northeast Federal Corp. is included
as Annex A to the Proxy Statement/Prospectus which is part of this
Registration Statement................................................
2(b) -- Purchase and Assumption Agreement, dated November 12, 1994, among
Barclays Business Credit Inc., Barclays Bank PLC, Shawmut National
Corporation and Shawmut Bank Connecticut, N.A. previously filed and
incorporated by reference to Shawmut National Corporation's Current
Report on Form 8-K (file no. 1- 10102), filed January 6, 1995.........
3(a) -- Restated Certificate of Incorporation, previously filed and
incorporated by reference to Exhibit 3(i).1 to Shawmut National
Corporation's Current Report on Form 8-K (file no. 1-10102) filed
December 29, 1994.....................................................
3(b) -- Certificate of Amendment to the Restated Certificate of Incorporation,
previously filed and incorporated by reference to Exhibit 3(i).2 to
Shawmut National Corporation's Current Report on Form 8-K (file no.
1-10102) filed December 29, 1994......................................
3(c) -- By-laws, as amended, previously filed and incorporated by reference to
Shawmut National Corporation's Quarterly Report on Form 10-Q filed
November 12, 1993.....................................................
4(a) -- Shareholder Rights Plan, previously filed and incorporated by
reference to Shawmut National Corporation's Registration Statement on
Form 8-A (file no. 1-10102) filed March 7, 1989, amended as of
February 20, 1995 and incorporated by reference to Exhibit 99.3 to
Shawmut National Corporation's Current Report on Form 8-K (file no.
1-10102) filed February 28, 1995......................................
4(b) -- Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock, previously filed and incorporated by
reference to Exhibit 3(i).3 to Shawmut National Corporation's Current
Report on Form 8-K (file no. 1-10102) filed December 29, 1994.........
4(c) -- Amended Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock previously filed and incorporated
by reference to Exhibit 3.1 to Shawmut National Corporation's Current
Report on Form 8-K (file no. 1-10102) filed February 7, 1995..........
4(d) -- Certificate of Designation of 9.30% Cumulative Preferred Stock,
previously filed and incorporated by reference to Exhibit 3(i).4 to
Shawmut National Corporation's Current Report on Form 8-K (file no.
1-10102) filed December 29, 1994......................................
4(e) -- Certificate of Correction of Certificate of Designation of 9.30%
Cumulative Preferred Stock, previously filed and incorporated by
reference to Exhibit 3(i).6 to Shawmut National Corporation's Current
Report on Form 8-K (file no. 1-10102) filed December 29, 1994.........
4(f) -- Amended Certificate of Designation of the 9.30% Cumulative Preferred
Stock, previously filed and incorporated by reference to Exhibit
3(i).5 to Shawmut National Corporation's Current Report on Form 8-K
(file no. 1-10102) filed December 29, 1994............................
</TABLE>
- ---------------
* Filed herewith.
** Previously filed.
<PAGE> 191
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ---------------------------------------------------------------------- ------------
<C> <C> <S> <C>
4(g) -- Certificate of Designation of 9.35% Cumulative Preferred Stock,
previously filed and incorporated by reference to Exhibit 4.04 to
Shawmut National Corporation's Current Report on Form 8-K (file no.
1-10102) filed January 26, 1995.......................................
5 -- Opinion of Sullivan & Cromwell**......................................
8 -- Opinion of Sullivan & Cromwell*.......................................
10(a) -- Agreement and Plan of Merger, dated as of February 20, 1995, by and
among Fleet Financial Group Inc. and Shawmut National Corporation,
previously filed and incorporated by reference to Shawmut National
Corporation's Current Report on Form 8-K (file no. 1-10102) filed
March 2, 1995.........................................................
10(b) -- Stock Option Agreement, dated as of February 20, 1995, between Fleet
Financial Group, Inc. as Issuer and Shawmut National Corporation as
Grantee, previously filed and incorporated by reference to Shawmut
National Corporation's Current Report on Form 8-K (file no. 1-10102)
filed March 2, 1995...................................................
10(c) -- Stock Option Agreement, dated as of February 20, 1995, between Shawmut
National Corporation as Issuer and Fleet Financial Group, Inc. as
Grantee, previously filed and incorporated by reference to Shawmut
National Corporation's Current Report on Form 8-K (file no. 1-10102)
filed March 2, 1995...................................................
23(a) -- Consent of Price Waterhouse LLP, Hartford, Connecticut (for Shawmut
National Corporation)**...............................................
23(b) -- Consent of Price Waterhouse LLP, Hartford, Connecticut (for the
Business Finance Division of Barclays Business Credit, Inc.)**........
23(c) -- Consent of Deloitte & Touche, LLP, Hartford, Connecticut**............
23(d) -- Consent of Coopers & Lybrand, LLP, Hartford, Connecticut**............
23(e) -- Consent of Wolf & Company, P.C., Boston, Massachusetts**..............
23(f) -- Consent of Wolf & Company, P.C., Boston, Massachusetts**..............
23(g) -- Consent of Lehman Brothers Inc.**.....................................
23(h) -- Consent of Sullivan & Cromwell (included in Exhibit 5)................
23(i) -- Consent of Sullivan & Cromwell (included in Exhibit 8)................
23(j) -- Consent of Price Waterhouse LLP, Hartford, Connecticut (for Shawmut
National Corporation).*...............................................
23(k) -- Consent of Price Waterhouse LLP, Hartford, Connecticut (for the
Business Finance Division of Barclays Business Credit, Inc.)*.........
23(l) -- Consent of Deloitte and Touche, LLP, Hartford, Connecticut*...........
23(m) -- Consent of Coopers & Lybrand, LLP, Hartford, Connecticut*.............
23(n) -- Consent of KPMG Peat Marwick, LLP, Providence, Rhode Island*..........
23(o) -- Consent of Lehman Brothers Inc*.......................................
24 -- Powers of Attorney**..................................................
99(a) -- Opinion of Lehman Brothers Inc. is included as Annex B to the Proxy
Statement/Prospectus which is part of this Registration Statement**...
99(b) -- Form of Proxy/Voting Authorization for Northeast Common Stock**.......
99(c) -- Form of Proxy/Voting Authorization for Northeast Common Stock for
stock held under the Thrift and Profit Sharing Plan for Employees of
Northeast Savings, F.A.**.............................................
</TABLE>
- ---------------
* Filed herewith.
** Previously filed.
<PAGE> 192
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ---------------------------------------------------------------------- ------------
<C> <C> <S> <C>
99(d) -- Form of Proxy/Voting Authorization for Northeast Common Stock for
stock held under the 1985 Northeast Savings, F.A. Employee Stock
Ownership Plan**......................................................
99(e) -- Opinion of Lehman Brothers Inc. is included as Annex A to the Proxy
Statement/Prospectus Supplement which is part of this Registration
Statement.*...........................................................
99(f) -- Form of Proxy/Voting Authorization for Northeast Common Stock*........
99(g) -- Form of Proxy/Voting Authorization for Northeast Common Stock for
stock held under the Thrift and Profit Sharing Plan for Employees of
Northeast Savings, F.A.*..............................................
99(h) -- Form of Proxy/Voting Authorization for Northeast Common Stock for
stock held under the 1985 Northeast Savings, F.A. Employee Stock
Ownership Plan*.......................................................
</TABLE>
- ---------------
* Filed herewith.
** Previously filed.
<PAGE> 1
EXHIBIT 8
[SULLIVAN & CROMWELL LETTERHEAD]
May 1, 1995
Shawmut National Corporation
777 Main Street
Hartford, Connecticut 06115
Northeast Federal Corp.
70 Batterson Park Road
Farmington, Connecticut 06034
Ladies and Gentlemen:
We have acted as special counsel to Shawmut National Corporation
("Shawmut") in connection with the Agreement and Plan of Merger dated as of June
11, 1994 (the "Merger Agreement") between Shawmut and Northeast Federal Corp.
("Northeast") which provides for the merger of Merger Sub, a wholly owned
subsidiary of Shawmut with and into Northeast (the "Merger"). We are rendering
this opinion to you, in part, pursuant to Section 7.1(f) of the Merger
Agreement. Unless otherwise indicated, capitalized terms used herein shall have
the meanings given to such terms in the Merger Agreement.
For purposes of this opinion we have reviewed the Merger Agreement and such
other documents and matters of law and fact as we have considered necessary or
appropriate and we have assumed, with your consent, the following:
(i) The Merger will be completed in the manner set forth in the Merger
Agreement and the Registration Statement on Form S-4 of Shawmut, including
the Proxy Statement/Prospectus of Northeast and Shawmut.
(ii) The representations made to us by Shawmut in a letter dated April
13, 1995 (including representations based on information supplied by Fleet
Financial Group, Inc. ("Fleet")), the representations made to us by
Northeast in a letter dated May 1, 1995 and the representations made to us
by The Rhode Island Depositors Economic Protection Corporation in a letter
dated April 12, 1995, will be true and complete at the Effective Time.
(iii) The Merger will qualify as a merger under the laws of the State
of Delaware.
(iv) The Effective Time will occur on or before June 30, 1995.
(v) If a proposed merger between Shawmut and Fleet is completed,
Shawmut (as set forth in its letter described in clause (ii) above) will
receive an opinion of counsel to the effect that such merger qualifies as a
reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended, and such opinion will be correct in all material
respects.
This opinion is based upon the Internal Revenue Code of 1986, as amended,
United States Treasury Regulations, judicial decisions and administrative
rulings and pronouncements of the Internal Revenue Service, all as in effect on
the date hereof.
On the basis of the foregoing, we hereby confirm to you our opinion set
forth under the heading "THE MERGER -- Certain Federal Income Tax
Considerations" in the Proxy Statement filed February 8, 1995 by Shawmut with
the Securities and Exchange Commission, relating to the Merger.
We hereby consent to the reference to us under the heading "THE
MERGER -- Certain Federal Income Tax Considerations" in the Proxy Statement and
to the filing of this opinion as an exhibit to the Registration Statement. In
giving this consent, we do not hereby admit that we are within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933
or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ SULLIVAN & CROMWELL
<PAGE> 1
EXHIBIT 23(J)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Post-Effective Amendment No. 1 to the Registration
Statement on Form S-4 (No. 33-57627) of our report dated February 20, 1995
appearing on page 83 of Shawmut National Corporation's Annual Report on Form
10-K for the year ended December 31, 1994. We also consent to the reference to
us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
Hartford, Connecticut
May 1, 1995
<PAGE> 1
EXHIBIT 23(K)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Post-Effective Amendment No. 1 to the Registration
Statement on Form S-4 (No. 33-57627) of Shawmut National Corporation of our
report dated April 7, 1995 relating to the financial statements of the Business
Finance Division of Barclays Business Credit, Inc., which appears in the Current
Report on Form 8-K of Shawmut National Corporation dated April 13, 1995. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
Hartford, Connecticut
May 1, 1995
<PAGE> 1
EXHIBIT 23(L)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective
Amendment No. 1 to the Registration Statement No. 33-57627 on Form S-4 of
Shawmut National Corporation dated on or about April 24, 1995, which includes
the Northeast Federal Corp. Proxy Statement/Shawmut National Corporation
Prospectus Supplement (the "Registration Statement"), of our report dated
January 20, 1995, appearing in the Annual Report on Form 10-K of Northeast
Federal Corp. for the year ended December 31, 1994 and to the reference to us
under the heading "Experts" which appears in the Proxy Statement/Prospectus
Supplement, which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE, LLP
Hartford, Connecticut
May 1, 1995
<PAGE> 1
EXHIBIT 23(M)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Proxy Statement/Prospectus
constituting part of this Registration Statement on Form S-4 of Shawmut National
Corporation of our report dated January 18, 1993, on our audit of the
consolidated statements of operations, changes in stockholders' equity and cash
flows of Northeast Federal Corp. for the nine months ended December 31, 1992,
included in Northeast Federal Corp.'s Annual Report on Form 10-K for the year
ended December 31, 1994, which is incorporated by reference into this Proxy
Statement/Prospectus. We also consent to the reference to our firm under the
caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
May 1, 1995
<PAGE> 1
EXHIBIT 23(N)
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Fleet Financial Group, Inc.:
We consent to the incorporation by reference in the registration statement (No.
33-57627) on Form S-4 of Shawmut National Corporation of our report dated
January 18, 1995, relating to the consolidated balance sheets of Fleet Financial
Group, Inc. as of December 31, 1994 and 1993 and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the years in the three year period ended December 31, 1994, which report appears
in the Current Report on Form 8-K of Shawmut National Corporation dated April
13, 1995 and to the reference to our Firm under the heading "Experts" in the
proxy statement/prospectus. Our report refers to a change in the method of
accounting for investments.
/s/ KPMG Peat Marwick LLP
Providence, Rhode Island
May 1, 1995
<PAGE> 1
EXHIBIT 23(O)
CONSENT OF LEHMAN BROTHERS INC.
We consent to the reference to our firm in the Post-Effective Amendment No.
1 of the Registration Statement on Form S-4 of Shawmut National Corporation (the
"Registration Statement") under the heading "CERTAIN INFORMATION REGARDING THE
PENDING SHAWMUT/FLEET MERGER -- Updated Opinion of Financial Advisor;" and to
the filing of our opinion, dated the date of the Proxy Statement/Prospectus
Supplement, as an annex to the Registration Statement. 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 and we do
not thereby admit that we are experts with respect to any part of the
Registration Statement under the meaning of the term "expert" as used in the
Securities Act.
LEHMAN BROTHERS INC.
By: /s/ KEVIN GENIRS
------------------------------------
Kevin Genirs
Vice President and
Associate General Counsel
New York, New York
May 1, 1995
<PAGE> 1
- --------------------------------------------------------------------------------
EXHIBIT 99(F)
REVOCABLE PROXY/VOTING AUTHORIZATION
NORTHEAST FEDERAL CORP.
70 BATTERSON PARK ROAD
FARMINGTON, CONNECTICUT 06034
This Proxy/Voting Authorization is Solicited on Behalf of the Board of
Directors
The undersigned hereby appoints Kirk W. Walters and David W. Clark, Jr.,
and each of them, each with full power of substitution, proxies of the
undersigned to vote, as designated herein, all the shares of Common Stock of
Northeast Federal Corp. held of record by the undersigned on February 10, 1995,
at the Adjourned Special Meeting of Stockholders to be held at [The Hartford
Club, 46 Prospect Street, Hartford, Connecticut] on May , 1995, at 9:00 a.m.,
including any adjournments thereof, on all matters as may properly be brought
before said meeting or any adjournments thereof.
(Continued and to be signed on the reverse side)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
/ / Please mark votes as in this example
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
1. To approve and adopt the Agreement and Plan of Merger, dated as of June 11,
1994, by and between Shawmut National Corporation ("Shawmut") and Northeast
Federal Corp. ("Northeast"), and each of the transactions contemplated
thereby, including the merger of Northeast with and into a wholly-owned
subsidiary of Shawmut, pursuant to which, among other things, Northeast
stockholders will become Shawmut stockholders.
FOR AGAINST ABSTAIN
/ / / / / /
2. In their discretion upon such other business as may come before the meeting.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder(s). On matters for which you do not specify a
choice, your shares will be voted for Proposal 1. If any other matters are
presented at the meeting, this proxy will be voted by the person(s) named in
this proxy in their discretion. At the present time, the Board of Directors
knows of no other business to be presented at the meeting.
------------------------------------
SIGNATURE OF STOCKHOLDER
DATED:
------------------------------
------------------------------------
SIGNATURE OF STOCKHOLDER
DATED:
------------------------------
Please sign exactly as your name
appears on this Proxy. If stock is
held jointly, each owner should
sign. Persons signing in a
representative capacity should give
their title.
PLEASE RETURN PROMPTLY USING THE ENCLOSED POSTAGE-PAID ENVELOPE.
- --------------------------------------------------------------------------------
<PAGE> 1
- --------------------------------------------------------------------------------
EXHIBIT 99(G)
REVOCABLE PROXY/VOTING AUTHORIZATION
NORTHEAST FEDERAL CORP.
70 BATTERSON PARK ROAD
FARMINGTON, CONNECTICUT 06034
The undersigned hereby instructs Shawmut Bank Connecticut, N.A., as
Trustee, to vote the shares of Common Stock of Northeast Federal Corp. Common
Stock, par value $0.01 per share, credited to my account under the Thrift and
Profit Sharing Plan for Employees of Northeast Savings, F.A. on February 10,
1995, at the Adjourned Special Meeting of Stockholders to be held at [The
Hartford Club, 46 Prospect Street, Hartford, Connecticut] on May , 1995, at
9:00 a.m., including any adjournments thereof on the approval of the Agreement
and Plan of Merger described on the reverse side in a manner directed herein by
the undersigned, and in its discretion upon such other matters as may come
before the meeting, all as set forth in the Notice and the Proxy
Statement/Prospectus for the meeting. The undersigned hereby authorizes Shawmut
Bank Connecticut, N.A., as Trustee, to vote upon any such other matters which
may properly come before the Special Meeting or any adjournments thereof in the
same manner as the proxies appointed by the Board of Directors to vote proxies
solicited on behalf of the Board of Directors.
(continued and to be signed on the reverse side)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
/ / Please mark votes as in this example
THIS VOTE AUTHORIZATION IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
1. To approve and adopt the Agreement and Plan of Merger, dated as of June 11,
1994, by and between Shawmut National Corporation ("Shawmut") and Northeast
Federal Corp. ("Northeast"), and each of the transactions contemplated
thereby, including the merger of Northeast with and into a wholly-owned
subsidiary of Shawmut, pursuant to which, among other things, Northeast
stockholders will become Shawmut stockholders.
FOR AGAINST ABSTAIN
/ / / / / /
2. In their discretion upon such other business as may come before the meeting.
TRUSTEE AUTHORIZATION
I hereby authorize Shawmut Bank Connecticut, N.A., as Trustee for the Thrift and
Profit Sharing Plan for Employees of Northeast Savings, F.A., to vote the shares
of Common Stock of Northeast Federal Corp. credited to my account under said
plan at the Special Meeting of Stockholders, in accordance with the instructions
given above.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder(s). On matters for which you do not specify a
choice, your shares will be voted for Proposal 1. If any other matters are
presented at the meeting, this voting authorization will be voted by the
person(s) named in this voting authorization in their discretion. At the present
time, the Board of Directors knows of no other business to be presented at the
meeting.
----------------------------------------
SIGNATURE OF STOCKHOLDER
DATED:
----------------------------------
PLEASE RETURN PROMPTLY USING THE ENCLOSED POSTAGE-PAID ENVELOPE
- --------------------------------------------------------------------------------
<PAGE> 1
- --------------------------------------------------------------------------------
EXHIBIT 99(H)
REVOCABLE PROXY/VOTING AUTHORIZATION
NORTHEAST FEDERAL CORP.
70 BATTERSON PARK ROAD
FARMINGTON, CONNECTICUT 06034
The undersigned hereby instructs Chemical Banking Corporation, as Trustee,
to vote the shares of Northeast Federal Corp. Common Stock, par value $0.01 per
share, allocated to my account under the 1985 Northeast Savings, F.A. Employee
Stock Ownership Plan held of record by the undersigned on February 10, 1995, at
the Adjourned Special Meeting of Stockholders to be held at [The Hartford Club,
46 Prospect Street, Hartford, Connecticut,] on May , 1995, at 9:00 a.m.,
including any adjournments thereof on the approval of the Agreement and Plan of
Merger described on the reverse side in the manner directed herein by the
undersigned, and in its discretion upon such other matters as may come before
the meeting, all as set forth in the Notice and the Proxy Statement/Prospectus
for the meeting. The undersigned hereby authorizes Chemical Banking Corporation,
as Trustee, to vote upon any such other matters which may properly come before
the Special Meeting or any adjournment thereof in the same manner as the proxies
appointed by the Board of Directors to vote proxies solicited on behalf of the
Board of Directors.
(continued and to be signed on the reverse side)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
/ / Please mark votes as in this example
THIS VOTE AUTHORIZATION IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
1. To approve and adopt the Agreement and Plan of Merger, dated as of June 11,
1994, by and between Shawmut National Corporation ("Shawmut") and Northeast
Federal Corp. ("Northeast"), and each of the transactions contemplated
thereby, including the merger of Northeast with and into a wholly-owned
subsidiary of Shawmut, pursuant to which, among other things, Northeast
stockholders will become Shawmut stockholders.
FOR AGAINST ABSTAIN
/ / / / / /
2. In their discretion upon such other business as may come before the meeting.
TRUSTEE AUTHORIZATION
I hereby authorize Chemical Banking Corporation, as Trustee, for the 1985
Northeast Savings, F.A. Employee Stock Ownership Plan to vote the shares of
Common Stock of Northeast Federal Corp. held for my account under said Plan at
the Special Meeting of Stockholders, in accordance with the instruction given
above.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder(s). On matters for which you do not specify a
choice, your shares will be voted for Proposal 1. If any other matters are
presented at the meeting, this voting authorization will be voted by the
person(s) named in this voting authorization in their discretion. At the present
time, the Board of Directors knows of no other business to be presented at the
meeting.
----------------------------------------
SIGNATURE OF STOCKHOLDER
DATED:
----------------------------------
PLEASE RETURN PROMPTLY USING THE ENCLOSED POSTAGE-PAID ENVELOPE
- --------------------------------------------------------------------------------
